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S.822
Flat Tax Act of 1999 (Introduced in the Senate)
`(ii) QUALIFIED PRE-1985 INSTRUMENT- For purposes of this
subparagraph, the term `qualified pre-1985 instrument' means any decree
of divorce or separate maintenance or written agreement--
`(I) which is executed before January 1, 1985,
`(II) which on such date contains the provision described in
clause (i)(I), and
`(III) which is not modified on or after such date in a
modification which expressly provides that this subparagraph shall not
apply to such decree or agreement.
`(E) SPECIAL RULE FOR SUPPORT RECEIVED FROM NEW SPOUSE OF PARENT- For
purposes of this paragraph, in the case of the remarriage of a parent,
support of a child received from the parent's spouse shall be treated as
received from the parent.
`PART II--TAX ON BUSINESS
ACTIVITIES
`Sec. 11. Tax imposed on
business activities.
`SEC. 11. TAX IMPOSED ON
BUSINESS ACTIVITIES.
`(a) TAX IMPOSED- There is
hereby imposed on every person engaged in a business activity located in the
United States a tax equal to 20
percent of the business taxable income of such person.
`(b) LIABILITY FOR TAX - The
tax imposed by this section
shall be paid by the person engaged in the business activity, whether such
person is an individual, partnership, corporation, or otherwise.
`(c) BUSINESS TAXABLE INCOME-
`(1) IN GENERAL- For purposes of this section, the term `business
taxable income' means gross active income reduced by the deductions
specified in subsection (d).
`(2) GROSS ACTIVE INCOME- For purposes of paragraph (1), the term `gross
active income' means gross income other than investment income.
`(1) IN GENERAL- The deductions specified in this subsection are--
`(A) the cost of business inputs for the business activity,
`(B) the compensation (including contributions to qualified retirement
plans but not including other fringe benefits) paid for employees
performing services in such activity, and
`(C) the cost of personal and real property used in such
activity.
`(A) IN GENERAL- For purposes of paragraph (1)(A), the term `cost of
business inputs' means--
`(i) the actual cost of goods, services, and materials, whether or
not resold during the taxable year, and
`(ii) the actual cost, if reasonable, of travel and entertainment
expenses for business purposes.
`(B) PURCHASES OF GOODS AND SERVICES EXCLUDED- Such term shall not
include purchases of goods and services provided to employees or
owners.
`(C) CERTAIN LOBBYING AND POLITICAL EXPENDITURES EXCLUDED-
`(i) IN GENERAL- Such term shall not include any amount paid or
incurred in connection with--
`(I) influencing legislation,
`(II) participation in, or intervention in, any political campaign
on behalf of (or in opposition to) any candidate for public
office,
`(III) any attempt to influence the general public, or segments
thereof, with respect to elections, legislative matters, or
referendums, or
`(IV) any direct communication with a covered executive branch
official in an attempt to influence the official actions or positions
of such official.
`(ii) EXCEPTION FOR LOCAL LEGISLATION- In the case of any
legislation of any local council or similar governing body--
`(I) clause (i)(I) shall not apply, and
`(II) such term shall include all ordinary and necessary expenses
(including, but not limited to, traveling expenses described in
subparagraph (A)(iii) and the cost of preparing testimony) paid or
incurred during the taxable year in carrying on any trade or
business--
`(aa) in direct connection with appearances before, submission of
statements to, or sending communications to the committees, or individual
members, of such council or body with respect to legislation or proposed
legislation of direct interest to the taxpayer, or
`(bb) in direct connection with communication of information between
the taxpayer and an organization of which the taxpayer is a member with respect
to any such legislation or proposed legislation which is of direct interest to
the taxpayer and to such organization, and that portion of the dues so paid or
incurred with respect to any organization of which the taxpayer is a member
which is attributable to the expenses of the activities carried on by such
organization.
`(iii) APPLICATION TO DUES OF TAX -EXEMPT ORGANIZATIONS- Such
term shall include the portion of dues or other similar amounts paid by
the taxpayer to an organization which is exempt from tax
under this subtitle which the organization notifies the taxpayer under
section 6033(e)(1)(A)(ii) is allocable to expenditures to which clause (i)
applies.
`(iv) INFLUENCING LEGISLATION- For purposes of this
subparagraph--
`(I) IN GENERAL- The term `influencing legislation' means any
attempt to influence any legislation through communication with any
member or employee of a legislative body, or with any government
official or employee who may participate in the formulation of
legislation.
`(II) LEGISLATION- The term `legislation' has the meaning given
that term in section 4911(e)(2).
`(v) OTHER SPECIAL RULES-
`(I) EXCEPTION FOR CERTAIN TAXPAYERS- In the case of any taxpayer
engaged in the trade or business of conducting activities described in
clause (i), clause (i) shall not apply to expenditures of the taxpayer
in conducting such activities directly on
behalf of another person (but shall apply to payments by such other person to
the taxpayer for conducting such activities).
`(II) DE MINIMIS EXCEPTION-
`(aa) IN GENERAL- Clause (i) shall not apply to any in-house
expenditures for any taxable year if such expenditures do not exceed $2,000. In
determining whether a taxpayer exceeds the $2,000 limit, there shall not be
taken into account overhead costs otherwise allocable to activities described in
subclauses (I) and (IV) of clause (i).
