I

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.

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

5 ‘‘Lifetime Tax Relief Act of 1999’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

4 to, or repeal of, a section or other provision, the reference

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.

7 (c) SECTION 15 NOT TO APPLY.—No amendment

8 made by section 103 shall be treated as a change in a

9 rate of tax for purposes of section 15 of the Internal Reve10 nue Code of 1986 .

11 (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.
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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.

1 TITLE I—FAMILY RELIEF

2 Subtitle A—Tax Relief

3 SEC. 101. BASIC STANDARD DEDUCTION FOR MARRIED IN4 DIVIDUALS TO BE TWICE THE DEDUCTION

5 FOR UNMARRIED INDIVIDUALS.

6 (a) IN GENERAL.—Paragraph (2) of section 63(c)

7 (relating to standard deduction) is amended—

8 (1) by striking ‘‘$5,000’’ in subparagraph (A)

9 and inserting ‘‘twice the dollar amount in effect

10 under subparagraph (C) for the taxable year’’,

11 (2) by adding ‘‘or’’ at the end of subparagraph

12 (B),

13 (3) by striking ‘‘in the case of’’ and all that fol14 lows in subparagraph (C) and inserting ‘‘in any

15 other case.’’, and

16 (4) by striking subparagraph (D).
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1 (b) TECHNICAL AMENDMENT.—Subparagraph (B) of

2 section 1(f)(6) is amended by striking ‘‘(other than with’’

3 and all that follows through ‘‘shall be applied’’ and insert4 ing ‘‘(other than sections 63(c)(4) and 151(d)(4)(A)) shall

5 be applied’’.

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

7 this section shall apply to taxable years beginning after

8 December 31, 1999.

9 SEC. 102. INCREASE IN PERSONAL EXEMPTION.

10 (a) IN GENERAL.—Paragraph (1) of section 151(d)

11 (relating to exemption amount) is amended by striking

12 ‘‘$2,000’’ and inserting ‘‘$3,500’’.

13 (b) CONFORMING AMENDMENT.—Subparagraph (A)

14 of section 151(d)(4) is amended to read as follows:

15 ‘‘(A) ADJUSTMENT TO BASIC AMOUNT OF

16 EXEMPTION.—In the case of any taxable year

17 beginning in a calendar year after 2000, the

18 dollar amount contained in paragraph (1) shall

19 be increased by an amount equal to—

20 ‘‘(i) such dollar amount, multiplied by

21 ‘‘(ii) the cost-of-living adjustment de22 termined under section 1(f)(3) for the cal23 endar year in which the taxable year be24 gins.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1999.

4 SEC. 103. REDUCTION OF INDIVIDUAL INCOME TAXES BY

5 INCREASING AMOUNTS OF INCOME SUBJECT

6 TO TAX AT THE 15 PERCENT RATE.

7 (a) GENERAL RULE.—Section 1 (relating to tax im8 posed) is amended by striking subsections (a) through (e)

9 and inserting the following:

10 ‘‘(a) MARRIED INDIVIDUALS FILING JOINT RETURNS

11 AND SURVIVING SPOUSES.—There is hereby imposed on

12 the taxable income of every married individual (as defined

13 in section 7703) who makes a single return jointly with

14 his spouse under section 6013, and every surviving spouse

15 (as defined in section 2(a)), a tax determined in accord16 ance with the following tables:

17 ‘‘(1) FOR TAXABLE YEARS BEGINNING IN

18 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.

19 ‘‘(2) FOR TAXABLE YEARS BEGINNING IN

20 2001.—
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‘‘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.

1 ‘‘(3) FOR TAXABLE YEARS BEGINNING AFTER

2 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.

3 ‘‘(b) HEADS OF HOUSEHOLDS.—There is hereby im4 posed on the taxable income of every head of a household

5 (as defined in section 2(b)) a tax determined in accordance

6 with the following tables:

7 ‘‘(1) FOR TAXABLE YEARS BEGINNING IN

8 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.

9 ‘‘(2) FOR TAXABLE YEARS BEGINNING IN

10 2001.—
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‘‘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.

1 ‘‘(3) FOR TAXABLE YEARS BEGINNING AFTER

2 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.

3 ‘‘(c) OTHER INDIVIDUALS.—There is hereby imposed

4 on the taxable income of every individual (other than an

5 individual to whom subsection (a) or (b) applies) a tax

6 determined in accordance with the following tables:

7 ‘‘(1) FOR TAXABLE YEARS BEGINNING IN

8 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.

9 ‘‘(2) FOR TAXABLE YEARS BEGINNING IN

10 2001.—
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‘‘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.

1 ‘‘(3) FOR TAXABLE YEARS BEGINNING AFTER

2 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.

