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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1084 Introduced in House (IH)]

106th CONGRESS
  1st Session
                                H. R. 1084

 To amend the Internal Revenue Code of 1986 to provide tax relief, to 
encourage savings and investment, and to provide incentives for public 
 school construction, and to amend the Social Security Act to provide 
                     relief from the earnings test.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 11, 1999

 Ms. Dunn (for herself, Mr. Weller, Mr. Gillmor, Mr. Hill of Montana, 
 Mr. Lewis of California, Mr. Hostettler, Mrs. Fowler, Mr. Spence, Mr. 
Cunningham, and Mrs. Biggert) 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 tax relief, to 
encourage savings and investment, and to provide incentives for public 
 school construction, and to amend the Social Security Act to provide 
                     relief from the earnings test.

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

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Lifetime Tax 
Relief Act of 1999''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Section 15 Not To Apply.--No amendment made by section 103 
shall be treated as a change in a rate of tax for purposes of section 
15 of the Internal Revenue Code of 1986 .
    (d) Table of Contents.--

Sec. 1. Short title.
                         TITLE I--FAMILY RELIEF

                         Subtitle A--Tax Relief

Sec. 101. Basic standard deduction for married individuals to be twice 
                            the deduction for unmarried individuals.
Sec. 102. Increase in personal exemption.
Sec. 103. Reduction of individual income taxes by increasing amounts of 
                            income subject to tax at the 15 percent 
                            rate.
Sec. 104. Nonrefundable personal credits fully allowed against regular 
                            tax liability during 1999 and 2000.
          Subtitle B--Relief From Social Security Earning Test

Sec. 111. Elimination of earnings test for individuals who have 
                            attained retirement age.
Sec. 112. Conforming amendments eliminating the special exempt amount 
                            for individuals who have attained 
                            retirement age.
Sec. 113. Additional conforming amendments.
Sec. 114. Effective date.
                       TITLE II--BUSINESS RELIEF

Sec. 201. Phaseout of estate and gift taxes.
Sec. 202. Modification and permanent extension of research credit.
Sec. 203. Work opportunity credit made permanent.
Sec. 204. Permanent subpart F exemption for active financing income.
Sec. 205. Deduction for health insurance costs of self-employed 
                            individuals increased to 100 percent.
Sec. 206. Increased exclusion and other modifications applicable to 
                            qualified small business stock.
Sec. 207. Increased exclusion for incentive stock options; exception 
                            from alternative minimum tax.
                   TITLE III--SAVINGS AND INVESTMENT

Sec. 301. Exclusion from gross income of certain amounts of the net 
                            capital gain of individuals.
Sec. 302. Increase in maximum amount of deduction for IRAs.
Sec. 303. Higher elective deferral limit if employee's spouse is not a 
                            participant in section 401(k) plan.
                          TITLE IV--EDUCATION

Sec. 401. Amendments to encourage additional school construction.
Sec. 402. Modification of arbitrage rebate rules applicable to public 
                            school construction bonds.
Sec. 403. Additional increase in arbitrage rebate exception for 
                            governmental bonds used to finance public 
                            school facilities.
Sec. 404. Exclusion from gross income of education distributions from 
                            qualified tuition programs; coverage of 
                            private programs.

                         TITLE I--FAMILY RELIEF

                         Subtitle A--Tax Relief

SEC. 101. BASIC STANDARD DEDUCTION FOR MARRIED INDIVIDUALS TO BE TWICE 
              THE DEDUCTION FOR UNMARRIED INDIVIDUALS.

    (a) In General.--Paragraph (2) of section 63(c) (relating to 
standard deduction) is amended--
            (1) by striking ``$5,000'' in subparagraph (A) and 
        inserting ``twice the dollar amount in effect under 
        subparagraph (C) for the taxable year'',
            (2) by adding ``or'' at the end of subparagraph (B),
            (3) by striking ``in the case of'' and all that follows in 
        subparagraph (C) and inserting ``in any other case.'', and
            (4) by striking subparagraph (D).
    (b) Technical Amendment.--Subparagraph (B) of section 1(f)(6) is 
amended by striking ``(other than with'' and all that follows through 
``shall be applied'' and inserting ``(other than sections 63(c)(4) and 
151(d)(4)(A)) shall be applied''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 102. INCREASE IN PERSONAL EXEMPTION.

    (a) In General.--Paragraph (1) of section 151(d) (relating to 
exemption amount) is amended by striking ``$2,000'' and inserting 
``$3,500''.
    (b) Conforming Amendment.--Subparagraph (A) of section 151(d)(4) is 
amended to read as follows:
                    ``(A) Adjustment to basic amount of exemption.--In 
                the case of any taxable year beginning in a calendar 
                year after 2000, the dollar amount contained in 
                paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year 
                        begins.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 103. REDUCTION OF INDIVIDUAL INCOME TAXES BY INCREASING AMOUNTS OF 
              INCOME SUBJECT TO TAX AT THE 15 PERCENT RATE.

