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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.

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