S 1379 IS

To amend the Internal Revenue Code of 1986 to provide broad based tax relief for all taxpaying families, to mitigate the marriage penalty, to expand retirement savings, to phase out gift and estate taxes, and for other purposes.

July 15, 1999

Mr. DOMENICI introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to provide broad based tax relief for all taxpaying families, to mitigate the marriage penalty, to expand retirement savings, to phase out gift and estate taxes, 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; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Share the Surplus Tax Reduction and Simplification Act'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I--TAX RELIEF

Sec. 11. Broad based tax relief for all taxpaying families.

Sec. 12. Marriage penalty mitigation and tax burden reduction.

TITLE II--SAVING AND INVESTMENT PROVISIONS

Sec. 21. Dividend and interest tax relief.

Sec. 22. Long-term capital gains deduction for individuals.

Sec. 23. Increase in contribution limits for traditional IRAs.

TITLE III--BUSINESS INVESTMENT PROVISIONS

Sec. 31. Repeal of alternative minimum tax on corporations.

Sec. 32. Increase in limit for expensing certain business assets.

TITLE IV--ESTATE AND GIFT TAX RELIEF

Sec. 41. Phaseout of estate and gift taxes.

TITLE V--RESEARCH CREDIT EXTENSION AND MODIFICATION

Sec. 51. Purpose.

Sec. 52. Permanent extension of research credit.

Sec. 53. Improved alternative incremental credit.

Sec. 54. Modifications to credit for basic research.

Sec. 55. Credit for expenses attributable to certain collaborative research consortia.

Sec. 56. Improvement to credit for small businesses and research partnerships.

TITLE VI--ENERGY INDEPENDENCE

Sec. 61. Purposes.

Sec. 62. Tax credit for marginal domestic oil and natural gas well production.

Sec. 63. 10-year carryback for unused minimum tax credit.

Sec. 64. 10-year net operating loss carryback for losses attributable to oil servicing companies and mineral interests of oil and gas producers.

Sec. 65. Waiver of limitations.

Sec. 66. Election to expense geological and geophysical expenditures and delay rental payments.

TITLE VII--REVENUE PROVISION

Sec. 71. 4-year averaging for conversion of traditional IRA to Roth IRA.

TITLE I--TAX RELIEF

SEC. 11. BROAD BASED TAX RELIEF FOR ALL TAXPAYING FAMILIES.

(a) PURPOSE- The purpose of this section is to cut taxes for 120,000,000 taxpaying families by lowering the 15 percent tax rate.

(b) IN GENERAL- Section 1 of the Internal Revenue Code of 1986 (relating to tax imposed) is amended--

(1) by striking `15%' each place it appears in the tables in subsections (a) through (e) and inserting `The applicable rate', and

(2) by adding at the end the following:

`(i) APPLICABLE RATE- For purposes of this section, the applicable rate for any taxable year shall be determined in accordance with the following table:

The applicable rate is:

14.9 percent

14.8 percent

14.7 percent

14.1 percent

13.5 percent.'

(b) CONFORMING AMENDMENTS-

(1) Section 1(f)(2) of the Internal Revenue Code of 1986 is amended--

(A) by inserting `except as provided in subsection (i),' before `by not changing' in subparagraph (B), and

(B) by inserting `and the adjustment in rates under subsection (i)' after `rate brackets' in subparagraph (C).

(2) Section 1(g)(7)(B)(ii)(II) of such Code is amended by striking `15 percent' and inserting `the applicable rate'.

(3) Section 3402(p)(2) of such Code is amended by striking `15 percent' and inserting `the applicable rate in effect under section 1(i) for the taxable year'.

(c) NEW TABLES- Not later than 15 days after the date of enactment of this Act, the Secretary of the Treasury--

(1) shall prescribe tables for taxable years beginning in 2002 which shall reflect the amendments made by this section and which shall apply in lieu of the tables prescribed under sections 1(f)(1) and 3(a) of the Internal Revenue Code of 1986 for such taxable years, and

(2) shall modify the withholding tables and procedures for such taxable years under section 3402(a)(1) of such Code to take effect as if the reduction in the rate of tax under section 1 of such Code (as amended by this section) was attributable to such a reduction effective on such date of enactment.

(d) SECTION 15 NOT TO APPLY- No amendment made by this section shall be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 12. MARRIAGE PENALTY MITIGATION AND TAX BURDEN REDUCTION.

(a) PURPOSE- The purposes of this section are to return 7,000,000 taxpaying families to the 15 percent tax bracket and to cut taxes for 35,000,000 taxpaying families who will benefit from a tax cut of up to $1,300 per family by eliminating or mitigating the marriage penalty for many middle class taxpaying families.

(b) IN GENERAL- Section 1(f) of the Internal Revenue Code of 1986 (relating to adjustments in tax tables so that inflation will not result in tax increases) is amended--

(1) in paragraph (2)--

(A) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D),

(B) by inserting after subparagraph (A) the following:

`(B) in the case of the tables contained in subsections (a), (b), (c), and (d), by increasing the maximum taxable income level for the lowest rate bracket and the minimum taxable income level for the 28 percent rate bracket otherwise determined under subparagraph (A) for taxable years beginning in any calendar year after 2001, by the applicable dollar amount for such calendar year,', and

(C) by striking `subparagraph (A)' in subparagraph (C) (as so redesignated) and inserting `subparagraphs (A) and (B)', and

(2) by adding at the end the following:

`(8) APPLICABLE DOLLAR AMOUNT- For purposes of paragraph (2)(B), the applicable dollar amount for any calendar year shall be determined as follows:

`(A) JOINT RETURNS AND SURVIVING SPOUSES- In the case of the table contained in subsection (a)--

$2,000

$4,000

$6,000

$8,000

$10,000.

`(B) OTHER TABLES- In the case of the table contained in subsection (b), (c), or (d)--

$1,000

$2,000

$3,000

$4,000

$5,000.'.

SEC. 13. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDIVIDUALS.

(a) PURPOSES- The purposes of this section are--

(1) to simplify the tax code so that millions of Americans will no longer be required to calculate their income taxes under 2 systems; and

(2) to recognize that tax credits should not be denied to individuals who are eligible for such credit.

(b) IN GENERAL- Subsection (a) of section 55 of the Internal Revenue Code of 1986 is amended by adding at the end the following new flush sentence:

`For purposes of this title, the tentative minimum tax on any taxpayer other than a corporation for any taxable year beginning after December 31, 2009, shall be zero.'

