II

106TH CONGRESS

1ST SESSION S. 1379

To amend the Internal Revenue Code of 1986 to provide broad based tax

relief for all taxpaying families, to mitigate the marriage penalty, to

expand retirement savings, to phase out gift and estate taxes, and for

other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 15, 1999

Mr. DOMENICI introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

broad based tax relief for all taxpaying families, to mitigate the marriage penalty, to expand retirement savings,

to phase out gift and estate taxes, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Share the Surplus Tax Reduction and Simplification

6 Act’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—TAX RELIEF

Sec. 11. Broad based tax relief for all taxpaying families.

Sec. 12. Marriage penalty mitigation and tax burden reduction.

TITLE II—SAVING AND INVESTMENT PROVISIONS

Sec. 21. Dividend and interest tax relief.

Sec. 22. Long-term capital gains deduction for individuals.

Sec. 23. Increase in contribution limits for traditional IRAs.

TITLE III—BUSINESS INVESTMENT PROVISIONS

Sec. 31. Repeal of alternative minimum tax on corporations.

Sec. 32. Increase in limit for expensing certain business assets.

TITLE IV—ESTATE AND GIFT TAX RELIEF

Sec. 41. Phaseout of estate and gift taxes.

TITLE V—RESEARCH CREDIT EXTENSION AND MODIFICATION

Sec. 51. Purpose.

Sec. 52. Permanent extension of research credit.

Sec. 53. Improved alternative incremental credit.

Sec. 54. Modifications to credit for basic research.

Sec. 55. Credit for expenses attributable to certain collaborative research consortia.

Sec. 56. Improvement to credit for small businesses and research partnerships.

TITLE VI—ENERGY INDEPENDENCE

Sec. 61. Purposes.

Sec. 62. Tax credit for marginal domestic oil and natural gas well production.

Sec. 63. 10-year carryback for unused minimum tax credit.

Sec. 64. 10-year net operating loss carryback for losses attributable to oil servicing companies and mineral interests of oil and gas producers.

Sec. 65. Waiver of limitations.

Sec. 66. Election to expense geological and geophysical expenditures and delay

rental payments.

TITLE VII—REVENUE PROVISION

Sec. 71. 4-year averaging for conversion of traditional IRA to Roth IRA.
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1 TITLE I—TAX RELIEF

2 SEC. 11. BROAD BASED TAX RELIEF FOR ALL TAXPAYING

3 FAMILIES.

4 (a) PURPOSE.—The purpose of this section is to cut

5 taxes for 120,000,000 taxpaying families by lowering the

6 15 percent tax rate.

7 (b) IN GENERAL.—Section 1 of the Internal Revenue

8 Code of 1986 (relating to tax imposed) is amended—

9 (1) by striking ‘‘15%’’ each place it appears in

10 the tables in subsections (a) through (e) and insert11 ing ‘‘The applicable rate’’, and

12 (2) by adding at the end the following:

13 ‘‘(i) APPLICABLE RATE.—For purposes of this sec14 tion, the applicable rate for any taxable year shall be de15 termined in accordance with the following table:

‘‘In the case of any taxable

year beginning in—

The applicable rate is:

2002 .........................................................................................14.9 percent

2003 .........................................................................................14.8 percent

2004 .........................................................................................14.7 percent

2005 .........................................................................................14.1 percent

2006 and thereafter .................................................................13.5 percent.’’

16 (b) CONFORMING AMENDMENTS.—

17 (1) Section 1(f)(2) of the Internal Revenue

18 Code of 1986 is amended—

19 (A) by inserting ‘‘except as provided in

20 subsection (i),’’ before ‘‘by not changing’’ in

21 subparagraph (B), and
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1 (B) by inserting ‘‘and the adjustment in

2 rates under subsection (i)’’ after ‘‘rate brack3 ets’’ in subparagraph (C).

4 (2) Section 1(g)(7)(B)(ii)(II) of such Code is

5 amended by striking ‘‘15 percent’’ and inserting

6 ‘‘the applicable rate’’.

7 (3) Section 3402(p)(2) of such Code is amend8 ed by striking ‘‘15 percent’’ and inserting ‘‘the ap9 plicable rate in effect under section 1(i) for the tax10 able year’’.

11 (c) NEW TABLES.—Not later than 15 days after the

12 date of enactment of this Act, the Secretary of the

13 Treasury—

14 (1) shall prescribe tables for taxable years be15 ginning in 2002 which shall reflect the amendments

16 made by this section and which shall apply in lieu

17 of the tables prescribed under sections 1(f)(1) and

18 3(a) of the Internal Revenue Code of 1986 for such

19 taxable years, and

20 (2) shall modify the withholding tables and pro21 cedures for such taxable years under section

22 3402(a)(1) of such Code to take effect as if the re23 duction in the rate of tax under section 1 of such

24 Code (as amended by this section) was attributable
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1 to such a reduction effective on such date of enact2 ment.

3 (d) SECTION 15 NOT TO APPLY.—No amendment

4 made by this section shall be treated as a change in a

5 rate of tax for purposes of section 15 of the Internal Rev6 enue Code of 1986.

7 (e) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to taxable years beginning after

9 December 31, 2001.

10 SEC. 12. MARRIAGE PENALTY MITIGATION AND TAX BUR11 DEN REDUCTION.

12 (a) PURPOSE.—The purposes of this section are to

13 return 7,000,000 taxpaying families to the 15 percent tax

14 bracket and to cut taxes for 35,000,000 taxpaying families

15 who will benefit from a tax cut of up to $1,300 per family

16 by eliminating or mitigating the marriage penalty for

17 many middle class taxpaying families.

18 (b) IN GENERAL.—Section 1(f) of the Internal Rev19 enue Code of 1986 (relating to adjustments in tax tables

20 so that inflation will not result in tax increases) is

21 amended—

22 (1) in paragraph (2)—

23 (A) by redesignating subparagraphs (B)

24 and (C) as subparagraphs (C) and (D),
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1 (B) by inserting after subparagraph (A)

2 the following:

3 ‘‘(B) in the case of the tables contained in

4 subsections (a), (b), (c), and (d), by increasing

5 the maximum taxable income level for the low6 est rate bracket and the minimum taxable in7 come level for the 28 percent rate bracket oth8 erwise determined under subparagraph (A) for

9 taxable years beginning in any calendar year

10 after 2001, by the applicable dollar amount for

11 such calendar year,’’, and

12 (C) by striking ‘‘subparagraph (A)’’ in

13 subparagraph (C) (as so redesignated) and in14 serting ‘‘subparagraphs (A) and (B)’’, and

15 (2) by adding at the end the following:

16 ‘‘(8) APPLICABLE DOLLAR AMOUNT.—For pur17 poses of paragraph (2)(B), the applicable dollar

18 amount for any calendar year shall be determined as

19 follows:

20 ‘‘(A) JOINT RETURNS AND SURVIVING

21 SPOUSES.—In the case of the table contained in

22 subsection (a)—

Applicable

‘‘Calendar year: Dollar Amount:

2002 ......................................................................................... $2,000

2003 ......................................................................................... $4,000

2004 ......................................................................................... $6,000

2005 ......................................................................................... $8,000

2006 and thereafter ................................................................. $10,000.
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1 ‘‘(B) OTHER TABLES.—In the case of the

2 table contained in subsection (b), (c), or (d)—

Applicable

‘‘Calendar year: Dollar Amount:

2002 ......................................................................................... $1,000

2003 ......................................................................................... $2,000

2004 ......................................................................................... $3,000

2005 ......................................................................................... $4,000

2006 and thereafter ................................................................. $5,000.’’.

3 SEC. 13. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDI4 VIDUALS.

5 (a) PURPOSES.—The purposes of this section are—

6 (1) to simplify the tax code so that millions of

7 Americans will no longer be required to calculate

8 their income taxes under 2 systems; and

9 (2) to recognize that tax credits should not be

10 denied to individuals who are eligible for such credit.

11 (b) IN GENERAL.—Subsection (a) of section 55 of the

12 Internal Revenue Code of 1986 is amended by adding at

13 the end the following new flush sentence:

14 ‘‘For purposes of this title, the tentative minimum tax on

15 any taxpayer other than a corporation for any taxable year

16 beginning after December 31, 2009, shall be zero.’’

17 (c) REDUCTION OF TAX ON INDIVIDUALS PRIOR TO

18 REPEAL.—Section 55 of the Internal Revenue Code of

19 1986 is amended by adding at the end the following new

20 subsection:

21 ‘‘(f) PHASEOUT OF TAX ON INDIVIDUALS.—
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1 ‘‘(1) IN GENERAL.—The tax imposed by this

2 section on a taxpayer other than a corporation for

3 any taxable year beginning after December 31,

4 2004, and before January 1, 2010, shall be the ap5 plicable percentage of the tax which would be im6 posed but for this subsection.

7 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

8 of paragraph (1), the applicable percentage shall be

9 determined in accordance with the following table:

‘‘For taxable years beginning The applicable

in calendar year— percentage is—

2005 ..................................................................................... 80

2006 ..................................................................................... 70

2007 ..................................................................................... 60

2008 or 2009 ....................................................................... 50.’’

