I 

108TH CONGRESS 

1ST SESSION H. R. 311

To amend the Internal Revenue Code of 1986 to provide a 10 percent 

maximum capital gains tax for individuals. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 8, 2003

Mr. PENCE (for himself, Mr. TOOMEY, Mrs. MYRICK, Mrs. JO ANN DAVIS of 

Virginia, Mr. GOODE, Mr. PITTS, Mr. KING of Iowa, Mr. CHOCOLA, Mr. 

RYUN of Kansas, Mr. TANCREDO, Mr. AKIN, Mr. WILSON of South Carolina, Mr. PEARCE, Mr. HOSTETTLER, Mr. HOEKSTRA, Mr. FEENEY, Mr. 

SOUDER, Mr. FLAKE, Mr. BURTON of Indiana, Mr. TERRY, Mr. TIAHRT, 

Mr. SHADEGG, Mr. SESSIONS, Mr. OTTER, Mr. ADERHOLT, Mr. WELDON

of Florida, Mr. RYAN of Wisconsin, Mr. BARRETT of South Carolina, Mr. 

DEMINT, Mr. CULBERSON, Mr. DOOLITTLE, Mr. GARRETT of New Jersey, and Mr. SULLIVAN) introduced the following bill; which was referred 

to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

a 10 percent maximum capital gains tax for individuals.

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. 

4 This Act may be cited as the ‘‘American Dream Tax 

5 Relief Act of 2003’’. 
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1 SEC. 2. 10 PERCENT MAXIMUM CAPITAL GAINS RATE FOR 

2 INDIVIDUALS. 

3 (a) IN GENERAL.—Subsection (h) of section 1 of the 

4 Internal Revenue Code of 1986 (relating to maximum cap5 ital gains rate) is amended to read as follows: 

6 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—

7 ‘‘(1) IN GENERAL.—If a taxpayer has a net 

8 capital gain for any taxable year, the tax imposed by 

9 this section for such taxable year shall not exceed 

10 the sum of—

11 ‘‘(A) a tax computed at the rates and in 

12 the same manner as if this subsection had not 

13 been enacted on taxable income reduced by the 

14 net capital gain, and 

15 ‘‘(B) 10 percent of the net capital gain. 

16 ‘‘(2) NET CAPITAL GAIN TAKEN INTO ACCOUNT

17 AS INVESTMENT INCOME.—For purposes of this sub18 section, the net capital gain for any taxable year 

19 shall be reduced (but not below zero) by the amount 

20 which the taxpayer elects to take into account as in21 vestment income under section 163(d)(4)(B)(iii).’’

22 (b) MINIMUM TAX.—

23 (1) IN GENERAL.—Paragraph (3) of section 

24 55(b) of such Code is amended to read as follows: 

25 ‘‘(3) MAXIMUM RATE OF TAX ON NET CAPITAL

26 GAIN OF NONCORPORATE TAXPAYERS.—The amount 
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1 determined under the first sentence of paragraph 

2 (1)(A)(i) shall not exceed the sum of—

3 ‘‘(A) the amount determined under such 

4 first sentence computed at the rates and in the 

5 same manner as if this paragraph had not been 

6 enacted on the taxable excess reduced by the 

7 net capital gain, plus 

8 ‘‘(B) 10 percent of the lesser of the net 

9 capital gain or the taxable excess.’’

10 (2) EXCLUSION OF SECTION 1202 GAIN NOT

11 TREATED AS AN ITEM OF TAX PREFERENCE.—Sub12 section (a) of section 57 of such Code is amended 

13 by striking paragraph (7). 

14 (c) CONFORMING AMENDMENTS.—

15 (1) Subclause (II) of section 53(d)(1)(B)(ii) of 

16 such Code is amended by striking ‘‘, (5), and (7)’’ 

17 and inserting ‘‘and (5)’’. 

18 (2) Paragraph (1) of section 1445(e) of such 

19 Code is amended by striking ‘‘20 percent’’ and in20 serting ‘‘10 percent’’. 

21 (3) The second sentence of section 

22 7518(g)(6)(A) of such Code is amended by striking 

23 ‘‘20 percent’’ and inserting ‘‘10 percent’’. 
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1 (4) The second sentence of section 607(h)(6)(A) 

2 of the Merchant Marine Act, 1936 is amended by 

3 striking ‘‘20 percent’’ and inserting ‘‘10 percent’’. 

4 (d) TRANSITIONAL RULES.—

5 (1) IN GENERAL.—For purposes of applying 

6 subsection (h) of section 1 of such Code in the case 

7 of a taxable year which includes the date of the en8 actment of this Act, the amount of tax determined 

9 under such subsection shall be the sum of—

10 (A) the amount determined under such 

11 subsection (as in effect on the day before the 

12 date of the enactment of this Act) taking into 

13 account only gain or loss properly taken into 

14 account for the portion of the taxable year be15 fore the date of the enactment of this Act, and 

16 (B) the amount determined under such 

17 subsection (as amended by this Act) taking into 

18 account only gain or loss properly taken into 

19 account for the portion of the taxable year on 

20 or after such date. 

21 (2) ALTERNATIVE MINIMUM TAX.—For pur22 poses of applying section 55(b)(3) of such Code in 

23 the case of such a taxable year, rules similar to the 

24 rules of paragraph (1) shall apply. 
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1 (3) PASS-THRU ENTITIES.—In applying this 

2 subsection with respect to any pass-thru entity, the 

3 determination of when gains and losses are properly 

4 taken into account shall be made at the entity level. 

5 (e) EFFECTIVE DATES.—

6 (1) IN GENERAL.—Except as provided in this 

7 subsection, the amendments made by this section 

8 shall apply to taxable years ending after the date of 

9 the enactment of this Act. 

10 (2) SMALL BUSINESS STOCK.—The amendment 

11 made by subsection (b)(2) shall apply to dispositions 

12 on or after the date of the enactment of this Act. 

13 (3) WITHHOLDING.—The amendment made by 

14 subsection (c)(2) shall apply to amounts paid after 

15 the date of the enactment of this Act.

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