A bill to amend the Internal Revenue Code of 1986 to modify the rules applicable to qualified small business stock.

Summary: Venture Capital Gains and Growth Act of 2001 - Amends the Internal Revenue Code to provide for a 100 percent (currently 50 percent) exclusion from gross income (a zero capital gains rate) for new long-term (three-year) investments in the stock of a small corporation (with $300 million or less in paid-in capital) acquired directly from the corporation. Repeals the minimum tax preference for such excluded capital gains.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Venture Capital Gains and Growth Act 
of 2001''.

SEC. 2. MODIFICATIONS APPLICABLE TO QUALIFIED SMALL BUSINESS STOCK.

    (a) Repeal of Minimum Tax Preference.--
            (1) In general.--Subsection (a) of section 57 of the 
        Internal Revenue Code of 1986 (relating to items of tax 
        preference) is amended by striking paragraph (7).
            (2) Technical amendment.--Subclause (II) of section 
        53(d)(1)(B)(ii) of such Code is amended by striking ``, (5), 
        and (7)'' and inserting ``and (5)''.
    (b) Increase in Rollover Period for Qualified Small Business 
Stock.--Subsections (a)(1) and (b)(3) of section 1045 of the Internal 
Revenue Code of 1986 (relating to rollover of gain from qualified small 
business stock to another qualified small business stock) are each 
amended by striking ``60-day'' and inserting ``180-day''.
    (c) Reduction in Holding Period.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to partial exclusion 
        for gains from certain small business stock) is amended by 
        striking ``5 years'' and inserting ``3 years''.
            (2) Conforming amendment.--Subsections (g)(2)(A) and 
        (j)(1)(A) of section 1202 of such Code are each amended by 
        striking ``5 years'' and inserting ``3 years''.
    (d) Repeal of Per-Issuer Limitation.--Section 1202(b) of the 
Internal Revenue Code of 1986 (relating to per-issuer limitations on 
taxpayer's eligible gain) is repealed.
    (e) Qualified Trade or Business.--Section 1202(e)(3) of the 
Internal Revenue Code of 1986 (relating to qualified trade or business) 
is amended by inserting ``, and is anticipated to continue to be,'' 
before ``the reputation'' in subparagraph (A).
    (f) Other Modifications.--
            (1) Repeal of working capital limitation.--Section 
        1202(e)(6) of the Internal Revenue Code of 1986 (relating to 
        working capital) is amended--
                    (A) in subparagraph (B), by striking ``2 years'' 
                and inserting ``5 years''; and
                    (B) by striking the last sentence.
            (2) Exception from redemption rules where business 
        purpose.--Section 1202(c)(3) of such Code (relating to certain 
        purchases by corporation of its own stock) is amended by adding 
        at the end the following new subparagraph:
                    ``(D) Waiver where business purpose.--A purchase of 
                stock by the issuing corporation shall be disregarded 
                for purposes of subparagraph (B) if the issuing 
                corporation establishes that there was a business 
                purpose for such purchase and one of the principal 
                purposes of the purchase was not to avoid the 
                limitations of this section.''.
    (g) Increased Exclusion.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to 50-percent exclusion 
        for gain from certain small business stock) is amended by 
        striking ``50 percent'' and inserting ``100 percent''.
            (2) Conforming amendments.--
                    (A) Subparagraph (A) of section 1(h)(5) of such 
                Code is amended to read as follows:
                    ``(A) collectibles gain, over''.
                    (B) Section 1(h) of such Code is amended by 
                striking paragraph (8).
                    (C) Paragraph (9) of section 1(h) of such Code is 
                amended by striking ``, gain described in paragraph 
                (7)(A)(i), and section 1202 gain'' and inserting ``and 
                gain described in paragraph (7)(A)(i)''.
                    (D) Section 1(h) of such Code is amended by 
                redesignating paragraphs (9) (as amended by 
                subparagraph (C)), (10), (11), and (12) as paragraphs 
                (8), (9), (10), and (11), respectively.
                    (E) The heading for section 1202 of such Code is 
                amended by striking ``partial'' and inserting ``100-
                percent''.
                    (F) The table of sections for part I of subchapter 
                P of chapter 1 of such Code is amended by striking 
                ``Partial'' in the item relating to section 1202 and 
                inserting ``100-percent''.
    (h) Exclusion Available to Corporations.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to partial exclusion 
        for gains from certain small business stock) is amended by 
        striking ``other than a corporation''.
            (2) Technical amendment.--Subsection (c) of section 1202 of 
        such Code is amended by adding at the end the following new 
        paragraph:
            ``(4) Stock held among members of controlled group not 
        eligible.--Stock of a member of a parent-subsidiary controlled 
        group (as defined in subsection (d)(3)) shall not be treated as 
        qualified small business stock while held by another member of 
        such group.''.
    (i) Stock of Larger Businesses Eligible for Exclusion.--
            (1) In general.--Paragraph (1) of section 1202(d) of the 
        Internal Revenue Code of 1986 (defining qualified small 
        business) is amended by striking ``$50,000,000'' each place it 
        appears and inserting ``$300,000,000''.
            (2) Inflation adjustment.--Section 1202(d) of such Code 
        (defining qualified small business) is amended by adding at the 
        end the following:
            ``(4) Inflation adjustment of asset limitation.--In the 
        case of stock issued in any calendar year after 2002, the 
        $300,000,000 amount contained in paragraph (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 2001' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount  shall be rounded to the 
nearest multiple of $10,000.''.
    (j) Effective Date.--The amendments made by this section shall 
apply to stock issued after the date of the enactment of this Act.