To amend the Internal Revenue Code of 1986 to encourage guaranteed lifetime income payments from annuities and similar payments of life insurance proceeds at dates later than death by taxing the income portion of such payments at capital gains rates.

SECTION 1. LIFETIME ANNUITY PAYOUTS AND SIMILAR PAYMENTS OF LIFE 
              INSURANCE PROCEEDS AT DATES LATER THAN DEATH TAXED AT 
              CAPITAL GAINS RATES.

    (a) In General.--Subsection (h) of section 1 of the Internal 
Revenue Code of 1986 (relating to maximum capital gains rate) is 
amended by adding at the end the following new paragraph:
            ``(13) Net capital gain increased by certain annuity and 
        life insurance payments.--
                    ``(A) In general.--For purposes of this subsection, 
                the amount (if any) of net capital gain, determined 
                without regard to this paragraph, for any taxable year 
                shall be increased by--
                            ``(i) the amount received as an annuity 
                        under an annuity contract which is includible 
                        in income under section 72, and
                            ``(ii) the amount received as a payment of 
                        life insurance proceeds at a date later than 
                        death which is includible in income under 
                        section 101(d).
                    ``(B) Amount received as an annuity under annuity 
                contract.--For purposes of subparagraph (A)(i), an 
                amount is received as an annuity under an annuity 
                contract if such amount is received as an annuity under 
                any portion of an annuity contract and is part of a 
                series of payments made over--
                            ``(i) the life of the annuitant,
                            ``(ii) the joint lives of 2 or more 
                        annuitants,
                            ``(iii) the life of the annuitant with a 
                        minimum period of payments certain or with a 
                        minimum amount which must be paid in any event, 
                        or
                            ``(iv) the joint lives of 2 or more 
                        annuitants with a minimum period of payments 
                        certain or with a minimum amount which must be 
                        paid in any event.
                    ``(C) Amount received as payment of life insurance 
                proceeds at a date later than death.--For purposes of 
                subparagraph (A)(ii), an amount is received as a 
                payment of life insurance proceeds at a date later than 
                death if such amount is part of a series of payments 
                made over--
                            ``(i) the life of the beneficiary of the 
                        life insurance contract,
                            ``(ii) the joint lives of 2 or more 
                        beneficiaries of the life insurance contract,
                            ``(iii) the life of the beneficiary of the 
                        life insurance contract with a minimum period 
                        of payments certain or with a minimum amount 
                        which must be paid in any event, or
                            ``(iv) the joint lives of 2 or more 
                        beneficiaries of the life insurance contract 
                        with a minimum period of payments certain or 
                        with a minimum amount which must be paid in any 
                        event.
                    ``(D) Exception for deferred compensation plans and 
                retirement plans.--Subparagraphs (A), (B), and (C) 
                shall not apply to amounts received under an eligible 
                deferred compensation plan (as defined in section 
                457(b)) or under a qualified retirement plan (as 
                defined in section 4974(c)).''.
    (b) Alternative Minimum Tax.--The last sentence of paragraph (3) of 
section 55(b) of such Code is amended by inserting ``(including the 
modification made by paragraph (13) thereof)'' after ``section 1(h)'' 
the first place it appears.
    (c) Conforming Amendments.--
            (1) Section 72(a) of such Code is amended--
                    (A) by striking ``Annuities.--Except'' and 
                inserting ``Annuities.--
            ``(1) Inclusion in gross income.--Except'', and
                    (B) by adding at the end the following:
            ``(2) Cross reference.--

                                ``For taxation at capital gains rates 
of certain amounts includible in income under this section, see section 
1(h)(13).''.
            (2) Section 101(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(4) Cross reference.--

                                ``For taxation at capital gains rates 
of certain amounts includible in income under this subsection, see 
section 1(h)(13).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts received in calendar years beginning after the date of 
enactment of this Act.

Summary: Amends the Internal Revenue Code to tax lifetime annuity payouts and similar payments of life insurance proceeds at dates later than death at capital gains rates. Excludes amounts received under an eligible deferred compensation plan or under a qualified retirement plan. Includes such gains in the calculation of the maximum rate of tax on net capital gains of noncorporate taxpayers when computing the alternative minimum tax.