    (a) General Rule.--Section 1 (relating to tax imposed) is amended 
by striking subsections (a) through (e) and inserting the following:
    ``(a) Married Individuals Filing Joint Returns and Surviving 
Spouses.--There is hereby imposed on the taxable income of every 
married individual (as defined in section 7703) who makes a single 
return jointly with his spouse under section 6013, and every surviving 
spouse (as defined in section 2(a)), a tax determined in accordance 
with the following tables:
            ``(1) For taxable years beginning in 2000.--

``If taxable income is:             The tax is:
    Not over $53,560...............
                                        15% of taxable income.
    Over $53,560 but not over 
        $124,900.
                                        $8,034, plus 28% of the excess 
                                                over $53,560.
    Over $124,900 but not over 
        $260,500.
                                        $28,009.20, plus 31% of the 
                                                excess over $124,900.
    Over $260,500 but not over 
        $566,300.
                                        $70,045.20, plus 36% of the 
                                                excess over $260,500.
    Over $566,300..................
                                        $180,133.20, plus 39.6% of the 
                                                excess over $566,300.
            ``(2) For taxable years beginning in 2001.--

``If taxable income is:             The tax is:
    Not over $55,105...............
                                        15% of taxable income.
    Over $55,105 but not over 
        $124,900.
                                        $8,265.75, plus 28% of the 
                                                excess over $55,105.
    Over $124,900 but not over 
        $260,500.
                                        $27,808.35, plus 31% of the 
                                                excess over $124,900.
    Over $260,500 but not over 
        $566,300.
                                        $69,844.35, plus 36% of the 
                                                excess over $260,500.
    Over $566,300..................
                                        $179,932.35, plus 39.6% of the 
                                                excess over $566,300.
            ``(3) For taxable years beginning after 2001.--

``If taxable income is:             The tax is:
    Not over $56,650...............
                                        15% of taxable income.
    Over $56,650 but not over 
        $124,900.
                                        $8,497.50, plus 28% of the 
                                                excess over $56,650.
    Over $124,900 but not over 
        $260,500.
                                        $27,607.50, plus 31% of the 
                                                excess over $124,900.
    Over $260,500 but not over 
        $566,300.
                                        $69,643.50, plus 36% of the 
                                                excess over $260,500.
    Over $566,300..................
                                        $179,731.50, plus 39.6% of the 
                                                excess over $566,300.
    ``(b) Heads of Households.--There is hereby imposed on the taxable 
income of every head of a household (as defined in section 2(b)) a tax 
determined in accordance with the following tables:
            ``(1) For taxable years beginning in 2000.--

``If taxable income is:             The tax is:
    Not over $35,932...............
                                        15% of taxable income.
    Over $35,932 but not over 
        $89,150.
                                        $5,389.80, plus 28% of the 
                                                excess over $35,932.
    Over $89,150 but not over 
        $144,400.
                                        $20,290.84, plus 31% of the 
                                                excess over $89,150.
    Over $144,400 but not over 
        $283,150.
                                        $37,418.34, plus 36% of the 
                                                excess over $144,400.
    Over $283,150..................
                                        $87,368.34, plus 39.6% of the 
                                                excess over $283,150.
            ``(2) For taxable years beginning in 2001.--

``If taxable income is:             The tax is:
    Not over $36,969...............
                                        15% of taxable income.
    Over $36,969 but not over 
        $89,150.
                                        $5,545.35, plus 28% of the 
                                                excess over $36,969.
    Over $89,150 but not over 
        $144,400.
                                        $20,156.03, plus 31% of the 
                                                excess over $89,150.
    Over $144,400 but not over 
        $283,150.
                                        $37,283.53, plus 36% of the 
                                                excess over $144,400.
    Over $283,150..................
                                        $87,233.53, plus 39.6% of the 
                                                excess over $283,150.
            ``(3) For taxable years beginning after 2001.--

``If taxable income is:             The tax is:
    Not over $38,514...............
                                        15% of taxable income.
    Over $38,514 but not over 
        $89,150.
                                        $5,777.10, plus 28% of the 
                                                excess over $38,514.
    Over $89,150 but not over 
        $144,400.
                                        $19,955.18, plus 31% of the 
                                                excess over $89,150.
    Over $144,400 but not over 
        $283,150.
                                        $37,082.68, plus 36% of the 
                                                excess over $144,400.
    Over $283,150..................
                                        $87,032.68, plus 39.6% of the 
                                                excess over $283,150.
    ``(c) Other Individuals.--There is hereby imposed on the taxable 
income of every individual (other than an individual to whom subsection 
(a) or (b) applies) a tax determined in accordance with the following 
tables:

            ``(1) For taxable years beginning in 2000.--

``If taxable income is:             The tax is:
    Not over $26,780...............
                                        15% of taxable income.
    Over $26,780 but not over 
        $62,450.
                                        $4,017, plus 28% of the excess 
                                                over $26,780.
    Over $62,450 but not over 
        $130,250.
                                        $14,004.60, plus 31% of the 
                                                excess over $62,450.
    Over $130,250 but not over 
        $283,150.
                                        $35,022.60, plus 36% of the 
                                                excess over $130,250.
    Over $283,150..................
                                        $90,066.60, plus 39.6% of the 
                                                excess over $283,150.
            ``(2) For taxable years beginning in 2001.--

