To amend the Internal Revenue Code of 1986 to restore the estate tax and repeal the carryover basis rule, to increase the estate and gift tax unified credit to an exclusion equivalent of $5,000,000, and to reduce the rate of the estate and gifts taxes to the generally applicable capital gains income tax rate.

SECTION 1. RESTORATION OF ESTATE TAX; REPEAL OF CARRYOVER BASIS.

    (a) In General.--Subtitles A and E of title V of the Economic 
Growth and Tax Relief Reconciliation Act of 2001, and the amendments 
made by such subtitles, are hereby repealed; and the Internal Revenue 
Code of 1986 shall be applied as if such subtitles, and amendments, had 
never been enacted.
    (b) Sunset not to Apply.--
            (1) Subsection (a) of section 901 of the Economic Growth 
        and Tax Relief Reconciliation Act of 2001 is amended by 
        striking ``this Act'' and all that follows and inserting ``this 
        Act (other than title V) shall not apply to taxable, plan, or 
        limitation years beginning after December 31, 2010.''.
            (2) Subsection (b) of such section 901 is amended by 
        striking ``, estates, gifts, and transfers''.
    (c) Conforming Amendments.--Subsections (d) and (e) of section 511 
of the Economic Growth and Tax Relief Reconciliation Act of 2001, and 
the amendments made by such subsections, are hereby repealed; and the 
Internal Revenue Code of 1986 shall be applied as if such subsections, 
and amendments, had never been enacted.

SEC. 2. ESTATE AND GIFT TAX RATES REDUCED TO 15 PERCENT OR, IF LOWER, 
              THE GENERALLY APPLICABLE CAPITAL GAINS RATE FOR 
              INDIVIDUALS.

    (a) Estate Tax.--
            (1) In general.--Section 2001 of the Internal Revenue Code 
        of 1986 (relating to estate tax) is amended by striking 
        subsections (b) and (c) and by inserting after subsection (a) 
        the following new subsection:
    ``(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 applicable percentage of the sum of--
                            ``(i) the amount of the taxable estate, and
                            ``(ii) the amount of the adjusted taxable 
                        gifts, over
                    ``(B) the aggregate amount of tax paid under 
                chapter 12 with respect to gifts made by the decedent 
                after December 31, 1976.
        For purposes of subparagraph (A)(ii), 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) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means the lesser of 15 
        percent or the rate contained in section 1(h)(1)(C).''
            (2) Conforming amendments.--
                    (A) Subsection (c) of section 2010 of such Code is 
                amended by striking ``the applicable credit amount'' 
                and all that follows through ``the applicable exclusion 
                amount'' and inserting ``the applicable credit amount 
                shall be the applicable percentage (as defined in 
                section 2001(b)(2)) of the applicable exclusion 
                amount''.
                    (B) Subsection (b) of section 2101 of such Code is 
                amended to read as follows:
    ``(b) Computation of Tax.--The tax imposed by this section shall be 
the amount equal to the excess (if any) of--
            ``(1) the applicable percentage (as defined in section 
        2001(b)(2)) of the sum of--
                    ``(A) the amount of the taxable estate, and
                    ``(B) the amount of the adjusted taxable gifts, 
                over
            ``(2) the aggregate amount of tax paid under chapter 12 
        with respect to gifts made by the decedent after December 31, 
        1976.''
                    (C) Subsection (c) of section 2102 of such Code, as 
                in effect prior to its redesignation by section 
                532(c)(7)(B) of the Economic Growth and Tax Relief 
                Reconciliation Act of 2001, is amended--
                            (i) by striking ``$13,000'' each place it 
                        appears and inserting ``$12,000'', and
                            (ii) by striking ``$46,800'' and inserting 
                        ``$35,000''.
                    (D) Subsection (a) of section 2201 of such Code is 
                amended by striking ``rate schedule set forth in 
                section 2001(c)'' and inserting ``applicable percentage 
                (as defined in section 2001(b)(2)''.
    (b) Gift Tax.--
            (1) In general.--Section 2502 of such Code is amended to 
        read as follows:

``SEC. 2502. RATE OF TAX.

    ``(a) General Rule.--The tax imposed by section 2501 for each 
calendar year shall be an amount equal to the applicable percentage (as 
defined in section 2001(b)(2)) of the sum of the taxable gifts for such 
calendar year.
    ``(b) Tax to Be Paid by Donor.--The tax imposed by section 2501 
shall be paid by the donor.''
            (2) Conforming amendments.--
                    (A) Subchapter A of chapter 12 of such Code is 
                amended by striking section 2504.
                    (B) The table of sections for such subchapter is 
                amended by striking the item relating to section 2504.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
2003.

SEC. 3. $5,000,000 EXEMPTION FROM ESTATE AND GIFT TAXES.

    (a) In General.--Subsection (c) of section 2010 of the Internal 
Revenue Code of 1986 (relating to applicable credit amount), as amended 
by section 2, is amended by striking ``the applicable exclusion 
amount'' and all that follows and inserting ``$5,000,000.''.
    (b) Gift Tax.--Paragraph (1) of section 2505(a) of such Code 
(relating to general rule) is amended by striking ``(determined as if 
the applicable exclusion amount were $1,000,000)''.
    (c) Effective Date.--The amendment made by this section shall apply 
to estates of decedents dying, and gifts made, after December 31, 2003.

Summary: Repeals subtitles A and E of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001. Makes the sunset provisions of such Act inapplicable to the remainder of title V. Reduces estate and gift tax rates to the lesser of 15 percent or the applicable capital gains rate. Sets a unified estate and gift tax credit of $5 million.