Home > 107th Congressional Bills > H.R. 193 (ih) To repeal the Federal estate and gift taxes. [Introduced in House] ...

H.R. 193 (ih) To repeal the Federal estate and gift taxes. [Introduced in House] ...


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108th CONGRESS
  1st Session
                                H. R. 1939

To amend the Internal Revenue Code of 1986 to provide a revenue-neutral 
              simplification of the individual income tax.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 1, 2003

  Mr. Neal of Massachusetts introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide a revenue-neutral 
              simplification of the individual income tax.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Individual Tax 
Simplification Act of 2003''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--

Sec. 1. Short title.
   TITLE I--SIMPLIFICATION RELATING TO NONREFUNDABLE PERSONAL CREDITS

Sec. 101. Repeal of interaction with alternative minimum tax.
Sec. 102. Uniform phaseout of credits for adoption, children, and 
                            education.
             TITLE II--SIMPLIFICATION OF CAPITAL GAINS TAX

Sec. 201. Simplification of capital gains tax.
TITLE III--REPEAL OF CERTAIN HIDDEN MARGINAL RATE INCREASES; REPEAL OF 
                         INDIVIDUAL MINIMUM TAX

                          Subtitle A--Repeals

Sec. 301. Repeal of overall limitation on itemized deductions.
Sec. 302. Repeal of phaseout of personal exemptions.
Sec. 303. Repeal of alternative minimum tax on individuals.
                      Subtitle B--Revenue Offsets

Sec. 311. Additional income tax.

   TITLE I--SIMPLIFICATION RELATING TO NONREFUNDABLE PERSONAL CREDITS

SEC. 101. REPEAL OF INTERACTION WITH ALTERNATIVE MINIMUM TAX.

    (a) General Rule.--Subsection (a) of section 26 (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 tax imposed by this chapter for the taxable year.''.
    (b) Conforming Amendment.--Paragraph (2) of section 26(b) is 
amended by inserting ``subsection (a) and'' before ``paragraph (1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 102. UNIFORM PHASEOUT OF CREDITS FOR ADOPTION, CHILDREN, AND 
              EDUCATION.

    (a) In General.--Section 26 is amended by redesignating subsections 
(b) and (c) as subsections (c) and (d), respectively, and by inserting 
after subsection (a) the following new subsection:
    ``(b) Uniform Phaseout of Adoption Expense Credit, Child Credit, 
and Hope and Lifetime Learning Credits.--
            ``(1) In general.--The aggregate amount which would (but 
        for subsection (a) and this subsection) be allowed as a credit 
        under sections 23, 24, and 25A shall be reduced (but not below 
        zero) by 10 percent of the amount by which the taxpayer's 
        modified adjusted gross income exceeds the threshold amount. 
        For purposes of the preceding sentence, the term `modified 
        adjusted gross income' means adjusted gross income increased by 
        any amount excluded from gross income under section 911, 931, 
        or 933.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        term `threshold amount' means--
                    ``(A) $110,000 in the case of a joint return,
                    ``(B) $75,000 in the case of an individual who is 
                not married, and
                    ``(C) $55,000 in the case of a married individual 
                filing a separate return.
        For purposes of this paragraph, marital status shall be 
        determined under section 7703.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 23(b) is amended to read as 
        follows:
    ``(2) Limitation based on adjusted gross income.--

                                ``For limitation based on adjusted 
gross income, see section 26(b).''.
            (2) Subsection (c) of section 23 is amended--
                    (A) by inserting ``(as reduced under section 
                26(b))'' before ``exceeds'', and
                    (B) by adding at the end the following new 
                sentence: ``For purposes of this subsection, the 
                reduction under section 26(b) shall first be applied to 
                the credits under sections 24 and 25A and then to the 
                credit under this section.''.
            (3) Subsection (b) of section 24 is amended to read as 
        follows:
    ``(b) Limitation Based on Adjusted Gross.--

                                ``For limitation based on adjusted 
gross income, see section 26(b).''.
            (4) Subsection (d) of section 25A is amended to read as 
        follows:
    ``(d) Limitation Based on Adjusted Gross.--

                                ``For limitation based on adjusted 
gross income, see section 26(b).''.
            (5) Subsection (h) of section 25A is amended to read as 
        follows:
    ``(h) Inflation Adjustments.--
            ``(1) In general.--In the case of a taxable year beginning 
        after 2004, each of the $1,000 amounts under subsection (b)(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 2003' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $100, such amount shall be rounded to 
        the next lowest multiple of $100.''.
            (6) The section heading for section 26 is amended by 
        inserting before the period ``; phaseout of certain credits 
        based on income; definitions''.
            (7) The item relating to section 26 in the table of 
        sections for subpart A of part IV of subchapter A of chapter 1 
        is amended by inserting before the period ``; phaseout of 
        certain credits based on income; definitions''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

             TITLE II--SIMPLIFICATION OF CAPITAL GAINS TAX

SEC. 201. SIMPLIFICATION OF CAPITAL GAINS TAX.

