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H.R.3081
Small Business Tax Fairness Act of 2000 (Placed on the Calendar in
the Senate)
TITLE III--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
SEC. 301. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) MAXIMUM RATE OF TAX REDUCED TO 50 PERCENT-
(1) IN GENERAL- The table contained in section 2001(c)(1) is amended by
striking the two highest brackets and inserting the following:
`Over $2,500,000
$1,025,800, plus 50% of the excess over $2,500,000.'.
(2) PHASE-IN OF REDUCED RATE- Subsection (c) of section 2001 is amended
by adding at the end the following new paragraph:
`(3) PHASE-IN OF REDUCED RATE- In the case of decedents dying, and gifts
made, during 2001, the last item in the table contained in paragraph (1)
shall be applied by substituting `53%' for `50%'.'.
(b) REPEAL OF PHASEOUT OF GRADUATED RATES- Subsection (c) of section 2001
is amended by striking paragraph (2) and redesignating paragraph (3), as added
by subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS OF RATES OF TAX- Subsection (c) of section 2001,
as so amended, is amended by adding at the end the following new paragraph:
`(3) PHASEDOWN OF TAX- In the case of estates of decedents dying, and
gifts made, during any calendar year after 2002--
`(A) IN GENERAL- Except as provided in subparagraph (C), the tentative
tax under this subsection shall be determined by using a table prescribed
by the Secretary (in lieu of using the table contained in paragraph (1))
which is the same as such table; except that--
`(i) each of the rates of tax shall be reduced by the number of
percentage points determined under subparagraph (B), and
`(ii) the amounts setting forth the tax shall be adjusted to the
extent necessary to reflect the adjustments under clause
(i).
`(B) PERCENTAGE POINTS OF REDUCTION-
--The number of
`For calendar year:
--percentage points is:
--1.0
--2.0.
`(C) TABLE FOR YEARS AFTER 2004- The table applicable under this
subsection to estates of decedents dying, and gifts made, during calendar
year 2004 shall apply to estates of decedents dying, and gifts made, after
calendar year 2004.
`(D) COORDINATION WITH CREDIT FOR STATE DEATH TAXES- Rules similar to
the rules of subparagraph (A) shall apply to the table contained in
section 2011(b) except that the Secretary shall prescribe percentage point
reductions which maintain the proportionate relationship (as in effect
before any reduction under this paragraph) between the credit under
section 2011 and the tax rates under subsection (c).'.
(1) SUBSECTIONS (a) AND (b)- The amendments made by subsections (a) and
(b) shall apply to estates of decedents dying, and gifts made, after
December 31, 2000.
(2) SUBSECTION (c)- The amendment made by subsection (c) shall apply to
estates of decedents dying, and gifts made, after December 31, 2002.
SEC. 302. SENSE OF THE CONGRESS CONCERNING REPEAL OF THE DEATH TAX.
(a) FINDINGS- Congress finds the following:
(1) The death tax stifles economic growth by taking productive resources
out of the private sector, thereby causing unemployment and inhibiting job
creation.
(2) The death tax penalizes hard work and entrepreneurial activity by
causing the demise of small, family-owned businesses when an owner
dies.
(3) The death tax rates in the United States are the second highest
among all industrialized nations.
(4) The death tax prevents minorities from gaining an economic foothold
in the economy since it limits the inter-generational transfer of wealth,
which is critical to establishing a legacy and power base for minorities in
our society.
(5) The death tax presents serious challenges for farmers whose value is
in their land, not liquid assets, and who must sell land to pay the tax,
thereby jeopardizing the future existence of the already-struggling family
farm.
(6) The death tax contributes to the development of rural areas by
causing farms and ranches to be sold and subdivided.
(7) Previous attempts by Congress to create death tax exemptions have
been ineffective due to an inability to legislatively duplicate the complex
family relationships that exist in our society.
