skip to main content

S. 1013: Gigabit Opportunity Act

The text of the bill below is as of May 3, 2017 (Introduced).


II

115th CONGRESS

1st Session

S. 1013

IN THE SENATE OF THE UNITED STATES

May 3, 2017

introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide tax benefits for investments in gigabit opportunity zones.

1.

Short title

This Act may be cited as the Gigabit Opportunity Act.

2.

Gigabit Opportunity Zones

(a)

Establishment of zones and benefits

(1)

In general

Chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

Z

Gigabit Opportunity Zones

Sec. 1400Z–1. Designation.

Sec. 1400Z–2. Deferral for eligible taxpayer of capital gains invested in gigabit opportunity zones.

Sec. 1400Z–3. Immediate expensing of qualified gigabit opportunity zone business property.

1400Z–1.

Designation

(a)

Qualified gigabit opportunity zone defined

For the purposes of this subchapter, the term qualified gigabit opportunity zone means a population census tract that is a low-income community—

(1)

which is located in a jurisdiction—

(A)

that has been certified by Secretary, in consultation with the National Telecommunications and Information Administration, as having adopted the Uniform Model Broadband Deployment Act prescribed by the Federal Communications Commission pursuant to section 4 of the Gigabit Opportunity Act, or

(B)

which has been determined by the Secretary, in consultation with the National Telecommunications and Information Administration, to have adopted laws which are comparable to such Model Broadband Development Act, and

(2)

which is designated as a qualified gigabit opportunity zone.

Paragraph (1)(B) shall not apply with respect to any jurisdiction for which a determination has been made after the date which is 3 years after the date of the enactment of this section.
(b)

Designation

(1)

In general

For purposes of subsection (a)(3), a population census tract that is a low-income community and which meets the requirements of paragraph (1) of subsection (a) is designated as a qualified gigabit opportunity zone if—

(A)

not later than the end of the determination period, the governor of the State in which the tract is located—

(i)

nominates the tract for designation as a qualified gigabit opportunity zone, and

(ii)

notifies the Secretary in writing of such nomination, and

(B)

the Secretary certifies such nomination and designates such tract as a qualified gigabit opportunity zone before the end of the consideration period.

(2)

Extension of periods

A governor may request that the Secretary extend either the determination or consideration period, or both (determined without regard to this subparagraph), for an additional 30 days.

(c)

Other definitions

For purposes of this subsection—

(1)

Low-income communities

The term low-income community has the same meaning as when used in section 45D(e).

(2)

Definition of periods

(A)

Consideration period

The term consideration period means the 30-day period beginning on the date on which the Secretary receives notice under subsection (b)(1)(A)(ii), as extended under subsection (b)(2).

(B)

Determination period

The term determination period means the 90-day period beginning on the date on which the State adopts the Uniform Model Broadband Act described in subsection (a)(1)(A), as extended under subsection (b)(2).

(d)

Guidance for opportunity zone nominations

When considering the nomination of qualified gigabit opportunity zones, governors should strive for the creation of qualified gigabit opportunity zones that are geographically concentrated and contiguous clusters of population census tracts and should give particular consideration to areas that—

(1)

are currently facing obstacles to economic development due to a lack of geographic broadband coverage or a lack of broadband speed,

(2)

are currently the focus of mutually reinforcing State, local, or private economic development initiatives, and

(3)
(A)

are poised for economic growth that requires access to high speed broadband for commercial purposes, and

(B)

represent the areas of a State where such service would result in the highest return on investment.

(e)

Number of designations

(1)

In general

Except as provided by paragraph (2), the number of population census tracts in a State that may be designated as qualified gigabit opportunity zones under this section may not exceed 25 percent of the number of low-income communities in the State.

(2)

Exception

If the number of low-income communities in a State is less than 100, then a total of 25 of such tracts may be designated as qualified gigabit opportunity zones.

(f)

Designation of tracts contiguous with low-Income communities

(1)

In general

A population census tract that is not a low-income community may be designated as a qualified gigabit opportunity zone under this section if—

(A)

such tract meets the requirements of paragraph (1) of subsection (a),

(B)

the tract is contiguous with the low-income community that is designated as a qualified gigabit opportunity zone, and

(C)

the median family income of the tract does not exceed 150 percent of the median family income of the low-income community with which the tract is contiguous.