3 ‘‘(d) ESTATES AND TRUSTS.—There is hereby im4 posed on the taxable income of every estate and every

5 trust taxable under this subsection a tax determined in

6 accordance with the following tables:

7 ‘‘(1) FOR TAXABLE YEARS BEGINNING IN

8 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.

9 ‘‘(2) FOR TAXABLE YEARS BEGINNING IN

10 2001.—
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‘‘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.

1 ‘‘(3) FOR TAXABLE YEARS BEGINNING AFTER

2 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.’’.

3 (b) INFLATION ADJUSTMENT TO APPLY IN DETER4 MINING RATES AFTER 1999.—Subsection (f) of section 1

5 is amended—

6 (1) by striking ‘‘1993’’ in paragraph (1) and in7 serting ‘‘1999’’,

8 (2) by striking ‘‘1992’’ in paragraph (3)(B) and

9 inserting ‘‘1998’’, and

10 (3) by striking paragraph (7).

11 (c) CONFORMING AMENDMENTS.—

12 (1) The following provisions are each amended

13 by striking ‘‘1992’’ and inserting ‘‘1998’’ each place

14 it appears:

15 (A) Section 25A(h).
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1 (B) Section 32(j)(1)(B).

2 (C) Section 41(e)(5)(C).

3 (D) Section 59(j)(2)(B).

4 (E) Section 63(c)(4)(B).

5 (F) Section 68(b)(2)(B).

6 (G) Section 135(b)(2)(B)(ii).

7 (H) Section 151(d)(4).

8 (I) Section 220(g)(2).

9 (J) Section 221(g)(1)(B).

10 (K) Section 512(d)(2)(B).

11 (L) Section 513(h)(2)(C)(ii).

12 (M) Section 685(c)(3)(B).

13 (N) Section 877(a)(2).

14 (O) Section 911(b)(2)(D)(ii)(II).

15 (P) Section 2032A(a)(3)(B).

16 (Q) Section 2503(b)(2)(B).

17 (R) Section 2631(c)(1)(B).

18 (S) Section 4001(e)(1)(B).

19 (T) Section 4261(e)(4)(A)(ii).

20 (U) Section 6039F(d).

21 (V) Section 6323(i)(4)(B).

22 (W) Section 6601(j)(3)(B).

23 (X) Section 7430(c)(1).

24 (2) Subclause (II) of section 42(h)(6)(G)(i) is

25 amended by striking ‘‘1987’’ and inserting ‘‘1998’’.
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1 (3) Subparagraph (B) of section 132(f)(6) is

2 amended by inserting before the period ‘‘, deter3 mined by substituting ‘calendar year 1992’ for ‘cal4 endar year 1998’ in subparagraph (B) thereof’’.

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

6 this section shall apply to taxable years beginning after

7 December 31, 1999.

8 SEC. 104. NONREFUNDABLE PERSONAL CREDITS FULLY AL9 LOWED AGAINST REGULAR TAX LIABILITY

10 DURING 1999 AND 2000.

11 (a) IN GENERAL.—The last sentence of section 26(a)

12 is by striking ‘‘1998’’ and inserting ‘‘1998, 1999, or

13 2000’’.

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

15 this section shall apply to taxable years beginning after

16 December 31, 1999.

17 Subtitle B—Relief From Social

18 Security Earning Test

19 SEC. 111. ELIMINATION OF EARNINGS TEST FOR INDIVID20 UALS WHO HAVE ATTAINED RETIREMENT

21 AGE.

22 Section 203 of the Social Security Act (42 U.S.C.

23 403) is amended—
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1 (1) in subsection (c)(1), by striking ‘‘the age of

2 seventy’’ and inserting ‘‘retirement age (as defined

3 in section 216(l))’’;

4 (2) in paragraphs (1)(A) and (2) of subsection

5 (d), by striking ‘‘the age of seventy’’ each place it

6 appears and inserting ‘‘retirement age (as defined in

7 section 216(l))’’;

8 (3) in subsection (f)(1)(B), by striking ‘‘was

9 age seventy or over’’ and inserting ‘‘was at or above

10 retirement age (as defined in section 216(l))’’;

11 (4) in subsection (f)(3)—

(A) by striking ‘‘331 12 ⁄3 percent’’ and all

13 that follows through ‘‘any other individual,’’

14 and inserting ‘‘50 percent of such individual’s

15 earnings for such year in excess of the product

16 of the exempt amount as determined under

17 paragraph (8),’’; and

18 (B) by striking ‘‘age 70’’ and inserting

19 ‘‘retirement age (as defined in section 216(l))’’;

20 (5) in subsection (h)(1)(A), by striking ‘‘age

21 70’’ each place it appears and inserting ‘‘retirement

22 age (as defined in section 216(l))’’; and

23 (6) in subsection (j)—

24 (A) in the heading, by striking ‘‘Age Sev25 enty’’ and inserting ‘‘Retirement Age’’; and
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1 (B) by striking ‘‘seventy years of age’’ and

2 inserting ‘‘having attained retirement age (as

3 defined in section 216(l))’’.