(c) REDUCTION OF TAX ON INDIVIDUALS PRIOR TO REPEAL- Section 55 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

`(f) PHASEOUT OF TAX ON INDIVIDUALS-

`(1) IN GENERAL- The tax imposed by this section on a taxpayer other than a corporation for any taxable year beginning after December 31, 2004, and before January 1, 2010, shall be the applicable percentage of the tax which would be imposed but for this subsection.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage shall be determined in accordance with the following table:

`For taxable years beginning

--The applicable

in calendar year--

--percentage is--

2005

--80

2006

--70

2007

--60

2008 or 2009

--50.'

(d) NONREFUNDABLE PERSONAL CREDITS FULLY ALLOWED AGAINST REGULAR TAX LIABILITY-

(1) IN GENERAL- Subsection (a) of section 26 of the Internal Revenue Code of 1986 (relating to limitation based on amount of tax) is amended to read as follows:

`(a) LIMITATION BASED ON AMOUNT OF TAX- The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the taxpayer's regular tax liability for the taxable year.'

(2) CHILD CREDIT- Subsection (d) of section 24 of such Code is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2).

(e) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY- Subsection (c) of section 53 of the Internal Revenue Code of 1986 is amended to read as follows:

`(c) LIMITATION-

`(1) IN GENERAL- Except as otherwise provided in this subsection, the credit allowable under subsection (a) for any taxable year shall not exceed the excess (if any) of--

`(A) the regular tax liability of the taxpayer for such taxable year reduced by the sum of the credits allowable under subparts A, B, D, E, and F of this part, over

`(B) the tentative minimum tax for the taxable year.

`(2) TAXABLE YEARS BEGINNING AFTER 2009- In the case of any taxable year beginning after 2009, the credit allowable under subsection (a) to a taxpayer other than a corporation for any taxable year shall not exceed 90 percent of the excess (if any) of--

`(A) regular tax liability of the taxpayer for such taxable year, over

`(B) the sum of the credits allowable under subparts A, B, D, E, and F of this part.'

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

TITLE II--SAVING AND INVESTMENT PROVISIONS

SEC. 21. DIVIDEND AND INTEREST TAX RELIEF.

(a) PURPOSES- The purposes of this section are--

(1) to provide an incremental step toward taxing income that is consumed rather than income that is earned and saved;

(2) to simplify the tax code by eliminating 67,000,000 hours spent on tax preparation;

(3) to eliminate all income tax on savings for more than 30,000,000 middle class families;

(4) to reduce income taxes on savings for 37,000,000 individuals; and

(5) to allow a $10,000 nest egg to grow tax-free and let individuals experience the miracle of compound interest.

(b) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to amounts specifically excluded from gross income) is amended by inserting after section 115 the following new section:

`SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST RECEIVED BY INDIVIDUALS.

`(a) EXCLUSION FROM GROSS INCOME- Gross income does not include the sum of the amounts received during the taxable year by an individual as--

`(1) dividends from domestic corporations, or

`(2) interest.

`(b) LIMITATIONS-

`(1) MAXIMUM AMOUNT- The aggregate amount excluded under subsection (a) for any taxable year shall not exceed $250 ($500 in the case of a joint return).

`(2) CERTAIN DIVIDENDS EXCLUDED- Subsection (a)(1) shall not apply to any dividend from a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organization) or section 521 (relating to farmers' cooperative associations).

`(c) INTEREST- For purposes of this section, the term `interest' means--

`(1) interest on deposits with a bank (as defined in section 581),

`(2) amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares, by--

`(A) a mutual savings bank, cooperative bank, domestic building and loan association, industrial loan association or bank, or credit union, or

`(B) any other savings or thrift institution which is chartered and supervised under Federal or State law,

the deposits or accounts in which are insured under Federal or State law or which are protected and guaranteed under State law,

`(3) interest on--

`(A) evidences of indebtedness (including bonds, debentures, notes, and certificates) issued by a domestic corporation in registered form, and

`(B) to the extent provided in regulations prescribed by the Secretary, other evidences of indebtedness issued by a domestic corporation of a type offered by corporations to the public,

`(4) interest on obligations of the United States, a State, or a political subdivision of a State (not excluded from gross income of the taxpayer under any other provision of law), and

`(5) interest attributable to participation shares in a trust established and maintained by a corporation established pursuant to Federal law.

`(d) SPECIAL RULES- For purposes of this section--

`(1) DISTRIBUTIONS FROM REGULATED INVESTMENT COMPANIES AND REAL ESTATE INVESTMENT TRUSTS- Subsection (a) shall apply with respect to distributions by--

`(A) regulated investment companies to the extent provided in section 854(c), and

`(B) real estate investment trusts to the extent provided in section 857(c).

`(2) DISTRIBUTIONS BY A TRUST- For purposes of subsection (a), the amount of dividends and interest properly allocable to a beneficiary under section 652 or 662 shall be deemed to have been received by the beneficiary ratably on the same date that the dividends and interest were received by the estate or trust.

`(3) CERTAIN NONRESIDENT ALIENS INELIGIBLE FOR EXCLUSION- In the case of a nonresident alien individual, subsection (a) shall apply only--

`(A) in determining the tax imposed for the taxable year pursuant to section 871(b)(1) and only in respect of dividends and interest which are effectively connected with the conduct of a trade or business within the United States, or

`(B) in determining the tax imposed for the taxable year pursuant to section 877(b).'.

(c) CONFORMING AMENDMENTS-

(1) The table of sections for part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 115 the following:

`Sec. 116. Partial exclusion of dividends and interest received by individuals.'.

(2) Paragraph (2) of section 265(a) of such Code is amended by inserting before the period at the end the following: `, or to purchase or carry obligations or shares, or to make deposits, to the extent the interest thereon is excludable from gross income under section 116'.

(3) Subsection (c) of section 584 of such Code is amended by adding at the end the following new flush sentence:

`The proportionate share of each participant in the amount of dividends or interest received by the common trust fund and to which section 116 applies shall be considered for purposes of such section as having been received by such participant.'.

(4) Subsection (a) of section 643 of such Code is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following:

`(7) DIVIDENDS OR INTEREST- There shall be included the amount of any dividends or interest excluded from gross income pursuant to section 116.'.

(5) Section 854 of such Code is amended by adding at the end the following:

`(c) TREATMENT UNDER SECTION 116-

`(1) IN GENERAL- For purposes of section 116, in the case of any dividend (other than a dividend described in subsection (a)) received from a regulated investment company which meets the requirements of section 852 for the taxable year in which it paid the dividend--

`(A) the entire amount of such dividend shall be treated as a dividend if the sum of the aggregate dividends and the aggregate interest received by such company during the taxable year equals or exceeds 75 percent of its gross income, or

`(B) if subparagraph (A) does not apply, there shall be taken into account under section 116 only the portion of such dividend which bears the same ratio to the amount of such dividend as the sum of the aggregate dividends received and aggregate interest received bears to gross income.