``If taxable income is:             The tax is:
    Not over $27,553...............
                                        15% of taxable income.
    Over $27,553 but not over 
        $62,450.
                                        $4,132.95, plus 28% of the 
                                                excess over $27,553.
    Over $62,450 but not over 
        $130,250.
                                        $13,904.11, plus 31% of the 
                                                excess over $62,450.
    Over $130,250 but not over 
        $283,150.
                                        $34,922.11, plus 36% of the 
                                                excess over $130,250.
    Over $283,150..................
                                        $89,966.11, plus 39.6% of the 
                                                excess over $283,150.
            ``(3) For taxable years beginning after 2001.--

``If taxable income is:             The tax is:
    Not over $28,326...............
                                        15% of taxable income.
    Over $28,326 but not over 
        $62,450.
                                        $4,248.90, plus 28% of the 
                                                excess over $28,326.
    Over $62,450 but not over 
        $130,250.
                                        $13,803.62, plus 31% of the 
                                                excess over $62,450.
    Over $130,250 but not over 
        $283,150.
                                        $34,821.62, plus 36% of the 
                                                excess over $130,250.
    Over $283,150..................
                                        $89,865.62, plus 39.6% of the 
                                                excess over $283,150.
    ``(d) Estates and Trusts.--There is hereby imposed on the taxable 
income of every estate and every trust taxable under this subsection a 
tax determined in accordance with the following tables:
            ``(1) For taxable years beginning in 2000.--

``If taxable income is:             The tax is:
    Not over $1,820................
                                        15% of taxable income.
    Over $1,820 but not over $4,050
                                        $273, plus 28% of the excess 
                                                over $1,820.
    Over $4,050 but not over $6,200
                                        $897.40, plus 31% of the excess 
                                                over $4,050.
    Over $6,200 but not over $8,450
                                        $1,563.90, plus 36% of the 
                                                excess over $6,200.
    Over $8,450....................
                                        $2,373.90, plus 39.6% of the 
                                                excess over $8,450.
            ``(2) For taxable years beginning in 2001.--

``If taxable income is:             The tax is:
    Not over $1,873................
                                        15% of taxable income.
    Over $1,873 but not over $4,050
                                        $280.95, plus 28% of the excess 
                                                over $1,873.
    Over $4,050 but not over $6,200
                                        $890.51, plus 31% of the excess 
                                                over $4,050.
    Over $6,200 but not over $8,450
                                        $1,557.01, plus 36% of the 
                                                excess over $6,200.
    Over $8,450....................
                                        $2,367.01, plus 39.6% of the 
                                                excess over $8,450.
            ``(3) For taxable years beginning after 2001.--

``If taxable income is:             The tax is:
    Not over $1,926................
                                        15% of taxable income.
    Over $1,926 but not over $4,050
                                        $288.90, plus 28% of the excess 
                                                over $1,926.
    Over $4,050 but not over $6,200
                                        $883.62, plus 31% of the excess 
                                                over $4,050.
    Over $6,200 but not over $8,450
                                        $1,550.12, plus 36% of the 
                                                excess over $6,200.
    Over $8,450....................
                                        $2,360.12, plus 39.6% of the 
                                                excess over $8,450.''.
    (b) Inflation Adjustment To Apply in Determining Rates After 
1999.--Subsection (f) of section 1 is amended--
            (1) by striking ``1993'' in paragraph (1) and inserting 
        ``1999'',
            (2) by striking ``1992'' in paragraph (3)(B) and inserting 
        ``1998'', and
            (3) by striking paragraph (7).
    (c) Conforming Amendments.--
            (1) The following provisions are each amended by striking 
        ``1992'' and inserting ``1998'' each place it appears:
                    (A) Section 25A(h).
                    (B) Section 32(j)(1)(B).
                    (C) Section 41(e)(5)(C).
                    (D) Section 59(j)(2)(B).
                    (E) Section 63(c)(4)(B).
                    (F) Section 68(b)(2)(B).
                    (G) Section 135(b)(2)(B)(ii).
                    (H) Section 151(d)(4).
                    (I) Section 220(g)(2).
                    (J) Section 221(g)(1)(B).
                    (K) Section 512(d)(2)(B).
                    (L) Section 513(h)(2)(C)(ii).
                    (M) Section 685(c)(3)(B).
                    (N) Section 877(a)(2).
                    (O) Section 911(b)(2)(D)(ii)(II).
                    (P) Section 2032A(a)(3)(B).
                    (Q) Section 2503(b)(2)(B).
                    (R) Section 2631(c)(1)(B).
                    (S) Section 4001(e)(1)(B).
                    (T) Section 4261(e)(4)(A)(ii).
                    (U) Section 6039F(d).
                    (V) Section 6323(i)(4)(B).
                    (W) Section 6601(j)(3)(B).
                    (X) Section 7430(c)(1).
            (2) Subclause (II) of section 42(h)(6)(G)(i) is amended by 
        striking ``1987'' and inserting ``1998''.
            (3) Subparagraph (B) of section 132(f)(6) is amended by 
        inserting before the period ``, determined by substituting 
        `calendar year 1992' for `calendar year 1998' in subparagraph 
        (B) thereof''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 104. NONREFUNDABLE PERSONAL CREDITS FULLY ALLOWED AGAINST REGULAR 
              TAX LIABILITY DURING 1999 AND 2000.

