,,ii #aacth ,,congress #ast ,session ,s4 #eea ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #ac1 #bjac ,mr4 ,wyden 7for himself1 ,ms4 ,murkowski1 ,mr4 ,begich1 ,ms4 ,cantwell1 ,mrs4 ,murray1 and ,mr4 ,merkley7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to provide an election to terminate certain capital construction funds without penalties4 #a4 ,short title ,this ,act may be cited as the ,capital ,construction ,fund ,penalty ,relief ,act4 #b4 ,election to terminate certain capital construction funds 7a7 ,amendments to chapter #ece of title #df1 ,united ,states ,code 7#a7 ,in general ,chapter #ece of title #df1 ,united ,states ,code1 is amended by adding at the end the following new section3 #eceah4 ,election to terminate 7a7 ,in general 7#a7 ,election ,any person who has entered into an agreement under this chapter with respect to a vessel operated in the fisheries of the ,united ,states may make an election under this paragraph to terminate the capital construction fund established under such agreement4 7#b7 ,effect of election on individuals ,in the case of an individual who makes an election under paragraph 7#a7 with respect to a capital construction fund-- 7,a7 any amount remaining in such capital construction fund on the date of such election shall be distributed to such individual as a nonqualified withdrawal1 except that-- 7i7 in computing the tax on such withdrawal1 except as provided in paragraph 7#d71 subsections 7c77#c77;,b7 and 7f7 of section #eceaa shall not apply2 and 7ii7 the taxpayer may elect to average the income from such withdrawal as provided in subsection 7b72 and 7,b7 such individual shall not be eligible to enter into1 directly or indirectly1 any future agreement to establish a capital construction fund under this chapter with respect to a vessel operated in the fisheries of the ,united ,states4 7#c7 ,effect of election for entities 7,a7 ,in general ,in the case of a person 7other than an individual7 who makes an election under paragraph 7#a7-- 7i7 the total amount in the capital construction fund on the date of such election shall be distributed to the shareholders1 partners1 or members of such person in accordance with the terms of the instruments setting forth the ownership interests of such shareholders1 partners1 or members2 7ii7 each shareholder1 partner1 or member shall be treated as having established a special temporary capital construction fund and having deposited amounts received in the distribution into such special temporary capital construction fund2 7iii7 no gain or loss shall be recognized with respect to such distribution2 7iv7 the basis of any shareholder1 partner1 or member in the person shall not be reduced as a result of such distribution2 7v7 any amounts not distributed pursuant to clause 7i7 shall be distributed in a nonqualified withdrawal2 and 7vi7 such person shall not be eligible to enter into1 directly or indirectly1 any future agreement to establish a capital construction fund under this chapter with respect to a vessel operated in the fisheries of the ,united ,states4 7,b7 ,special temporary capital construction funds ,for purposes of this chapter1 a special temporary capital construction fund shall be treated in the same manner as a capital construction fund established under section #ecejc1 except that the following rules shall apply3 7i7 ,a special temporary capital construction fund shall be established without regard to any agreement under section #ecejc and without regard to any eligible or qualified vessel4 7ii7 ,section #eceje shall not apply and no amounts may be deposited into a special temporary capital construction fund other than amounts received pursuant to a distribution described in subparagraph 7,a77i74 7iii7 ,in the case of any amounts distributed from a special temporary capital construction fund directly to a capital construction fund of the taxpayer established under section #eceje-- 7,i7 no gain or loss shall be recognized2 7,,ii7 the limitation under section #eceje shall not apply with respect to any amount so transferred2 7,,iii7 such amounts shall not reduce taxable income under section #ecejg7;a77#a72 and 7,,iv7 for purposes of section #eceaa7;e71 such amounts shall be treated as deposited in the capital construction fund on the date that such funds were deposited in the capital construction fund with respect to which the election under paragraph 7#a7 was made4 7iv7 ,in the case of any amounts distributed from a special temporary capital construction fund pursuant to an election under paragraph 7#a71 clauses 7i7 and 7ii7 of paragraph 7#b77;,a7 shall not apply to so much of such amounts as are attributable to earnings accrued after the date of the establishment of such special temporary capital construction fund4 7v7 ,any amount not distributed from a special temporary capital construction fund before the due date of the tax return 7including extension7 for the last taxable year of the individual ending before ,january #a1 #bjai1 shall be treated as distributed to the taxpayer on the day before such due date as if an election under paragraph 7#a7 were made by the taxpayer on such day4 7,c7 ,regulations ,the joint regulations shall provide rules for-- 7i7 assigning the amounts received by the shareholders1 partners1 or members in a distribution described in subparagraph 7,a77i7 to the accounts described in section #ecejh7;a7 in special temporary capital construction funds2 and 7ii7 preventing the abuse of the purposes of this section4 7#d7 ,tax benefit rule ,rules similar to the rules under section #eceaa7;f77#c7 shall apply for purposes of determining tax liability on any nonqualified withdrawal under paragraph 7#b77;,a71 7#c77;,a77v71 or 7#c77;,b77v74 7#e7 ,election ,any election under paragraph 7#a7-- 7,a7 may only be made-- 7i7 by a person who maintains a capital construction fund with respect to a vessel operated in the fisheries of the ,united ,states on the date of the enactment of this section2 or 7ii7 by a person who maintains a capital construction fund which was established pursuant to paragraph 7#c77;,a77ii7 as a result of an election made by an entity in which such person was a shareholder1 partner1 or member2 7,b7 shall be made not later than the due date of the tax return 7including extensions7 for the person's last taxable year ending on or before ,december #ca1 #bjah2 and 7,c7 shall apply to all amounts in the capital construction fund with respect to which the election is made4 7b7 ,election to average income ,at the election of an individual who