To amend the Internal Revenue Code of 1986 to clarify that certain settlement funds established under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 are beneficially owned by the United States and are not subject to tax.

February 13, 2003

Mr. HOUGHTON (for himself, Mr. BECERRA, and Mr. BOEHLERT) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to clarify that certain settlement funds established under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 are beneficially owned by the United States and are not subject to tax.

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

SECTION 1. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENT FUNDS.

Subsection (g) of section 468B of the Internal Revenue Code of 1986 is amended to read as follows:

`(g) CLARIFICATION OF TAXATION OF CERTAIN FUNDS-

`(1) IN GENERAL- Except as provided in paragraph (2), nothing in any provision of law shall be construed as providing that an escrow account, settlement fund, or similar fund is not subject to current income tax. The Secretary shall prescribe regulations providing for the taxation of any such account or fund whether as a grantor trust or otherwise.

`(2) EXEMPTION FROM TAX FOR CERTAIN SETTLEMENT FUNDS- An escrow account, settlement fund, or similar fund shall be treated as beneficially owned by the United States and shall be exempt from taxation under this subtitle if--

`(A) it is established pursuant to a consent decree entered by a judge of a United States District Court,

`(B) it is created for the receipt of settlement payments as directed by a government entity for the sole purpose of resolving or satisfying one or more claims asserting liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980,

`(C) the authority and control over the expenditure of funds therein (including the expenditure of contributions thereto and any net earnings thereon) is with such government entity, and

`(D) upon termination, any remaining funds will be disbursed upon instructions by such government entity in accordance with applicable law.

For purposes of this paragraph, the term `government entity' means the United States, any State or political subdivision thereof, the District of Columbia, any possession of the United States, and any agency or instrumentality of any of the foregoing.'.

SEC. 2. EFFECTIVE DATE.

The amendment made by this Act shall apply as if included in the provision of the Tax Reform Act of 1986 to which it relates.

END