10 (d) NONREFUNDABLE PERSONAL CREDITS FULLY

11 ALLOWED AGAINST REGULAR TAX LIABILITY.—

12 (1) IN GENERAL.—Subsection (a) of section 26

13 of the Internal Revenue Code of 1986 (relating to

14 limitation based on amount of tax) is amended to

15 read as follows:

16 ‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The

17 aggregate amount of credits allowed by this subpart for

18 the taxable year shall not exceed the taxpayer’s regular

19 tax liability for the taxable year.’’

20 (2) CHILD CREDIT.—Subsection (d) of section

21 24 of such Code is amended by striking paragraph
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1 (2) and by redesignating paragraph (3) as para2 graph (2).

3 (e) LIMITATION ON USE OF CREDIT FOR PRIOR

4 YEAR MINIMUM TAX LIABILITY.—Subsection (c) of sec5 tion 53 of the Internal Revenue Code of 1986 is amended

6 to read as follows:

7 ‘‘(c) LIMITATION.—

8 ‘‘(1) IN GENERAL.—Except as otherwise pro9 vided in this subsection, the credit allowable under

10 subsection (a) for any taxable year shall not exceed

11 the excess (if any) of—

12 ‘‘(A) the regular tax liability of the tax13 payer for such taxable year reduced by the sum

14 of the credits allowable under subparts A, B, D,

15 E, and F of this part, over

16 ‘‘(B) the tentative minimum tax for the

17 taxable year.

18 ‘‘(2) TAXABLE YEARS BEGINNING AFTER

19 2009.—In the case of any taxable year beginning

20 after 2009, the credit allowable under subsection (a)

21 to a taxpayer other than a corporation for any tax22 able year shall not exceed 90 percent of the excess

23 (if any) of—

24 ‘‘(A) regular tax liability of the taxpayer

25 for such taxable year, over
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1 ‘‘(B) the sum of the credits allowable

2 under subparts A, B, D, E, and F of this

3 part.’’

4 (f) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 1998.

7 TITLE II—SAVING AND

8 INVESTMENT PROVISIONS

9 SEC. 21. DIVIDEND AND INTEREST TAX RELIEF.

10 (a) PURPOSES.—The purposes of this section are—

11 (1) to provide an incremental step toward tax12 ing income that is consumed rather than income

13 that is earned and saved;

14 (2) to simplify the tax code by eliminating

15 67,000,000 hours spent on tax preparation;

16 (3) to eliminate all income tax on savings for

17 more than 30,000,000 middle class families;

18 (4) to reduce income taxes on savings for

19 37,000,000 individuals; and

20 (5) to allow a $10,000 nest egg to grow tax-free

21 and let individuals experience the miracle of com22 pound interest.

23 (b) IN GENERAL.—Part III of subchapter B of chap24 ter 1 of the Internal Revenue Code of 1986 (relating to

25 amounts specifically excluded from gross income) is
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1 amended by inserting after section 115 the following new

2 section:

3 ‘‘SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTER4 EST RECEIVED BY INDIVIDUALS.

5 ‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in6 come does not include the sum of the amounts received

7 during the taxable year by an individual as—

8 ‘‘(1) dividends from domestic corporations, or

9 ‘‘(2) interest.

10 ‘‘(b) LIMITATIONS.—

11 ‘‘(1) MAXIMUM AMOUNT.—The aggregate

12 amount excluded under subsection (a) for any tax13 able year shall not exceed $250 ($500 in the case of

14 a joint return).

15 ‘‘(2) CERTAIN DIVIDENDS EXCLUDED.—Sub16 section (a)(1) shall not apply to any dividend from

17 a corporation which, for the taxable year of the cor18 poration in which the distribution is made, or for the

19 next preceding taxable year of the corporation, is a

20 corporation exempt from tax under section 501 (re21 lating to certain charitable, etc., organization) or

22 section 521 (relating to farmers’ cooperative associa23 tions).

24 ‘‘(c) INTEREST.—For purposes of this section, the

25 term ‘interest’ means—
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1 ‘‘(1) interest on deposits with a bank (as de2 fined in section 581),

3 ‘‘(2) amounts (whether or not designated as in4 terest) paid in respect of deposits, investment certifi5 cates, or withdrawable or repurchasable shares, by—

6 ‘‘(A) a mutual savings bank, cooperative

7 bank, domestic building and loan association,

8 industrial loan association or bank, or credit

9 union, or

10 ‘‘(B) any other savings or thrift institution

11 which is chartered and supervised under Fed12 eral or State law,

13 the deposits or accounts in which are insured under

14 Federal or State law or which are protected and

15 guaranteed under State law,

16 ‘‘(3) interest on—

17 ‘‘(A) evidences of indebtedness (including

18 bonds, debentures, notes, and certificates)

19 issued by a domestic corporation in registered

20 form, and

21 ‘‘(B) to the extent provided in regulations

22 prescribed by the Secretary, other evidences of

23 indebtedness issued by a domestic corporation

24 of a type offered by corporations to the public,
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1 ‘‘(4) interest on obligations of the United

2 States, a State, or a political subdivision of a State

3 (not excluded from gross income of the taxpayer

4 under any other provision of law), and

5 ‘‘(5) interest attributable to participation shares

6 in a trust established and maintained by a corpora7 tion established pursuant to Federal law.

8 ‘‘(d) SPECIAL RULES.—For purposes of this

9 section—

10 ‘‘(1) DISTRIBUTIONS FROM REGULATED IN11 VESTMENT COMPANIES AND REAL ESTATE INVEST12 MENT TRUSTS.—Subsection (a) shall apply with re13 spect to distributions by—

14 ‘‘(A) regulated investment companies to

15 the extent provided in section 854(c), and

16 ‘‘(B) real estate investment trusts to the

17 extent provided in section 857(c).

18 ‘‘(2) DISTRIBUTIONS BY A TRUST.—For pur19 poses of subsection (a), the amount of dividends and

20 interest properly allocable to a beneficiary under sec21 tion 652 or 662 shall be deemed to have been re22 ceived by the beneficiary ratably on the same date

23 that the dividends and interest were received by the

24 estate or trust.
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1 ‘‘(3) CERTAIN NONRESIDENT ALIENS INELI2 GIBLE FOR EXCLUSION.—In the case of a non3 resident alien individual, subsection (a) shall apply

4 only—

5 ‘‘(A) in determining the tax imposed for

6 the taxable year pursuant to section 871(b)(1)

7 and only in respect of dividends and interest

8 which are effectively connected with the conduct

9 of a trade or business within the United States,

10 or

11 ‘‘(B) in determining the tax imposed for

12 the taxable year pursuant to section 877(b).’’.

13 (c) CONFORMING AMENDMENTS.—

14 (1) The table of sections for part III of sub15 chapter B of chapter 1 of the Internal Revenue Code

16 of 1986 is amended by inserting after the item relat17 ing to section 115 the following:

‘‘Sec. 116. Partial exclusion of dividends and interest received by

individuals.’’.

18 (2) Paragraph (2) of section 265(a) of such

19 Code is amended by inserting before the period at

20 the end the following: ‘‘, or to purchase or carry ob21 ligations or shares, or to make deposits, to the ex22 tent the interest thereon is excludable from gross in23 come under section 116’’.
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1 (3) Subsection (c) of section 584 of such Code

2 is amended by adding at the end the following new

3 flush sentence:

4 ‘‘The proportionate share of each participant in the

5 amount of dividends or interest received by the common

6 trust fund and to which section 116 applies shall be con7 sidered for purposes of such section as having been re8 ceived by such participant.’’.

9 (4) Subsection (a) of section 643 of such Code

10 is amended by redesignating paragraph (7) as para11 graph (8) and by inserting after paragraph (6) the

12 following:

13 ‘‘(7) DIVIDENDS OR INTEREST.—There shall be

14 included the amount of any dividends or interest ex15 cluded from gross income pursuant to section 116.’’.

16 (5) Section 854 of such Code is amended by

17 adding at the end the following:

18 ‘‘(c) TREATMENT UNDER SECTION 116.—

19 ‘‘(1) IN GENERAL.—For purposes of section

20 116, in the case of any dividend (other than a divi21 dend described in subsection (a)) received from a

22 regulated investment company which meets the re23 quirements of section 852 for the taxable year in

24 which it paid the dividend—
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1 ‘‘(A) the entire amount of such dividend

2 shall be treated as a dividend if the sum of the

3 aggregate dividends and the aggregate interest

4 received by such company during the taxable

5 year equals or exceeds 75 percent of its gross

6 income, or

7 ‘‘(B) if subparagraph (A) does not apply,

8 there shall be taken into account under section

9 116 only the portion of such dividend which

10 bears the same ratio to the amount of such div11 idend as the sum of the aggregate dividends re12 ceived and aggregate interest received bears to

13 gross income.

14 For purposes of the preceding sentence, gross in15 come and aggregate interest received shall each be

16 reduced by so much of the deduction allowable by

17 section 163 for the taxable year as does not exceed

18 aggregate interest received for the taxable year.

19 ‘‘(2) NOTICE TO SHAREHOLDERS.—The amount

20 of any distribution by a regulated investment com21 pany which may be taken into account as a dividend

22 for purposes of the exclusion under section 116 shall

23 not exceed the amount so designated by the com24 pany in a written notice to its shareholders mailed
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1 not later than 60 days after the close of its taxable

2 year.

3 ‘‘(3) DEFINITIONS.—For purposes of this

4 subsection—

5 ‘‘(A) GROSS INCOME.—The term ‘gross in6 come’ does not include gain from the sale or

7 other disposition of stock or securities.

