To amend the Internal Revenue Code of 1986 to reduce estate and gift tax rates, and for other purposes.

SECTION 1. SHORT TITLE.

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

SEC. 2. REDUCTION OF ESTATE TAX RATES.

    (a) 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 subsections:
    ``(b) Computation of Tax.--The tax imposed by this section shall be 
39.6 percent of the amount equal to the excess (if any) of--
            ``(1) 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) Adjusted Taxable Gifts.--For purposes of paragraph (1)(B), 
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.''.
    (b) Conforming Amendments.--
            (1) Section 2010(c) of such Code is amended by striking 
        ``the rate schedule set forth in section 2001(c)'' and 
        inserting ``section 2001''.
            (2) 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) a tax computed under section 2001 on 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.''.
            (3) 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--
            ``(1) the tax computed under section 2001 on the sum of the 
        taxable gifts for such calendar year, over
            ``(2) the tax computed under section 2001 on the sum of the 
        taxable gifts for each of the preceding calendar periods.
    ``(b) Tax To Be Paid by Donor.--The tax imposed by section 2501 
shall be paid by the donor.''.
            (4) Section 6601(j)(2)(A)(i) of such Code is amended by 
        striking ``the rate schedule set forth in section 2001(c)'' and 
        inserting ``section 2001''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after the date of 
the enactment of this Act.

SEC. 3. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES INCREASED TO 
              EXCLUSION EQUIVALENT OF $10,000,000; INFLATION ADJUSTMENT 
              OF CREDIT.

    (a) In General.--Subsection (c) of section 2010 of the Internal 
Revenue Code of 1986 (relating to applicable credit amount) is amended 
to read as follows:
    ``(c) Applicable Credit Amount.--For purposes of this section, the 
applicable credit amount is the amount of tax which would be determined 
under section 2001 if the amount with respect to which such tax is to 
be computed were the applicable exclusion amount. For purposes of the 
preceding sentence, the applicable exclusion amount is $10,000,000.''.
    (b) Inflation Adjustment.--
            (1) In general.--Section 2010 of such Code is amended by 
        redesignating subsection (d) as subsection (e) and by inserting 
        after subsection (c) the following new subsection:
     ``(d) Inflation Adjustment.--In the case of any decedent dying, 
and gift made, in a calendar year after 2001, the $10,000,000 amount 
set forth in subsection (c) shall be increased by an amount equal to--
            ``(1) $10,000,000, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 2000' 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.''.
            (2) Conforming amendment.--Section 6018(a)(1) of such Code 
        is amended by striking ``section 2010(c)'' and inserting 
        ``section 2010''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after the date of 
the enactment of this Act.

SEC. 4. REPEAL OF ESTATE TAX BENEFIT FOR FAMILY-OWNED BUSINESS 
              INTERESTS.

    (a) In General.--Section 2057 of the Internal Revenue Code of 1986 
(relating to family-owned business interests) is hereby repealed.
    (b) Conforming Amendments.--
            (1) 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 the Estate Tax Relief Act of 2001)'' before 
        the period.
            (2) 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.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after the date of 
the enactment of this Act.

Summary: Estate Tax Relief Act of 2001 - Amends the Internal Revenue Code to: (1) reduce the estate and gift tax rate, and (2) increase the unified credit exclusion to $10 million.