has received a distribution described in subsection 7a71 for purposes of section #acja of the ,internal ,revenue ,code of #aihf-- 7#a7 such individual shall be treated as engaged in a fishing business1 and 7#b7 such distribution shall be treated as income attributable to a fishing business for such taxable year4 4 7#b7 ,conforming amendments 7,a7 ,section #eceaa of title #df1 ,united ,states ,code1 is amended by striking section #eceac and inserting sections #eceac and #eceah4 7,b7 ,the table of sections for chapter #ece of title #df1 ,united ,states ,code1 is amended by inserting after the item relating to section #eceag the following new item3 #eceah4 ,election to terminate4 4 7b7 ,amendments to the ,internal ,revenue ,code of #aihf 7#a7 ,in general ,section #geah of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7j7 ,election ,to terminate capital construction funds 7#a7 ,in general ,any person who has entered into an agreement under chapter #ece of title #df of the ,united ,states ,code1 with respect to a vessel operated in the fisheries of the ,united ,states may make an election under this paragraph to terminate the capital construction fund established under such agreement4 7#b7 ,effect of election on individuals ,in the case of an individual who makes an election under paragraph 7#a7 with respect to a capital construction fund1 any amount remaining in such capital construction fund on the date of such election shall be distributed to such individual as a nonqualified withdrawal1 except that-- 7,a7 in computing the tax on such withdrawal1 except as provided in paragraph 7#d71 paragraphs 7#c77;,c77ii7 and 7#f7 of subsection 7g7 shall not apply1 and 7,b7 the taxpayer may elect to average the income from such withdrawal as provided in paragraph 7#f74 7#c7 ,effect of election for entities 7,a7 ,in general ,in the case of a person 7other than an individual7 who makes an election under paragraph 7#a7-- 7i7 the total amount in the capital construction fund on the date of such election shall be distributed to the shareholders1 partners1 or members of such person in accordance with the terms of the instruments setting forth the ownership interests of such shareholders1 partners1 or members1 7ii7 each shareholder1 partner1 or member shall be treated as having established a special temporary capital construction fund and having deposited amounts received in the distribution into such special temporary capital construction fund1 7iii7 no gain or loss shall be recognized with respect to such distribution1 7iv7 the basis of any shareholder1 partner1 or member in the person shall not be reduced as a result of such distribution1 and 7v7 any amounts not distributed pursuant to clause 7i7 shall be distributed as a nonqualified withdrawal4 7,b7 ,special temporary capital construction funds ,for purposes of this section1 a special temporary capital construction fund shall be treated in the same manner as a capital construction fund established under section #ecejc of title #df1 ,united ,states ,code1 except that the following rules shall apply3 7i7 ,subsection 7a7 shall not apply and no amounts may be deposited into a special temporary capital construction fund other than amounts received pursuant to a distribution described in subparagraph 7,a77i74 7ii7 ,in the case of any amounts distributed from a special temporary capital construction fund directly to a capital construction fund of the taxpayer established under section #eceje of title #df1 ,united ,states ,code-- 7,i7 no gain or loss shall be recognized2 7,,ii7 the limitation under subsection 7a7 shall not apply with respect to any amount so transferred2 7,,iii7 such amounts shall not reduce taxable income under subsection 7c77#a77;,a72 and 7,,iv7 for purposes of subsection 7g77#e71 such amounts shall be treated as deposited in the capital construction fund on the date that such funds were deposited in the capital construction fund with respect to which the election under paragraph 7#a7 was made4 7iii7 ,in the case of any amounts distributed from a special temporary capital construction fund pursuant to an election under paragraph 7#a71 subparagraphs 7,a7 and 7,b7 of paragraph 7#b7 shall not apply to so much of such amounts as are attributable to earnings accrued after the date of the establishment of such special temporary capital construction fund4 7iv7 ,any amount not distributed from a special temporary capital construction fund before the due date of the tax return 7including extension7 for the last taxable year of the individual ending before ,january #a1 #bjai1 shall be treated as distributed to the taxpayer on the day before such due date as if an election under paragraph 7#a7 were made by the taxpayer on such day4 7,c7 ,regulations ,the joint regulations shall provide rules for-- 7i7 assigning the amounts received by the shareholders1 partners1 or members in a distribution described in subparagraph 7,a77i7 to the accounts described in subsection 7d77#a7 in special temporary capital construction funds2 and 7ii7 preventing the abuse of the purposes of this section4 7#d7 ,tax benefit rule ,rules similar to the rules under subsection 7g77#f77;,b7 shall apply for purposes of determining tax liability on any nonqualified withdrawal under paragraph 7#b71 7#c77;,a77v71 or 7#c77;,b77iv74 7#e7 ,election ,any election under paragraph 7#a7-- 7,a7 may only be made-- 7i7 by a person who maintains a capital construction fund with respect to a vessel operated in the fisheries of the ,united ,states on the date of the enactment of this subsection1 or 7ii7 by a person who maintains a capital construction fund which was established pursuant to subparagraph 7#c77;,a77ii7 as a result of an election made by an entity in which such person was a shareholder1 partner1 or member1 7,b7 shall be made not later than the due date of the tax return 7including extensions7 for the person's last taxable year ending on or before ,december #ca1 #bjah1 and 7,c7 shall apply to all amounts in the capital construction fund with respect to which the election is made4 7#f7 ,election to average income ,at the election of an individual who has received a distribution described in paragraph 7#b71 for purposes of section #acja-- 7,a7 such individual shall be treated as engaged in a fishing business1 and 7,b7 such distribution shall be treated as income attributable to a fishing business for such taxable year4 4 7#b7 ,conforming amendment ,section #geah7;g77#a7 of such ,code is amended by striking subsection 7h7 and inserting subsections 7h7 and 7j74