    (a) In General.--The last sentence of section 26(a) is by striking 
``1998'' and inserting ``1998, 1999, or 2000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

          Subtitle B--Relief From Social Security Earning Test

SEC. 111. ELIMINATION OF EARNINGS TEST FOR INDIVIDUALS WHO HAVE 
              ATTAINED RETIREMENT AGE.

    Section 203 of the Social Security Act (42 U.S.C. 403) is amended--
            (1) in subsection (c)(1), by striking ``the age of 
        seventy'' and inserting ``retirement age (as defined in section 
        216(l))'';
            (2) in paragraphs (1)(A) and (2) of subsection (d), by 
        striking ``the age of seventy'' each place it appears and 
        inserting ``retirement age (as defined in section 216(l))'';
            (3) in subsection (f)(1)(B), by striking ``was age seventy 
        or over'' and inserting ``was at or above retirement age (as 
        defined in section 216(l))'';
            (4) in subsection (f)(3)--
                    (A) by striking ``33\1/3\ percent'' and all that 
                follows through ``any other individual,'' and inserting 
                ``50 percent of such individual's earnings for such 
                year in excess of the product of the exempt amount as 
                determined under paragraph (8),''; and
                    (B) by striking ``age 70'' and inserting 
                ``retirement age (as defined in section 216(l))'';
            (5) in subsection (h)(1)(A), by striking ``age 70'' each 
        place it appears and inserting ``retirement age (as defined in 
        section 216(l))''; and
            (6) in subsection (j)--
                    (A) in the heading, by striking ``Age Seventy'' and 
                inserting ``Retirement Age''; and
                    (B) by striking ``seventy years of age'' and 
                inserting ``having attained retirement age (as defined 
                in section 216(l))''.

SEC. 112. CONFORMING AMENDMENTS ELIMINATING THE SPECIAL EXEMPT AMOUNT 
              FOR INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.

    (a) Uniform Exempt Amount.--Section 203(f)(8)(A) of the Social 
Security Act (42 U.S.C. 403(f)(8)(A)) is amended by striking ``the new 
exempt amounts (separately stated for individuals described in 
subparagraph (D) and for other individuals) which are to be 
applicable'' and inserting ``a new exempt amount which shall be 
applicable''.
    (b) Conforming Amendments.--Section 203(f)(8)(B) of the Social 
Security Act (42 U.S.C. 403(f)(8)(B)) is amended--
            (1) in the matter preceding clause (i), by striking 
        ``Except'' and all that follows through ``whichever'' and 
        inserting ``The exempt amount which is applicable for each 
        month of a particular taxable year shall be whichever'';
            (2) in clauses (i) and (ii), by striking ``corresponding'' 
        each place it appears; and
            (3) in the last sentence, by striking ``an exempt amount'' 
        and inserting ``the exempt amount''.
    (c) Repeal of Basis for Computation of Special Exempt Amount.--
Section 203(f)(8)(D) of the Social Security Act (42 U.S.C. 
403(f)(8)(D)) is repealed.

SEC. 113. ADDITIONAL CONFORMING AMENDMENTS.

    (a) Elimination of Redundant References to Retirement Age.--Section 
203 of the Social Security Act (42 U.S.C. 403) is amended--
            (1) in subsection (c), in the last sentence, by striking 
        ``nor shall any deduction'' and all that follows and inserting 
        ``nor shall any deduction be made under this subsection from 
        any widow's or widower's insurance benefit if the widow, 
        surviving divorced wife, widower, or surviving divorced husband 
        involved became entitled to such benefit prior to attaining age 
        60.''; and
            (2) in subsection (f)(1), by striking clause (D) and 
        inserting the following: ``(D) for which such individual is 
        entitled to widow's or widower's insurance benefits if such 
        individual became so entitled prior to attaining age 60,''.
    (b) Conforming Amendment to Provisions for Determining Amount of 
Increase on Account of Delayed Retirement.--Section 202(w)(2)(B)(ii) of 
the Social Security Act (42 U.S.C. 402(w)(2)(B)(ii)) is amended--
            (1) by striking ``either''; and
            (2) by striking ``or suffered deductions under section 
        203(b) or 203(c) in amounts equal to the amount of such 
        benefit''.
    (c) Provisions Relating to Earnings Taken Into Account in 
Determining Substantial Gainful Activity of Blind Individuals.--The 
second sentence of section 223(d)(4) of such Act (42 U.S.C. 423(d)(4)) 
is amended by striking ``if section 102 of the Senior Citizens' Right 
to Work Act of 1996 had not been enacted'' and inserting the following: 
``if the amendments to section 203 made by section 102 of the Senior 
Citizens' Right to Work Act of 1996 and by subtitle B of title I of the 
Lifetime Tax Relief Act of 1999 had not been enacted''.

