To amend the Internal Revenue Code of 1986 to reduce the maximum estate and gift tax rate to 45 percent, to replace the unified credit against the estate and gift tax with a unified exemption amount, and to increase the gift exclusion amount.

Summary: Estate Tax Relief Act of 2001 - Amends the Internal Revenue Code to: (1) reduce the maximum estate and gift tax rate to 45 percent; (2) replace the unified credit against the estate and gift taxes with a unified exemption amount of $10 million; and (3) increase from $10,000 to $50,000 the annual gift exclusion amount.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Estate Tax Relief Act of 2001''.

SEC. 2. MAXIMUM ESTATE AND GIFT TAX RATE REDUCED TO 45 PERCENT.

    (a) In General.--The table contained in section 2001(c)(1) of the 
Internal Revenue Code of 1986 is amended by striking the four highest 
brackets and inserting the following:

    ``Over $1,500,000..............
                                        $555,800, plus 45% of the 
                                                excess over 
                                                $1,500,000.''.
    (b) Repeal of Phaseout of Graduated Rates.--
            (1) In general.--Subsection (c) of section 2001 of such 
        Code is amended by striking paragraph (2).
            (2) Conforming amendment.--Section 2001(c) is amended by 
        striking ``(1) In
        general.--'' and moving the text 2 ems to the left.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
2000.

SEC. 3. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH 
              UNIFIED EXEMPTION AMOUNT.

