To amend the Internal Revenue Code of 1986 to allow a deduction for dividends paid by domestic corporations, to reduce the tax on capital gains from assets held for more than 3 years, and to restore the investment tax credit for certain property.

SECTION 1. ALLOWANCE OF DEDUCTION FOR DIVIDENDS PAID BY DOMESTIC 
              CORPORATIONS.

    (a) In General.--Section 243 of the Internal Revenue Code of 1986 
(relating to dividends received by corporations) is amended to read as 
follows:

``SEC. 243. DIVIDENDS PAID BY DOMESTIC CORPORATIONS.

    ``(a) General Rule.--In the case of a domestic corporation which is 
subject to taxation under this chapter, there shall be allowed as a 
deduction for the taxable year an amount equal to the dividends paid by 
such corporation during the taxable year.
    ``(b) Dividends.--For purposes of this section, the term `dividend' 
means any dividend (as defined in section 316) to which section 301 
applies.
    ``(c) Certain Corporations Not Eligible.--No deduction shall be 
allowed under this section with respect to dividends paid by any 
corporation which is--
            ``(1) an S corporation (as defined in section 1361(a)(1));
            ``(2) a regulated investment company (as defined in section 
        851(a));
            ``(3) a real estate investment trust (as defined in section 
        856(a)); or
            ``(4) a personal holding company (as defined in section 
        542).
    ``(d) Special Rules for Certain Distributions of Mutual Savings 
Banks, Etc.--For purposes of this section, any amount allowed as a 
deduction under section 591 (relating to deduction for dividends paid 
by mutual savings banks, etc.) shall not be treated as a dividend.''
    (b) Repeal of Deductions for Dividends Received From Domestic 
Corporations and Rules Relating Thereto; Repeal of Deduction for 
Dividends Paid on Certain Preferred Stock of Public Utilities.--
Sections 244 (relating to dividends received on certain preferred 
stock), 246 (relating to rules applying to deductions for dividends 
received), and 247 (relating to dividends paid on certain preferred 
stock of public utilities) of such Code are hereby repealed.
    (c) Conforming Amendments.--
            (1) Dividends received from certain foreign corporations.--
                    (A) Transfer of provision specifying deductible 
                percentage of dividend received.--
                            (i) Paragraph (1) of section 245(a) of such 
                        Code (relating generally to dividends received 
                        from 10-percent owned foreign corporations) is 
                        amended by striking ``the percent (specified in 
                        section 243 for the taxable year)'' and 
                        inserting ``the applicable percentage 
                        determined under paragraph (12)''.
                            (ii) Subsection (a) of section 245 of such 
                        Code is amended by adding at the end thereof 
                        the following new paragraph:
            ``(12) Applicable percentage.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the applicable percentage is--
                            ``(i) 100 percent in the case of dividends 
                        received by a small business investment company 
                        operating under the Small Business Investment 
                        Act of 1958 (15 U.S.C. 661 and following),
                            ``(ii) 80 percent in the case of dividends 
                        not described in clause (i) from a 20-percent 
                        owned corporation, and
                            ``(iii) 70 percent in the case of any other 
                        dividends.
                    ``(B) 20-percent owned corporation.--For purposes 
                of subparagraph (A), the term `20-percent owned 
                corporation' means any corporation if 20 percent or 
                more of the stock in such corporation (by vote and 
                value) is owned by the taxpayer. For purposes of the 
                preceding sentence, stock described in section 1504(a) 
                shall not be taken into account.''
                            (iii) Subparagraph (B) of section 245(c)(1) 
                        of such Code is amended by striking ``section 
                        243(c)(2)'' and inserting ``subsection 
                        (a)(12)(B)''.
                    (B) Transfer of limitation on aggregate amount of 
                dividends received deduction, exclusion of certain 
                dividends, etc.--Section 245 of such Code (relating to 
                dividends received from certain foreign corporations) 
                is amended by adding at the end the following new 
                subsections:
    ``(e) Limitation and Special Rules.--
            ``(1) Limitation on aggregate amount of deduction.--
                    ``(A) In general.--Except as provided by 
                subparagraph (B), the aggregate amount of the 
                deductions allowed by subsections (a) and (b) shall not 
                exceed the percentage determined under subparagraph (C) 
                of the taxable income computed without regard to--
                            ``(i) the deductions allowed by section 
                        172,
                            ``(ii) any adjustment under section 1059, 
                        and
                            ``(iii) any capital loss carryback to the 
                        taxable year under section 1212(a)(1).
                    ``(B) Effect of net operating loss.--Subparagraph 
                (A) shall not apply for any taxable year for which 
                there is a net operating loss (as determined under 
                section 172).
                    ``(c) Special rules.--The provisions of 
                subparagraph (A) shall be applied--
                            ``(i) first separately with respect to 
                        dividends from 20-percent owned corporations 
                        and the percentage determined under this 
                        subparagraph shall be 80 percent, and
                            ``(ii) then separately with respect to 
                        dividends not from 20-percent owned 
                        corporations and the percentage determined 
                        under this subparagraph shall be 70 percent and 
                        the taxable income shall be reduced by the 
                        aggregate amount of dividends from 20-percent 
                        owned corporations.
            ``(2) Exclusion of certain dividends.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) or (b) in respect of any dividend 
                on any share of stock--
                            ``(i) which is sold or otherwise disposed 
                        of in any case in which the taxpayer has held 
                        such share for 45 days or less, or
                            ``(ii) to the extent that the taxpayer is 
                        under an obligation (whether pursuant to a 
                        short sale or otherwise) to make corresponding 
                        payments with respect to positions in 
                        substantially similar or related property.
                    ``(B) 90-day rule in the case of certain preference 
                dividends.--In the case of any stock having preference 
                in dividends, the holding period specified in 
                subparagraph (A)(i) shall be 90 days in lieu of 45 days 
                if the taxpayer receives dividends with respect to such 
                stock which are attributable to a period or periods 
                aggregating in excess of 366 days.
                    ``(C) Determination of holding periods.--For 
                purposes of this subsection, in determining the period 
                for which the taxpayer has held any share of stock--
                            ``(i) the day of disposition, but not the 
                        day of acquisition, shall be taken into 
                        account,
                            ``(ii) there shall not be taken into 
                        account any day which is more than 45 days (or 
                        90 days in the case of stock to which 
                        subparagraph (B) applies) after the date on 
                        which such share becomes ex-dividend, and
                            ``(iii) paragraph (4) of section 1223 shall 
                        not apply.
                    ``(D) Holding period reduced for periods where risk 
                of loss diminished.--The holding periods determined 
                under the preceding provisions of this subparagraph 
                shall be appropriately reduced (in the manner provided 
                in regulations prescribed by the Secretary) for any 
                period (during such periods) in which--
                            ``(i) the taxpayer has an option to sell, 
                        is under a contractual obligation to sell, or 
                        has made (and not closed) a short sale of, 
                        substantially identical stock or securities,
                            ``(ii) the taxpayer is the grantor of an 
                        option to buy substantially identical stock or 
                        securities, or
                            ``(iii) under regulations prescribed by the 
                        Secretary, a taxpayer has diminished his risk 
                        of loss by holding 1 or more other positions 
                        with respect to substantially similar or 
                        related property.
The preceding sentence shall not apply in the case of any qualified 
covered call (as defined in section 1092(c)(4) but without regard to 
the requirement that gain or loss with respect to the option not be 
ordinary income or loss).
    ``(f) Cross Reference.--