    (a) In General.--Part I of subchapter P of chapter 1 (relating to 
treatment of capital gains) is amended by adding at the end the 
following new section:

``SEC. 1203. CAPITAL GAINS DEDUCTION.

    ``If for any taxable year a taxpayer other than a corporation has a 
net capital gain, 38 percent of such gain shall be a deduction from 
gross income.''.
    (b) Deduction Allowable Whether or Not Taxpayer Itemizes Other 
Deductions.--
            (1) Subsection (b) of section 63 is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) the deduction allowed by section 1203.''.
            (2) Subsection (d) of section 63 is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) the deduction allowed by section 1203.''.
    (c) Treatment of Collectibles.--
            (1) In general.--Section 1222 is amended by inserting after 
        paragraph (11) the following new paragraph:
            ``(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 interests in 
                partnerships, 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) is amended by 
                adding at the end thereof the following new sentence: 
                ``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) is amended 
                by inserting before the period at the end thereof the 
                following: ``and section 1222 shall be applied without 
                regard to paragraph (12) thereof (relating to special 
                rule for collectibles)''.
    (d) Technical and Conforming Changes.--
            (1) Section 1 is amended by striking subsection (h).
            (2) Subparagraph (E) of section 163(d)(4) is amended to 
        read as follows:
                    ``(E) Coordination with capital gains deduction.--
                The net capital gain taken into account under section 
                1203 for any taxable year shall be reduced (but not 
                below zero) by the amount which the taxpayer takes into 
                account as investment income under subparagraph 
                (B)(iii) for such year.''.
            (3) Paragraph (1) of section 170(e) is amended by striking 
        ``the amount of gain'' in the material following subparagraph 
        (B)(ii) and inserting ``62 percent (100 percent in the case of 
        a corporation) of the amount of gain''.
            (4) Subparagraph (B) of section 172(d)(2) is amended to 
        read as follows:
                    ``(B) the exclusion under section 1202 and the 
                deduction under section 1203 shall not be allowed.''.
            (5) The last sentence of section 453A(c)(3) is amended by 
        striking all that follows ``long-term capital gain,'' and 
        inserting ``the maximum rate on net capital gain under section 
        1201 or the deduction under section 1203 (whichever is 
        appropriate) shall be taken into account.''.
            (6)(A) Section 641(c)(2)(A) is amended by striking ``Except 
        as provided in section 1(h), the'' and inserting ``The''.
            (B) Section 641(c)(2)(C) is amended by inserting after 
        clause (iii) the following new clause:
                            ``(iv) The deduction under section 1203.''.
            (7) Paragraph (4) of section 642(c) is amended to read as 
        follows:
            ``(4) Adjustments.--To the extent that the amount otherwise 
        allowable as a deduction under this subsection consists of gain 
        from the sale or exchange of capital assets held for more than 
        1 year, proper adjustment shall be made for any exclusion 
        allowable under section 1202 and any deduction allowable under 
        section 1203 to the estate or trust. In the case of a trust, 
        the deduction allowed by this subsection shall be subject to 
        section 681 (relating to unrelated business income).''.
            (8) Section 642 is amended by adding at the end the 
        following new subsection:
    ``(j) Capital Gains Deduction.--The deduction under section 1203 to 
an estate or trust shall be computed by excluding the portion (if any) 
of the gains for the taxable year which is includible by the income 
beneficiaries under sections 652 and 662 (relating to inclusions of 
amounts in gross income of beneficiaries of trusts) as gain derived 
from the sale or exchange of capital assets.''.
            (9) The last sentence of section 643(a)(3) is amended to 
        read as follows: ``The exclusion under section 1202 and the 
        deduction under section 1203 shall not be taken into 
        account.''.
            (10) Subparagraph (C) of section 643(a)(6) is amended by 
        inserting ``(i)'' before ``there shall'' and by inserting 
        before the period ``, and (ii) the deduction under section 1203 
        (relating to capital gains deduction) shall not be taken into 
        account''.
            (11) Paragraph (4) of section 691(c) is amended by striking 
        ``1(h),'' and by inserting ``1203,'' after ``1202,''.
            (12) The second sentence of paragraph (2) of section 871(a) 
        is amended by striking ``section 1202'' and inserting 
        ``sections 1202 and 1203''.
            (13)(A) Paragraph (2) of section 904(b) is amended by 
        striking subparagraphs (A) and (C), by redesignating 
        subparagraph (B) as subparagraph (A), and by inserting after 
        subparagraph (A) (as so redesignated) the following new 
        subparagraph:
                    ``(B) Other taxpayers.--In the case of a taxpayer 
                other than a corporation, taxable income from sources 
                outside the United States shall include gain from the 
                sale or exchange of capital assets only to the extent 
                of foreign source capital gain net income.''.
            (B) Subparagraph (A) of section 904(b)(2), as so 
        redesignated, is amended--
                    (i) by striking all that precedes clause (i) and 
                inserting the following:
                    ``(A) Corporations.--In the case of a corporation--
                '', and
                    (ii) by striking in clause (i) ``in lieu of 
                applying subparagraph (A),''.
            (C) Paragraph (3) of section 904(b) is amended by striking 

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