    (a) In General.--
            (1) Estate tax.--Subsection (b) of section 2001 of the 
        Internal Revenue Code of 1986 (relating to computation of tax) 
        is amended to read as follows:
    ``(b) Computation of Tax.--
            ``(1) In general.--The tax imposed by this section shall be 
        the amount equal to the excess (if any) of--
                    ``(A) the tentative tax determined under paragraph 
                (2), over
                    ``(B) the aggregate amount of tax which would have 
                been payable under chapter 12 with respect to gifts 
                made by the decedent after December 31, 1976, if the 
                provisions of subsection (c) (as in effect at the 
                decedent's death) had been applicable at the time of 
                such gifts.
            ``(2) Tentative tax.--For purposes of paragraph (1), the 
        tentative tax determined under this paragraph is a tax computed 
        under subsection (c) on the excess of--
                    ``(A) the sum of--
                            ``(i) the amount of the taxable estate, and
                            ``(ii) the amount of the adjusted taxable 
                        gifts, over
                    ``(B) the exemption amount.
            ``(3) Exemption amount.--For purposes of paragraph (2), the 
        term `exemption amount' means $10,000,000.
            ``(4) Adjusted taxable gifts.--For purposes of paragraph 
        (2), the term `adjusted taxable gifts' means the total amount 
        of the taxable gifts (within the meaning of section 2503) made 
        by the decedent after December 31, 1976, other than gifts which 
        are includible in the gross estate of the decedent.''.
            (2) Gift tax.--Subsection (a) of section 2502 of such Code 
        (relating to computation of tax) is amended to read as follows:
    ``(a) Computation of Tax.--
            ``(1) In general.--The tax imposed by section 2501 for each 
        calendar year shall be the amount equal to the excess (if any) 
        of--
                    ``(A) the tentative tax determined under paragraph 
                (2) for such calendar year, over
                    ``(B) the aggregate amount of tax that would have 
                been payable under this chapter with respect to gifts 
                made by the donor in preceding calendar periods if the 
                tax had been computed under the provisions of section 
                2001(c) as in effect for such calendar year.
            ``(2) Tentative tax.--For purposes of paragraph (1), the 
        tentative tax determined under this paragraph for a calendar 
        year is a tax computed under section 2001(c) on the excess of--
                    ``(A) the aggregate sum of the taxable gifts for 
                such calendar year and for each of the preceding 
                calendar periods, over
                    ``(B) the exemption amount under section 2001(b)(3) 
                for such calendar year.''.
    (b) Repeal of Unified Credits.--
            (1) Section 2010 of such Code (relating to unified credit 
        against estate tax) is hereby repealed.
            (2) Section 2505 of such Code (relating to unified credit 
        against gift tax) is hereby repealed.
    (c) Conforming Amendments.--
            (1)(A) Subsection (b) of section 2011 of such Code is 
        amended--
                    (i) by striking ``adjusted'' in the table; and
                    (ii) by striking the last sentence.
            (B) Subsection (f) of section 2011 of such Code is amended 
        by striking ``, reduced by the amount of the unified credit 
        provided by section 2010''.
            (2) Subsection (a) of section 2012 of such Code is amended 
        by striking ``and the unified credit provided by section 
        2010''.
            (3) Subparagraph (A) of section 2013(c)(1) of such Code is 
        amended by striking ``2010,''.
            (4) Paragraph (2) of section 2014(b) of such Code is 
        amended by striking ``2010, 2011,'' and inserting ``2011''.
            (5) Clause (ii) of section 2056A(b)(12)(C) of such Code is 
        amended to read as follows:
                            ``(ii) to treat any reduction in the tax 
                        imposed by paragraph (1)(A) by reason of the 
                        credit allowable under section 2010 (as in 
                        effect on the day before the date of the 
                        enactment of the Estate Tax Relief Act of 2001) 
                        or the exemption amount allowable under section 
                        2001(b) with respect to the decedent as a 
                        credit under section 2505 (as so in effect) or 
                        exemption under section 2501 (as the case may 
                        be) allowable to such surviving spouse for 
                        purposes of determining the amount of the 
                        exemption allowable under section 2501 with 
                        respect to taxable gifts made by the surviving 
                        spouse during the year in which the spouse 
                        becomes a citizen or any subsequent year,''.
            (6)(A) Section 2057 of such Code is repealed and the table 
        of sections for part IV of subchapter A of chapter 11 of such 
        Code is amended by striking the item relating to section 2057.
            (B) Paragraph (10) of section 2031(c) of such Code is 
        amended by inserting ``(as in effect on the day before the date 
        of the enactment of this parenthetical)'' before the period.
            (7) Subsection (b) of section 2101 of such Code is amended 
        to read as follows:
    ``(b) Computation of Tax.--
            ``(1) In general.--The tax imposed by this section shall be 
        the amount equal to the excess (if any) of--
                    ``(A) the tentative tax determined under paragraph 
                (2), over
                    ``(B) a tentative tax computed under section 
                2001(c) on the amount of the adjusted taxable gifts.
            ``(2) Tentative tax.--For purposes of paragraph (1), the 
        tentative tax determined under this paragraph is a tax computed 
        under section 2001(c) on the excess of--
                    ``(A) the sum of--
                            ``(i) the amount of the taxable estate, and
                            ``(ii) the amount of the adjusted taxable 
                        gifts, over
                    ``(B) the exemption amount for the calendar year in 
                which the decedent died.
            ``(3) Exemption amount.--
                    ``(A) In general.--The term `exemption amount' 
                means $60,000.
                    ``(B) Residents of possessions of the united 
                states.--In the case of a decedent who is considered to 
                be a nonresident not a citizen of the United States 
                under section 2209, the exemption amount under this 
                paragraph shall be the greater of--
                            ``(i) $60,000, or
                            ``(ii) that proportion of $175,000 which 
                        the value of that part of the decedent's gross 
                        estate which at the time of his death is 
                        situated in the United States bears to the 
                        value of his entire gross estate wherever 
                        situated.
                    ``(C) Special rules.--
                            ``(i) Coordination with treaties.--To the 
                        extent required under any treaty obligation of 
                        the United States, the exemption amount allowed 
                        under this paragraph shall be equal to the 
                        amount which bears the same ratio to the 
                        exemption amount under section 2001(b)(3) (for 
                        the calendar year in which the decedent died) 
                        as the value of the part of the decedent's 
                        gross estate which at the time of his death is 
                        situated in the United States bears to the 
                        value of his entire gross estate wherever 
                        situated. For purposes of the preceding 
                        sentence, property shall not be treated as 
                        situated in the United States if such property 
                        is exempt from the tax imposed by this 
                        subchapter under any treaty obligation of the 
                        United States.
                            ``(ii) Coordination with gift tax exemption 
                        and unified credit.--If an exemption has been 
                        allowed under section 2501 (or a credit has 
                        been allowed under section 2505 as in effect on 
                        the day before the date of the enactment of the 
                        Estate Tax Relief Act of 2001) with respect to 
                        any gift made by the decedent, each dollar 
                        amount contained in subparagraph (A) or (B) or 
                        the exemption amount applicable under clause 
                        (i) of this subparagraph (whichever applies) 
                        shall be reduced by the exemption so allowed 
                        under section 2501 (or, in the case of such a 
                        credit, by the amount of the gift for which the 
                        credit was so allowed).''.
            (8) Section 2102 of such Code is amended by striking 
        subsection (c).
            (9)(A) Paragraph (1) of section 2107(a) of such Code is 
        amended by striking ``the table contained in''.
            (B) Paragraph (1) of section 2107(c) of such Code is 
        amended to read as follows:
            ``(1) Exemption amount.--For purposes of subsection (a), 
        the exemption amount under section 2001 shall be $60,000.''
            (C) Paragraph (3) of section 2107(c) of such Code is 
        amended by striking the second sentence.
            (D) The heading of subsection (c) of section 2107 of such 
        Code is amended to read as follows:
    ``(c) Exemption Amount and Credits.--''.
            (10) Paragraph (1) of section 6018(a) of such Code is 
        amended by striking ``the applicable exclusion amount in effect 
        under section 2010(c)'' and inserting ``the exemption amount 
        under section 2001(b)(3)''.
            (11) Subparagraph (A) of section 6601(j)(2) of such Code is 
        amended to read as follows:
                    ``(A) the amount of the tentative tax which would 
                be determined under the rate schedule set forth in 
                section 2001(c) if the amount with respect to which 
                such tentative tax is to be computed were $1,000,000, 
                or''.
            (12) The table of sections for part II of subchapter A of 
        chapter 11 of such Code is amended by striking the item 
        relating to section 2010.
            (13) The table of sections for subchapter A of chapter 12 
        of such Code is amended by striking the item relating to 
        section 2505.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying and gifts made after December 31, 
2000.

SEC. 4. INCREASE IN ANNUAL GIFT EXCLUSION AMOUNT.

    (a) In General.--Paragraph (1) of section 2503(b) of the Internal 
Revenue Code of 1986 (relating to general exclusion from gifts) is 
amended by striking ``$10,000'' and inserting ``$50,000''.
    (b) Inflation Adjustment.--Paragraph (2) of section 2503(b) of such 
Code is amended--
            (1) by striking ``$10,000'' both places it appears and 
        inserting ``$50,000'',
            (2) by striking ``1998'' and inserting ``2001'', and
            (3) by striking ``1997'' and inserting ``2000''.
    (c) Conforming Amendment.--Section 2523(i)(2) of such Code is 
amended by striking ``$10,000'' and inserting ``$50,000''.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying and gifts made after December 31, 
2000.