SEC. 114. EFFECTIVE DATE.

    The amendments and repeals made by this subtitle shall apply with 
respect to taxable years ending after December 31, 1999.

                       TITLE II--BUSINESS RELIEF

SEC. 201. PHASEOUT OF ESTATE AND GIFT TAXES.

    (a) Repeal of Estate and Gift Taxes.--Subtitle B (relating to 
estate and gift taxes) is repealed effective with respect to estates of 
decedents dying, and gifts made, after December 31, 2009.
    (b) Phaseout of Tax.--Subsection (c) of section 2001 (relating to 
imposition and rate of tax) is amended by adding at the end the 
following new paragraph:
            ``(3) Phaseout of tax.--In the case of estates of decedents 
        dying, and gifts made, during any calendar year after 1999 and 
        before 2010--
                    ``(A) In general.--The tentative tax under this 
                subsection shall be determined by using a table 
                prescribed by the Secretary (in lieu of using the table 
                contained in paragraph (1)) which is the same as such 
                table; except that--
                            ``(i) each of the rates of tax shall be 
                        reduced (but not below zero) by the number of 
                        percentage points determined under subparagraph 
                        (B), and
                            ``(ii) the amounts setting forth the tax 
                        shall be adjusted to the extent necessary to 
                        reflect the adjustments under clause (i).
                    ``(B) Percentage points of reduction.--

                                                          The number of
``For calendar year:                              percentage points is:
    2000..........................................                   5 
    2001..........................................                  10 
    2002..........................................                  15 
    2003..........................................                  20 
    2004..........................................                  25 
    2005..........................................                  30 
    2006..........................................                  35 
    2007..........................................                  40 
    2008..........................................                  45 
    2009..........................................                  50.
                    ``(C) Coordination with paragraph (2).--Paragraph 
                (2) shall be applied by reducing the 55 percent 
                percentage contained therein by the number of 
                percentage points determined for such calendar year 
                under subparagraph (B).
                    ``(D) Coordination with credit for state death 
                taxes.--Rules similar to the rules of subparagraph (A) 
                shall apply to the table contained in section 2011(b) 
                except that the number of percentage points referred to 
                in subparagraph (A)(i) shall be determined under the 
                following table:

                                                          The number of
``For calendar year:                              percentage points is:
    2000..........................................              1\1/2\ 
    2001..........................................                   3 
    2002..........................................              4\1/2\ 
    2003..........................................                   6 
    2004..........................................              7\1/2\ 
    2005..........................................                   9 
    2006..........................................             10\1/2\ 
    2007..........................................                  12 
    2008..........................................             13\1/2\ 
    2009..........................................                15.''
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
1999.

SEC. 202. MODIFICATION AND PERMANENT EXTENSION OF RESEARCH CREDIT.

    (a) Credit Made Permanent.--
            (1) In general.--Section 41 (relating to credit for 
        increasing research activities) is amended by striking 
        subsection (h).
            (2) Conforming amendment.--Paragraph (1) of section 45C(b) 
        is amended by striking subparagraph (D).
    (b) Increase in Alternative Incremental Credit Rates.--Subparagraph 
(A) of section 41(c)(4) is amended--
            (1) by striking ``1.65 percent'' in clause (i) and 
        inserting ``2.65 percent'',
            (2) by striking ``2.2 percent'' in clause (ii) and 
        inserting ``3.2 percent'', and
            (3) by striking ``2.75 percent'' in clause (iii) and 
        inserting ``3.75 percent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after June 30, 1999.

SEC. 203. WORK OPPORTUNITY CREDIT MADE PERMANENT.

    (a) In General.--Subsection (c) of section 51 is amended by 
striking paragraph (4).
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individuals who begin work for the employer after June 30, 
1999.

SEC. 204. PERMANENT SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

    (a) Banking, Financing, or Similar Businesses.--Subsection (h) of 
section 954 (relating to special rule for income derived in the active 
conduct of banking, financing, or similar businesses) is amended by 
striking paragraph (9).
    (b) Insurance Businesses.--Subsection (a) of section 953 (defining 
insurance income) is amended by striking paragraph (10) and by 
redesignating paragraph (11) as paragraph (10).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of a foreign corporation beginning after 
December 31, 1998, and to taxable years of United States shareholders 
with or within which such taxable years of such foreign corporation 
end.

SEC. 205. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS INCREASED TO 100 PERCENT.

    (a) In General.--Paragraph (1) of section 162(l) (relating to 
special rules for health insurance costs of self-employed individuals) 
is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to the amount paid during the taxable year for 
        insurance which constitutes medical care for the taxpayer, the 
        taxpayer's spouse, and dependents.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 206. INCREASED EXCLUSION AND OTHER MODIFICATIONS APPLICABLE TO 
              QUALIFIED SMALL BUSINESS STOCK.

