asset exchange or conversion transaction

(12) (A) Benevolent life insurance associations of a purely local character, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations; but only if 85 percent or more of the income consists of amounts collected from members for the sole purpose of meeting losses and expenses. (B) In the case of a mutual or cooperative telephone company, subparagraph (A) shall be applied without taking into account any income received or accrued— (i) from a nonmember telephone company for the performance of communication services which involve members of the mutual or cooperative telephone company, (ii) from qualified pole rentals, (iii) from the sale of display listings in a directory furnished to the members of the mutual or cooperative telephone company, or (iv) from the prepayment of a loan under section 306A , 306B , or 311 of the Rural Electrification Act of 1936 (as in effect on January 1, 1987 ). (C) In the case of a mutual or cooperative electric company, subparagraph (A) shall be applied without taking into account any income received or accrued— (i) from qualified pole rentals, or (ii) from any provision or sale of electric energy transmission services or ancillary services if such services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by FERC or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), (iii) from the provision or sale of electric energy distribution services or ancillary services if such services are provided on a nondiscriminatory open access basis to distribute electric energy not owned by the mutual or electric cooperative company— (I) to end-users who are served by distribution facilities not owned by such company or any of its members (other than income received or accrued directly or indirectly from a member), or (II) generated by a generation facility not owned or leased by such company or any of its members and which is directly connected to distribution facilities owned by such company or any of its members (other than income received or accrued directly or indirectly from a member), (iv) from any nuclear decommissioning transaction, or (v) from any asset exchange or conversion transaction. (D) For purposes of this paragraph, the term “qualified pole rental” means any rental of a pole (or other structure used to support wires) if such pole (or other structure)— (i) is used by the telephone or electric company to support one or more wires which are used by such company in providing telephone or electric services to its members, and (ii) is used pursuant to the rental to support one or more wires (in addition to the wires described in clause (i)) for use in connection with the transmission by wire of electricity or of telephone or other communications. For purposes of the preceding sentence, the term “rental” includes any sale of the right to use the pole (or other structure). (E) For purposes of subparagraph (C)(ii), the term “FERC” means— (i) the Federal Energy Regulatory Commission, or (ii) in the case of any utility with respect to which all of the electricity generated, transmitted, or distributed by such utility is generated, transmitted, distributed, and consumed in the same State, the State agency of such State with the authority to regulate electric utilities. (F) For purposes of subparagraph (C)(iv), the term “nuclear decommissioning transaction” means— (i) any transfer into a trust, fund, or instrument established to pay any nuclear decommissioning costs if the transfer is in connection with the transfer of the mutual or cooperative electric company’s interest in a nuclear power plant or nuclear power plant unit, (ii) any distribution from any trust, fund, or instrument established to pay any nuclear decommissioning costs, or (iii) any earnings from any trust, fund, or instrument established to pay any nuclear decommissioning costs. (G) For purposes of subparagraph (C)(v), the term “asset exchange or conversion transaction” means any voluntary exchange or involuntary conversion of any property related to generating, transmitting, distributing, or selling electric energy by a mutual or cooperative electric company, the gain from which qualifies for deferred recognition under section 1031 or 1033, but only if the replacement property acquired by such company pursuant to such section constitutes property which is used, or to be used, for— (i) generating, transmitting, distributing, or selling electric energy, or (ii) producing, transmitting, distributing, or selling natural gas. (H) (i) In the case of a mutual or cooperative electric company described in this paragraph or an organization described in section 1381(a)(2)(C), income received or accrued from a load loss transaction shall be treated as an amount collected from members for the sole purpose of meeting losses and expenses. (ii) For purposes of clause (i), the term “load loss transaction” means any wholesale or retail sale of electric energy (other than to members) to the extent that the aggregate sales during the recovery period do not exceed the load loss mitigation sales limit for such period. (iii) For purposes of clause (ii), the load loss mitigation sales limit for the recovery period is the sum of the annual load losses for each year of such period. (iv) For purposes of clause (iii), a mutual or cooperative electric company’s annual load loss for each year of the recovery period is the amount (if any) by which— (I) the megawatt hours of electric energy sold during such year to members of such electric company are less than (II) the megawatt hours of electric energy sold during the base year to such members. (v) For purposes of clause (iv)(II), the term “base year” means— (I) the calendar year preceding the start-up year, or (II) at the election of the mutual or cooperative electric company, the second or third calendar years preceding the start-up year. (vi) For purposes of this subparagraph, the recovery period is the 7-year period beginning with the start-up year. (vii) For purposes of this subparagraph, the start-up year is the first year that the mutual or cooperative electric company offers nondiscriminatory open access or the calendar year which includes the date of the enactment of this subparagraph, if later, at the election of such company. (viii) A company shall not fail to be treated as a mutual or cooperative electric company for purposes of this paragraph or as a corporation operating on a cooperative basis for purposes of section 1381(a)(2)(C) by reason of the treatment under clause (i). (ix) For purposes of subparagraph (A), in the case of a mutual or cooperative electric company, income received, or accrued, indirectly from a member shall be treated as an amount collected from members for the sole purpose of meeting losses and expenses. (I) In the case of a mutual or cooperative electric company described in this paragraph or an organization described in section 1381(a)(2), income received or accrued in connection with an election under section 45J(e)(1) shall be treated as an amount collected from members for the sole purpose of meeting losses and expenses.

Source

26 USC § 501(c)(12)


Scoping language

For purposes of this paragraph
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