For purposes of the preceding sentence, gross income and aggregate interest received shall each be reduced by so much of the deduction allowable by section 163 for the taxable year as does not exceed aggregate interest received for the taxable year.

`(2) NOTICE TO SHAREHOLDERS- The amount of any distribution by a regulated investment company which may be taken into account as a dividend for purposes of the exclusion under section 116 shall not exceed the amount so designated by the company in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.

`(3) DEFINITIONS- For purposes of this subsection--

`(A) GROSS INCOME- The term `gross income' does not include gain from the sale or other disposition of stock or securities.

`(B) AGGREGATE DIVIDENDS- The term `aggregate dividends' includes only dividends received from domestic corporations other than dividends described in section 116(b)(2). In determining the amount of any dividend for purposes of this subparagraph, the rules provided in section 116(d)(1) (relating to certain distributions) shall apply.

`(C) INTEREST- The term `interest' has the meaning given such term by section 116(c).'.

(6) Subsection (c) of section 857 of such Code is amended to read as follows:

`(c) LIMITATIONS APPLICABLE TO DIVIDENDS RECEIVED FROM REAL ESTATE INVESTMENT TRUSTS-

`(1) IN GENERAL- For purposes of section 116 (relating to an exclusion for dividends and interest received by individuals) and section 243 (relating to deductions for dividends received by corporations), a dividend received from a real estate investment trust which meets the requirements of this part shall not be considered as a dividend.

`(2) TREATMENT AS INTEREST- For purposes of section 116, in the case of a dividend (other than a capital gain dividend, as defined in subsection (b)(3)(C)) received from a real estate investment trust which meets the requirements of this part for the taxable year in which it paid the dividend--

`(A) such dividend shall be treated as interest if the aggregate interest received by the real estate investment trust for the taxable year equals or exceeds 75 percent of its gross income, or

`(B) if subparagraph (A) does not apply, the portion of such dividend which bears the same ratio to the amount of such dividend as the aggregate interest received bears to gross income shall be treated as interest.

`(3) ADJUSTMENTS TO GROSS INCOME AND AGGREGATE INTEREST RECEIVED- For purposes of paragraph (2)--

`(A) gross income does not include the net capital gain,

`(B) gross income and aggregate interest received shall each be reduced by so much of the deduction allowable by section 163 for the taxable year (other than for interest on mortgages on real property owned by the real estate investment trust) as does not exceed aggregate interest received by the taxable year, and

`(C) gross income shall be reduced by the sum of the taxes imposed by paragraphs (4), (5), and (6) of section 857(b).

`(4) INTEREST- The term `interest' has the meaning given such term by section 116(c).

`(5) NOTICE TO SHAREHOLDERS- The amount of any distribution by a real estate investment trust which may be taken into account as interest for purposes of the exclusion under section 116 shall not exceed the amount so designated by the trust in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 22. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

(a) PURPOSES- The purposes of this section are--

(1) to provide an incremental step toward shifting the Internal Revenue Code away from taxing savings and investment,

(2) to lower the cost of capital so that prosperity, better paying jobs, and innovation will continue in the United States,

(3) to eliminate capital gain taxes for 10,000,000 families, 75 percent of whom have annual incomes of $75,000 or less, and

(4) to simplify the tax code and thereby eliminate 70,000,000 hours of tax preparation.

(b) GENERAL RULE- Part I of subchapter P of chapter 1 of the Internal Revenue Code of 1986 (relating to treatment of capital gains) is amended by redesignating section 1202 as section 1203 and by inserting after section 1201 the following:

`SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

`(a) IN GENERAL- In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the lesser of--

`(1) the net capital gain of the taxpayer for the taxable year, or

`(2) $5,000.

`(b) SALES BETWEEN RELATED PARTIES- Gains from sales and exchanges to any related person (within the meaning of section 267(b) or 707(b)(1)) shall not be taken into account in determining net capital gain.

`(c) SPECIAL RULE FOR SECTION 1250 PROPERTY- Solely for purposes of this section, in applying section 1250 to any disposition of section 1250 property, all depreciation adjustments in respect of the property shall be treated as additional depreciation.

`(d) SECTION NOT TO APPLY TO CERTAIN TAXPAYERS- No deduction shall be allowed under this section to--

`(1) an individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins,

`(2) a married individual (within the meaning of section 7703) filing a separate return for the taxable year, or

`(3) an estate or trust.

`(e) SPECIAL RULE FOR PASS-THRU ENTITIES-

`(1) IN GENERAL- In applying this section with respect to any pass-thru entity, the determination of when the sale or exchange occurs shall be made at the entity level.

`(2) PASS-THRU ENTITY DEFINED- For purposes of paragraph (1), the term `pass-thru entity' means--

`(A) a regulated investment company,

`(B) a real estate investment trust,

`(C) an S corporation,

`(D) a partnership,

`(E) an estate or trust, and

`(F) a common trust fund.'.

(c) COORDINATION WITH MAXIMUM CAPITAL GAINS RATE- Paragraph (3) of section 1(h) of the Internal Revenue Code of 1986 (relating to maximum capital gains rate) is amended to read as follows:

`(3) COORDINATION WITH OTHER PROVISIONS- For purposes of this subsection, the amount of the net capital gain shall be reduced (but not below zero) by the sum of--

`(A) the amount of the net capital gain taken into account under section 1202(a) for the taxable year, plus

`(B) the amount which the taxpayer elects to take into account as investment income for the taxable year under section 163(d)(4)(B)(iii).'.

(d) DEDUCTION ALLOWABLE IN COMPUTING ADJUSTED GROSS INCOME- Subsection (a) of section 62 of the Internal Revenue Code of 1986 (defining adjusted gross income) is amended by inserting after paragraph (17) the following:

`(18) LONG-TERM CAPITAL GAINS- The deduction allowed by section 1202.'.

(e) TREATMENT OF COLLECTIBLES-

(1) IN GENERAL- Section 1222 of the Internal Revenue Code of 1986 (relating to other terms relating to capital gains and losses) is amended by inserting after paragraph (11) the following:

`(12) SPECIAL RULE FOR COLLECTIBLES-

`(A) IN GENERAL- Any gain or loss from the sale or exchange of a collectible shall be treated as a short-term capital gain or loss (as the case may be), without regard to the period such asset was held. The preceding sentence shall apply only to the extent the gain or loss is taken into account in computing taxable income.

`(B) TREATMENT OF CERTAIN SALES OF INTEREST IN PARTNERSHIP, ETC- For purposes of subparagraph (A), any gain from the sale or exchange of an interest in a partnership, S corporation, or trust which is attributable to unrealized appreciation in the value of collectibles held by such entity shall be treated as gain from the sale or exchange of a collectible. Rules similar to the rules of section 751(f) shall apply for purposes of the preceding sentence.