    (a) Increased Exclusion.--
            (1) In general.--Subsection (a) of section 1202 (50-percent 
        exclusion for gain from certain small business stock) is 
        amended--
                    (A) by striking ``50 percent'' and inserting ``100 
                percent'', and
                    (B) by striking ``50-Percent'' in the heading and 
                inserting ``100-Percent''.
            (2) Conforming amendments.--
                    (A) Subparagraph (A) of section 1(h)(5) is amended 
                to read as follows:
                    ``(A) collectibles gain, over''.
                    (B) Section 1(h) is amended by striking paragraph 
                (8).
                    (C) Paragraph (9) of section 1(h) is amended by 
                striking ``, gain described in paragraph (7)(A)(i), and 
                section 1202 gain'' and inserting ``and gain described 
                in paragraph (7)(A)(i)''.
                    (D) The heading for section 1202 is amended by 
                striking ``50-percent'' and inserting ``100-percent''.
                    (E) The table of sections for part I of subchapter 
                P of chapter 1 is amended by striking ``50-percent'' in 
                the item relating to section 1202 and inserting ``100-
                percent''.
    (b) Reduction in Holding Period.--
            (1) In general.--Subsection (a) of section 1202 is amended 
        by striking ``5 years'' and inserting ``3 years''.
            (2) Conforming amendment.--Subsections (g)(2)(A) and 
        (j)(1)(A) of section 1202 are each amended by striking ``5 
        years'' and inserting ``3 years''.
    (c) Exclusion Available to Corporations.--
            (1) In general.--Subsection (a) of section 1202 is amended 
        by striking ``other than a corporation''.
            (2) Technical amendment.--Subsection (c) of section 1202 is 
        amended by adding at the end the following new paragraph:
            ``(4) Stock held among members of controlled group not 
        eligible.--Stock of a member of a parent-subsidiary controlled 
        group (as defined in subsection (d)(3)) shall not be treated as 
        qualified small business stock while held by another member of 
        such group.''
    (d) Repeal of Minimum Tax Preference.--
            (1) In general.--Subsection (a) of section 57 (relating to 
        items of tax preference) is amended by striking paragraph (7).
            (2) Technical amendment.--Subclause (II) of section 
        53(d)(1)(B)(ii) is amended by striking ``, (5), and (7)'' and 
        inserting ``and (5)''.
    (e) Stock of Larger Businesses Eligible for Exclusion.--
            (1) In general.--Paragraph (1) of section 1202(d) (defining 
        qualified small business) is amended by striking 
        ``$50,000,000'' each place it appears and inserting 
        ``$300,000,000''.
            (2) Inflation adjustment.--Section 1202(d) is amended by 
        adding at the end the following:
            ``(4) Inflation adjustment of asset limitation.--In the 
        case of stock issued in any calendar year after 2000, the 
        $300,000,000 amount contained in paragraph (1) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 1999' 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.''
    (f) Repeal of Per-Issuer Limitation.--Section 1202 is amended by 
striking subsection (b).
    (g) Other Modifications.--
            (1) Repeal of working capital limitation.--Section 
        1202(e)(6) (relating to working capital) is amended--
                    (A) in subparagraph (B), by striking ``2 years'' 
                and inserting ``5 years''; and
                    (B) by striking the last sentence.
            (2) Exception from redemption rules where business 
        purpose.--Section 1202(c)(3) (relating to certain purchases by 
        corporation of its own stock) is amended by adding at the end 
        the following:
                    ``(D) Waiver where business purpose.--A purchase of 
                stock by the issuing corporation shall be disregarded 
                for purposes of subparagraph (B) if the issuing 
                corporation establishes that there was a business 
                purpose for such purchase and one of the principal 
                purposes of the purchase was not to avoid the 
                limitations of this section.''
    (h) Qualified Trade or Business.--Section 1202(e)(3) (defining 
qualified trade or business) is amended by inserting ``and'' at the end 
of subparagraph (C), by striking ``, and'' at the end of subparagraph 
(D) and inserting a period, and by striking subparagraph (E).
    (i) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section apply to stock issued after the 
        date of enactment of this Act.
            (2) Special rule.--The amendments made by subsections (a), 
        (c), (e), (f), and (g)(1) apply to stock issued after August 
        10, 1993.

SEC. 207. INCREASED EXCLUSION FOR INCENTIVE STOCK OPTIONS; EXCEPTION 
              FROM ALTERNATIVE MINIMUM TAX.

    (a) Increased Exclusion.--Subsection (d) of section 422 (relating 
to $100,000 per year limitation) is amended by striking ``$100,000'' 
each place it appears and inserting ``$200,000''.
    (b) Exception From Alternative Minimum Tax.--Subsection (b) of 
section 56 is amended by striking paragraph (3).
    (c) Effective Date.--The amendments made by this section shall 
apply to options exercised in calendar years beginning after the date 
of the enactment of this Act.

                   TITLE III--SAVINGS AND INVESTMENT

SEC. 301. EXCLUSION FROM GROSS INCOME OF CERTAIN AMOUNTS OF THE NET 
              CAPITAL GAIN OF INDIVIDUALS.