4 SEC. 112. CONFORMING AMENDMENTS ELIMINATING THE

5 SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS

6 WHO HAVE ATTAINED RETIREMENT AGE.

7 (a) UNIFORM EXEMPT AMOUNT.—Section

8 203(f)(8)(A) of the Social Security Act (42 U.S.C.

9 403(f)(8)(A)) is amended by striking ‘‘the new exempt

10 amounts (separately stated for individuals described in

11 subparagraph (D) and for other individuals) which are to

12 be applicable’’ and inserting ‘‘a new exempt amount which

13 shall be applicable’’.

14 (b) CONFORMING AMENDMENTS.—Section

15 203(f)(8)(B) of the Social Security Act (42 U.S.C.

16 403(f)(8)(B)) is amended—

17 (1) in the matter preceding clause (i), by strik18 ing ‘‘Except’’ and all that follows through ‘‘which19 ever’’ and inserting ‘‘The exempt amount which is

20 applicable for each month of a particular taxable

21 year shall be whichever’’;

22 (2) in clauses (i) and (ii), by striking ‘‘cor23 responding’’ each place it appears; and

24 (3) in the last sentence, by striking ‘‘an exempt

25 amount’’ and inserting ‘‘the exempt amount’’.
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1 (c) REPEAL OF BASIS FOR COMPUTATION OF SPE2 CIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of the So3 cial Security Act (42 U.S.C. 403(f)(8)(D)) is repealed.

4 SEC. 113. ADDITIONAL CONFORMING AMENDMENTS.

5 (a) ELIMINATION OF REDUNDANT REFERENCES TO

6 RETIREMENT AGE.—Section 203 of the Social Security

7 Act (42 U.S.C. 403) is amended—

8 (1) in subsection (c), in the last sentence, by

9 striking ‘‘nor shall any deduction’’ and all that fol10 lows and inserting ‘‘nor shall any deduction be made

11 under this subsection from any widow’s or widower’s

12 insurance benefit if the widow, surviving divorced

13 wife, widower, or surviving divorced husband in14 volved became entitled to such benefit prior to at15 taining age 60.’’; and

16 (2) in subsection (f)(1), by striking clause (D)

17 and inserting the following: ‘‘(D) for which such in18 dividual is entitled to widow’s or widower’s insurance

19 benefits if such individual became so entitled prior

20 to attaining age 60,’’.

21 (b) CONFORMING AMENDMENT TO PROVISIONS FOR

22 DETERMINING AMOUNT OF INCREASE ON ACCOUNT OF

23 DELAYED RETIREMENT.—Section 202(w)(2)(B)(ii) of the

24 Social Security Act (42 U.S.C. 402(w)(2)(B)(ii)) is

25 amended—
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1 (1) by striking ‘‘either’’; and

2 (2) by striking ‘‘or suffered deductions under

3 section 203(b) or 203(c) in amounts equal to the

4 amount of such benefit’’.

5 (c) PROVISIONS RELATING TO EARNINGS TAKEN

6 INTO ACCOUNT IN DETERMINING SUBSTANTIAL GAINFUL

7 ACTIVITY OF BLIND INDIVIDUALS.—The second sentence

8 of section 223(d)(4) of such Act (42 U.S.C. 423(d)(4))

9 is amended by striking ‘‘if section 102 of the Senior Citi10 zens’ Right to Work Act of 1996 had not been enacted’’

11 and inserting the following: ‘‘if the amendments to section

12 203 made by section 102 of the Senior Citizens’ Right

13 to Work Act of 1996 and by subtitle B of title I of the

14 Lifetime Tax Relief Act of 1999 had not been enacted’’.

15 SEC. 114. EFFECTIVE DATE.

16 The amendments and repeals made by this subtitle

17 shall apply with respect to taxable years ending after De18 cember 31, 1999.

19 TITLE II—BUSINESS RELIEF

20 SEC. 201. PHASEOUT OF ESTATE AND GIFT TAXES.

21 (a) REPEAL OF ESTATE AND GIFT TAXES.—Subtitle

22 B (relating to estate and gift taxes) is repealed effective

23 with respect to estates of decedents dying, and gifts made,

24 after December 31, 2009.
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1 (b) PHASEOUT OF TAX.—Subsection (c) of section

2 2001 (relating to imposition and rate of tax) is amended

3 by adding at the end the following new paragraph:

4 ‘‘(3) PHASEOUT OF TAX.—In the case of es5 tates of decedents dying, and gifts made, during any

6 calendar year after 1999 and before 2010—

7 ‘‘(A) IN GENERAL.—The tentative tax

8 under this subsection shall be determined by

9 using a table prescribed by the Secretary (in

10 lieu of using the table contained in paragraph

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

12 that—

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

14 reduced (but not below zero) by the num15 ber of percentage points determined under

16 subparagraph (B), and

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

18 shall be adjusted to the extent necessary to

19 reflect the adjustments under clause (i).

