A bill to amend the Internal Revenue Code of 1986 to reduce the maximum capital gains rates for individual taxpayers and to reduce the holding period for long-term capital gain treatment to 1 month, and for other purposes.

Summary: Amends the Internal Revenue Code of 1986 to: (1) revise a specified formula in order to reduce the maximum capital gains rates for individuals; and (2) decrease from one year to one month the holding period required for long-term capital gain treatment.

SECTION 1. REDUCTION OF MAXIMUM CAPITAL GAINS RATES FOR INDIVIDUALS.

    (a) In General.--Section 1(h) of the Internal Revenue Code of 1986 
(relating to maximum capital gains rate) is amended to read as follows:
    ``(h) Maximum Capital Gains Rate.--
            ``(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 on taxable income reduced by 
                the net capital gain, at the rates and in the same 
                manner as if this subsection had not been enacted,
                    ``(B) 7.5 percent of so much of the taxpayer's 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 of 15 percent or less, over
                            ``(ii) the amount on which tax is 
                        determined under subparagraph (A), plus
                    ``(C) 15 percent of the taxpayer's net capital gain 
                (or, if less, taxable income) in excess of the amount 
                of capital gain on which tax is determined under 
                subparagraph (B).
            ``(2) Net capital gain taken into account as investment 
        income.--For purposes of this subsection, the net capital gain 
        for any taxable year shall be reduced (but not below zero) by 
        the amount which the taxpayer elects to take into account as 
        investment income for the taxable year under section 
        163(d)(4)(B)(iii).''.
    (b) Minimum Tax.--Subparagraph (A) of section 55(b)(1) of the 
Internal Revenue Code of 1986 (relating to amount of tentative tax) is 
amended by redesignating clauses (ii) and (iii) as clauses (iii) and 
(iv), respectively, and by inserting after clause (i) the following new 
clause:
                            ``(ii) Maximum rate of tax on net capital 
                        gain.--The amount determined under the first 
                        sentence of clause (i) shall not exceed the sum 
                        of--
                                    ``(I) the amount determined under 
                                such first sentence computed at the 
                                rates and in the same manner as if this 
                                clause had not been enacted on the 
                                taxable excess reduced by the net 
                                capital gain, plus
                                    ``(II) a tax of 15 percent of the 
                                lesser of the net capital gain or the 
                                taxable excess.''
            (2) Conforming amendment.--Section 55(b) of such Code is 
        amended by striking paragraph (3).
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 1445(e) of the Internal 
        Revenue Code of 1986 is amended by striking ``20 percent'' and 
        inserting ``15 percent''.
            (2)(A) The second sentence of section 7518(g)(6)(A) is 
        amended by striking ``20 percent'' and inserting ``15 
        percent''.
            (B) The second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936 is amended by striking ``20 percent'' 
        and inserting ``15 percent''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after December 31, 2001.
            (2) Withholding.--The amendment made by subsection (c)(1) 
        shall apply to amounts paid after the date of the enactment of 
        this Act.

SEC. 2. DECREASE IN HOLDING PERIOD REQUIRED FOR LONG-TERM CAPITAL GAIN 
              TREATMENT.

    (a) In General.--
            (1) Capital gain.--Paragraphs (1) and (3) of section 1222 
        of the Internal Revenue Code of 1986 (relating to other terms 
        relating to capital gains and losses) are each amended by 
        striking ``1 year'' and inserting ``1 month''.
            (2) Capital losses.--Paragraphs (2) and (4) of section 1222 
        of such Code are each amended by striking ``1 year'' and 
        inserting ``1 month''.
    (b) Conforming Amendments.--The following provisions of the 
Internal Revenue Code of 1986 are each amended by striking ``1 year'' 
each place it appears and inserting ``1 month'':
            (1) Section 166(d)(1)(B).
            (2) Section 422(a)(1).
            (3) Section 423(a)(1).
            (4) Section 584(c).
            (5) Subsections (b) and (c) of section 631.
            (6) Section 642(c)(3).
            (7) Paragraphs (1) and (2) of section 702(a).
            (8) Section 818(b)(1).
            (9) Section 852(b)(3)(B).
            (10) Section 857(b)(3)(B).
            (11) Paragraphs (11) and (12) of section 1223.
            (12) Section 1231.
            (13) Subsections (b), (d), and (e)(4)(A) of section 1233.
            (14) Section 1234(b)(1).
            (15) Section 1235(a).
            (16) Section 1246(a)(4).
            (17) Section 1247(i).
            (18) Subsections (b) and (g)(2)(C) of section 1248.
    (c) Technical Amendment.--The first sentence of section 631(a) of 
the Internal Revenue Code of 1986 is amended by striking ``for a period 
of more than one year'' and inserting ``on the first day of such year 
and for a period of more than 1 month before such cutting''.
    (d) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2001.