I

106TH CONGRESS

2D SESSION H. R. 5471

To amend the Internal Revenue Code of 1986 to allow individuals an exclusion

from gross income for certain amounts of capital gains distributions

from regulated investment companies.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 12, 2000

Mr. SAXTON 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 allow individuals an exclusion from gross income for certain

amounts of capital gains distributions from regulated

investment companies.

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

3 SECTION 1. PARTIAL EXCLUSION OF CAPITAL GAINS DIS4 TRIBUTIONS FROM REGULATED INVESTMENT

5 COMPANIES.

6 (a) IN GENERAL.—Part III of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to
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1 items specifically excluded from gross income) is amended

2 by inserting after section 115 the following new section:

3 ‘‘SEC. 116. PARTIAL EXCLUSION OF CAPITAL GAINS DIS4 TRIBUTIONS FROM REGULATED INVESTMENT

5 COMPANIES.

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

7 gross income shall not include any capital gain dividend—

8 ‘‘(1) which is distributed by a regulated invest9 ment company to which part I of subchapter M ap10 plies, and

11 ‘‘(2) which is automatically reinvested by the

12 company in the stock of such company with respect

13 to which the dividend is distributed.

14 ‘‘(b) MAXIMUM EXCLUSION.—The amount excluded

15 from gross income under subsection (a) for the taxable

16 year shall not exceed—

17 ‘‘(1) $5,000, or

18 ‘‘(2) in the case of a joint return, twice the

19 amount applicable under paragraph (1).

20 ‘‘(c) CAPITAL GAIN DIVIDEND.—For purposes of this

21 section, the term ‘capital gain dividend’ means—

22 ‘‘(1) any capital gain dividend (as defined by

23 section 852(b)(3)(C)), and

24 ‘‘(2) the portion of any other dividend des25 ignated by the company (under rules similar to the
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1 rules of such section) as representing such dividend’s

2 proportionate share of the net short-term capital

3 gain of the company.

4 ‘‘(d) INFLATION ADJUSTMENT OF MAXIMUM EXCLU5 SION.—

6 ‘‘(1) IN GENERAL.—In the case of any taxable

7 year beginning in a calendar year after 2001, the

8 $5,000 amount in subsection (b)(1) shall be in9 creased by an amount equal to—

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

11 ‘‘(B) the cost-of-living adjustment deter12 mined under section 1(f)(3) for the calendar

13 year in which the taxable year begins, deter14 mined by substituting ‘calendar year 2000’ for

15 ‘calendar year 1992’ in subparagraph (B)

16 thereof.

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

18 adjustment under paragraph (1) is not a multiple of

19 $100, such amount shall be rounded to the nearest

20 multiple of $100.

21 ‘‘(e) NO BASIS ADJUSTMENT.—No adjustment shall

22 be made to the taxpayer’s basis in the shares of the regu23 lated investment company by reason of any amount ex24 cluded from gross income under this section.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 for part III of subchapter B of chapter 1 of such Code

3 is amended by inserting after the item relating to section

4 115 the following new item:

‘‘Sec. 116. Partial exclusion of capital gains distributions from

regulated investment companies.’’

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

6 this section shall apply to taxable years beginning after

7 the date of the enactment of this Act.

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