8 ‘‘(B) AGGREGATE DIVIDENDS.—The term

9 ‘aggregate dividends’ includes only dividends re10 ceived from domestic corporations other than

11 dividends described in section 116(b)(2). In de12 termining the amount of any dividend for pur13 poses of this subparagraph, the rules provided

14 in section 116(d)(1) (relating to certain dis15 tributions) shall apply.

16 ‘‘(C) INTEREST.—The term ‘interest’ has

17 the meaning given such term by section

18 116(c).’’.

19 (6) Subsection (c) of section 857 of such Code

20 is amended to read as follows:

21 ‘‘(c) LIMITATIONS APPLICABLE TO DIVIDENDS RE22 CEIVED FROM REAL ESTATE INVESTMENT TRUSTS.—

23 ‘‘(1) IN GENERAL.—For purposes of section

24 116 (relating to an exclusion for dividends and inter25 est received by individuals) and section 243 (relating
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1 to deductions for dividends received by corpora2 tions), a dividend received from a real estate invest3 ment trust which meets the requirements of this

4 part shall not be considered as a dividend.

5 ‘‘(2) TREATMENT AS INTEREST.—For purposes

6 of section 116, in the case of a dividend (other than

7 a capital gain dividend, as defined in subsection

8 (b)(3)(C)) received from a real estate investment

9 trust which meets the requirements of this part for

10 the taxable year in which it paid the dividend—

11 ‘‘(A) such dividend shall be treated as in12 terest if the aggregate interest received by the

13 real estate investment trust for the taxable year

14 equals or exceeds 75 percent of its gross in15 come, or

16 ‘‘(B) if subparagraph (A) does not apply,

17 the portion of such dividend which bears the

18 same ratio to the amount of such dividend as

19 the aggregate interest received bears to gross

20 income shall be treated as interest.

21 ‘‘(3) ADJUSTMENTS TO GROSS INCOME AND AG22 GREGATE INTEREST RECEIVED.—For purposes of

23 paragraph (2)—

24 ‘‘(A) gross income does not include the net

25 capital gain,
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1 ‘‘(B) gross income and aggregate interest

2 received shall each be reduced by so much of

3 the deduction allowable by section 163 for the

4 taxable year (other than for interest on mort5 gages on real property owned by the real estate

6 investment trust) as does not exceed aggregate

7 interest received by the taxable year, and

8 ‘‘(C) gross income shall be reduced by the

9 sum of the taxes imposed by paragraphs (4),

10 (5), and (6) of section 857(b).

11 ‘‘(4) INTEREST.—The term ‘interest’ has the

12 meaning given such term by section 116(c).

13 ‘‘(5) NOTICE TO SHAREHOLDERS.—The amount

14 of any distribution by a real estate investment trust

15 which may be taken into account as interest for pur16 poses of the exclusion under section 116 shall not

17 exceed the amount so designated by the trust in a

18 written notice to its shareholders mailed not later

19 than 60 days after the close of its taxable year.’’.

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 December 31, 2001.

23 SEC. 22. LONG-TERM CAPITAL GAINS DEDUCTION FOR IN24 DIVIDUALS.

25 (a) PURPOSES.—The purposes of this section are—
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1 (1) to provide an incremental step toward shift2 ing the Internal Revenue Code away from taxing

3 savings and investment,

4 (2) to lower the cost of capital so that pros5 perity, better paying jobs, and innovation will con6 tinue in the United States,

7 (3) to eliminate capital gain taxes for

8 10,000,000 families, 75 percent of whom have an9 nual incomes of $75,000 or less, and

10 (4) to simplify the tax code and thereby elimi11 nate 70,000,000 hours of tax preparation.

12 (b) GENERAL RULE.—Part I of subchapter P of

13 chapter 1 of the Internal Revenue Code of 1986 (relating

14 to treatment of capital gains) is amended by redesignating

15 section 1202 as section 1203 and by inserting after section

16 1201 the following:

17 ‘‘SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

18 ‘‘(a) IN GENERAL.—In the case of an individual,

19 there shall be allowed as a deduction for the taxable year

20 an amount equal to the lesser of—

21 ‘‘(1) the net capital gain of the taxpayer for the

22 taxable year, or

23 ‘‘(2) $5,000.

24 ‘‘(b) SALES BETWEEN RELATED PARTIES.—Gains

25 from sales and exchanges to any related person (within
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1 the meaning of section 267(b) or 707(b)(1)) shall not be

2 taken into account in determining net capital gain.

3 ‘‘(c) SPECIAL RULE FOR SECTION 1250 PROP4 ERTY.—Solely for purposes of this section, in applying sec5 tion 1250 to any disposition of section 1250 property, all

6 depreciation adjustments in respect of the property shall

7 be treated as additional depreciation.

8 ‘‘(d) SECTION NOT TO APPLY TO CERTAIN TAX9 PAYERS.—No deduction shall be allowed under this section

10 to—

11 ‘‘(1) an individual with respect to whom a de12 duction under section 151 is allowable to another

13 taxpayer for a taxable year beginning in the cal14 endar year in which such individual’s taxable year

15 begins,

16 ‘‘(2) a married individual (within the meaning

17 of section 7703) filing a separate return for the tax18 able year, or

19 ‘‘(3) an estate or trust.

20 ‘‘(e) SPECIAL RULE FOR PASS-THRU ENTITIES.—

21 ‘‘(1) IN GENERAL.—In applying this section

22 with respect to any pass-thru entity, the determina23 tion of when the sale or exchange occurs shall be

24 made at the entity level.
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1 ‘‘(2) PASS-THRU ENTITY DEFINED.—For pur2 poses of paragraph (1), the term ‘pass-thru entity’

3 means—

4 ‘‘(A) a regulated investment company,

5 ‘‘(B) a real estate investment trust,

6 ‘‘(C) an S corporation,

7 ‘‘(D) a partnership,

8 ‘‘(E) an estate or trust, and

9 ‘‘(F) a common trust fund.’’.

10 (c) COORDINATION WITH MAXIMUM CAPITAL GAINS

11 RATE.—Paragraph (3) of section 1(h) of the Internal Rev12 enue Code of 1986 (relating to maximum capital gains

13 rate) is amended to read as follows:

14 ‘‘(3) COORDINATION WITH OTHER PROVI15 SIONS.—For purposes of this subsection, the amount

16 of the net capital gain shall be reduced (but not

17 below zero) by the sum of—

18 ‘‘(A) the amount of the net capital gain

19 taken into account under section 1202(a) for

20 the taxable year, plus

21 ‘‘(B) the amount which the taxpayer elects

22 to take into account as investment income for

23 the taxable year under section

24 163(d)(4)(B)(iii).’’.
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1 (d) DEDUCTION ALLOWABLE IN COMPUTING AD2 JUSTED GROSS INCOME.—Subsection (a) of section 62 of

3 the Internal Revenue Code of 1986 (defining adjusted

4 gross income) is amended by inserting after paragraph

5 (17) the following:

6 ‘‘(18) LONG-TERM CAPITAL GAINS.—The de7 duction allowed by section 1202.’’.

8 (e) TREATMENT OF COLLECTIBLES.—

9 (1) IN GENERAL.—Section 1222 of the Internal

10 Revenue Code of 1986 (relating to other terms relat11 ing to capital gains and losses) is amended by in12 serting after paragraph (11) the following:

13 ‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—

14 ‘‘(A) IN GENERAL.—Any gain or loss from

15 the sale or exchange of a collectible shall be

16 treated as a short-term capital gain or loss (as

17 the case may be), without regard to the period

18 such asset was held. The preceding sentence

19 shall apply only to the extent the gain or loss

20 is taken into account in computing taxable in21 come.

22 ‘‘(B) TREATMENT OF CERTAIN SALES OF

23 INTEREST IN PARTNERSHIP, ETC.—For pur24 poses of subparagraph (A), any gain from the

25 sale or exchange of an interest in a partnership,
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1 S corporation, or trust which is attributable to

2 unrealized appreciation in the value of collect3 ibles held by such entity shall be treated as gain

4 from the sale or exchange of a collectible. Rules

5 similar to the rules of section 751(f) shall apply

6 for purposes of the preceding sentence.

7 ‘‘(C) COLLECTIBLE.—For purposes of this

8 paragraph, the term ‘collectible’ means any cap9 ital asset which is a collectible (as defined in

10 section 408(m) without regard to paragraph (3)

11 thereof).’’.

12 (2) CHARITABLE DEDUCTION NOT AF13 FECTED.—

14 (A) Paragraph (1) of section 170(e) of

15 such Code is amended by adding at the end the

16 following: ‘‘For purposes of this paragraph, sec17 tion 1222 shall be applied without regard to

18 paragraph (12) thereof (relating to special rule

19 for collectibles).’’.

20 (B) Clause (iv) of section 170(b)(1)(C) of

21 such Code is amended by inserting before the

22 period at the end the following: ‘‘and section

23 1222 shall be applied without regard to para24 graph (12) thereof (relating to special rule for

25 collectibles)’’.
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•S 1379 IS

1 (f) CONFORMING AMENDMENTS.—

2 (1) Section 57(a)(7) of the Internal Revenue

3 Code of 1986 is amended by striking ‘‘1202’’ and in4 serting ‘‘1203’’.

5 (2) Clause (iii) of section 163(d)(4)(B) of such

6 Code is amended to read as follows:

7 ‘‘(iii) the sum of—

8 ‘‘(I) the portion of the net capital

9 gain referred to in clause (ii)(II) (or,

10 if lesser, the net capital gain referred

11 to in clause (ii)(I)) taken into account

12 under section 1202, reduced by the

13 amount of the deduction allowed with

14 respect to such gain under section

15 1202, plus

16 ‘‘(II) so much of the gain de17 scribed in subclause (I) which is not

18 taken into account under section 1202

19 and which the taxpayer elects to take

20 into account under this clause.’’.