`(bb) IN-HOUSE EXPENDITURES- For purposes of provision (aa), the term
`in-house expenditures' means expenditures described in subclauses (I) and (IV)
of clause (i) other than payments by the taxpayer to a person engaged in the
trade or business of conducting activities described in clause (i) for the
conduct of such activities on behalf of the taxpayer, or dues or other similar
amounts paid or incurred by the taxpayer which are allocable to activities
described in clause (i).
`(III) EXPENSES INCURRED IN CONNECTION WITH LOBBYING AND POLITICAL
ACTIVITIES- Any amount paid or incurred for research for, or
preparation, planning, or coordination of, any activity described in
clause (i) shall be treated as paid or incurred in connection with
such activity.
`(vi) COVERED EXECUTIVE BRANCH OFFICIAL- For purposes of this
subparagraph, the term `covered executive branch official'
means--
`(II) the Vice President,
`(III) any officer or employee of the White House Office of the
Executive Office of the President, and the 2 most senior level
officers of each of the other agencies in such Executive Office,
and
`(IV) any individual serving in a position in level I of the
Executive Schedule under section 5312 of title 5, United States Code,
any other individual designated by the President as having Cabinet
level status, and any immediate deputy of such an
individual.
`(vii) SPECIAL RULE FOR INDIAN TRIBAL GOVERNMENTS- For purposes of
this subparagraph, an Indian tribal government shall be treated in the
same manner as a local council or similar governing body.
`For reporting requirements and alternative taxes related to this
subsection, see section 6033(e).
`(e) CARRYOVER OF EXCESS DEDUCTIONS-
`(1) IN GENERAL- If the aggregate deductions for any taxable year exceed
the gross active income for such taxable year, the amount of the deductions
specified in subsection (d) for the succeeding taxable year (determined
without regard to this subsection) shall be increased by the sum of--
`(B) the product of such excess and the 3-month Treasury rate for the
last month of such taxable year.
`(2) 3-MONTH TREASURY RATE- For purposes of paragraph (1), the 3-month
Treasury rate is the rate determined by the Secretary based on the average
market yield (during any 1-month period selected by the Secretary and ending
in the calendar month in which the determination is made) on outstanding
marketable obligations of the United States with remaining periods to
maturity of 3 months or less.'
(b) CONFORMING REPEALS AND REDESIGNATIONS-
(1) REPEALS- The following subchapters of chapter 1 of subtitle A and
the items relating to such subchapters in the table of subchapters for such
chapter 1 are repealed:
(A) Subchapter B (relating to computation of taxable income).
(B) Subchapter C (relating to corporate distributions and
adjustments).
(C) Subchapter D (relating to deferred compensation, etc.).
(D) Subchapter G (relating to corporations used to avoid income tax on shareholders).
(E) Subchapter H (relating to banking institutions).
(F) Subchapter I (relating to natural resources).
(G) Subchapter J (relating to estates, trusts, beneficiaries, and
decedents).
(H) Subchapter L (relating to insurance companies).
(I) Subchapter M (relating to regulated investment companies and real
estate investment
trusts).
(J) Subchapter N (relating to tax based on income from sources
within or without the United States).
(K) Subchapter O (relating to gain or loss on disposition of
property).
(L) Subchapter P (relating to capital gains and losses).
(M) Subchapter Q (relating to readjustment of tax between years and special
limitations).
(N) Subchapter S (relating to tax treatment of S corporations
and their shareholders).
(O) Subchapter T (relating to cooperatives and their
patrons).
(P) Subchapter U (relating to designation and treatment of empowerment
zones, enterprise communities, and rural development investment
areas).
(Q) Subchapter V (relating to title 11 cases).
(R) Subchapter W (relating to District of Columbia Enterprise
Zone).
(2) REDESIGNATIONS- The following subchapters of chapter 1 of subtitle A
and the items relating to such subchapters in the table of subchapters for
such chapter 1 are redesignated:
(A) Subchapter E (relating to accounting periods and methods of
accounting) as subchapter B.
(B) Subchapter F (relating to exempt organizations) as subchapter
C.
(C) Subchapter K (relating to partners and partnerships) as subchapter
D.
SEC. 3. REPEAL OF ESTATE AND GIFT TAXES.
Subtitle B (relating to estate , gift, and generation-skipping
taxes) and the item relating to such subtitle in the table of subtitles is
repealed.
SEC. 4. ADDITIONAL REPEALS.
Subtitles H (relating to financing of presidential election campaigns) and
J (relating to coal industry health benefits) and the items relating to such
subtitles in the table of subtitles are repealed.
SEC. 5. EFFECTIVE DATES.
(a) IN GENERAL- Except as provided in subsection (b), the amendments made
by this Act apply to taxable years beginning after December 31, 1999.
(b) REPEAL OF ESTATE AND GIFT TAXES- The repeal made by section 3 applies to
estates of decedents dying, and transfers made, after December 31, 1999.
(c) TECHNICAL AND CONFORMING CHANGES- The Secretary of the Treasury or the
Secretary's delegate shall, as soon as practicable but in any event not later
than 90 days after the date of enactment of this Act, submit to the Committee
on Ways and Means of the House of Representatives and the Committee on Finance
of the Senate a draft of any technical and conforming changes in the Internal
Revenue Code of 1986 which are necessary to reflect throughout such Code the
changes in the substantive provisions of law made by this Act.
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