`(C) COLLECTIBLE- For purposes of this paragraph, the term `collectible' means any capital asset which is a collectible (as defined in section 408(m) without regard to paragraph (3) thereof).'.

(2) CHARITABLE DEDUCTION NOT AFFECTED-

(A) Paragraph (1) of section 170(e) of such Code is amended by adding at the end the following: `For purposes of this paragraph, section 1222 shall be applied without regard to paragraph (12) thereof (relating to special rule for collectibles).'.

(B) Clause (iv) of section 170(b)(1)(C) of such Code is amended by inserting before the period at the end the following: `and section 1222 shall be applied without regard to paragraph (12) thereof (relating to special rule for collectibles)'.

(f) CONFORMING AMENDMENTS-

(1) Section 57(a)(7) of the Internal Revenue Code of 1986 is amended by striking `1202' and inserting `1203'.

(2) Clause (iii) of section 163(d)(4)(B) of such Code is amended to read as follows:

`(iii) the sum of--

`(I) the portion of the net capital gain referred to in clause (ii)(II) (or, if lesser, the net capital gain referred to in clause (ii)(I)) taken into account under section 1202, reduced by the amount of the deduction allowed with respect to such gain under section 1202, plus

`(II) so much of the gain described in subclause (I) which is not taken into account under section 1202 and which the taxpayer elects to take into account under this clause.'.

(3) Subparagraph (B) of section 172(d)(2) of such Code is amended to read as follows:

`(B) the deduction under section 1202 and the exclusion under section 1203 shall not be allowed.'.

(4) Section 642(c)(4) of such Code is amended by striking `1202' and inserting `1203'.

(5) Section 643(a)(3) of such Code is amended by striking `1202' and inserting `1203'.

(6) Paragraph (4) of section 691(c) of such Code is amended inserting `1203,' after `1202,'.

(7) The second sentence of section 871(a)(2) of such Code is amended by inserting `or 1203' after `section 1202'.

(8) The last sentence of section 1044(d) of such Code is amended by striking `1202' and inserting `1203'.

(9) Paragraph (1) of section 1402(i) of such Code is amended by inserting `, and the deduction provided by section 1202 and the exclusion provided by section 1203 shall not apply' before the period at the end.

(10) Section 121 of such Code is amended by adding at the end the following:

`(h) CROSS REFERENCE-

(11) Section 1203 of such Code, as redesignated by subsection (a), is amended by adding at the end the following:

`(l) CROSS REFERENCE-

(12) The table of sections for part I of subchapter P of chapter 1 of such Code is amended by striking the item relating to section 1202 and by inserting after the item relating to section 1201 the following:

`Sec. 1202. Capital gains deduction.

`Sec. 1203. 50-percent exclusion for gain from certain small business stock.'.

(g) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2000.

(2) COLLECTIBLES- The amendments made by subsection (d) shall apply to sales and exchanges after December 31, 2000.

SEC. 23. INCREASE IN CONTRIBUTION LIMITS FOR TRADITIONAL IRAS.

(a) PURPOSES- The purposes of this section are--

(1) to increase the savings rate for all Americans by reforming the tax system to favorably treat income that is invested for retirement, and

(2) to provide targeted incentives to middle class families to increase their retirement savings in a traditional IRA by $1,000 per working member of the family per taxable year.

(b) INCREASE IN CONTRIBUTION LIMIT- Paragraph (1)(A) of section 219(b) of the Internal Revenue Code of 1986 (relating to maximum amount of deduction) is amended by striking `$2,000' and inserting `$3,000'.

(c) INFLATION ADJUSTMENT- Section 219 of the Internal Revenue Code of 1986 (relating to deduction for retirement savings) is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following:

`(h) COST-OF-LIVING ADJUSTMENT-

`(1) DEDUCTIBLE AMOUNTS- In the case of any taxable year beginning in a calendar year after 2009, the $3,000 amount under subsection (b)(1)(A) shall be increased by an amount equal to--

`(A) such dollar amount, multiplied by

`(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2008' for `calendar year 1992' in subparagraph (B) thereof.

`(2) ROUNDING RULES- If any amount after adjustment under paragraph (1) is not a multiple of $100, such amount shall be rounded to the next lower multiple of $100.'.

(d) CONFORMING AMENDMENTS-

(1) Section 408(a)(1) of the Internal Revenue Code of 1986 is amended by striking `in excess of $2,000 on behalf of any individual' and inserting `on behalf of any individual in excess of the amount in effect for such taxable year under section 219(b)(1)(A)'.

(2) Section 408(b)(2)(B) of such Code is amended by striking `$2,000' and inserting `the dollar amount in effect under section 219(b)(1)(A)'.

(3) Section 408(b) of such Code is amended by striking `$2,000' in the matter following paragraph (4) and inserting `the dollar amount in effect under section 219(b)(1)(A)'.

(4) Section 408(j) of such Code is amended by striking `$2,000'.

(5) Section 408(p)(8) of such Code is amended by striking `$2,000' and inserting `the dollar amount in effect under section 219(b)(1)(A)'.

(6) Section 408A(c)(2)(A) of such Code is amended to read as follows:

`(A) $2,000, over'.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

TITLE III--BUSINESS INVESTMENT PROVISIONS

SEC. 31. REPEAL OF ALTERNATIVE MINIMUM TAX ON CORPORATIONS.

(a) PURPOSE- The purpose of this section is to eliminate one of the most misguided, anti-growth, anti-investment tax schemes ever devised.

(b) IN GENERAL- The last sentence of section 55(a) of the Internal Revenue Code of 1986, as amended by section 13, is amended by striking `on any taxpayer other than a corporation'.

(c) REPEAL OF 90 PERCENT LIMITATION ON FOREIGN TAX CREDIT-

(1) IN GENERAL- Section 59(a) of the Internal Revenue Code of 1986 (relating to alternative minimum tax foreign tax credit) is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(2) CONFORMING AMENDMENT- Section 53(d)(1)(B)(i)(II) of such Code is amended by striking `and if section 59(a)(2) did not apply'.

(d) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY-

(1) IN GENERAL- Subsection (c) of section 53 of the Internal Revenue Code of 1986, as amended by section 13, is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph:

`(2) CORPORATIONS FOR TAXABLE YEARS BEGINNING AFTER 2004- In the case of corporation for any taxable year beginning after 2004 and before 2010, the limitation under paragraph (1) shall be increased by the applicable percentage (determined in accordance with the following table) of the tentative minimum tax for the taxable year.

`For taxable years beginning

--The applicable

in calendar year--

--percentage is--

2005

--20

2006

--30

2007

--40

2008 or 2009

--50.

In no event shall the limitation determined under this paragraph be greater than the sum of the tax imposed by section 55 and the regular tax reduced by the sum of the credits allowed under subparts A, B, D, E, and F of this part.'