                                ``For special rule relating to mutual 
savings banks, etc., to which section 593 applies, see section 596.''
            (2) Net operating loss deduction.--Paragraph (5) of section 
        172(d) of such Code is amended to read as follows:
            ``(5) Computation of deduction for dividends received from 
        certain foreign corporations.--The deduction allowed by section 
        245 (relating to dividends received from certain foreign 
        corporations) shall be computed without regard to section 
        245(e)(1).''
            (3) Dividends received deduction reduced where portfolio 
        stock is debt financed.--
                    (A) Subsections (a) and (e) of section 246A of such 
                Code (relating to dividends received deduction reduced 
                where portfolio stock is debt financed) are each 
                amended by striking ``243, 244, or''.
                    (B) Subsection (b) of section 246A of such Code is 
                amended to read as follows:
    ``(b) Section Not to Apply to Dividends for Which 100 Percent 
Dividends Received Deduction Allowable.--Subsection (a) shall not apply 
to dividends received by a small business investment company operating 
under the Small Business Investment Act of 1958.''
            (4) Limitation on dividends received deduction for mutual 
        savings banks, etc.--Section 596 of such Code (relating to 
        limitation on dividends received deduction) is amended by 
        striking ``sections 243, 244, and 245'' and inserting in lieu 
        thereof ``section 245''.
    (d) Clerical Amendments.--The table of sections for part VIII of 
subchapter B of chapter 1 is amended by striking the items relating to 
sections 243, 244, 246, and 247 and inserting after the item relating 
to section 241 the following:

``Sec. 243. Dividends paid by domestic corporations.''
    (e) Effective Date.--The amendments made by this section shall 
apply to distributions made after June 30, 1993 under the following 
schedule:
            (1) for the period beginning July 1, 1993, through December 
        31, 1994, the amount of the deduction for the taxable year 
        shall be no more than 50 percent of the permitted deduction 
        calculated under this section;
            (2) for the period beginning January 1, 1995, through 
        December 31, 1996, the amount of the deduction for the taxable 
        year shall be no more than 75 percent of the permitted 
        deduction calculated under this section; and
            (3) for the period beginning January 1, 1997, the amount of 
        the deduction for the taxable year shall be 100% of the 
        permitted deduction calculated under this section.

SEC. 2. REDUCTION IN CAPITAL GAINS TAX.

