H.R. 2504 Zero Gravity, Zero Tax Act of 2001 (Introduced in the House)

HR 2504 IH

To amend the Internal Revenue Code of 1986 to provide tax incentives for investing in companies involved in space-related activities.

July 16, 2001

Mr. ROHRABACHER (for himself, Ms. HARMAN, and Mr. CALVERT) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide tax incentives for investing in companies involved in space-related activities.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Zero Gravity, Zero Tax Act of 2001′.

SEC. 2. EXCLUSION OF SPACE-RELATED INCOME FROM GROSS INCOME.

(a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 139 as section 140 and inserting after section 138 the following new section:

`SEC. 139. SPACE-RELATED INCOME.

`(a) GENERAL RULE- Gross income shall not include space-related income.

`(b) SPACE-RELATED INCOME-

`(1) IN GENERAL- For purposes of this section, the term `space-related income’ means–

`(A) income derived from the sale by the taxpayer to an unrelated person of–

`(i) any product or article which is produced by the taxpayer in outer space, and

`(ii) any service provided by the taxpayer in or from outer space,

`(B) income of an individual attributable to services performed in or from outer space by such individual in a trade or business, and

`(C) any amount not described in subparagraph (A) or (B) which is interest, rent, royalty, or similar amount received with respect to production or service described in subparagraph (A) or (B).

`(2) EXCEPTION FOR TELECOMMUNICATIONS SERVICES, ETC- Paragraph (1)(A)(ii) shall not apply to–

`(A) any telecommunications service provided from earth orbit,

`(B) any service provided by a weather or other earth observation satellite, and

`(C) any other service provided on or before the date of the enactment of this section of transporting property to or from outer space.

`(3) EXCEPTION FOR WAGES- Paragraph (1) shall not apply to wages (as defined in section 3401) received by any employee of an employer.

`(4) PROPORTIONAL ALLOCATION BETWEEN SPACE-BASED AND EARTH-BASED ACTIVITIES- In the case of any product or article which is produced partly in space, space-related income shall be an amount which bears the same ratio to the amount of gross income attributable to the sale of such product or article as the expenses attributable to producing such product or article in space bears to the total expenses incurred in producing such product or article.

`(5) PRODUCED- For purposes of this section, the term `produced’ includes created, fabricated, developed, grown, manufactured, extracted, processed, cured, and aged.

`(c) EXCLUSION FROM TARIFFS, ETC- Any product–

`(1) which is manufactured in outer space, and

`(2) which was–

`(A) launched from, and returned to Earth, within the United States, or

`(B) manufactured at a facility in outer space which is owned by 1 or more United States persons,

shall be exempt from all Federal excises, imposts, and duties and any other Federal tariffs.

`(d) PHASEOUT OF BENEFITS- In the case of a taxable year beginning after December 31, 2012, the amount excluded under subsection (a) shall be reduced (but not below zero) by x/10th’s of the amount excludable without regard to this subsection, where `x’ is the number of years such taxable year is after the last taxable year beginning before January 1, 2013. A similar rule shall apply to the benefits under subsection (c).’.

(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items:

`Sec. 139. Space-related income.

`Sec. 140. Cross references to other Acts.’

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 3. CREDIT FOR PURCHASE OF QUALIFIED SPACE COMPANY STOCK.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45G. SPACE COMPANY INVESTMENT CREDIT.

`(a) GENERAL RULE- For purposes of section 38, the space company investment credit determined under this section for any taxable year is the amount paid in the taxable year for the purchase of qualified stock in a qualified space company.

`(b) QUALIFIED SPACE COMPANY- For purposes of this section–

`(1) IN GENERAL- The term `qualified space company’ means a domestic C corporation if for the 3-taxable-year period ending with the taxable year immediately preceding the taxable year in which qualified stock is purchased–

`(A) the average annual gross receipts of such entity does not exceed $100,000,000, and

`(B) more than 70 percent of such gross receipts are derived from space-based business.