(2) CONFORMING AMENDMENTS-

(A) Section 55(e) of such Code is amended by striking paragraph (5).

(B) Paragraph (3) of section 53(c) of such Code, as redesignated by paragraph (1), is amended by striking `to a taxpayer other than a corporation'.

(e) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to taxable years beginning after December 31, 2004.

(2) REPEAL OF 90 PERCENT LIMITATION ON FOREIGN TAX CREDIT- The amendments made by subsection (c) shall apply to taxable years beginning after December 31, 2003.

(3) SUBSECTION (d)(2)(A)- The amendment made by subsection (d)(2)(A) shall apply to taxable years beginning after December 31, 2009.

SEC. 32. INCREASE IN LIMIT FOR ELECTION TO EXPENSE CERTAIN BUSINESS ASSETS.

(a) IN GENERAL- Section 179(b)(1) of the Internal Revenue Code of 1986 (relating to dollar limitation) is amended by striking the last item in the table and inserting the following new items:

25,000

250,000.'

(b) INDEX- Section 179(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

`(5) INFLATION ADJUSTMENT- In the case of a taxable year beginning after 2005, the $25,000 amount under paragraph (1) shall be increased by an amount equal to--

`(A) such dollar amount, multiplied by

`(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2004' for `calendar year 1992' in subparagraph (B) thereof.'

(c) INCREASE IN LIMITATION ON COST OF PROPERTY PLACED IN SERVICE- Section 179(b)(2) of the Internal Revenue Code of 1986 (relating to reduction in limitation) is amended by striking `$200,000' and inserting `$4,000,000'.

TITLE IV--ESTATE AND GIFT TAX RELIEF

SEC. 41. PHASEOUT OF ESTATE AND GIFT TAXES.

(a) PURPOSE- The purpose of this section is to begin phasing out the confiscatory gift and estate tax by reducing the rate of tax.

(b) REPEAL OF ESTATE AND GIFT TAXES- Subtitle B of the Internal Revenue Code of 1986 (relating to estate and gift taxes) is repealed effective with respect to estates of decedents dying, and gifts made, after December 31, 2009.

(c) PHASEOUT OF TAX- Subsection (c) of section 2001 of the Internal Revenue Code of 1986 (relating to imposition and rate of tax) is amended by adding at the end the following:

`(3) PHASEOUT OF TAX- In the case of estates of decedents dying, and gifts made, during any calendar year after 1999 and before 2010--

`(A) IN GENERAL- 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 (but not below zero) 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-

1

2

3

4

5

7

9

11

15.

`(C) COORDINATION WITH PARAGRAPH (2)- Paragraph (2) shall be applied by reducing the 55 percent percentage contained therein by the number of percentage points determined for such calendar year under subparagraph (B).

`(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 number of percentage points referred to in subparagraph (A)(i) shall be determined under the following table:

1

2

3

4

5

7

9

11

15.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to estates of decedents dying, and gifts made, after December 31, 2000.

TITLE V--RESEARCH CREDIT EXTENSION AND MODIFICATION

SEC. 51. PURPOSE.

The purpose of this title is to make the research credit permanent and make certain modifications to the credit.

SEC. 52. PERMANENT EXTENSION OF RESEARCH CREDIT.

(a) IN GENERAL- Section 41 of the Internal Revenue Code of 1986 (relating to credit for increasing research activities) is amended by striking subsection (h).

(b) CONFORMING AMENDMENT- Section 45C(b)(1) of the Internal Revenue Code of 1986 is amended by striking subparagraph (D).

(c) EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred after December 31, 2000.

SEC. 53. IMPROVED ALTERNATIVE INCREMENTAL CREDIT.

(a) IN GENERAL- Section 41 of the Internal Revenue Code of 1986 (relating to credit for increasing research activities), as amended by section 52, is amended by adding at the end the following:

`(h) ELECTION OF ALTERNATIVE INCREMENTAL CREDIT-

`(1) IN GENERAL- At the election of the taxpayer, the credit under subsection (a)(1) shall be determined under this section by taking into account the modifications provided by this subsection.

`(2) DETERMINATION OF BASE AMOUNT-

`(A) IN GENERAL- In computing the base amount under subsection (c)--

`(i) notwithstanding subsection (c)(3), the fixed-base percentage shall be equal to 80 percent of the percentage which the aggregate qualified research expenses of the taxpayer for the base period is of the aggregate gross receipts of the taxpayer for the base period, and

`(ii) the minimum base amount under subsection (c)(2) shall not apply.

`(B) START-UP AND SMALL TAXPAYERS- In computing the base amount under subsection (c), the gross receipts of a taxpayer for any taxable year in the base period shall be treated as at least equal to $1,000,000.

`(C) BASE PERIOD- For purposes of this subsection, the base period is the 8-taxable year period preceding the taxable year (or, if shorter, the period the taxpayer (and any predecessor) has been in existence).

`(3) ELECTION- An election under this subsection shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Secretary.'.

(b) CONFORMING AMENDMENT- Section 41(c) of the Internal Revenue Code of 1986 is amended by striking paragraph (4) and by redesignating paragraphs (5) and (6) as paragraphs (4) and (5), respectively.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

SEC. 54. MODIFICATIONS TO CREDIT FOR BASIC RESEARCH.

(a) ELIMINATION OF INCREMENTAL REQUIREMENT-

(1) IN GENERAL- Paragraph (1) of section 41(e) of the Internal Revenue Code of 1986 (relating to credit allowable with respect to certain payments to qualified organizations for basic research) is amended to read as follows:

`(1) IN GENERAL- The amount of basic research payments taken into account under subsection (a)(2) shall be determined in accordance with this subsection.'.

(2) CONFORMING AMENDMENTS-

(A) Section 41(a)(2) of the Internal Revenue Code of 1986 is amended by striking `determined under subsection (e)(1)(A)' and inserting `for the taxable year'.

(B) Section 41(e) of such Code is amended by striking paragraphs (3), (4), and (5) and by redesignating paragraphs (6) and (7) as paragraphs (3) and (4), respectively.

(C) Section 41(e)(4) of such Code, as redesignated by subparagraph (B), is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D), respectively.

(D) Clause (i) of section 170(e)(4)(B) of such Code is amended by striking `section 41(e)(6)' and inserting `section 41(e)(3)'.

(b) BASIC RESEARCH-

(1) SPECIFIC COMMERCIAL OBJECTIVE- Section 41(e)(4) of the Internal Revenue Code of 1986 (relating to definitions and special rules), as redesignated by subsection (a)(2)(B), is amended by adding at the end the following:

`(E) SPECIFIC COMMERCIAL OBJECTIVE- For purposes of subparagraph (A), research shall not be treated as having a specific commercial objective if the results of such research are to be published in a timely manner as to be available to the general public prior to their use for a commercial purpose.'.