20 ‘‘(B) PERCENTAGE POINTS OF REDUC21 TION.—

The number of

‘‘For calendar year: percentage points is:

2000 ......................................................................................... 5

2001 ......................................................................................... 10

2002 ......................................................................................... 15

2003 ......................................................................................... 20

2004 ......................................................................................... 25

2005 ......................................................................................... 30

2006 ......................................................................................... 35
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The number of

‘‘For calendar year: percentage points is:

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

2008 ......................................................................................... 45

2009 ......................................................................................... 50.

1 ‘‘(C) COORDINATION WITH PARAGRAPH

2 (2).—Paragraph (2) shall be applied by reduc3 ing the 55 percent percentage contained therein

4 by the number of percentage points determined

5 for such calendar year under subparagraph (B).

6 ‘‘(D) COORDINATION WITH CREDIT FOR

7 STATE DEATH TAXES.—Rules similar to the

8 rules of subparagraph (A) shall apply to the

9 table contained in section 2011(b) except that

10 the number of percentage points referred to in

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

12 the following table:

The number of

‘‘For calendar year: percentage points is:

2000 ......................................................................................... 11⁄2

2001 ......................................................................................... 3

2002 ......................................................................................... 41⁄2

2003 ......................................................................................... 6

2004 ......................................................................................... 71⁄2

2005 ......................................................................................... 9

2006 ......................................................................................... 101⁄2

2007 ......................................................................................... 12

2008 ......................................................................................... 131⁄2

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

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

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

15 gifts made, after December 31, 1999.
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1 SEC. 202. MODIFICATION AND PERMANENT EXTENSION OF

2 RESEARCH CREDIT.

3 (a) CREDIT MADE PERMANENT.—

4 (1) IN GENERAL.—Section 41 (relating to cred5 it for increasing research activities) is amended by

6 striking subsection (h).

7 (2) CONFORMING AMENDMENT.—Paragraph (1)

8 of section 45C(b) is amended by striking subpara9 graph (D).

10 (b) INCREASE IN ALTERNATIVE INCREMENTAL

11 CREDIT RATES.—Subparagraph (A) of section 41(c)(4) is

12 amended—

13 (1) by striking ‘‘1.65 percent’’ in clause (i) and

14 inserting ‘‘2.65 percent’’,

15 (2) by striking ‘‘2.2 percent’’ in clause (ii) and

16 inserting ‘‘3.2 percent’’, and

17 (3) by striking ‘‘2.75 percent’’ in clause (iii)

18 and inserting ‘‘3.75 percent’’.

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

20 this section shall apply to amounts paid or incurred after

21 June 30, 1999.

22 SEC. 203. WORK OPPORTUNITY CREDIT MADE PERMANENT.

23 (a) IN GENERAL.—Subsection (c) of section 51 is

24 amended by striking paragraph (4).
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to individuals who begin work

3 for the employer after June 30, 1999.

4 SEC. 204. PERMANENT SUBPART F EXEMPTION FOR ACTIVE

5 FINANCING INCOME.

6 (a) BANKING, FINANCING, OR SIMILAR BUSI7 NESSES.—Subsection (h) of section 954 (relating to spe8 cial rule for income derived in the active conduct of bank9 ing, financing, or similar businesses) is amended by strik10 ing paragraph (9).

11 (b) INSURANCE BUSINESSES.—Subsection (a) of sec12 tion 953 (defining insurance income) is amended by strik13 ing paragraph (10) and by redesignating paragraph (11)

14 as paragraph (10).

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

16 this section shall apply to taxable years of a foreign cor17 poration beginning after December 31, 1998, and to tax18 able years of United States shareholders with or within

19 which such taxable years of such foreign corporation end.

20 SEC. 205. DEDUCTION FOR HEALTH INSURANCE COSTS OF

21 SELF-EMPLOYED INDIVIDUALS INCREASED

22 TO 100 PERCENT.

23 (a) IN GENERAL.—Paragraph (1) of section 162(l)

24 (relating to special rules for health insurance costs of self25 employed individuals) is amended to read as follows:
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1 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

2 of an individual who is an employee within the

3 meaning of section 401(c)(1), there shall be allowed

4 as a deduction under this section an amount equal

5 to the amount paid during the taxable year for in6 surance which constitutes medical care for the tax7 payer, the taxpayer’s spouse, and dependents.’’