`(2) SPACE-BASED BUSINESS- The term `space-based business’ means a business whose gross receipts are substantially space-related income, as defined in section 139(b).

`(3) AGGREGATION RULES- Rules similar to the rules of section 1202(d)(3) shall apply.

`(c) QUALIFIED STOCK- For purposes of this section–

`(1) IN GENERAL- Except as otherwise provided in this section, the term `qualified stock’ means any stock in a domestic C corporation if–

`(A) as of the date of issuance of such stock, such corporation is a qualified space company, and

`(B) except as provided in subsections (f) and (h), such stock is acquired by the taxpayer at its original issue (directly or through an underwriter)–

`(i) in exchange for money or other property (not including stock), or

`(ii) as compensation for services provided to such corporation (other than services performed as an underwriter of such stock).

`(2) ACTIVE BUSINESS REQUIREMENT- Stock in a corporation shall not be treated as qualified stock unless, during substantially all of the taxpayer’s holding period for such stock–

`(A) such corporation meets active business requirements substantially similar to the requirements of section 1202(e), determined on the basis that the qualified trade or business is a space-based business, and

`(B) such corporation is a C corporation.

`(3) CERTAIN PURCHASE BY CORPORATION OF ITS OWN STOCK- Rules similar to the rules of section 1202(c)(3) shall apply.

`(e) RECAPTURE- If, during any taxable year ending with or within the 10-year period beginning on the date qualified stock was purchased by the taxpayer, the issuer of such stock ceases to a qualified space company, the tax under this chapter for such taxable year shall be increased by the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under subsection (a) with respect to such stock.

`(f) TERMINATION- This section shall not apply to stock acquired after December 31, 2009.’.

(b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) of such Code (defining current year business credit) is amended by striking `plus’ at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting `, plus’, and by adding at the end the following new paragraph:

`(16) space company investment credit determined under section 45G(a).’.

(c) CONFORMING AMENDMENTS-

(1) Section 39(d) of such Code is amended by adding at the end the following new paragraph:

`(11) NO CARRYBACK OF SPACE COMPANY INVESTMENT CREDIT BEFORE JANUARY 1, 2002- No portion of the unused business credit for any taxable year which is attributable to the space company investment credit determined under section 45G may be carried back to a taxable year beginning before January 1, 2002.’.

(2) Subsection (c) of section 196 of such Code is amended by striking `and’ at the end of paragraph (9), by striking the period at the end of paragraph (10) and inserting `, and’, and by adding at the end the following new paragraph:

`(11) the space company investment credit determined under section 45G(a).’.

(3) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45G. Space Company Investment Credit.’.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to costs paid or incurred in taxable years beginning after December 31, 2001.

SEC. 4. CAPITAL GAINS EXCLUSION.

(a) IN GENERAL- Part I of subchapter P of the Internal Revenue Code of 1986 (relating to treatment of capital gains) is amended by adding at the end the following new section:

`SEC. 1203. EXCLUSION FOR GAINS FROM SALE OR EXCHANGE OF STOCK OF QUALIFIED SPACE CORPORATIONS.

`(a) IN GENERAL- Gross income shall not include gain on the sale or exchange of any stock of a qualified space corporation.

`(b) QUALIFIED SPACE CORPORATION- For purposes of subsection (a), the term `qualified space corporation’ means, with respect to any taxable year, a domestic corporation which is a C corporation if–

`(1) such corporation is organized exclusively for providing to unrelated persons–

`(A) any product or article which is produced (within the meaning of section 139(b)(5)) by the corporation in outer space, or

`(B) any service provided by the corporation in or from outer space, and

`(2) at least 90 percent of the expenses of such corporation are attributable to the active conduct of a trade or business of providing a product, article, or service described in paragraph (1).

Such term shall not include a corporation providing a service, product, or article described in section 139(b)(2).’.

(2) CLERICAL AMENDMENT- The table of sections for part I of subchapter P of such Code is amended by adding at the end the following new item:

`Sec. 1203. Exclusion for gains from sale or exchange of stock of qualified space corporations.’.

(b) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.