(8) Increasing entrepreneurship and investment in retirement will bring
a whole new class of people under the death tax.
(b) SENSE OF CONGRESS- It is the sense of the Congress that the death tax
relief in this Act is considered a first step in our effort to ultimately
repeal this onerous tax.
Subtitle B--Unified Credit Replaced With Unified Exemption
Amount
SEC. 311. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH UNIFIED
EXEMPTION AMOUNT.
(1) ESTATE TAX- Subsection (b) of section 2001 (relating to computation
of tax) is amended to read as follows:
`(1) IN GENERAL- The tax imposed by this section shall be the amount
equal to the excess (if any) of--
`(A) the tentative tax determined under paragraph (2), over
`(B) the aggregate amount of tax which would have been payable under
chapter 12 with respect to gifts made by the decedent after December 31,
1976, if the provisions of subsection (c) (as in effect at the decedent's
death) had been applicable at the time of such gifts.
`(2) TENTATIVE TAX- For purposes of paragraph (1), the tentative tax
determined under this paragraph is a tax computed under subsection (c) on
the excess of--
`(i) the amount of the taxable estate, and
`(ii) the amount of the adjusted taxable gifts, over
`(B) the exemption amount for the calendar year in which the decedent
died.
`(3) EXEMPTION AMOUNT- For purposes of paragraph (2), the term
`exemption amount' means the amount determined in accordance with the
following table:
`In the case of
--The exemption
calendar year:
--amount is:
2001
--$675,000
2002 and 2003
--$700,000
2004
--$850,000
2005
--$950,000
2006 or thereafter
--$1,000,000.
`(4) ADJUSTED TAXABLE GIFTS- For purposes of paragraph (2), the term
`adjusted taxable gifts' means the total amount of the taxable gifts (within
the meaning of section 2503) made by the decedent after December 31, 1976,
other than gifts which are includible in the gross estate of the
decedent.'.
(2) GIFT TAX- Subsection (a) of section 2502 (relating to computation of
tax) is amended to read as follows:
`(1) IN GENERAL- The tax imposed by section 2501 for each calendar year
shall be the amount equal to the excess (if any) of--
`(A) the tentative tax determined under paragraph (2), over
`(B) the tax paid under this section for all prior calendar
periods.
`(2) TENTATIVE TAX- For purposes of paragraph (1), the tentative tax
determined under this paragraph for a calendar year is a tax computed under
section 2001(c) on the excess of--
`(A) the aggregate sum of the taxable gifts for such calendar year and
for each of the preceding calendar periods, over
`(B) the exemption amount under section 2001(b)(3) for such calendar
year.'.
(b) REPEAL OF UNIFIED CREDITS-
(1) Section 2010 (relating to unified credit against estate tax) is
hereby repealed.
(2) Section 2505 (relating to unified credit against gift tax) is hereby
repealed.
(c) CONFORMING AMENDMENTS-
(1)(A) Subsection (b) of section 2011 is amended--
(i) by striking `adjusted' in the table; and
(ii) by striking the last sentence.
(B) Subsection (f) of section 2011 is amended by striking `, reduced by
the amount of the unified credit provided by section 2010'.
(2) Subsection (a) of section 2012 is amended by striking `and the
unified credit provided by section 2010'.
(3) Subparagraph (A) of section 2013(c)(1) is amended by striking
`2010,'.
(4) Paragraph (2) of section 2014(b) is amended by striking
`2010,'.
(5) Clause (ii) of section 2056A(b)(12)(C) is amended to read as
follows:
`(ii) to treat any reduction in the tax imposed by paragraph (1)(A)
by reason of the credit allowable under section 2010 (as in effect on
the day before the date of the enactment of the Small Business Tax
Fairness Act of 2000) or the exemption amount allowable under section
2001(b) with respect to the decedent as a credit under section 2505 (as
so in effect) or exemption under section 2521 (as the case may be)
allowable to such surviving spouse for purposes of determining the
amount of the exemption allowable under section 2521 with respect to
taxable gifts made by the surviving spouse during the year in which the
spouse becomes a citizen or any subsequent year,'.