(2)

Limitation

Not more than 25 percent of the population census tracts designated in a State as a qualified gigabit opportunity zone may be designated under paragraph (1).

(g)

Period for which designation is in effect

A designation as a qualified gigabit opportunity zone shall remain in effect for the period beginning on the date of the designation and ending at the close of the 7th calendar year beginning on or after such date of designation.

1400Z–2.

Deferral for eligible taxpayer of capital gains invested in gigabit opportunity zones

(a)

In general

(1)

Exclusion of gain invested in gigabit opportunity zone property

In the case of gain from the sale to, or exchange with, an unrelated person of any property held by an eligible taxpayer, at the election of the eligible taxpayer—

(A)

gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate cost of all qualified gigabit opportunity zone property acquired by the taxpayer during the 180-day period beginning on the date of such sale or exchange, and

(B)

the amount of gain excluded by subparagraph (A) shall be included in gross income as provided by paragraph (2).

(2)

Deferral of gain invested in qualified gigabit opportunity zone property

(A)

Year of inclusion

Except as provided by subparagraph (C), gain to which paragraph (1)(B) applies shall be included in income in the taxable year in which the qualified gigabit opportunity zone property related to such gain is sold or exchanged in the amount determined under subparagraph (B).

(B)

Amount includible

The amount of gain determined under this clause shall be—

(i)

100 percent of such gain in the case of the sale or exchange of the qualified gigabit opportunity zone property with respect to which gain is deferred under paragraph (1) that is held for less than 5 years,

(ii)

90 percent of such gain in the case of the sale or exchange of the qualified gigabit opportunity zone property with respect to which gain is deferred under paragraph (1) that is held for at least 5 years but less than 7 years, and

(iii)

85 percent of such gain in the case of the sale or exchange of the qualified gigabit opportunity zone property with respect to which gain is deferred under paragraph (1) that is held for at least 7 years.

(3)

Exclusion of gain on qualified gigabit opportunity zone property held for at least 10 years

Except as provided in paragraph (2), in the case of the sale or exchange of qualified gigabit opportunity zone property, or an investment in a qualified opportunity fund, held for at least 10 years, gross income for the taxable year shall not include any gain from the sale or exchange of such property or investment.

(4)

One election per property

No election may be made under paragraph (1) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect.

(b)

Basis rules relating to qualified gigabit opportunity zone property

(1)

Reduced by gain deferred under subsection (a)(1)

The basis of a qualified gigabit opportunity zone property immediately after its acquisition under subsection (a) shall be reduced by the amount of gain deferred by reason of subsection (a)(1)(A) with respect to such property.

(2)

Increase for gain recognized under subsection (a)(2)

The basis of qualified gigabit opportunity zone property shall be increased by the amount of gain recognized by reason of subsection (a)(2) with respect to such property.

(3)

Subsequent increase in basis for property held for at least 5 years but less than 10 years

In the case of qualified gigabit opportunity zone property held for at least 5 years but less than 10 years—

(A)

Property held for 5 years

For qualified gigabit opportunity zone property held for at least 5 years, the basis of such property shall be increased by an amount equal to 10 percent of the amount of gain deferred by reason of subsection (a)(1)(A) with respect to such property.

(B)

Property held for 7 years

For qualified gigabit opportunity zone property held for at least 7 years, the basis of such property shall be increased by an amount equal to 5 percent of the amount of gain deferred by reason of subsection (a)(1)(A) with respect to such property.

(c)

Eligible taxpayer

For purposes of this section, the term eligible taxpayer means any taxpayer who has a trade or business a substantial part of which consists of selling broadband Internet service to commercial customers, residential customers, or both through one or a combination of the following technologies:

(1)

Digital Subscriber Line transmission technology that transmits data faster over traditional copper telephone lines, without regards to the specific type of Digital Subscriber Line transmission technology such as Asymmetrical Digital Subscriber Line, Symmetrical Digital Subscriber Line, High data rate Digital Subscriber Line, or Very High data rate Digital Subscriber Line.

(2)

Cable Modem transmission technology that enables operators to provide broadband using the same coaxial cables that deliver pictures and sound to televisions.

(3)

Fiber optic transmission technology that converts electrical signals carrying data to light and sends the light through transparent glass fibers.

(4)

Wireless transmission technology that utilizes a radio link between the customer’s location and the service provider’s facility, whether mobile or fixed.

(5)

Satellite transmission technology that provides broadband links via orbiting satellites.

