To amend the Internal Revenue Code of 1986 to reduce the rate of tax on unrecaptured section 1250 gain from 25 percent to 20 percent.

Summary: Amends the Internal Revenue Code to reduce the tax rate on unrecaptured gain from dispositions of certain depreciable property.

SECTION 1. MAXIMUM CAPITAL GAINS RATES FOR INDIVIDUALS.

    (a) Regular Tax.--Paragraph (1) of section 1(h) of the Internal 
Revenue Code of 1986 (relating to maximum capital gains rate) is 
amended to read as follows:
            ``(1) In general.--If a taxpayer has a net capital gain for 
        any taxable year, the tax imposed by this section for such 
        taxable year shall not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                the greater of--
                            ``(i) taxable income reduced by the net 
                        capital gain, or
                            ``(ii) the lesser of--
                                    ``(I) the amount of taxable income 
                                taxed at a rate below 28 percent, or
                                    ``(II) the taxable income reduced 
                                by the adjusted net capital gain, plus
                    ``(B) 28 percent of the amount of taxable income in 
                excess of the sum of--
                            ``(i) the adjusted net capital gain, plus
                            ``(ii) the amount on which tax is 
                        determined under subparagraph (A), plus
                    ``(C) 10 percent of so much of the taxpayer's 
                adjusted net capital gain (or, if less, taxable income) 
                as does not exceed the excess (if any) of--
                            ``(i) the amount of taxable income which 
                        would (without regard to this paragraph) be 
                        taxed at a rate below 28 percent, over
                            ``(ii) the taxable income reduced by the 
                        adjusted net capital gain, plus
                    ``(D) 20 percent of the taxpayer's adjusted net 
                capital gain (or, if less, taxable income) in excess of 
                the amount on which a tax is determined under 
                subparagraph (C).''.
    (b) Minimum Tax.--Paragraph (3) of section 55(b) of such Code is 
amended to read as follows:
            ``(3) Maximum rate of tax on net capital gain of 
        noncorporate taxpayers.--The amount determined under the first 
        sentence of paragraph (1)(A)(i) shall not exceed the sum of--
                    ``(A) the amount determined under such first 
                sentence computed at the rates and in the same manner 
                as if this paragraph had not been enacted on the 
                taxable excess reduced by the lesser of--
                            ``(i) the net capital gain, or
                            ``(ii) the adjusted net capital gain, plus
                    ``(B) 10 percent of so much of the taxpayer's 
                adjusted net capital gain (or, if less, taxable excess) 
                as does not exceed the amount on which a tax is 
                determined under section 1(h)(1)(C), plus
                    ``(C) 20 percent of the taxpayer's adjusted net 
                capital gain (or, if less, taxable excess) in excess of 
                the amount on which tax is determined under 
                subparagraph (B).
        In the case of taxable years beginning after December 31, 2000, 
        rules similar to the rules of section 1(h)(2) shall apply for 
        purposes of subparagraphs (B) and (C). Terms used in this 
        paragraph which are also used in section 1(h) shall have the 
        respective meanings given such terms by section 1(h).''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1(h) of such Code is amended--
                    (A) by striking ``paragraph (1)(D)'' in 
                subparagraph (A) and inserting ``paragraph (1)(C)'', 
                and
                    (B) by striking ``paragraph (1)(E)'' in 
                subparagraph (B) and inserting ``paragraph (1)(D)''.
            (2) Paragraph (4) of section 1(h) of such Code is amended 
        by striking subparagraph (B) and by redesignating subparagraphs 
        (C) and (D) as subparagraph (B) and (C), respectively.
            (3) Subsection (h) of section 1 of such Code is amended by 
        striking paragraph (6) and by redesignating paragraphs (7) 
        through (11) as paragraphs (6) through (10), respectively.
            (4) Paragraph (8) of section 1(h) of such Code, as 
        redesignated by paragraph (3), is amended by striking 
        ``unrecaptured section 1250 gain (determined without regard to 
        subparagraph (B) of paragraph (6)),''.
            (5) Subparagraph (A) of section 1(h)(9) of such Code, as 
        redesignated by paragraph (3), is amended by striking 
        ``paragraph (8)(A)'' and inserting ``paragraph (7)(A)''.
            (6) Paragraph (10) of section 1(h) of such Code, as 
        redesignated by paragraph (3), is amended by striking 
        ``paragraph (10)(C)'' and inserting ``paragraph (9)(C)''.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 311 of the 
Taxpayer Relief Act of 1997.