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

9 this section shall apply to taxable years beginning after

10 December 31, 1999.

11 SEC. 206. INCREASED EXCLUSION AND OTHER MODIFICA12 TIONS APPLICABLE TO QUALIFIED SMALL

13 BUSINESS STOCK.

14 (a) INCREASED EXCLUSION.—

15 (1) IN GENERAL.—Subsection (a) of section

16 1202 (50-percent exclusion for gain from certain

17 small business stock) is amended—

18 (A) by striking ‘‘50 percent’’ and inserting

19 ‘‘100 percent’’, and

20 (B) by striking ‘‘50-PERCENT’’ in the

21 heading and inserting ‘‘100-PERCENT’’.

22 (2) CONFORMING AMENDMENTS.—

23 (A) Subparagraph (A) of section 1(h)(5) is

24 amended to read as follows:

25 ‘‘(A) collectibles gain, over’’.
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1 (B) Section 1(h) is amended by striking

2 paragraph (8).

3 (C) Paragraph (9) of section 1(h) is

4 amended by striking ‘‘, gain described in para5 graph (7)(A)(i), and section 1202 gain’’ and in6 serting ‘‘and gain described in paragraph

7 (7)(A)(i)’’.

8 (D) The heading for section 1202 is

9 amended by striking ‘‘50-PERCENT’’ and in10 serting ‘‘100-PERCENT’’.

11 (E) The table of sections for part I of sub12 chapter P of chapter 1 is amended by striking

13 ‘‘50-percent’’ in the item relating to section

14 1202 and inserting ‘‘100-percent’’.

15 (b) REDUCTION IN HOLDING PERIOD.—

16 (1) IN GENERAL.—Subsection (a) of section

17 1202 is amended by striking ‘‘5 years’’ and inserting

18 ‘‘3 years’’.

19 (2) CONFORMING AMENDMENT.—Subsections

20 (g)(2)(A) and (j)(1)(A) of section 1202 are each

21 amended by striking ‘‘5 years’’ and inserting ‘‘3

22 years’’.

23 (c) EXCLUSION AVAILABLE TO CORPORATIONS.—
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1 (1) IN GENERAL.—Subsection (a) of section

2 1202 is amended by striking ‘‘other than a corpora3 tion’’.

4 (2) TECHNICAL AMENDMENT.—Subsection (c)

5 of section 1202 is amended by adding at the end the

6 following new paragraph:

7 ‘‘(4) STOCK HELD AMONG MEMBERS OF CON8 TROLLED GROUP NOT ELIGIBLE.—Stock of a mem9 ber of a parent-subsidiary controlled group (as de10 fined in subsection (d)(3)) shall not be treated as

11 qualified small business stock while held by another

12 member of such group.’’

13 (d) REPEAL OF MINIMUM TAX PREFERENCE.—

14 (1) IN GENERAL.—Subsection (a) of section 57

15 (relating to items of tax preference) is amended by

16 striking paragraph (7).

17 (2) TECHNICAL AMENDMENT.—Subclause (II)

18 of section 53(d)(1)(B)(ii) is amended by striking ‘‘,

19 (5), and (7)’’ and inserting ‘‘and (5)’’.

20 (e) STOCK OF LARGER BUSINESSES ELIGIBLE FOR

21 EXCLUSION.—

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

23 1202(d) (defining qualified small business) is

24 amended by striking ‘‘$50,000,000’’ each place it

25 appears and inserting ‘‘$300,000,000’’.
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1 (2) INFLATION ADJUSTMENT.—Section 1202(d)

2 is amended by adding at the end the following:

3 ‘‘(4) INFLATION ADJUSTMENT OF ASSET LIMI4 TATION.—In the case of stock issued in any calendar

5 year after 2000, the $300,000,000 amount con6 tained in paragraph (1) shall be increased by an

7 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 1999’ for

13 ‘calendar year 1992’ in subparagraph (B)

14 thereof.

15 If any amount as adjusted under the preceding sen16 tence is not a multiple of $10,000, such amount

17 shall be rounded to the nearest multiple of

18 $10,000.’’

19 (f) REPEAL OF PER-ISSUER LIMITATION.—Section

20 1202 is amended by striking subsection (b).

21 (g) OTHER MODIFICATIONS.—

22 (1) REPEAL OF WORKING CAPITAL LIMITA23 TION.—Section 1202(e)(6) (relating to working cap24 ital) is amended—
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1 (A) in subparagraph (B), by striking ‘‘2

2 years’’ and inserting ‘‘5 years’’; and

3 (B) by striking the last sentence.