(6)

Broadband over powerline transmission technology that delivers broadband over the existing low- and medium-voltage electric power distribution network.

(7)

Such other technologies as the Secretary, in consultation with the Federal Communications Commission, may designate by rule as a broadband provider technology.

(d)

Qualified gigabit opportunity zone property

For purposes of this section:

(1)

In general

The term qualified gigabit opportunity zone property means property which is—

(A)

qualified gigabit opportunity zone stock,

(B)

qualified gigabit opportunity zone partnership interest,

(C)

qualified gigabit opportunity zone business property, or

(D)

an interest in a qualified investment fund.

(2)

Qualified gigabit opportunity zone stock

(A)

In general

Except as provided in subparagraph (B), the term qualified gigabit opportunity zone stock means any stock in a domestic corporation if—

(i)

such stock is acquired by the taxpayer after December 31, 2017, at its original issue (directly or through an underwriter) from the corporation solely in exchange for cash,

(ii)

as of the time such stock was issued, such corporation was a qualified gigabit opportunity zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a qualified gigabit opportunity zone business), and

(iii)

during substantially all of the taxpayer's holding period for such stock, such corporation qualified as a qualified gigabit opportunity zone business.

(B)

Redemptions

A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.

(3)

Qualified gigabit opportunity zone partnership interest

The term qualified gigabit opportunity zone partnership interest means any capital or profits interest in a domestic partnership if—

(A)

such interest is acquired by the taxpayer after December 31, 2017, from the partnership solely in exchange for cash,

(B)

as of the time such interest was acquired, such partnership was a qualified gigabit opportunity zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a qualified gigabit opportunity zone business), and

(C)

during substantially all of the taxpayer's holding period for such interest, such partnership qualified as a qualified gigabit opportunity zone business.

(4)

Qualified gigabit opportunity zone business property

(A)

In general

The term qualified gigabit opportunity zone business property means tangible property used in a trade or business of the taxpayer if—

(i)

such property—

(I)

is used primarily to provide broadband transmission services to locations which do not have such service that meets the minimum speed requirements required for universal service support under Phase II of the Connect America Fund of the Federal Communications Commission, as set forth under subpart D of part 54 of title 47, Code of Federal Regulations, and

(II)

is capable of transmitting signals at a rate of at least 1,000,000,000 bits per second,

(ii)

such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after December 31, 2017,

(iii)

the original use of such property in the qualified gigabit opportunity zone commences with the taxpayer or the taxpayer substantially improves the property, and

(iv)

during substantially all of the taxpayer’s holding period for such property, substantially all of the use of such property was in a qualified gigabit opportunity zone.

(B)

Special rule for certain property

In the case of property which is placed in service before January 1, 2021, and which is with respect to technology described in paragraph (4) or (5) of subsection (c), subparagraph (A)(i)(II) shall be applied by substituting 150,000,000 bits per second for 1,000,000,000 bits per second.

(C)

Substantial improvement

For purposes of subparagraph (A)(iii), property shall be treated as substantially improved by the taxpayer only if, during any 30-month period beginning after the date of acquisition of such property, additions to basis with respect to such property in the hands of the taxpayer exceed an amount equal to the adjusted basis of such property at the beginning of such 30-month period in the hands of the taxpayer.

(D)

Treatment of related parties

For purposes of subparagraph (A)(ii), the rules of subparagraph (A) of section 179(d)(2) shall be applied using the relationship described in subsection (e)(2) in lieu of the relationship described in such subparagraph.

(5)

Qualified gigabit opportunity fund

The term qualified gigabit opportunity fund means any investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified gigabit opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property, determined—

(A)

on the last day of the first 6-month period of the taxable year of the fund, and

(B)

on the last day of the taxable year of the fund.

(6)

Qualified gigabit opportunity zone business

(A)

In general

The term qualified gigabit opportunity zone business means a trade or business—

(i)

in which substantially all of the tangible property owned or leased by the taxpayer is qualified gigabit opportunity zone business property,

(ii)

which satisfies the requirements of paragraphs (2), (4), and (8) of section 1397C(b), and

(iii)

which is not described in section 144(c)(6)(B).

(B)

Special rule

For purposes of subparagraph (A), tangible property that ceases to be a qualified gigabit opportunity zone business property shall continue to be treated as a qualified gigabit opportunity zone business property for the lesser of—

(i)

5 years after the date on which such tangible property ceases to be so qualified, or

(ii)

the date on which such tangible property is no longer held by the qualified gigabit opportunity zone business.