(2) EXCLUSIONS FROM BASIC RESEARCH- Clause (ii) of section 41(e)(4)(A) of such Code (relating to definitions and special rules), as redesignated by subsection (a), is amended to read as follows:

`(ii) basic research in the arts and humanities.'.

(c) EXPANSION OF CREDIT TO RESEARCH DONE AT FEDERAL LABORATORIES- Section 41(e)(3) of the Internal Revenue Code of 1986, as redesignated by subsection (a), is amended by adding at the end the following new subparagraph:

`(E) FEDERAL LABORATORIES- Any organization which is a Federal laboratory (as defined in section 4(6) of the Stevenson-Wydler Technology Innovation Act of 1980 (15 U.S.C. 3703(6)).'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

SEC. 55. CREDIT FOR EXPENSES ATTRIBUTABLE TO CERTAIN COLLABORATIVE RESEARCH CONSORTIA.

(a) CREDIT FOR EXPENSES ATTRIBUTABLE TO CERTAIN COLLABORATIVE RESEARCH CONSORTIA- Subsection (a) of section 41 of the Internal Revenue Code of 1986 (relating to credit for increasing research activities) is amended by striking `and' at the end of paragraph (1), striking the period at the end of paragraph (2) and inserting `, and ', and by adding at the end the following:

`(3) 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to a qualified research consortium.'.

(b) QUALIFIED RESEARCH CONSORTIUM DEFINED- Subsection (f) of section 41 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`(6) QUALIFIED RESEARCH CONSORTIUM- The term `qualified research consortium' means any organization--

`(A) which is--

`(i) described in section 501(c)(3) and is exempt from tax under section 501(a) and is organized and operated primarily to conduct scientific or engineering research, or

`(ii) organized and operated primarily to conduct scientific or engineering research in the public interest (within the meaning of section 501(c)(3)),

`(B) which is not a private foundation,

`(C) to which at least 5 unrelated persons paid or incurred during the calendar year in which the taxable year of the organization begins amounts (including as contributions) to such organization for scientific or engineering research, and

`(D) to which no single person paid or incurred (including as contributions) during such calendar year an amount equal to more than 50 percent of the total amounts received by such organization during such calendar year for scientific or engineering research.

All persons treated as a single employer under subsection (a) or (b) of section 52 shall be treated as related persons for purposes of subparagraph (C) and as a single person for purposes of subparagraph (D).'.

(c) CONFORMING AMENDMENT- Paragraph (3) of section 41(b) of the Internal Revenue Code of 1986 is amended by striking subparagraph (C).

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

SEC. 56. IMPROVEMENT TO CREDIT FOR SMALL BUSINESSES AND RESEARCH PARTNERSHIPS.

(a) ASSISTANCE TO SMALL AND START-UP BUSINESSES- The Secretary of the Treasury or the Secretary's delegate shall take such actions as are appropriate to--

(1) provide assistance to small and start-up businesses in complying with the requirements of section 41 of the Internal Revenue Code of 1986, and

(2) reduce the costs of such compliance.

(b) REPEAL OF LIMITATION ON CONTRACT RESEARCH EXPENSES PAID TO SMALL BUSINESSES, UNIVERSITIES, AND FEDERAL LABORATORIES- Section 41(b)(3) of the Internal Revenue Code of 1986, as amended by section 55(c), is amended by adding at the end the following:

`(C) AMOUNTS PAID TO ELIGIBLE SMALL BUSINESSES, UNIVERSITIES, AND FEDERAL LABORATORIES-

`(i) IN GENERAL- In the case of amounts paid by the taxpayer to an eligible small business, an institution of higher education (as defined in section 3304(f)), or an organization which is a Federal laboratory (as defined in subsection (e)(3)(E)), subparagraph (A) shall be applied by substituting `100 percent' for `65 percent'.

`(ii) ELIGIBLE SMALL BUSINESS- For purposes of this subparagraph, the term `eligible small business' means a small business with respect to which the taxpayer does not own (within the meaning of section 318) 50 percent or more of--

`(I) in the case of a corporation, the outstanding stock of the corporation (either by vote or value), and

`(II) in the case of a small business which is not a corporation, the capital and profits interests of the small business.

`(iii) SMALL BUSINESS- For purposes of this subparagraph--

`(I) IN GENERAL- The term `small business' means, with respect to any calendar year, any person if the annual average number of employees employed by such person during either of the 2 preceding calendar years was 500 or fewer. For purposes of the preceding sentence, a preceding calendar year may be taken into account only if the person was in existence throughout the year.

`(II) STARTUPS, CONTROLLED GROUPS, AND PREDECESSORS- Rules similar to the rules of subparagraphs (B) and (D) of section 220(c)(4) shall apply for purposes of this clause.'.

(c) CREDIT FOR PATENT FILING FEES- Section 41(a) of the Internal Revenue Code of 1986, as amended by section 55(a), is amended by striking `and' at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting `, and', and by adding at the end the following:

`(4) 20 percent of the patent filing fees paid or incurred by a small business (as defined in subsection (b)(3)(C)(iii)) to the United States or to any foreign government in carrying on any trade or business.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

TITLE VI--ENERGY INDEPENDENCE

SEC. 61. PURPOSES.

The purposes of this title are--

(1) to prevent the abandonment of marginal oil and gas wells owned and operated by independent oil and gas producers, which are responsible for half of the United States' domestic production, and

(2) to transform earned tax credits and other benefits into working capital for the cash-strapped domestic oil and gas producers and service companies.

SEC. 62. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL PRODUCTION.

(a) CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business credits) is amended by adding at the end the following:

`SEC. 45D. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.

`(a) GENERAL RULE- For purposes of section 38, the marginal well production credit for any taxable year is an amount equal to the product of--

`(1) the credit amount, and

`(2) the qualified crude oil production and the qualified natural gas production which is attributable to the taxpayer.

`(b) CREDIT AMOUNT- For purposes of this section--

`(1) IN GENERAL- The credit amount is--

`(A) $3 per barrel of qualified crude oil production, and

`(B) 50 cents per 1,000 cubic feet of qualified natural gas production.

`(2) REDUCTION AS OIL AND GAS PRICES INCREASE-

`(A) IN GENERAL- The $3 and 50 cents amounts under paragraph (1) shall each be reduced (but not below zero) by an amount which bears the same ratio to such amount (determined without regard to this paragraph) as--

`(i) the excess (if any) of the applicable reference price over $14 ($1.56 for qualified natural gas production), bears to

`(ii) $3 ($0.33 for qualified natural gas production).