(6) Subsection (a) of section 2057 is amended by striking paragraphs (2)
and (3) and inserting the following new paragraph:
`(2) MAXIMUM DEDUCTION- The deduction allowed by this section shall not
exceed the excess of $1,300,000 over the exemption amount (as defined in
section 2001(b)(3)).'.
(7)(A) Subsection (b) of section 2101 is amended amended to read as
follows:
`(1) IN GENERAL- The tax imposed by this section shall be the amount
equal to the excess (if any) of--
`(A) the tentative tax determined under paragraph (2), over
`(B) a tentative tax computed under section 2001(c) on the amount of
the adjusted taxable gifts.
`(2) TENTATIVE TAX- For purposes of paragraph (1), the tentative tax
determined under this paragraph is a tax computed under section 2001(c) on
the excess of--
`(i) the amount of the taxable estate, and
`(ii) the amount of the adjusted taxable gifts, over
`(B) the exemption amount for the calendar year in which the decedent
died.
`(A) IN GENERAL- The term `exemption amount' means $60,000.
`(B) RESIDENTS OF POSSESSIONS OF THE UNITED STATES- In the case of a
decedent who is considered to be a nonresident not a citizen of the United
States under section 2209, the exemption amount under this paragraph shall
be the greater of--
`(ii) that proportion of $175,000 which the value of that part of
the decedent's gross estate which at the time of his death is situated
in the United States bears to the value of his entire gross estate
wherever situated.
`(i) COORDINATION WITH TREATIES- To the extent required under any
treaty obligation of the United States, the exemption amount allowed
under this paragraph shall be equal to the amount which bears the same
ratio to the exemption amount under section 2001(b)(3) (for the calendar
year in which the decedent died) as the value of the part of the
decedent's gross estate which at the time of his death is situated in
the United States bears to the value of his entire gross estate wherever
situated. For purposes of the preceding sentence, property shall not be
treated as situated in the United States if such property is exempt from
the tax imposed by this subchapter under any treaty obligation of the
United States.
`(ii) COORDINATION WITH GIFT TAX EXEMPTION AND UNIFIED CREDIT- If an
exemption has been allowed under section 2521 (or a credit has been
allowed under section 2505 as in effect on the day before the date of
the enactment of the Small Business Tax Fairness Act of 2000) with
respect to any gift made by the decedent, each dollar amount contained
in subparagraph (A) or (B) or the exemption amount applicable under
clause (i) of this subparagraph (whichever applies) shall be reduced by
the exemption so allowed under 2521 (or, in the case of such a credit,
by the amount of the gift for which the credit was so
allowed).'.
(8) Section 2102 is amended by striking subsection (c).
(9)(A) Subsection (a) of section 2107 is amended by adding at the end
the following new paragraph:
`(3) LIMITATION ON EXEMPTION AMOUNT- Subparagraphs (B) and (C) of
section 2101(b)(3) shall not apply in applying section 2101 for purposes of
this section.'.
(B) Subsection (c) of section 2107 is amended--
(i) by striking paragraph (1) and by redesignating paragraphs (2)
and (3) as paragraphs (1) and (2), respectively; and
(ii) by striking the second sentence of paragraph (2) (as so
redesignated).
(10) Paragraph (1) of section 6018(a) is amended by striking `the
applicable exclusion amount in effect under section 2010(c)' and inserting
`the exemption amount under section 2001(b)(3)'.
(11) Subparagraph (A) of section 6601(j)(2) is amended to read as
follows:
`(A) the amount of the tentative tax which would be determined under
the rate schedule set forth in section 2001(c) if the amount with respect
to which such tentative tax is to be computed were $1,000,000,
or'.
(12) The table of sections for part II of subchapter A of chapter 11 is
amended by striking the item relating to section 2010.