21 (3) Subparagraph (B) of section 172(d)(2) of

22 such Code is amended to read as follows:

23 ‘‘(B) the deduction under section 1202 and

24 the exclusion under section 1203 shall not be

25 allowed.’’.
26

•S 1379 IS

1 (4) Section 642(c)(4) of such Code is amended

2 by striking ‘‘1202’’ and inserting ‘‘1203’’.

3 (5) Section 643(a)(3) of such Code is amended

4 by striking ‘‘1202’’ and inserting ‘‘1203’’.

5 (6) Paragraph (4) of section 691(c) of such

6 Code is amended inserting ‘‘1203,’’ after ‘‘1202,’’.

7 (7) The second sentence of section 871(a)(2) of

8 such Code is amended by inserting ‘‘or 1203’’ after

9 ‘‘section 1202’’.

10 (8) The last sentence of section 1044(d) of such

11 Code is amended by striking ‘‘1202’’ and inserting

12 ‘‘1203’’.

13 (9) Paragraph (1) of section 1402(i) of such

14 Code is amended by inserting ‘‘, and the deduction

15 provided by section 1202 and the exclusion provided

16 by section 1203 shall not apply’’ before the period

17 at the end.

18 (10) Section 121 of such Code is amended by

19 adding at the end the following:

20 ‘‘(h) CROSS REFERENCE.—

‘‘For treatment of eligible gain not excluded under

subsection (a), see section 1202.’’.

21 (11) Section 1203 of such Code, as redesig22 nated by subsection (a), is amended by adding at the

23 end the following:
27

•S 1379 IS

1 ‘‘(l) CROSS REFERENCE.—

‘‘For treatment of eligible gain not excluded under

subsection (a), see section 1202.’’.

2 (12) The table of sections for part I of sub3 chapter P of chapter 1 of such Code is amended by

4 striking the item relating to section 1202 and by in5 serting after the item relating to section 1201 the

6 following:

‘‘Sec. 1202. Capital gains deduction.

‘‘Sec. 1203. 50-percent exclusion for gain from certain small

business stock.’’.

7 (g) EFFECTIVE DATES.—

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by this section

10 shall apply to taxable years beginning after Decem11 ber 31, 2000.

12 (2) COLLECTIBLES.—The amendments made by

13 subsection (d) shall apply to sales and exchanges

14 after December 31, 2000.

15 SEC. 23. INCREASE IN CONTRIBUTION LIMITS FOR TRADI16 TIONAL IRAS.

17 (a) PURPOSES.—The purposes of this section are—

18 (1) to increase the savings rate for all Ameri19 cans by reforming the tax system to favorably treat

20 income that is invested for retirement, and

21 (2) to provide targeted incentives to middle

22 class families to increase their retirement savings in
28

•S 1379 IS

1 a traditional IRA by $1,000 per working member of

2 the family per taxable year.

3 (b) INCREASE IN CONTRIBUTION LIMIT.—Paragraph

4 (1)(A) of section 219(b) of the Internal Revenue Code of

5 1986 (relating to maximum amount of deduction) is

6 amended by striking ‘‘$2,000’’ and inserting ‘‘$3,000’’.

7 (c) INFLATION ADJUSTMENT.—Section 219 of the

8 Internal Revenue Code of 1986 (relating to deduction for

9 retirement savings) is amended by redesignating sub10 section (h) as subsection (i) and by inserting after sub11 section (g) the following:

12 ‘‘(h) COST-OF-LIVING ADJUSTMENT.—

13 ‘‘(1) DEDUCTIBLE AMOUNTS.—In the case of

14 any taxable year beginning in a calendar year after

15 2009, the $3,000 amount under subsection (b)(1)(A)

16 shall be increased by an amount equal to—

17 ‘‘(A) such dollar amount, multiplied by

18 ‘‘(B) the cost-of-living adjustment deter19 mined under section 1(f)(3) for the calendar

20 year in which the taxable year begins, deter21 mined by substituting ‘calendar year 2008’ for

22 ‘calendar year 1992’ in subparagraph (B)

23 thereof.

24 ‘‘(2) ROUNDING RULES.—If any amount after

25 adjustment under paragraph (1) is not a multiple of
29

•S 1379 IS

1 $100, such amount shall be rounded to the next

2 lower multiple of $100.’’.

3 (d) CONFORMING AMENDMENTS.—

4 (1) Section 408(a)(1) of the Internal Revenue

5 Code of 1986 is amended by striking ‘‘in excess of

6 $2,000 on behalf of any individual’’ and inserting

7 ‘‘on behalf of any individual in excess of the amount

8 in effect for such taxable year under section

9 219(b)(1)(A)’’.

10 (2) Section 408(b)(2)(B) of such Code is

11 amended by striking ‘‘$2,000’’ and inserting ‘‘the

12 dollar amount in effect under section 219(b)(1)(A)’’.

13 (3) Section 408(b) of such Code is amended by

14 striking ‘‘$2,000’’ in the matter following paragraph

15 (4) and inserting ‘‘the dollar amount in effect under

16 section 219(b)(1)(A)’’.

17 (4) Section 408(j) of such Code is amended by

18 striking ‘‘$2,000’’.

19 (5) Section 408(p)(8) of such Code is amended

20 by striking ‘‘$2,000’’ and inserting ‘‘the dollar

21 amount in effect under section 219(b)(1)(A)’’.

22 (6) Section 408A(c)(2)(A) of such Code is

23 amended to read as follows:

24 ‘‘(A) $2,000, over’’.
30

•S 1379 IS

1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 TITLE III—BUSINESS

5 INVESTMENT PROVISIONS

6 SEC. 31. REPEAL OF ALTERNATIVE MINIMUM TAX ON COR7 PORATIONS.

8 (a) PURPOSE.—The purpose of this section is to

9 eliminate one of the most misguided, anti-growth, anti-in10 vestment tax schemes ever devised.

11 (b) IN GENERAL.—The last sentence of section 55(a)

12 of the Internal Revenue Code of 1986, as amended by sec13 tion 13, is amended by striking ‘‘on any taxpayer other

14 than a corporation’’.

15 (c) REPEAL OF 90 PERCENT LIMITATION ON FOR16 EIGN TAX CREDIT.—

17 (1) IN GENERAL.—Section 59(a) of the Internal

18 Revenue Code of 1986 (relating to alternative min19 imum tax foreign tax credit) is amended by striking

20 paragraph (2) and by redesignating paragraphs (3)

21 and (4) as paragraphs (2) and (3), respectively.

22 (2) CONFORMING AMENDMENT.—Section

23 53(d)(1)(B)(i)(II) of such Code is amended by strik24 ing ‘‘and if section 59(a)(2) did not apply’’.
31

•S 1379 IS

1 (d) LIMITATION ON USE OF CREDIT FOR PRIOR

2 YEAR MINIMUM TAX LIABILITY.—

3 (1) IN GENERAL.—Subsection (c) of section 53

4 of the Internal Revenue Code of 1986, as amended

5 by section 13, is amended by redesignating para6 graph (2) as paragraph (3) and by inserting after

7 paragraph (1) the following new paragraph:

8 ‘‘(2) CORPORATIONS FOR TAXABLE YEARS BE9 GINNING AFTER 2004.—In the case of corporation for

10 any taxable year beginning after 2004 and before

11 2010, the limitation under paragraph (1) shall be in12 creased by the applicable percentage (determined in

13 accordance with the following table) of the tentative

14 minimum tax for the taxable year.

‘‘For taxable years beginning The applicable

in calendar year— percentage is—

2005 ..................................................................................... 20

2006 ..................................................................................... 30

2007 ..................................................................................... 40

2008 or 2009 ....................................................................... 50.

15 In no event shall the limitation determined under

16 this paragraph be greater than the sum of the tax

17 imposed by section 55 and the regular tax reduced

18 by the sum of the credits allowed under subparts A,

19 B, D, E, and F of this part.’’

20 (2) CONFORMING AMENDMENTS.—

21 (A) Section 55(e) of such Code is amended

22 by striking paragraph (5).
32

•S 1379 IS

1 (B) Paragraph (3) of section 53(c) of such

2 Code, as redesignated by paragraph (1), is

3 amended by striking ‘‘to a taxpayer other than

4 a corporation’’.

5 (e) EFFECTIVE DATE.—

6 (1) IN GENERAL.—Except as provided in para7 graphs (2) and (3), the amendments made by this

8 section shall apply to taxable years beginning after

9 December 31, 2004.

10 (2) REPEAL OF 90 PERCENT LIMITATION ON

11 FOREIGN TAX CREDIT.—The amendments made by

12 subsection (c) shall apply to taxable years beginning

13 after December 31, 2003.

14 (3) SUBSECTION (d)(2)(A).—The amendment

15 made by subsection (d)(2)(A) shall apply to taxable

16 years beginning after December 31, 2009.

