To amend the Internal Revenue Code of 1986 to provide for S corporation reform, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE, REFERENCE.
(a) Short Title.--This Act may be cited as the ``S Corporation Modernization Act of 2011''. (b) Amendment of 1986 Code.--Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
SEC. 2. REDUCED RECOGNITION PERIOD FOR BUILT-IN GAINS MADE PERMANENT.
(a) In General.--Paragraph (7) of section 1374(d) (relating to definitions and special rules) is amended to read as follows: ``(7) Recognition period.--The term `recognition period' means the 5-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation. For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593(e), the preceding sentence shall be applied without regard to the duration of the recognition period in effect on the date of such distribution.''. (b) Effective Date.--The amendment made by this section-- (1) shall apply for purposes of determining the recognition period with respect to 1st days referred to in section 1374(d)(7) of the Internal Revenue Code of 1986 occurring...