4 (2) EXCEPTION FROM REDEMPTION RULES

5 WHERE BUSINESS PURPOSE.—Section 1202(c)(3)

6 (relating to certain purchases by corporation of its

7 own stock) is amended by adding at the end the fol8 lowing:

9 ‘‘(D) WAIVER WHERE BUSINESS PUR10 POSE.—A purchase of stock by the issuing cor11 poration shall be disregarded for purposes of

12 subparagraph (B) if the issuing corporation es13 tablishes that there was a business purpose for

14 such purchase and one of the principal purposes

15 of the purchase was not to avoid the limitations

16 of this section.’’

17 (h) QUALIFIED TRADE OR BUSINESS.—Section

18 1202(e)(3) (defining qualified trade or business) is

19 amended by inserting ‘‘and’’ at the end of subparagraph

20 (C), by striking ‘‘, and’’ at the end of subparagraph (D)

21 and inserting a period, and by striking subparagraph (E).

22 (i) EFFECTIVE DATES.—

23 (1) IN GENERAL.—Except as provided in para24 graph (2), the amendments made by this section
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1 apply to stock issued after the date of enactment of

2 this Act.

3 (2) SPECIAL RULE.—The amendments made by

4 subsections (a), (c), (e), (f), and (g)(1) apply to

5 stock issued after August 10, 1993.

6 SEC. 207. INCREASED EXCLUSION FOR INCENTIVE STOCK

7 OPTIONS; EXCEPTION FROM ALTERNATIVE

8 MINIMUM TAX.

9 (a) INCREASED EXCLUSION.—Subsection (d) of sec10 tion 422 (relating to $100,000 per year limitation) is

11 amended by striking ‘‘$100,000’’ each place it appears

12 and inserting ‘‘$200,000’’.

13 (b) EXCEPTION FROM ALTERNATIVE MINIMUM

14 TAX.—Subsection (b) of section 56 is amended by striking

15 paragraph (3).

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

17 this section shall apply to options exercised in calendar

18 years beginning after the date of the enactment of this

19 Act.
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1 TITLE III—SAVINGS AND

2 INVESTMENT

3 SEC. 301. EXCLUSION FROM GROSS INCOME OF CERTAIN

4 AMOUNTS OF THE NET CAPITAL GAIN OF IN5 DIVIDUALS.

6 (a) IN GENERAL.—Part I of subchapter P of chapter

7 1 (relating to treatment of capital gains) is amended by

8 adding at the end the following new section:

9 ‘‘SEC. 1203. EXCLUSION OF CERTAIN AMOUNTS OF NET CAP10 ITAL GAIN OF INDIVIDUALS.

11 ‘‘(a) GENERAL RULE.—In the case of an individual,

12 gross income shall not include an amount equal to the net

13 capital gain of the taxpayer for the taxable year.

14 ‘‘(b) LIMITATION.—The amount excluded from gross

15 income under subsection (a) shall not exceed $1,000

16 ($2,000 in the case of a joint return).’’

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 1222 is amended by adding at the

19 end the following new sentence:

20 ‘‘Determinations under this section shall be made before

21 the application of section 1203.’’

22 (2) The table of sections for part I of sub23 chapter P of chapter 1 is amended by adding at the

24 end the following new item:

‘‘Sec. 1203. Exclusion of certain amounts of net capital gain of

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

2 this section shall apply to taxable years beginning after

3 December 31, 1999.

4 SEC. 302. INCREASE IN MAXIMUM AMOUNT OF DEDUCTION

5 FOR IRAS.

6 (a) INCREASE IN MAXIMUM AMOUNT OF DEDUC7 TION.—Subparagraph (A) of section 219(b)(1) (relating

8 to maximum amount of deduction) is amended by striking

9 ‘‘$2,000’’ and inserting ‘‘$3,000’’.

10 (b) CONFORMING AMENDMENTS.—

11 (1) Subsections (a)(1) and (b) of section 408

12 are each amended by striking ‘‘$2,000’’ each place

13 it appears and inserting ‘‘the dollar limitation in ef14 fect under section 219(b)(1)(A)’’.

15 (2) Subsection (j) of section 408 is amended by

16 striking ‘‘the $2,000 amounts contained’’ and insert17 ing ‘‘the dollar limitations referred to’’.

18 (3) Paragraph (8) of section 408(p) is amended

19 by striking ‘‘$2,000’’ and inserting ‘‘the dollar limi20 tation in effect under section 219(b)(1)(A)’’.

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

22 this section shall apply to taxable years beginning after

23 December 31, 1999.
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1 SEC. 303. HIGHER ELECTIVE DEFERRAL LIMIT IF EMPLOY2 EE’S SPOUSE IS NOT A PARTICIPANT IN ELEC3 TIVE DEFERRALS PLAN.