17 SEC. 32. INCREASE IN LIMIT FOR ELECTION TO EXPENSE

18 CERTAIN BUSINESS ASSETS.

19 (a) IN GENERAL.—Section 179(b)(1) of the Internal

20 Revenue Code of 1986 (relating to dollar limitation) is

21 amended by striking the last item in the table and insert22 ing the following new items:

‘‘2003 or 2004 ......................................................................... 25,000

‘‘2005 or thereafter .................................................................. 250,000.’’
33

•S 1379 IS

1 (b) INDEX.—Section 179(b) of the Internal Revenue

2 Code of 1986 is amended by adding at the end the fol3 lowing new paragraph:

4 ‘‘(5) INFLATION ADJUSTMENT.—In the case of

5 a taxable year beginning after 2005, the $25,000

6 amount under paragraph (1) shall be increased by

7 an amount equal to—

8 ‘‘(A) such dollar amount, multiplied by

9 ‘‘(B) the cost-of-living adjustment deter10 mined under section 1(f)(3) for the calendar

11 year in which the taxable year begins, deter12 mined by substituting ‘calendar year 2004’ for

13 ‘calendar year 1992’ in subparagraph (B)

14 thereof.’’

15 (c) INCREASE IN LIMITATION ON COST OF PROPERTY

16 PLACED IN SERVICE.—Section 179(b)(2) of the Internal

17 Revenue Code of 1986 (relating to reduction in limitation)

18 is amended by striking ‘‘$200,000’’ and inserting

19 ‘‘$4,000,000’’.

20 TITLE IV—ESTATE AND GIFT TAX

21 RELIEF

22 SEC. 41. PHASEOUT OF ESTATE AND GIFT TAXES.

23 (a) PURPOSE.—The purpose of this section is to

24 begin phasing out the confiscatory gift and estate tax by

25 reducing the rate of tax.
34

•S 1379 IS

1 (b) REPEAL OF ESTATE AND GIFT TAXES.—Subtitle

2 B of the Internal Revenue Code of 1986 (relating to estate

3 and gift taxes) is repealed effective with respect to estates

4 of decedents dying, and gifts made, after December 31,

5 2009.

6 (c) PHASEOUT OF TAX.—Subsection (c) of section

7 2001 of the Internal Revenue Code of 1986 (relating to

8 imposition and rate of tax) is amended by adding at the

9 end the following:

10 ‘‘(3) PHASEOUT OF TAX.—In the case of es11 tates of decedents dying, and gifts made, during any

12 calendar year after 1999 and before 2010—

13 ‘‘(A) IN GENERAL.—The tentative tax

14 under this subsection shall be determined by

15 using a table prescribed by the Secretary (in

16 lieu of using the table contained in paragraph

17 (1)) which is the same as such table; except

18 that—

19 ‘‘(i) each of the rates of tax shall be

20 reduced (but not below zero) by the num21 ber of percentage points determined under

22 subparagraph (B), and

23 ‘‘(ii) the amounts setting forth the tax

24 shall be adjusted to the extent necessary to

25 reflect the adjustments under clause (i).
35

•S 1379 IS

1 ‘‘(B) PERCENTAGE POINTS OF REDUC2 TION.—

The number of

‘‘For calendar year: percentage points is:

2001 ......................................................................................... 1

2002 ......................................................................................... 2

2003 ......................................................................................... 3

2004 ......................................................................................... 4

2005 ......................................................................................... 5

2006 ......................................................................................... 7

2007 ......................................................................................... 9

2008 ......................................................................................... 11

2009 ......................................................................................... 15.

3 ‘‘(C) COORDINATION WITH PARAGRAPH

4 (2).—Paragraph (2) shall be applied by reduc5 ing the 55 percent percentage contained therein

6 by the number of percentage points determined

7 for such calendar year under subparagraph (B).

8 ‘‘(D) COORDINATION WITH CREDIT FOR

9 STATE DEATH TAXES.—Rules similar to the

10 rules of subparagraph (A) shall apply to the

11 table contained in section 2011(b) except that

12 the number of percentage points referred to in

13 subparagraph (A)(i) shall be determined under

14 the following table:

The number of

‘‘For calendar year: percentage points is:

2001 ......................................................................................... 1

2002 ......................................................................................... 2

2003 ......................................................................................... 3

2004 ......................................................................................... 4

2005 ......................................................................................... 5

2006 ......................................................................................... 7

2007 ......................................................................................... 9

2008 ......................................................................................... 11

2009 ......................................................................................... 15.’’.
36

•S 1379 IS

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to estates of decedents dying, and

3 gifts made, after December 31, 2000.

4 TITLE V—RESEARCH CREDIT

5 EXTENSION AND MODIFICATION

6 SEC. 51. PURPOSE.

7 The purpose of this title is to make the research cred8 it permanent and make certain modifications to the credit.

9 SEC. 52. PERMANENT EXTENSION OF RESEARCH CREDIT.

10 (a) IN GENERAL.—Section 41 of the Internal Rev11 enue Code of 1986 (relating to credit for increasing re12 search activities) is amended by striking subsection (h).

13 (b) CONFORMING AMENDMENT.—Section 45C(b)(1)

14 of the Internal Revenue Code of 1986 is amended by strik15 ing subparagraph (D).

16 (c) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to amounts paid or incurred after

18 December 31, 2000.

19 SEC. 53. IMPROVED ALTERNATIVE INCREMENTAL CREDIT.

20 (a) IN GENERAL.—Section 41 of the Internal Rev21 enue Code of 1986 (relating to credit for increasing re22 search activities), as amended by section 52, is amended

23 by adding at the end the following:

24 ‘‘(h) ELECTION OF ALTERNATIVE INCREMENTAL

25 CREDIT.—
37

•S 1379 IS

1 ‘‘(1) IN GENERAL.—At the election of the tax2 payer, the credit under subsection (a)(1) shall be de3 termined under this section by taking into account

4 the modifications provided by this subsection.

5 ‘‘(2) DETERMINATION OF BASE AMOUNT.—

6 ‘‘(A) IN GENERAL.—In computing the base

7 amount under subsection (c)—

8 ‘‘(i) notwithstanding subsection (c)(3),

9 the fixed-base percentage shall be equal to

10 80 percent of the percentage which the ag11 gregate qualified research expenses of the

12 taxpayer for the base period is of the ag13 gregate gross receipts of the taxpayer for

14 the base period, and

15 ‘‘(ii) the minimum base amount under

16 subsection (c)(2) shall not apply.

17 ‘‘(B) START-UP AND SMALL TAXPAYERS.—

18 In computing the base amount under subsection

19 (c), the gross receipts of a taxpayer for any tax20 able year in the base period shall be treated as

21 at least equal to $1,000,000.

22 ‘‘(C) BASE PERIOD.—For purposes of this

23 subsection, the base period is the 8-taxable year

24 period preceding the taxable year (or, if shorter,
38

•S 1379 IS

1 the period the taxpayer (and any predecessor)

2 has been in existence).

3 ‘‘(3) ELECTION.—An election under this sub4 section shall apply to the taxable year for which

5 made and all succeeding taxable years unless re6 voked with the consent of the Secretary.’’.

7 (b) CONFORMING AMENDMENT.—Section 41(c) of

8 the Internal Revenue Code of 1986 is amended by striking

9 paragraph (4) and by redesignating paragraphs (5) and

10 (6) as paragraphs (4) and (5), respectively.

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 2004.

14 SEC. 54. MODIFICATIONS TO CREDIT FOR BASIC RE15 SEARCH.

16 (a) ELIMINATION OF INCREMENTAL REQUIRE17 MENT.—

18 (1) IN GENERAL.—Paragraph (1) of section

19 41(e) of the Internal Revenue Code of 1986 (relat20 ing to credit allowable with respect to certain pay21 ments to qualified organizations for basic research)

22 is amended to read as follows:

23 ‘‘(1) IN GENERAL.—The amount of basic re24 search payments taken into account under sub-
39

•S 1379 IS

1 section (a)(2) shall be determined in accordance with

2 this subsection.’’.

3 (2) CONFORMING AMENDMENTS.—

4 (A) Section 41(a)(2) of the Internal Rev5 enue Code of 1986 is amended by striking ‘‘de6 termined under subsection (e)(1)(A)’’ and in7 serting ‘‘for the taxable year’’.

8 (B) Section 41(e) of such Code is amended

9 by striking paragraphs (3), (4), and (5) and by

10 redesignating paragraphs (6) and (7) as para11 graphs (3) and (4), respectively.

12 (C) Section 41(e)(4) of such Code, as re13 designated by subparagraph (B), is amended by

14 striking subparagraph (B) and by redesignating

15 subparagraphs (C), (D), and (E) as subpara16 graphs (B), (C), and (D), respectively.

17 (D) Clause (i) of section 170(e)(4)(B) of

18 such Code is amended by striking ‘‘section

19 41(e)(6)’’ and inserting ‘‘section 41(e)(3)’’.

20 (b) BASIC RESEARCH.—

21 (1) SPECIFIC COMMERCIAL OBJECTIVE.—Sec22 tion 41(e)(4) of the Internal Revenue Code of 1986

23 (relating to definitions and special rules), as redesig24 nated by subsection (a)(2)(B), is amended by adding

25 at the end the following:
40

•S 1379 IS

1 ‘‘(E) SPECIFIC COMMERCIAL OBJECTIVE.—

2 For purposes of subparagraph (A), research

3 shall not be treated as having a specific com4 mercial objective if the results of such research

5 are to be published in a timely manner as to be

6 available to the general public prior to their use

7 for a commercial purpose.’’.

