SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY.

SEC. 909. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY.(a) In General.—Section 451 (relating to general rule for taxable year of inclusion) is amended by adding at the end the following new subsection:“(i) Special Rule for Sales or Dispositions To Implement Federal Energy Regulatory Commission or State Electric Restructuring Policy.—“(1) In general.—In the case of any qualifying electric transmission transaction for which the taxpayer elects the application of this section, qualified gain from such transaction shall be recognized—“(A) in the taxable year which includes the date of such transaction to the extent the amount realized from such transaction exceeds—“(i) the cost of exempt utility property which is purchased by the taxpayer during the 4-year period beginning on such date, reduced (but not below zero) by“(ii) any portion of such cost previously taken into account under this subsection, and“(B) ratably over the 8-taxable year period beginning with the taxable year which includes the date of such transaction, in the case of any such gain not recognized under subparagraph (A).“(2) Qualified gain.—For purposes of this subsection, the term ‘qualified gain’ means, with respect to any qualifying electric transmission transaction in any taxable year—“(A) any ordinary income derived from such transaction which would be required to be recognized under section 1245 or 1250 for such taxable year (determined without regard to this subsection), and“(B) any income derived from such transaction in excess of the amount described in subparagraph (A) which is required to be included in gross income for such taxable year (determined without regard to this subsection).“(3) Qualifying electric transmission transaction.—For purposes of this subsection, the term ‘qualifying electric 118 STAT. 1658 transmission transaction’ means any sale or other disposition before January 1, 2007, of—“(A) property used in the trade or business of providing electric transmission services, or“(B) any stock or partnership interest in a corporation or partnership, as the case may be, whose principal trade or business consists of providing electric transmission services,but only if such sale or disposition is to an independent transmission company.“(4) Independent transmission company.—For purposes of this subsection, the term ‘independent transmission company’ means—“(A) an independent transmission provider approved by the Federal Energy Regulatory Commission,“(B) a person—“(i) who the Federal Energy Regulatory Commission determines in its authorization of the transaction under section 203 of the Federal Power Act (16 U.S.C. 824b) or by declaratory order is not a market participant within the meaning of such Commission’s rules applicable to independent transmission providers, and“(ii) whose transmission facilities to which the election under this subsection applies are under the operational control of a Federal Energy Regulatory Commission-approved independent transmission provider before the close of the period specified in such authorization, but not later than the close of the period applicable under subsection (a)(2)(B) as extended under paragraph (2), or“(C) in the case of facilities subject to the jurisdiction of the Public Utility Commission of Texas—“(i) a person which is approved by that Commission as consistent with Texas State law regarding an independent transmission provider, or “(ii) a political subdivision or affiliate thereof whose transmission facilities are under the operational control of a person described in clause (i).“(5) Exempt utility property.—For purposes of this subsection:“(A) In general.—The term ‘exempt utility property’ means property used in the trade or business of—“(i) generating, transmitting, distributing, or selling electricity, or“(ii) producing, transmitting, distributing, or selling natural gas.“(B) Nonrecognition of gain by reason of acquisition of stock.—Acquisition of control of a corporation shall be taken into account under this subsection with respect to a qualifying electric transmission transaction only if the principal trade or business of such corporation is a trade or business referred to in subparagraph (A).“(6) Special rule for consolidated groups.—In the case of a corporation which is a member of an affiliated group filing a consolidated return, any exempt utility property purchased by another member of such group shall be treated 118 STAT. 1659 as purchased by such corporation for purposes of applying paragraph (1)(A).“(7) Time for assessment of deficiencies.—If the taxpayer has made the election under paragraph (1) and any gain is recognized by such taxpayer as provided in paragraph (1)(B), then—“(A) the statutory period for the assessment of any deficiency, for any taxable year in which any part of the gain on the transaction is realized, attributable to such gain shall not expire prior to the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may by regulations prescribe) of the purchase of exempt utility property or of an intention not to purchase such property, and“(B) such deficiency may be assessed before the expiration of such 3-year period notwithstanding any law or rule of law which would otherwise prevent such assessment. “(8) Purchase.—For purposes of this subsection, the taxpayer shall be considered to have purchased any property if the unadjusted basis of such property is its cost within the meaning of section 1012.“(9) Election.—An election under paragraph (1) shall be made at such time and in such manner as the Secretary may require and, once made, shall be irrevocable.“(10) Nonapplication of installment sales treatment.—Section 453 shall not apply to any qualifying electric transmission transaction with respect to which an election to apply this subsection is made.”.(b) Effective Date.—The amendments made by this section shall apply to transactions occurring after the date of the enactment of this Act, in taxable years ending after such date.