The applicable reference price for a taxable year is the reference price for the calendar year preceding the calendar year in which the taxable year begins.

`(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2000, each of the dollar amounts contained in subparagraph (A) shall be increased to an amount equal to such dollar amount multiplied by the inflation adjustment factor for such calendar year (determined under section 43(b)(3)(B) by substituting `1999' for `1990').

`(C) REFERENCE PRICE- For purposes of this paragraph, the term `reference price' means, with respect to any calendar year--

`(i) in the case of qualified crude oil production, the reference price determined under section 29(d)(2)(C), and

`(ii) in the case of qualified natural gas production, the Secretary's estimate of the annual average wellhead price per 1,000 cubic feet for all domestic natural gas.

`(c) QUALIFIED CRUDE OIL AND NATURAL GAS PRODUCTION- For purposes of this section--

`(1) IN GENERAL- The terms `qualified crude oil production' and `qualified natural gas production' mean domestic crude oil or natural gas which is produced from a marginal well.

`(2) LIMITATION ON AMOUNT OF PRODUCTION WHICH MAY QUALIFY-

`(A) IN GENERAL- Crude oil or natural gas produced during any taxable year from any well shall not be treated as qualified crude oil production or qualified natural gas production to the extent production from the well during the taxable year exceeds 1,095 barrels or barrel equivalents.

`(B) PROPORTIONATE REDUCTIONS-

`(i) SHORT TAXABLE YEARS- In the case of a short taxable year, the limitations under this paragraph shall be proportionately reduced to reflect the ratio which the number of days in such taxable year bears to 365.

`(ii) WELLS NOT IN PRODUCTION ENTIRE YEAR- In the case of a well which is not capable of production during each day of a taxable year, the limitations under this paragraph applicable to the well shall be proportionately reduced to reflect the ratio which the number of days of production bears to the total number of days in the taxable year.

`(3) DEFINITIONS-

`(A) MARGINAL WELL- The term `marginal well' means a domestic well--

`(i) the production from which during the taxable year is treated as marginal production under section 613A(c)(6), or

`(ii) which, during the taxable year--

`(I) has average daily production of not more than 25 barrel equivalents, and

`(II) produces water at a rate not less than 95 percent of total well effluent.

`(B) CRUDE OIL, ETC- The terms `crude oil', `natural gas', `domestic', and `barrel' have the meanings given such terms by section 613A(e).

`(C) BARREL EQUIVALENT- The term `barrel equivalent' means, with respect to natural gas, a conversion ratio of 6,000 cubic feet of natural gas to 1 barrel of crude oil.

`(d) OTHER RULES-

`(1) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER- In the case of a marginal well in which there is more than one owner of operating interests in the well and the crude oil or natural gas production exceeds the limitation under subsection (c)(2), qualifying crude oil production or qualifying natural gas production attributable to the taxpayer shall be determined on the basis of the ratio which taxpayer's revenue interest in the production bears to the aggregate of the revenue interests of all operating interest owners in the production.

`(2) OPERATING INTEREST REQUIRED- Any credit under this section may be claimed only on production which is attributable to the holder of an operating interest.

`(3) PRODUCTION FROM NONCONVENTIONAL SOURCES EXCLUDED- In the case of production from a marginal well which is eligible for the credit allowed under section 29 for the taxable year, no credit shall be allowable under this section unless the taxpayer elects not to claim the credit under section 29 with respect to the well.'.

(b) CREDIT TREATED AS BUSINESS CREDIT- Section 38(b) of the Internal Revenue Code of 1986 is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end the following:

`(13) the marginal oil and gas well production credit determined under section 45D(a).'.

(c) CREDIT ALLOWED AGAINST REGULAR AND MINIMUM TAX-

(1) IN GENERAL- Subsection (c) of section 38 of the Internal Revenue Code of 1986 (relating to limitation based on amount of tax) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following:

`(3) SPECIAL RULES FOR MARGINAL OIL AND GAS WELL PRODUCTION CREDIT-

`(A) IN GENERAL- In the case of the marginal oil and gas well production credit--

`(i) this section and section 39 shall be applied separately with respect to the credit, and

`(ii) in applying paragraph (1) to the credit--

`(I) subparagraphs (A) and (B) thereof shall not apply, and

`(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the marginal oil and gas well production credit).

`(B) MARGINAL OIL AND GAS WELL PRODUCTION CREDIT- For purposes of this subsection, the term `marginal oil and gas well production credit' means the credit allowable under subsection (a) by reason of section 45D(a).'.

(2) CONFORMING AMENDMENT- Subclause (II) of section 38(c)(2)(A)(ii) of such Code is amended by inserting `or the marginal oil and gas well production credit' after `employment credit'.

(d) CARRYBACK- Subsection (a) of section 39 of the Internal Revenue Code of 1986 (relating to carryback and carryforward of unused credits generally) is amended by adding at the end the following:

`(3) 10-YEAR CARRYBACK FOR MARGINAL OIL AND GAS WELL PRODUCTION CREDIT- In the case of the marginal oil and gas well production credit--

`(A) this section shall be applied separately from the business credit (other than the marginal oil and gas well production credit),

`(B) paragraph (1) shall be applied by substituting `10 taxable years' for `1 taxable years' in subparagraph (A) thereof, and

`(C) paragraph (2) shall be applied--

`(i) by substituting `31 taxable years' for `21 taxable years' in subparagraph (A) thereof, and

`(ii) by substituting `30 taxable years' for `20 taxable years' in subparagraph (B) thereof.'.

(e) COORDINATION WITH SECTION 29- Section 29(a) of the Internal Revenue Code of 1986 is amended by striking `There' and inserting `At the election of the taxpayer, there'.

(f) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`45D. Credit for producing oil and gas from marginal wells.'.

(g) EFFECTIVE DATE- The amendments made by this section shall apply to production after December 31, 2000.

SEC. 63. 10-YEAR CARRYBACK FOR UNUSED MINIMUM TAX CREDIT.

(a) IN GENERAL- Section 53(c) of the Internal Revenue Code of 1986 (relating to limitation) is amended by adding at the end the following:

`(2) SPECIAL RULE FOR TAXPAYERS WITH UNUSED ENERGY MINIMUM TAX CREDITS-

`(A) IN GENERAL- If, during the 10-taxable year period ending with the current taxable year, a taxpayer has an unused energy minimum tax credit for any taxable year in such period (determined without regard to the application of this paragraph to the current taxable year)--

`(i) paragraph (1) shall not apply to each of the taxable years in such period for which the taxpayer has an unused energy minimum tax credit (as so determined), and

`(ii) the credit allowable under subsection (a) for each of such taxable years shall be equal to the excess (if any) of--

`(I) the sum of the regular tax liability and the net minimum tax for such taxable year, over

`(II) the sum of the credits allowable under subparts A, B, D, E, and F of this part.