4 (a) IN GENERAL.—Paragraph (1) of section 402(g)

5 (relating to limitation on elective deferrals) is amended to

6 read as follows:

7 ‘‘(1) DOLLAR LIMITATION.—

8 ‘‘(A) IN GENERAL.—Notwithstanding sub9 sections (e)(3) and (h)(1)(B), the elective defer10 rals of any individual for any taxable year shall

11 be included in such individual’s gross income to

12 the extent the amount of such deferrals for the

13 taxable year exceeds $7,000.

14 ‘‘(B) HIGHER LIMITATION IF SPOUSE OF

15 EMPLOYEE NOT ELIGIBLE TO PARTICIPATE IN

16 ELECTIVE DEFERRAL PLAN.—In the case of a

17 married individual whose spouse is not eligible

18 at any time during the taxable year to partici19 pate in any plan or contract which permits elec20 tive deferrals—

21 ‘‘(I) the dollar amount applicable to

22 such individual under subparagraph (A)

23 shall be twice the dollar amount which

24 would otherwise be applicable for the tax25 able year, and
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1 ‘‘(II) elective deferrals permitted by

2 this subparagraph shall not be taken into

3 account under section 415, 401(a)(4), or

4 401(k)(4)(A)(ii).’’

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

6 subsection (a) shall apply to taxable years beginning after

7 December 31, 1999.

8 TITLE IV—EDUCATION

9 SEC. 401. AMENDMENTS TO ENCOURAGE ADDITIONAL

10 SCHOOL CONSTRUCTION.

11 (a) IN GENERAL.—Clause (i) of section 149(d)(3)(A)

12 is amended—

13 (1) by striking ‘‘or’’ at the end of subclause (I),

14 (2) by adding ‘‘or’’ at the end of subclause (II),

15 and

16 (3) by inserting after subclause (II) the follow17 ing:

18 ‘‘(III) the 2d advance refunding

19 of the original bond if the original

20 bond was issued after 1985 or the 3d

21 advance refunding of the original

22 bond if the original bond was issued

23 before 1986 if, in either case, the

24 original bond was issued to finance

25 the construction, reconstruction, or re-
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1 habilitation of public elementary and

2 secondary schools, provided that the

3 issuer in good faith estimates the

4 present value savings, if any, associ5 ated with such advance refunding and

6 applies those savings to the construc7 tion, reconstruction, or rehabilitation

8 of public elementary and secondary

9 schools,’’.

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

11 this section shall apply to refunding obligations issued

12 after December 31, 1999.

13 SEC. 402. MODIFICATION OF ARBITRAGE REBATE RULES

14 APPLICABLE TO PUBLIC SCHOOL CONSTRUC15 TION BONDS.

16 (a) IN GENERAL.—Subparagraph (C) of section

17 148(f)(4) is amended by adding at the end the following

18 new clause:

19 ‘‘(xviii) 4-YEAR SPENDING REQUIRE20 MENT FOR PUBLIC SCHOOL CONSTRUCTION

21 ISSUE.—

22 ‘‘(I) IN GENERAL.—In the case

23 of a public school construction issue,

24 the spending requirements of clause

25 (ii) shall be treated as met if at least
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1 10 percent of the available construc2 tion proceeds of the construction issue

3 are spent for the governmental pur4 poses of the issue within the 1-year

5 period beginning on the date the

6 bonds are issued, 30 percent of such

7 proceeds are spent for such purposes

8 within the 2-year period beginning on

9 such date, 50 percent of such pro10 ceeds are spent for such purposes

11 within the 3-year period beginning on

12 such date, and 100 percent of such

13 proceeds are spent for such purposes

14 within the 4-year period beginning on

15 such date.

16 ‘‘(II) PUBLIC SCHOOL CON17 STRUCTION ISSUE.—For purposes of

18 this clause, the term ‘public school

19 construction issue’ means any con20 struction issue if no bond which is

21 part of such issue is a private activity

22 bond and all of the available construc23 tion proceeds of such issue are to be

24 used for the construction (as defined

25 in clause (iv)) of public school facili-
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1 ties to provide education or training

2 below the postsecondary level or for

3 the acquisition of land that is func4 tionally related and subordinate to

5 such facilities.

6 ‘‘(III) OTHER RULES TO

7 APPLY.—Rules similar to the rules of

8 the preceding provisions of this sub9 paragraph which apply to clause (ii)

10 also apply to this clause.’’.

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

12 this section shall apply to obligations issued after Decem13 ber 31, 1999.

14 SEC. 403. ADDITIONAL INCREASE IN ARBITRAGE REBATE

15 EXCEPTION FOR GOVERNMENTAL BONDS

16 USED TO FINANCE PUBLIC SCHOOL FACILI17 TIES.

18 (a) IN GENERAL.—Section 148(f)(4)(D)(vii) (relat19 ing to increase in exception for bonds financing public

20 school capital expenditures) is amended by striking

21 ‘‘$5,000,000’’ the second place it appears and inserting

22 ‘‘$15,000,000’’.