(e)

Applicable rules

(1)

In general

For purposes of this section and except as otherwise provided in this section, rules similar to the rules applicable to deferred like kind exchanges under section 1031 shall apply except that reinvestment in qualified gigabit opportunity zone property need not require an intermediary party.

(2)

Related persons

For purposes of this subsection, persons are related to each other if such persons are described in section 267(b) or 707(b)(1), determined by substituting 20 percent for 50 percent each place it occurs in such sections.

(3)

Decedents

In the case of a decedent, amounts recognized under this section shall, if not properly includible in the gross income of the decedent, be includible in gross income as provided by section 691.

(4)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including—

(A)

rules providing for proportionate inclusion in income and increases in basis for purposes of subsections (a) and (b) in cases in which a sale or exchange of any qualified gigabit opportunity zone property with respect to which gain is deferred under subsection (a)(1)(A) is less than all of such property,

(B)

rules requiring taxpayers to provide such information as the Secretary determines to be necessary or appropriate for the identification of both the assets sold (including basis and sale price) and the assets acquired and investments made, and

(C)

rules to prevent abuse.

1400Z–3.

Immediate expensing of qualified gigabit opportunity zone business property

(a)

In general

A eligible taxpayer may elect to treat the cost of any qualified gigabit opportunity zone business property (as defined in section 1400Z–2) as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the qualified gigabit opportunity zone business property is placed in service.

(b)

Eligible taxpayer

For purposes of this section, the term eligible taxpayer has the same meaning given to such term under section 1400Z–2(c).

(c)

Exception for certain property

For purposes of this section, the term qualified gigabit opportunity zone business property shall not include any property to which section 168(g) applies.

(d)

Election

An election under this section shall be made under rules similar to the rules of section 179(c).

(e)

Coordination with section 179

For purposes of section 179, qualified gigabit opportunity zone business property shall not be treated as section 179 property.

(f)

Application of other rules

Rules similar to the rules of paragraphs (3), (4), (5), (7), (9), and (10) of section 179(d) shall apply for purposes of this section.

(g)

Taxpayer reporting

This section shall not apply with respect to any taxpayer for any taxable year unless such taxpayer provides the Secretary with such information as the Secretary may require to allow the Secretary to evaluate the effectiveness of the program established under this part.

.

(2)

Basis adjustments

Section 1016(a) of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by inserting after paragraph (37) the following:

(38)

to the extent provided in section 1400Z–2(b).

.

(3)

Clerical amendment

The table of subchapters for chapter 1 of such Code is amended by adding at the end the following new item:

Subchapter Z. Gigabit opportunity zones

.

(4)

Effective date

The amendments made by this subsection shall take effect on the date of the enactment of this Act.

3.

Private activity bonds for qualified broadband projects

(a)

In general

Section 142(a) of the Internal Revenue Code of 1986 is amended by striking or at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting , or, and by adding at the end the following new paragraph:

(16)

qualified broadband projects.

.

(b)

Qualified broadband projects

Section 142 of such Code is amended by adding at the end the following new subsection:

(n)

Qualified broadband project

(1)

In general

For purposes of subsection (a)(16), the term qualified broadband project means any project which—

(A)

is located in a jurisdiction that has been certified by Secretary, in consultation with the National Telecommunications and Information Administration, as having adopted the Uniform Model Broadband Deployment Act prescribed by the Federal Communications Commission pursuant to section 4 of the Gigabit Opportunity Act, and

(B)

results in gigabit capable Internet access to residential or commercial locations—

(i)

where a broadband service provider previously did not provide service, or

(ii)

which do not have broadband service which meets the minimum speed requirements required for universal service support under Phase II of the Connect America Fund of the Federal Communications Commission, as set forth under subpart D of part 54 of title 47, Code of Federal Regulations.

.

(c)

Effective date

The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.

4.

Uniform Model Broadband Act

(a)

In general

Not later than 1 year after the date of the enactment of this Act, the Federal Communications Commission shall publish a Uniform Model Broadband Deployment Act containing laws for the State regulation of the deployment of broadband services.

(b)

No inference relating to data collection

Nothing in this Act or the amendments made by this Act shall be construed to provide additional authority for the collection of data to the Federal Communications Commission or the National Telecommunications and Information Administration.