    (a) In General.--Part I of subchapter P of chapter 1 (relating to 
treatment of capital gains) is amended by adding at the end the 
following new section:

``SEC. 1203. EXCLUSION OF CERTAIN AMOUNTS OF NET CAPITAL GAIN OF 
              INDIVIDUALS.

    ``(a) General Rule.--In the case of an individual, gross income 
shall not include an amount equal to the net capital gain of the 
taxpayer for the taxable year.
    ``(b) Limitation.--The amount excluded from gross income under 
subsection (a) shall not exceed $1,000 ($2,000 in the case of a joint 
return).''
    (b) Conforming Amendments.--
            (1) Section 1222 is amended by adding at the end the 
        following new sentence:
``Determinations under this section shall be made before the 
application of section 1203.''
            (2) The table of sections for part I of subchapter P of 
        chapter 1 is amended by adding at the end the following new 
        item:

                              ``Sec. 1203. Exclusion of certain amounts 
                                        of net capital gain of 
                                        individuals.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 302. INCREASE IN MAXIMUM AMOUNT OF DEDUCTION FOR IRAS.

    (a) Increase in Maximum Amount of Deduction.--Subparagraph (A) of 
section 219(b)(1) (relating to maximum amount of deduction) is amended 
by striking ``$2,000'' and inserting ``$3,000''.
    (b) Conforming Amendments.--
            (1) Subsections (a)(1) and (b) of section 408 are each 
        amended by striking ``$2,000'' each place it appears and 
        inserting ``the dollar limitation in effect under section 
        219(b)(1)(A)''.
            (2) Subsection (j) of section 408 is amended by striking 
        ``the $2,000 amounts contained'' and inserting ``the dollar 
        limitations referred to''.
            (3) Paragraph (8) of section 408(p) is amended by striking 
        ``$2,000'' and inserting ``the dollar limitation in effect 
        under section 219(b)(1)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 303. HIGHER ELECTIVE DEFERRAL LIMIT IF EMPLOYEE'S SPOUSE IS NOT A 
              PARTICIPANT IN ELECTIVE DEFERRALS PLAN.

    (a) In General.--Paragraph (1) of section 402(g) (relating to 
limitation on elective deferrals) is amended to read as follows:
            ``(1) Dollar limitation.--
                    ``(A) In general.--Notwithstanding subsections 
                (e)(3) and (h)(1)(B), the elective deferrals of any 
                individual for any taxable year shall be included in 
                such individual's gross income to the extent the amount 
                of such deferrals for the taxable year exceeds $7,000.
                    ``(B) Higher limitation if spouse of employee not 
                eligible to participate in elective deferral plan.--In 
                the case of a married individual whose spouse is not 
                eligible at any time during the taxable year to 
                participate in any plan or contract which permits 
                elective deferrals--
                            ``(I) the dollar amount applicable to such 
                        individual under subparagraph (A) shall be 
                        twice the dollar amount which would otherwise 
                        be applicable for the taxable year, and
                            ``(II) elective deferrals permitted by this 
                        subparagraph shall not be taken into account 
                        under section 415, 401(a)(4), or 
                        401(k)(4)(A)(ii).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1999.

                          TITLE IV--EDUCATION

SEC. 401. AMENDMENTS TO ENCOURAGE ADDITIONAL SCHOOL CONSTRUCTION.

    (a) In General.--Clause (i) of section 149(d)(3)(A) is amended--
            (1) by striking ``or'' at the end of subclause (I),
            (2) by adding ``or'' at the end of subclause (II), and
            (3) by inserting after subclause (II) the following:
                                    ``(III) the 2d advance refunding of 
                                the original bond if the original bond 
                                was issued after 1985 or the 3d advance 
                                refunding of the original bond if the 
                                original bond was issued before 1986 
                                if, in either case, the original bond 
                                was issued to finance the construction, 
                                reconstruction, or rehabilitation of 
                                public elementary and secondary 
                                schools, provided that the issuer in 
                                good faith estimates the present value 
                                savings, if any, associated with such 
                                advance refunding and applies those 
                                savings to the construction, 
                                reconstruction, or rehabilitation of 
                                public elementary and secondary 
                                schools,''.
    (b) Effective Date.--The amendment made by this section shall apply 
to refunding obligations issued after December 31, 1999.

SEC. 402. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE TO PUBLIC 
              SCHOOL CONSTRUCTION BONDS.