8 (2) EXCLUSIONS FROM BASIC RESEARCH.—

9 Clause (ii) of section 41(e)(4)(A) of such Code (re10 lating to definitions and special rules), as redesig11 nated by subsection (a), is amended to read as fol12 lows:

13 ‘‘(ii) basic research in the arts and

14 humanities.’’.

15 (c) EXPANSION OF CREDIT TO RESEARCH DONE AT

16 FEDERAL LABORATORIES.—Section 41(e)(3) of the Inter17 nal Revenue Code of 1986, as redesignated by subsection

18 (a), is amended by adding at the end the following new

19 subparagraph:

20 ‘‘(E) FEDERAL LABORATORIES.—Any or21 ganization which is a Federal laboratory (as de22 fined in section 4(6) of the Stevenson-Wydler

23 Technology Innovation Act of 1980 (15 U.S.C.

24 3703(6)).’’.
41

•S 1379 IS

1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2004.

4 SEC. 55. CREDIT FOR EXPENSES ATTRIBUTABLE TO CER5 TAIN COLLABORATIVE RESEARCH CON6 SORTIA.

7 (a) CREDIT FOR EXPENSES ATTRIBUTABLE TO CER8 TAIN COLLABORATIVE RESEARCH CONSORTIA.—Sub9 section (a) of section 41 of the Internal Revenue Code of

10 1986 (relating to credit for increasing research activities)

11 is amended by striking ‘‘and’’ at the end of paragraph (1),

12 striking the period at the end of paragraph (2) and insert13 ing ‘‘, and ’’, and by adding at the end the following:

14 ‘‘(3) 20 percent of the amounts paid or in15 curred by the taxpayer in carrying on any trade or

16 business of the taxpayer during the taxable year (in17 cluding as contributions) to a qualified research con18 sortium.’’.

19 (b) QUALIFIED RESEARCH CONSORTIUM DE20 FINED.—Subsection (f) of section 41 of the Internal Rev21 enue Code of 1986 is amended by adding at the end the

22 following:

23 ‘‘(6) QUALIFIED RESEARCH CONSORTIUM.—The

24 term ‘qualified research consortium’ means any

25 organization—
42

•S 1379 IS

1 ‘‘(A) which is—

2 ‘‘(i) described in section 501(c)(3) and

3 is exempt from tax under section 501(a)

4 and is organized and operated primarily to

5 conduct scientific or engineering research,

6 or

7 ‘‘(ii) organized and operated primarily

8 to conduct scientific or engineering re9 search in the public interest (within the

10 meaning of section 501(c)(3)),

11 ‘‘(B) which is not a private foundation,

12 ‘‘(C) to which at least 5 unrelated persons

13 paid or incurred during the calendar year in

14 which the taxable year of the organization be15 gins amounts (including as contributions) to

16 such organization for scientific or engineering

17 research, and

18 ‘‘(D) to which no single person paid or in19 curred (including as contributions) during such

20 calendar year an amount equal to more than 50

21 percent of the total amounts received by such

22 organization during such calendar year for sci23 entific or engineering research.

24 All persons treated as a single employer under sub25 section (a) or (b) of section 52 shall be treated as
43

•S 1379 IS

1 related persons for purposes of subparagraph (C)

2 and as a single person for purposes of subparagraph

3 (D).’’.

4 (c) CONFORMING AMENDMENT.—Paragraph (3) of

5 section 41(b) of the Internal Revenue Code of 1986 is

6 amended by striking subparagraph (C).

7 (d) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to taxable years beginning after

9 December 31, 2004.

10 SEC. 56. IMPROVEMENT TO CREDIT FOR SMALL BUSI11 NESSES AND RESEARCH PARTNERSHIPS.

12 (a) ASSISTANCE TO SMALL AND START-UP BUSI13 NESSES.—The Secretary of the Treasury or the Sec14 retary’s delegate shall take such actions as are appropriate

15 to—

16 (1) provide assistance to small and start-up

17 businesses in complying with the requirements of

18 section 41 of the Internal Revenue Code of 1986,

19 and

20 (2) reduce the costs of such compliance.

21 (b) REPEAL OF LIMITATION ON CONTRACT RE22 SEARCH EXPENSES PAID TO SMALL BUSINESSES, UNI23 VERSITIES, AND FEDERAL LABORATORIES.—Section

24 41(b)(3) of the Internal Revenue Code of 1986, as amend-
44

•S 1379 IS

1 ed by section 55(c), is amended by adding at the end the

2 following:

3 ‘‘(C) AMOUNTS PAID TO ELIGIBLE SMALL

4 BUSINESSES, UNIVERSITIES, AND FEDERAL

5 LABORATORIES.—

6 ‘‘(i) IN GENERAL.—In the case of

7 amounts paid by the taxpayer to an eligible

8 small business, an institution of higher

9 education (as defined in section 3304(f)),

10 or an organization which is a Federal lab11 oratory (as defined in subsection

12 (e)(3)(E)), subparagraph (A) shall be ap13 plied by substituting ‘100 percent’ for ‘65

14 percent’.

15 ‘‘(ii) ELIGIBLE SMALL BUSINESS.—

16 For purposes of this subparagraph, the

17 term ‘eligible small business’ means a

18 small business with respect to which the

19 taxpayer does not own (within the meaning

20 of section 318) 50 percent or more of—

21 ‘‘(I) in the case of a corporation,

22 the outstanding stock of the corpora23 tion (either by vote or value), and

24 ‘‘(II) in the case of a small busi25 ness which is not a corporation, the
45

•S 1379 IS

1 capital and profits interests of the

2 small business.

3 ‘‘(iii) SMALL BUSINESS.—For pur4 poses of this subparagraph—

5 ‘‘(I) IN GENERAL.—The term

6 ‘small business’ means, with respect

7 to any calendar year, any person if

8 the annual average number of employ9 ees employed by such person during

10 either of the 2 preceding calendar

11 years was 500 or fewer. For purposes

12 of the preceding sentence, a preceding

13 calendar year may be taken into ac14 count only if the person was in exist15 ence throughout the year.

16 ‘‘(II) STARTUPS, CONTROLLED

17 GROUPS, AND PREDECESSORS.—Rules

18 similar to the rules of subparagraphs

19 (B) and (D) of section 220(c)(4) shall

20 apply for purposes of this clause.’’.

21 (c) CREDIT FOR PATENT FILING FEES.—Section

22 41(a) of the Internal Revenue Code of 1986, as amended

23 by section 55(a), is amended by striking ‘‘and’’ at the end

24 of paragraph (2), by striking the period at the end of para-
46

•S 1379 IS

1 graph (3) and inserting ‘‘, and’’, and by adding at the

2 end the following:

3 ‘‘(4) 20 percent of the patent filing fees paid or

4 incurred by a small business (as defined in sub5 section (b)(3)(C)(iii)) to the United States or to any

6 foreign government in carrying on any trade or busi7 ness.’’.

8 (d) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 2004.

11 TITLE VI—ENERGY

12 INDEPENDENCE

13 SEC. 61. PURPOSES.

14 The purposes of this title are—

15 (1) to prevent the abandonment of marginal oil

16 and gas wells owned and operated by independent oil

17 and gas producers, which are responsible for half of

18 the United States’ domestic production, and

19 (2) to transform earned tax credits and other

20 benefits into working capital for the cash-strapped

21 domestic oil and gas producers and service compa22 nies.
47

•S 1379 IS

1 SEC. 62. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND

2 NATURAL GAS WELL PRODUCTION.

3 (a) CREDIT FOR PRODUCING OIL AND GAS FROM

4 MARGINAL WELLS.—Subpart D of part IV of subchapter

5 A of chapter 1 of the Internal Revenue Code of 1986 (re6 lating to business credits) is amended by adding at the

7 end the following:

8 ‘‘SEC. 45D. CREDIT FOR PRODUCING OIL AND GAS FROM

9 MARGINAL WELLS.

10 ‘‘(a) GENERAL RULE.—For purposes of section 38,

11 the marginal well production credit for any taxable year

12 is an amount equal to the product of—

13 ‘‘(1) the credit amount, and

14 ‘‘(2) the qualified crude oil production and the

15 qualified natural gas production which is attrib16 utable to the taxpayer.

17 ‘‘(b) CREDIT AMOUNT.—For purposes of this

18 section—

19 ‘‘(1) IN GENERAL.—The credit amount is—

20 ‘‘(A) $3 per barrel of qualified crude oil

21 production, and

22 ‘‘(B) 50 cents per 1,000 cubic feet of

23 qualified natural gas production.

24 ‘‘(2) REDUCTION AS OIL AND GAS PRICES IN25 CREASE.—
48

•S 1379 IS

1 ‘‘(A) IN GENERAL.—The $3 and 50 cents

2 amounts under paragraph (1) shall each be re3 duced (but not below zero) by an amount which

4 bears the same ratio to such amount (deter5 mined without regard to this paragraph) as—

6 ‘‘(i) the excess (if any) of the applica7 ble reference price over $14 ($1.56 for

8 qualified natural gas production), bears to

9 ‘‘(ii) $3 ($0.33 for qualified natural

10 gas production).