(20) The table of sections for subchapter A of chapter 12 is amended by
striking the item relating to section 2505.
(13) The table of sections for subchapter C of chapter 12 is amended by
inserting before the item relating to section 2522 the following new
item:
`Sec. 2521. Exemption.'.
(d) EFFECTIVE DATE- The amendments made by this section--
(1) insofar as they relate to the tax imposed by chapter 11 of the
Internal Revenue Code of 1986, shall apply to estates of decedents dying
after December 31, 2000; and
(2) insofar as they relate to the tax imposed by chapter 12 of such
Code, shall apply to gifts made after December 31, 2000.
Subtitle C--Modifications of Generation-skipping Transfer
Tax
SEC. 321. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO
TRUSTS; RETROACTIVE ALLOCATIONS.
(a) IN GENERAL- Section 2632 (relating to special rules for allocation of
GST exemption) is amended by redesignating subsection (c) as subsection (e)
and by inserting after subsection (b) the following new subsections:
`(c) DEEMED ALLOCATION TO CERTAIN LIFETIME TRANSFERS TO GST TRUSTS-
`(1) IN GENERAL- If any individual makes an indirect skip during such
individual's lifetime, any unused portion of such individual's GST exemption
shall be allocated to the property transferred to the extent necessary to
make the inclusion ratio for such property zero. If the amount of the
indirect skip exceeds such unused portion, the entire unused portion shall
be allocated to the property transferred.
`(2) UNUSED PORTION- For purposes of paragraph (1), the unused portion
of an individual's GST exemption is that portion of such exemption which has
not previously been--
`(A) allocated by such individual,
`(B) treated as allocated under subsection (b) with respect to a
direct skip occurring during or before the calendar year in which the
indirect skip is made, or
`(C) treated as allocated under paragraph (1) with respect to a prior
indirect skip.
`(A) INDIRECT SKIP- For purposes of this subsection, the term
`indirect skip' means any transfer of property (other than a direct skip)
subject to the tax imposed by chapter 12 made to a GST trust.
`(B) GST TRUST- The term `GST trust' means a trust that could have a
generation-skipping transfer with respect to the transferor
unless--
`(i) the trust instrument provides that more than 25 percent of the
trust corpus must be distributed to or may be withdrawn by one or more
individuals who are non-skip persons--
`(I) before the date that the individual attains age
46,
`(II) on or before one or more dates specified in the trust
instrument that will occur before the date that such individual
attains age 46, or
`(III) upon the occurrence of an event that, in accordance with
regulations prescribed by the Secretary, may reasonably be expected to
occur before the date that such individual attains age
46;
`(ii) the trust instrument provides that more than 25 percent of the
trust corpus must be distributed to or may be withdrawn by one or more
individuals who are non-skip persons and who are living on the date of
death of another person identified in the instrument (by name or by
class) who is more than 10 years older than such
individuals;
`(iii) the trust instrument provides that, if one or more
individuals who are non-skip persons die on or before a date or event
described in clause (i) or (ii), more than 25 percent of the trust
corpus either must be distributed to the estate or estates of one or
more of such individuals or is subject to a general power of appointment
exercisable by one or more of such individuals;
`(iv) the trust is a trust any portion of which would be included in
the gross estate of a non-skip person (other than the transferor) if
such person died immediately after the transfer;
`(v) the trust is a charitable lead annuity trust (within the
meaning of section 2642(e)(3)(A)) or a charitable remainder annuity
trust or a charitable remainder unitrust (within the meaning of section
664(d)); or
`(vi) the trust is a trust with respect to which a deduction was
allowed under section 2522 for the amount of an interest in the form of
the right to receive annual payments of a fixed percentage of the net
fair market value of the trust property (determined yearly) and which is
required to pay principal to a non-skip person if such person is alive
when the yearly payments for which the deduction was allowed
terminate.
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