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

24 subsection (a) shall apply to obligations issued after De25 cember 31, 1999.
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1 SEC. 404. EXCLUSION FROM GROSS INCOME OF EDUCATION

2 DISTRIBUTIONS FROM QUALIFIED TUITION

3 PROGRAMS; COVERAGE OF PRIVATE PRO4 GRAMS.

5 (a) EXCLUSION.—

6 (1) IN GENERAL.—Subparagraph (B) of section

7 529(c)(3) (relating to distributions) is amended to

8 read as follows:

9 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED

10 HIGHER EDUCATION EXPENSES.—If a distribu11 tee elects the application of this subparagraph

12 for any taxable year—

13 ‘‘(i) no amount shall be includible in

14 gross income by reason of a distribution

15 which consists of providing a benefit to the

16 distributee which, if paid for by the dis17 tributee, would constitute payment of a

18 qualified higher education expense, and

19 ‘‘(ii) the amount which (but for the

20 election) would be includible in gross in21 come by reason of any other distribution

22 shall not be so includible in an amount

23 which bears the same ratio to the amount

24 which would be so includible as the amount

25 of the qualified higher education expenses
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1 of the distributee bears to the amount of

2 the distribution.’’

3 (2) ADDITIONAL TAX ON AMOUNTS NOT USED

4 FOR HIGHER EDUCATION EXPENSES.—Section 529

5 is amended by adding at the end the following new

6 subsection:

7 ‘‘(f) ADDITIONAL TAX FOR DISTRIBUTIONS NOT

8 USED FOR EDUCATIONAL EXPENSES.—

9 ‘‘(1) IN GENERAL.—The tax imposed by section

10 530(d)(4) shall apply to payments and distributions

11 from qualified tuition programs in the same manner

12 as such tax applies to education individual retire13 ment accounts.

14 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE15 FORE DUE DATE OF RETURN.—Paragraph (1) shall

16 not apply to the distribution to a contributor of any

17 contribution paid during a taxable year to a quali18 fied tuition program to the extent that such con19 tribution exceeds the limitation in section 4973(e) if

20 such distribution (and the net income with respect

21 to such excess contribution) meets requirements

22 comparable to the requirements of clauses (i) and

23 (ii) of section 530(d)(4)(C).’’
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1 (3) COORDINATION WITH EDUCATION CRED2 ITS.—Section 25A(e)(2) is amended by inserting

3 ‘‘529(c)(3)(B) or’’ before ‘‘530(d)(2)’’.

4 (4) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply to distributions after

6 December 31, 1999, for education furnished in aca7 demic periods beginning after such date.

8 (b) ELIGIBLE EDUCATIONAL INSTITUTIONS PER9 MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—

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

11 529(b) (defining qualified State tuition program) is

12 amended by inserting ‘‘or by one or more eligible

13 educational institutions’’ after ‘‘maintained by a

14 State or agency or instrumentality thereof’’.

15 (2) CONFORMING AMENDMENTS.—

16 (A) Paragraph (2) of section 26(b) is

17 amended by redesignating subparagraphs (E)

18 through (Q) as subparagraphs (F) through (R),

19 respectively, and by inserting after subpara20 graph (D) the following new subparagraph:

21 ‘‘(E) section 529(f) (relating to additional

22 tax on certain distributions from qualified tui23 tion programs),’’.

24 (B) The text and headings of sections 529

25 and 530 are amended by striking ‘‘qualified
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1 State tuition program’’ each place it appears

2 and inserting ‘‘qualified tuition program’’.

3 (C)(i) The section heading of section 529

4 is amended to read as follows:

5 ‘‘SEC. 529. QUALIFIED TUITION PROGRAMS.’’

6 (ii) The item relating to section 529 in the

7 table of sections for part VIII of subchapter F

8 of chapter 1 is amended by striking ‘‘State’’.

9 (3) EFFECTIVE DATE.—The amendments made

10 by this subsection shall apply to taxable years begin11 ning after December 31, 1999.

12 (c) CHANGE OF QUALIFIED TUITION PROGRAM OR

13 OF DESIGNATED BENEFICIARY.—

14 (1) IN GENERAL.—Clause (i) of section

15 529(c)(3)(C) is amended by inserting ‘‘to another

16 qualified tuition program for the benefit of the des17 ignated beneficiary or’’ after ‘‘transferred’’.

18 (2) INCLUSION OF SIBLINGS AS MEMBER OF

19 FAMILY.—Paragraph (2) of section 529(e) is amend20 ed by striking ‘‘subparagraph (B).’’ and inserting

21 ‘‘subparagraph (B),

22 except that such term shall include any sibling

23 (whether by the whole or half blood) of the des24 ignated beneficiary.’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to taxable years begin3 ning after December 31, 1999.

Æ