11 The applicable reference price for a taxable

12 year is the reference price for the calendar year

13 preceding the calendar year in which the tax14 able year begins.

15 ‘‘(B) INFLATION ADJUSTMENT.—In the

16 case of any taxable year beginning in a calendar

17 year after 2000, each of the dollar amounts

18 contained in subparagraph (A) shall be in19 creased to an amount equal to such dollar

20 amount multiplied by the inflation adjustment

21 factor for such calendar year (determined under

22 section 43(b)(3)(B) by substituting ‘1999’ for

23 ‘1990’).
49

•S 1379 IS

1 ‘‘(C) REFERENCE PRICE.—For purposes of

2 this paragraph, the term ‘reference price’

3 means, with respect to any calendar year—

4 ‘‘(i) in the case of qualified crude oil

5 production, the reference price determined

6 under section 29(d)(2)(C), and

7 ‘‘(ii) in the case of qualified natural

8 gas production, the Secretary’s estimate of

9 the annual average wellhead price per

10 1,000 cubic feet for all domestic natural

11 gas.

12 ‘‘(c) QUALIFIED CRUDE OIL AND NATURAL GAS

13 PRODUCTION.—For purposes of this section—

14 ‘‘(1) IN GENERAL.—The terms ‘qualified crude

15 oil production’ and ‘qualified natural gas production’

16 mean domestic crude oil or natural gas which is pro17 duced from a marginal well.

18 ‘‘(2) LIMITATION ON AMOUNT OF PRODUCTION

19 WHICH MAY QUALIFY.—

20 ‘‘(A) IN GENERAL.—Crude oil or natural

21 gas produced during any taxable year from any

22 well shall not be treated as qualified crude oil

23 production or qualified natural gas production

24 to the extent production from the well during
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•S 1379 IS

1 the taxable year exceeds 1,095 barrels or barrel

2 equivalents.

3 ‘‘(B) PROPORTIONATE REDUCTIONS.—

4 ‘‘(i) SHORT TAXABLE YEARS.—In the

5 case of a short taxable year, the limitations

6 under this paragraph shall be proportion7 ately reduced to reflect the ratio which the

8 number of days in such taxable year bears

9 to 365.

10 ‘‘(ii) WELLS NOT IN PRODUCTION EN11 TIRE YEAR.—In the case of a well which is

12 not capable of production during each day

13 of a taxable year, the limitations under

14 this paragraph applicable to the well shall

15 be proportionately reduced to reflect the

16 ratio which the number of days of produc17 tion bears to the total number of days in

18 the taxable year.

19 ‘‘(3) DEFINITIONS.—

20 ‘‘(A) MARGINAL WELL.—The term ‘mar21 ginal well’ means a domestic well—

22 ‘‘(i) the production from which during

23 the taxable year is treated as marginal

24 production under section 613A(c)(6), or

25 ‘‘(ii) which, during the taxable year—
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•S 1379 IS

1 ‘‘(I) has average daily production

2 of not more than 25 barrel equiva3 lents, and

4 ‘‘(II) produces water at a rate

5 not less than 95 percent of total well

6 effluent.

7 ‘‘(B) CRUDE OIL, ETC.—The terms ‘crude

8 oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have

9 the meanings given such terms by section

10 613A(e).

11 ‘‘(C) BARREL EQUIVALENT.—The term

12 ‘barrel equivalent’ means, with respect to nat13 ural gas, a conversion ratio of 6,000 cubic feet

14 of natural gas to 1 barrel of crude oil.

15 ‘‘(d) OTHER RULES.—

16 ‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX17 PAYER.—In the case of a marginal well in which

18 there is more than one owner of operating interests

19 in the well and the crude oil or natural gas produc20 tion exceeds the limitation under subsection (c)(2),

21 qualifying crude oil production or qualifying natural

22 gas production attributable to the taxpayer shall be

23 determined on the basis of the ratio which tax24 payer’s revenue interest in the production bears to
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1 the aggregate of the revenue interests of all oper2 ating interest owners in the production.

3 ‘‘(2) OPERATING INTEREST REQUIRED.—Any

4 credit under this section may be claimed only on

5 production which is attributable to the holder of an

6 operating interest.

7 ‘‘(3) PRODUCTION FROM NONCONVENTIONAL

8 SOURCES EXCLUDED.—In the case of production

9 from a marginal well which is eligible for the credit

10 allowed under section 29 for the taxable year, no

11 credit shall be allowable under this section unless

12 the taxpayer elects not to claim the credit under sec13 tion 29 with respect to the well.’’.

14 (b) CREDIT TREATED AS BUSINESS CREDIT.—Sec15 tion 38(b) of the Internal Revenue Code of 1986 is amend16 ed by striking ‘‘plus’’ at the end of paragraph (11), by

17 striking the period at the end of paragraph (12) and in18 serting ‘‘, plus’’, and by adding at the end the following:

19 ‘‘(13) the marginal oil and gas well production

20 credit determined under section 45D(a).’’.

21 (c) CREDIT ALLOWED AGAINST REGULAR AND MIN22 IMUM TAX.—

23 (1) IN GENERAL.—Subsection (c) of section 38

24 of the Internal Revenue Code of 1986 (relating to

25 limitation based on amount of tax) is amended by
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•S 1379 IS

1 redesignating paragraph (3) as paragraph (4) and

2 by inserting after paragraph (2) the following:

3 ‘‘(3) SPECIAL RULES FOR MARGINAL OIL AND

4 GAS WELL PRODUCTION CREDIT.—

5 ‘‘(A) IN GENERAL.—In the case of the

6 marginal oil and gas well production credit—

7 ‘‘(i) this section and section 39 shall

8 be applied separately with respect to the

9 credit, and

10 ‘‘(ii) in applying paragraph (1) to the

11 credit—

12 ‘‘(I) subparagraphs (A) and (B)

13 thereof shall not apply, and

14 ‘‘(II) the limitation under para15 graph (1) (as modified by subclause

16 (I)) shall be reduced by the credit al17 lowed under subsection (a) for the

18 taxable year (other than the marginal

19 oil and gas well production credit).

20 ‘‘(B) MARGINAL OIL AND GAS WELL PRO21 DUCTION CREDIT.—For purposes of this sub22 section, the term ‘marginal oil and gas well pro23 duction credit’ means the credit allowable under

24 subsection (a) by reason of section 45D(a).’’.
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1 (2) CONFORMING AMENDMENT.—Subclause (II)

2 of section 38(c)(2)(A)(ii) of such Code is amended

3 by inserting ‘‘or the marginal oil and gas well pro4 duction credit’’ after ‘‘employment credit’’.

5 (d) CARRYBACK.—Subsection (a) of section 39 of the

6 Internal Revenue Code of 1986 (relating to carryback and

7 carryforward of unused credits generally) is amended by

8 adding at the end the following:

9 ‘‘(3) 10-YEAR CARRYBACK FOR MARGINAL OIL

10 AND GAS WELL PRODUCTION CREDIT.—In the case

11 of the marginal oil and gas well production credit—

12 ‘‘(A) this section shall be applied sepa13 rately from the business credit (other than the

14 marginal oil and gas well production credit),

15 ‘‘(B) paragraph (1) shall be applied by

16 substituting ‘10 taxable years’ for ‘1 taxable

17 years’ in subparagraph (A) thereof, and

18 ‘‘(C) paragraph (2) shall be applied—

19 ‘‘(i) by substituting ‘31 taxable years’

20 for ‘21 taxable years’ in subparagraph (A)

21 thereof, and

22 ‘‘(ii) by substituting ‘30 taxable years’

23 for ‘20 taxable years’ in subparagraph (B)

24 thereof.’’.
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1 (e) COORDINATION WITH SECTION 29.—Section

2 29(a) of the Internal Revenue Code of 1986 is amended

3 by striking ‘‘There’’ and inserting ‘‘At the election of the

4 taxpayer, there’’.

5 (f) CLERICAL AMENDMENT.—The table of sections

6 for subpart D of part IV of subchapter A of chapter 1

7 of the Internal Revenue Code of 1986 is amended by add8 ing at the end the following:

‘‘45D. Credit for producing oil and gas from marginal wells.’’.

9 (g) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to production after December 31,

11 2000.

12 SEC. 63. 10-YEAR CARRYBACK FOR UNUSED MINIMUM TAX

13 CREDIT.

14 (a) IN GENERAL.—Section 53(c) of the Internal Rev15 enue Code of 1986 (relating to limitation) is amended by

16 adding at the end the following:

17 ‘‘(2) SPECIAL RULE FOR TAXPAYERS WITH UN18 USED ENERGY MINIMUM TAX CREDITS.—

19 ‘‘(A) IN GENERAL.—If, during the 10-tax20 able year period ending with the current taxable

21 year, a taxpayer has an unused energy min22 imum tax credit for any taxable year in such

23 period (determined without regard to the appli24 cation of this paragraph to the current taxable

25 year)—
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•S 1379 IS

1 ‘‘(i) paragraph (1) shall not apply to

2 each of the taxable years in such period for

3 which the taxpayer has an unused energy

4 minimum tax credit (as so determined),

5 and

6 ‘‘(ii) the credit allowable under sub7 section (a) for each of such taxable years

8 shall be equal to the excess (if any) of—

9 ‘‘(I) the sum of the regular tax

10 liability and the net minimum tax for

11 such taxable year, over

12 ‘‘(II) the sum of the credits al13 lowable under subparts A, B, D, E,

14 and F of this part.