`(B) ENERGY MINIMUM TAX CREDIT- For purposes of this paragraph, the term `energy minimum tax credit' means the minimum tax credit which would be computed with respect to any taxable year if the adjusted net minimum tax were computed by only taking into account items attributable to--

`(i) the taxpayer's mineral interests in oil and gas property, and

`(ii) the taxpayer's active conduct of a trade or business of providing tools, products, personnel, and technical solutions on a contractual basis to persons engaged in oil and gas exploration and production.'.

(b) CONFORMING AMENDMENTS- Section 53(c) of the Internal Revenue Code of 1986 (as in effect before the amendment made by subsection (a)) is amended--

(1) by striking `The' and inserting:

`(1) IN GENERAL- Except as provided in paragraph (2), the ', and

(2) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B).

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000, and to any taxable year beginning on or before such date to the extent necessary to apply section 53(c)(2) of the Internal Revenue Code of 1986 (as added by subsection (a)).

SEC. 64. 10-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE TO OIL SERVICING COMPANIES AND MINERAL INTERESTS OF OIL AND GAS PRODUCERS.

(a) IN GENERAL- Paragraph (1) of section 172(b) of the Internal Revenue Code of 1986 (relating to years to which loss may be carried) is amended by adding at the end the following:

`(H) LOSSES ON OPERATING MINERAL INTERESTS OF OIL AND GAS PRODUCERS AND OILFIELD SERVICING COMPANIES- In the case of a taxpayer which has an eligible oil and gas loss (as defined in subsection (j)) for a taxable year, such eligible oil and gas loss shall be a net operating loss carryback to each of the 10 taxable years preceding the taxable year of such loss.'.

(b) ELIGIBLE OIL AND GAS LOSS- Section 172 of the Internal Revenue Code of 1986 is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following:

`(j) ELIGIBLE OIL AND GAS LOSS- For purposes of this section--

`(1) IN GENERAL- The term `eligible oil and gas loss' means the lesser of--

`(A) the amount which would be the net operating loss for the taxable year if only income and deductions attributable to--

`(i) mineral interests in oil and gas wells, and

`(ii) the active conduct of a trade or business of providing tools, products, personnel, and technical solutions on a contractual basis to persons engaged in oil and gas exploration and production,

are taken into account, and

`(B) the amount of the net operating loss for such taxable year.

`(2) COORDINATION WITH SUBSECTION (b)(2)- For purposes of applying subsection (b)(2), an eligible oil and gas loss for any taxable year shall be treated in a manner similar to the manner in which a specified liability loss is treated.

`(3) ELECTION- Any taxpayer entitled to a 10-year carryback under subsection (b)(1)(H) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H). Such election shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to net operating losses for taxable years beginning after December 31, 1999, and to any taxable year beginning on or before such date to the extent necessary to apply section 172(b)(1)(H) of the Internal Revenue Code of 1986 (as added by subsection (a)).

SEC. 65. WAIVER OF LIMITATIONS.

If refund or credit of any overpayment of tax resulting from the application of the amendments made by sections 63 and 64 is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.

SEC. 66. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES AND DELAY RENTAL PAYMENTS.

(a) PURPOSE- The purpose of this section is to recognize that geological and geophysical expenditures and delay rentals are ordinary and necessary business expenses that should be deducted in the year the expense is incurred.

(b) Election To Expense Geological and Geophysical Expenditures-

(1) IN GENERAL- Section 263 of the Internal Revenue Code of 1986 (relating to capital expenditures) is amended by adding at the end the following:

`(j) GEOLOGICAL AND GEOPHYSICAL EXPENDITURES FOR DOMESTIC OIL AND GAS WELLS- Notwithstanding subsection (a), a taxpayer may elect to treat geological and geophysical expenses incurred in connection with the exploration for, or development of, oil or gas within the United States (as defined in section 638) as expenses which are not chargeable to capital account. Any expenses so treated shall be allowed as a deduction in the taxable year in which paid or incurred.'.

(2) CONFORMING AMENDMENT- Section 263A(c)(3) of such Code is amended by inserting `263(j),' after `263(i),'.

(3) Effective date-

(A) IN GENERAL- The amendments made by this subsection shall apply to expenses paid or incurred after December 31, 2000.

(B) TRANSITION RULE- In the case of any expenses described in section 263(j) of the Internal Revenue Code of 1986, as added by this subsection, which were paid or incurred on or before December 31, 2000, the taxpayer may elect, at such time and in such manner as the Secretary of the Treasury may prescribe, to amortize the unamortized portion of such expenses over the 36-month period beginning with the month of January, 2001. For purposes of this subparagraph, the unamortized portion of any expense is the amount remaining unamortized as of the first day of the 36-month period.

(c) ELECTION TO EXPENSE DELAY RENTAL PAYMENTS-

(1) IN GENERAL- Section 263 of the Internal Revenue Code of 1986 (relating to capital expenditures), as amended by subsection (b)(1), is amended by adding at the end the following:

`(k) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL AND GAS WELLS-

`(1) IN GENERAL- Notwithstanding subsection (a), a taxpayer may elect to treat delay rental payments incurred in connection with the development of oil or gas within the United States (as defined in section 638) as payments which are not chargeable to capital account. Any payments so treated shall be allowed as a deduction in the taxable year in which paid or incurred.

`(2) DELAY RENTAL PAYMENTS- For purposes of paragraph (1), the term `delay rental payment' means an amount paid for the privilege of deferring development of an oil or gas well.'.

(2) CONFORMING AMENDMENT- Section 263A(c)(3) of the Internal Revenue Code of 1986, as amended by subsection (b)(2), is amended by inserting `263(k),' after `263(j),'.

(3) EFFECTIVE DATE-

(A) IN GENERAL- The amendments made by this subsection shall apply to payments made or incurred after December 31, 2000.

(B) TRANSITION RULE- In the case of any payments described in section 263(k) of the Internal Revenue Code of 1986, as added by this subsection, which were made or incurred on or before December 31, 2000, the taxpayer may elect, at such time and in such manner as the Secretary of the Treasury may prescribe, to amortize the unamortized portion of such payments over the 36-month period beginning with the month of January, 2001. For purposes of this subparagraph, the unamortized portion of any payment is the amount remaining unamortized as of the first day of the 36-month period.

TITLE VII--REVENUE PROVISION

SEC. 71. 4-YEAR AVERAGING FOR CONVERSION OF TRADITIONAL IRA TO ROTH IRA.

(a) IN GENERAL- Section 408A(d)(3)(A)(iii) of the Internal Revenue Code of 1986 is amended by striking `January 1, 1999,' and inserting `January 1, 2004,'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to distributions made after December 31, 2000.

END