    (a) General Rule.--Subsection (h) of section 1 of the Internal 
Revenue Code of 1986 (relating to maximum capital gains rate is amended 
to read as follows:
    ``(j) Maximum Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has a qualified net 
        capital gain for any taxable year, then the tax imposed by this 
        section 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 taxable income reduced by the qualified net capital 
                gain, plus
                    ``(B) a tax equal to the sum of--
                            ``(i) 23 percent of the 3-to-6 year net 
                        gain,
                            ``(ii) 21 percent of the 6-to-9 year net 
                        gain,
                            ``(iii) 19 percent of the 9-to-12 year net 
                        gain,
                            ``(iv) 17 percent of the 12-to-15 year net 
                        gain, plus
                            ``(v) 15 percent of the over 15-year net 
                        gain.
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) Qualified net capital gain.--The term 
                `qualified net capital gain' means the lesser of--
                            ``(i) the net capital gain determined by 
                        taking into account only gains and losses from 
                        dispositions of assets held for more than 3 
                        years, or
                            ``(ii) the net capital gain.
                    ``(B) 3-to-6 year net gain.--The term `3-to-6 year 
                net gain' means the lesser of--
                            ``(i) the net capital gain determined by 
                        only taking into account gains and losses from 
                        dispositions of assets held for more than 3 but 
                        not more than 6 years, or
                            ``(ii) the qualified net capital gain.
                    ``(C) 6-to-9 year net gain.--The term `6-to-9 year 
                net gain' means the lesser of--
                            ``(i) the net capital gain determined by 
                        only taking into account gains and losses from 
                        dispositions of assets held for more than 6 but 
                        not more than 9 years, or
                            ``(ii) the qualified net capital gain 
                        reduced by the 3-to-6 year net gain.
                    ``(D) Other definitions.--The 9-to-12 year net 
                gain, 12-to-15 year net gain, and over 15-year net gain 
                shall be determined under principles similar to the 
                principles of subparagraph (C).
            ``(3) Special rule.--If the highest rate of tax set forth 
        in subsection (a), (b), (c), (d), or (e) (whichever applies) 
        for any taxable year exceeds 28 percent, the amount of the tax 
        determined under such subsection which is attributable to the 
        excess of the net capital gain over the qualified net capital 
        gain shall not exceed 28 percent of such excess.''.
    (b) Qualified Net Capital Gain Not Taken Into Account In Phase-
Out.--Subparagraph (A) of section 1(g)(1) of such Code is amended to 
read as follows:
                    ``(A) taxable income reduced by the qualified net 
                capital gain (as defined in subsection (j)(2)), over''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1991.

SEC. 3. RESTORATION OF INVESTMENT TAX CREDIT FOR PROPERTY WITH LONG 
              USEFUL LIFE.

    (a) General Rule.--Section 46 of the Internal Revenue Code of 1986 
(relating to amount of credit) is amended by striking the period in 
subparagraph (3) and insert in lieu thereof ``, and'' followed by the 
following new subparagraph:
            ``(4) manufacturing equipment credit.''.
    (b) Manufacturing Equipment Credit.--Section 48 of the Internal 
Revenue Code of 1986 is amended by adding at the end thereof the 
following new section:

``SEC. 48a. MANUFACTURING EQUIPMENT CREDIT.

    ``(a) In General.--For purposes of section 46, the manufacturing 
equipment credit for any taxable year is 10 percent of the portion of 
the amortizable basis of any property if--
            ``(1) such property is used as an integral part of 
        manufacturing, production, or extraction, by a domestic 
        manufacturing company, situated within the United States, or 
        its territories, wherein over 50 percent of the total voting 
        stock of such company is owned and controlled by citizens of 
        the United States;
            ``(2) the class life of such property (as defined in 
        section 168(i)(1)) exceeds 24 months;
            ``(3) such property is not public utility property (as 
        defined in section 46(f)(5).
    ``(b) Phase Out of Credit.--For periods after December 31, 1993, 
the applicable manufacturing equipment credit for any taxable year 
shall be 7.5 percent of the portion of the amortizable basis of the 
property.''.
    (c) Effective Date.--The amendment made by this section shall apply 
solely to a period beginning January 1, 1993, through December 31, 
1996.

Summary: Amends the Internal Revenue Code to permit an income tax deduction in the amount of dividends paid by domestic corporations, except S corporations, regulated investment companies, real estate investment trusts, and personal holding companies. Repeals the income tax deductions currently permitted in connection with: (1) dividends received by a corporation. (2) dividends received by a corporation on the preferred stock of a public utility. And (3) dividends paid by a public utility on its preferred stock. Revises the deductible percentage of amounts received by a corporation from a qualified ten-percent owned foreign corporation. Revises the maximum capital gains rate to limit such tax to the sum of: (1) a tax computed at the rates and in the same manner as if capital gains provisions had not been enacted on taxable income reduced by the qualified net capital gain. And (2) a tax equal to the sum of specified percentages of net gains based on number of years . Restores the investment tax credit for manufacturing equipment.