15 ‘‘(B) ENERGY MINIMUM TAX CREDIT.—For

16 purposes of this paragraph, the term ‘energy

17 minimum tax credit’ means the minimum tax

18 credit which would be computed with respect to

19 any taxable year if the adjusted net minimum

20 tax were computed by only taking into account

21 items attributable to—

22 ‘‘(i) the taxpayer’s mineral interests

23 in oil and gas property, and

24 ‘‘(ii) the taxpayer’s active conduct of

25 a trade or business of providing tools,
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•S 1379 IS

1 products, personnel, and technical solu2 tions on a contractual basis to persons en3 gaged in oil and gas exploration and pro4 duction.’’.

5 (b) CONFORMING AMENDMENTS.—Section 53(c) of

6 the Internal Revenue Code of 1986 (as in effect before

7 the amendment made by subsection (a)) is amended—

8 (1) by striking ‘‘The’’ and inserting:

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), the ’’, and

11 (2) by redesignating paragraphs (1) and (2) as

12 subparagraphs (A) and (B).

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 2000, and to any taxable year beginning

16 on or before such date to the extent necessary to apply

17 section 53(c)(2) of the Internal Revenue Code of 1986 (as

18 added by subsection (a)).

19 SEC. 64. 10-YEAR NET OPERATING LOSS CARRYBACK FOR

20 LOSSES ATTRIBUTABLE TO OIL SERVICING

21 COMPANIES AND MINERAL INTERESTS OF

22 OIL AND GAS PRODUCERS.

23 (a) IN GENERAL.—Paragraph (1) of section 172(b)

24 of the Internal Revenue Code of 1986 (relating to years
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1 to which loss may be carried) is amended by adding at

2 the end the following:

3 ‘‘(H) LOSSES ON OPERATING MINERAL IN4 TERESTS OF OIL AND GAS PRODUCERS AND

5 OILFIELD SERVICING COMPANIES.—In the case

6 of a taxpayer which has an eligible oil and gas

7 loss (as defined in subsection (j)) for a taxable

8 year, such eligible oil and gas loss shall be a net

9 operating loss carryback to each of the 10 tax10 able years preceding the taxable year of such

11 loss.’’.

12 (b) ELIGIBLE OIL AND GAS LOSS.—Section 172 of

13 the Internal Revenue Code of 1986 is amended by redesig14 nating subsection (j) as subsection (k) and by inserting

15 after subsection (i) the following:

16 ‘‘(j) ELIGIBLE OIL AND GAS LOSS.—For purposes of

17 this section—

18 ‘‘(1) IN GENERAL.—The term ‘eligible oil and

19 gas loss’ means the lesser of—

20 ‘‘(A) the amount which would be the net

21 operating loss for the taxable year if only in22 come and deductions attributable to—

23 ‘‘(i) mineral interests in oil and gas

24 wells, and
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1 ‘‘(ii) the active conduct of a trade or

2 business of providing tools, products, per3 sonnel, and technical solutions on a con4 tractual basis to persons engaged in oil

5 and gas exploration and production,

6 are taken into account, and

7 ‘‘(B) the amount of the net operating loss

8 for such taxable year.

9 ‘‘(2) COORDINATION WITH SUBSECTION

10 (b)(2).—For purposes of applying subsection (b)(2),

11 an eligible oil and gas loss for any taxable year shall

12 be treated in a manner similar to the manner in

13 which a specified liability loss is treated.

14 ‘‘(3) ELECTION.—Any taxpayer entitled to a

15 10-year carryback under subsection (b)(1)(H) from

16 any loss year may elect to have the carryback period

17 with respect to such loss year determined without re18 gard to subsection (b)(1)(H). Such election shall be

19 made in such manner as may be prescribed by the

20 Secretary and shall be made by the due date (includ21 ing extensions of time) for filing the taxpayer’s re22 turn for the taxable year of the net operating loss.

23 Such election, once made for any taxable year, shall

24 be irrevocable for such taxable year.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to net operating losses for taxable

3 years beginning after December 31, 1999, and to any tax4 able year beginning on or before such date to the extent

5 necessary to apply section 172(b)(1)(H) of the Internal

6 Revenue Code of 1986 (as added by subsection (a)).

7 SEC. 65. WAIVER OF LIMITATIONS.

8 If refund or credit of any overpayment of tax result9 ing from the application of the amendments made by sec10 tions 63 and 64 is prevented at any time before the close

11 of the 1-year period beginning on the date of the enact12 ment of this Act by the operation of any law or rule of

13 law (including res judicata), such refund or credit may

14 nevertheless be made or allowed if claim therefor is filed

15 before the close of such period.

16 SEC. 66. ELECTION TO EXPENSE GEOLOGICAL AND GEO17 PHYSICAL EXPENDITURES AND DELAY RENT18 AL PAYMENTS.

19 (a) PURPOSE.—The purpose of this section is to rec20 ognize that geological and geophysical expenditures and

21 delay rentals are ordinary and necessary business expenses

22 that should be deducted in the year the expense is in23 curred.

24 (b) ELECTION TO EXPENSE GEOLOGICAL AND GEO25 PHYSICAL EXPENDITURES.—
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1 (1) IN GENERAL.—Section 263 of the Internal

2 Revenue Code of 1986 (relating to capital expendi3 tures) is amended by adding at the end the fol4 lowing:

5 ‘‘(j) GEOLOGICAL AND GEOPHYSICAL EXPENDI6 TURES FOR DOMESTIC OIL AND GAS WELLS.—Notwith7 standing subsection (a), a taxpayer may elect to treat geo8 logical and geophysical expenses incurred in connection

9 with the exploration for, or development of, oil or gas with10 in the United States (as defined in section 638) as ex11 penses which are not chargeable to capital account. Any

12 expenses so treated shall be allowed as a deduction in the

13 taxable year in which paid or incurred.’’.

14 (2) CONFORMING AMENDMENT.—Section

15 263A(c)(3) of such Code is amended by inserting

16 ‘‘263(j),’’ after ‘‘263(i),’’.

17 (3) EFFECTIVE DATE.—

18 (A) IN GENERAL.—The amendments made

19 by this subsection shall apply to expenses paid

20 or incurred after December 31, 2000.

21 (B) TRANSITION RULE.—In the case of

22 any expenses described in section 263(j) of the

23 Internal Revenue Code of 1986, as added by

24 this subsection, which were paid or incurred on

25 or before December 31, 2000, the taxpayer may
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1 elect, at such time and in such manner as the

2 Secretary of the Treasury may prescribe, to

3 amortize the unamortized portion of such ex4 penses over the 36-month period beginning with

5 the month of January, 2001. For purposes of

6 this subparagraph, the unamortized portion of

7 any expense is the amount remaining

8 unamortized as of the first day of the 36-month

9 period.

10 (c) ELECTION TO EXPENSE DELAY RENTAL PAY11 MENTS.—

12 (1) IN GENERAL.—Section 263 of the Internal

13 Revenue Code of 1986 (relating to capital expendi14 tures), as amended by subsection (b)(1), is amended

15 by adding at the end the following:

16 ‘‘(k) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL

17 AND GAS WELLS.—

18 ‘‘(1) IN GENERAL.—Notwithstanding subsection

19 (a), a taxpayer may elect to treat delay rental pay20 ments incurred in connection with the development

21 of oil or gas within the United States (as defined in

22 section 638) as payments which are not chargeable

23 to capital account. Any payments so treated shall be

24 allowed as a deduction in the taxable year in which

25 paid or incurred.
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1 ‘‘(2) DELAY RENTAL PAYMENTS.—For purposes

2 of paragraph (1), the term ‘delay rental payment’

3 means an amount paid for the privilege of deferring

4 development of an oil or gas well.’’.

5 (2) CONFORMING AMENDMENT.—Section

6 263A(c)(3) of the Internal Revenue Code of 1986,

7 as amended by subsection (b)(2), is amended by in8 serting ‘‘263(k),’’ after ‘‘263(j),’’.

9 (3) EFFECTIVE DATE.—

10 (A) IN GENERAL.—The amendments made

11 by this subsection shall apply to payments made

12 or incurred after December 31, 2000.

13 (B) TRANSITION RULE.—In the case of

14 any payments described in section 263(k) of the

15 Internal Revenue Code of 1986, as added by

16 this subsection, which were made or incurred on

17 or before December 31, 2000, the taxpayer may

18 elect, at such time and in such manner as the

19 Secretary of the Treasury may prescribe, to

20 amortize the unamortized portion of such pay21 ments over the 36-month period beginning with

22 the month of January, 2001. For purposes of

23 this subparagraph, the unamortized portion of

24 any payment is the amount remaining
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1 unamortized as of the first day of the 36-month

2 period.

3 TITLE VII—REVENUE PROVISION

4 SEC. 71. 4-YEAR AVERAGING FOR CONVERSION OF TRADI5 TIONAL IRA TO ROTH IRA.

6 (a) IN GENERAL.—Section 408A(d)(3)(A)(iii) of the

7 Internal Revenue Code of 1986 is amended by striking

8 ‘‘January 1, 1999,’’ and inserting ‘‘January 1, 2004,’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 subsection (a) shall apply to distributions made after De11 cember 31, 2000.

Æ