    (a) In General.--Subparagraph (C) of section 148(f)(4) is amended 
by adding at the end the following new clause:
                            ``(xviii) 4-year spending requirement for 
                        public school construction issue.--
                                    ``(I) In general.--In the case of a 
                                public school construction issue, the 
                                spending requirements of clause (ii) 
                                shall be treated as met if at least 10 
                                percent of the available construction 
                                proceeds of the construction issue are 
                                spent for the governmental purposes of 
                                the issue within the 1-year period 
                                beginning on the date the bonds are 
                                issued, 30 percent of such proceeds are 
                                spent for such purposes within the 2-
                                year period beginning on such date, 50 
                                percent of such proceeds are spent for 
                                such purposes within the 3-year period 
                                beginning on such date, and 100 percent 
                                of such proceeds are spent for such 
                                purposes within the 4-year period 
                                beginning on such date.
                                    ``(II) Public school construction 
                                issue.--For purposes of this clause, 
                                the term `public school construction 
                                issue' means any construction issue if 
                                no bond which is part of such issue is 
                                a private activity bond and all of the 
                                available construction proceeds of such 
                                issue are to be used for the 
                                construction (as defined in clause 
                                (iv)) of public school facilities to 
                                provide education or training below the 
                                postsecondary level or for the 
                                acquisition of land that is 
                                functionally related and subordinate to 
                                such facilities.
                                    ``(III) Other rules to apply.--
                                Rules similar to the rules of the 
                                preceding provisions of this 
                                subparagraph which apply to clause (ii) 
                                also apply to this clause.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to obligations issued after December 31, 1999.

SEC. 403. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION FOR 
              GOVERNMENTAL BONDS USED TO FINANCE PUBLIC SCHOOL 
              FACILITIES.

    (a) In General.--Section 148(f)(4)(D)(vii) (relating to increase in 
exception for bonds financing public school capital expenditures) is 
amended by striking ``$5,000,000'' the second place it appears and 
inserting ``$15,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to obligations issued after December 31, 1999.

SEC. 404. EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM 
              QUALIFIED TUITION PROGRAMS; COVERAGE OF PRIVATE PROGRAMS.

    (a) Exclusion.--
            (1) In general.--Subparagraph (B) of section 529(c)(3) 
        (relating to distributions) is amended to read as follows:
                    ``(B) Distributions for qualified higher education 
                expenses.--If a distributee elects the application of 
                this subparagraph for any taxable year--
                            ``(i) no amount shall be includible in 
                        gross income by reason of a distribution which 
                        consists of providing a benefit to the 
                        distributee which, if paid for by the 
                        distributee, would constitute payment of a 
                        qualified higher education expense, and
                            ``(ii) the amount which (but for the 
                        election) would be includible in gross income 
                        by reason of any other distribution shall not 
                        be so includible in an amount which bears the 
                        same ratio to the amount which would be so 
                        includible as the amount of the qualified 
                        higher education expenses of the distributee 
                        bears to the amount of the distribution.''
            (2) Additional tax on amounts not used for higher education 
        expenses.--Section 529 is amended by adding at the end the 
        following new subsection:
    ``(f) Additional Tax for Distributions Not Used for Educational 
Expenses.--
            ``(1) In general.--The tax imposed by section 530(d)(4) 
        shall apply to payments and distributions from qualified 
        tuition programs in the same manner as such tax applies to 
        education individual retirement accounts.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution to a 
        contributor of any contribution paid during a taxable year to a 
        qualified tuition program to the extent that such contribution 
        exceeds the limitation in section 4973(e) if such distribution 
        (and the net income with respect to such excess contribution) 
        meets requirements comparable to the requirements of clauses 
        (i) and (ii) of section 530(d)(4)(C).''
            (3) Coordination with education credits.--Section 25A(e)(2) 
        is amended by inserting ``529(c)(3)(B) or'' before 
        ``530(d)(2)''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to distributions after December 31, 1999, for 
        education furnished in academic periods beginning after such 
        date.
    (b) Eligible Educational Institutions Permitted To Maintain 
Qualified Tuition Programs.--
            (1) In general.--Paragraph (1) of section 529(b) (defining 
        qualified State tuition program) is amended by inserting ``or 
        by one or more eligible educational institutions'' after 
        ``maintained by a State or agency or instrumentality thereof''.
            (2) Conforming amendments.--
                    (A) Paragraph (2) of section 26(b) is amended by 
                redesignating subparagraphs (E) through (Q) as 
                subparagraphs (F) through (R), respectively, and by 
                inserting after subparagraph (D) the following new 
                subparagraph:
                    ``(E) section 529(f) (relating to additional tax on 
                certain distributions from qualified tuition 
                programs),''.
                    (B) The text and headings of sections 529 and 530 
                are amended by striking ``qualified State tuition 
                program'' each place it appears and inserting 
                ``qualified tuition program''.
                    (C)(i) The section heading of section 529 is 
                amended to read as follows:

``SEC. 529. QUALIFIED TUITION PROGRAMS.''

                    (ii) The item relating to section 529 in the table 
                of sections for part VIII of subchapter F of chapter 1 
                is amended by striking ``State''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1999.
    (c) Change of Qualified Tuition Program or of Designated 
Beneficiary.--
            (1) In general.--Clause (i) of section 529(c)(3)(C) is 
        amended by inserting ``to another qualified tuition program for 
        the benefit of the designated beneficiary or'' after 
        ``transferred''.
            (2) Inclusion of siblings as member of family.--Paragraph 
        (2) of section 529(e) is amended by striking ``subparagraph 
        (B).'' and inserting ``subparagraph (B),
        except that such term shall include any sibling (whether by the 
        whole or half blood) of the designated beneficiary.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1999.
                                 <all>
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