I

103D CONGRESS

1ST SESSION H. R. 912

To amend the Internal Revenue Code of 1986 to repeal the limitation on

passive activity losses and credits, provide an accelerated depreciation

schedule for real estate, restore the investment tax credit, allow a deduction for certain capital gains, restore and increase the deduction for

health insurance costs of self-employed individuals, restore income averaging, and reduce social security taxes and remove the ceiling on wages

subject to such taxes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 16, 1993

Mr. PETERSON of Minnesota 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 repeal

the limitation on passive activity losses and credits, provide an accelerated depreciation schedule for real estate,

restore the investment tax credit, allow a deduction for

certain capital gains, restore and increase the deduction

for health insurance costs of self-employed individuals,

restore income averaging, and reduce social security

taxes and remove the ceiling on wages subject to such

taxes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

3 ‘‘Economic Stimulus Tax Act of 1993’’.

4 (b) AMENDMENT OF 1986 CODE.—Except as other5 wise expressly provided, whenever in this Act an amend6 ment or repeal is expressed in terms of an amendment

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

8 shall be considered to be made to a section or other provi9 sion of the Internal Revenue Code of 1986.

10 SEC. 2. REPEAL OF LIMITATION ON PASSIVE ACTIVITY

11 LOSSES AND CREDITS.

12 (a) IN GENERAL.—Section 469 (relating to passive

13 activity losses and credits limited) is hereby repealed.

14 (b) CONFORMING AMENDMENT.—The table of sec15 tions for subpart C of part II of subchapter E of chapter

16 1 is amended by striking the item relating to section 469.

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

18 this section shall apply to taxable years beginning after

19 December 31, 1993.

20 SEC. 3. ACCELERATED DEPRECIATION SCHEDULE FOR

21 REAL ESTATE.

22 (a) IN GENERAL.—Paragraph (1) of section 168(c)

23 (relating to applicable recovery period) is amended by

24 striking the items relating to residential rental property

25 and nonresidential real property and inserting the follow26 ing:
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‘‘Residential rental property ............................................. 15 years

Nonresidential real property ........................................... 18 years’’.

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

2 this section shall apply to property placed in service after

3 December 31, 1993.

4 SEC. 4. RESTORATION OF 10-PERCENT INVESTMENT TAX

5 CREDIT.

6 (a) ALLOWANCE OF CREDIT.—Section 46 (relating to

7 amount of investment credit) is amended by striking

8 ‘‘and’’ at the end of paragraph (2), by striking the period

9 at the end of paragraph (3) and inserting ‘‘, and’’, and

10 by adding at the end thereof the following new paragraph:

11 ‘‘(4) the general investment credit.’’

12 (b) AMOUNT OF CREDIT.—Section 48 is amended by

13 adding at the end thereof the following new subsection:

14 ‘‘(c) GENERAL INVESTMENT CREDIT.—

15 ‘‘(1) IN GENERAL.—For purposes of section 46,

16 the general investment credit for any taxable year is

17 an amount equal to 10 percent of the qualified in18 vestment for such taxable year.

19 ‘‘(2) QUALIFIED INVESTMENT.—

20 ‘‘(A) IN GENERAL.—For purposes of para21 graph (1), the qualified investment for any tax22 able year is the aggregate of—

23 ‘‘(i) the applicable percentage of the

24 basis of each new section 38 property
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1 placed in service by the taxpayer during

2 such taxable year, plus

3 ‘‘(ii) the applicable percentage of the

4 cost of each used section 38 property

5 placed in service by the taxpayer during

6 such taxable year.

7 ‘‘(B) APPLICABLE PERCENTAGE.—For

8 purposes of subparagraph (A), the applicable

9 percentage for any property shall be determined

10 under paragraphs (2) and (7) of section 46(c)

11 (as in effect on the day before the date of the

12 enactment of the Revenue Reconciliation Act of

13 1990).

14 ‘‘(C) CERTAIN RULES MADE APPLICA15 BLE.—The provisions of subsections (b) and (c)

16 of section 48 (as in effect on the day before the

17 date of the enactment of the Revenue Reconcili18 ation Act of 1990) shall apply for purposes of

19 this paragraph.

20 ‘‘(3) SECTION 38 PROPERTY.—For purposes of

21 this subsection, the term ‘section 38 property’

22 means—

23 ‘‘(A) tangible personal property (other

24 than an air conditioning or heating unit), or
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1 ‘‘(B) other tangible property (not including

2 a building and its structural components) but

3 only if such property—

4 ‘‘(i) is used as an integral part of

5 manufacturing, production, or extraction

6 or of furnishing transportation, commu7 nications, electrical energy, gas, water, or

8 sewage disposal services, or

9 ‘‘(ii) constitutes a research facility

10 used in connection with any of the activi11 ties referred to in clause (i), or

12 ‘‘(iii) constitutes a facility used in

13 connection with any of the activities re14 ferred to in clause (i) for the bulk storage

15 of fungible commodities (including com16 modities in a liquid or gaseous state), or

17 ‘‘(C) elevators and escalators, but only if—

18 ‘‘(i) the construction, reconstruction,

19 or erection of the elevator or escalator is

20 completed by the taxpayer, or

21 ‘‘(ii) the original use of such elevator

22 or escalator commences with the taxpayer,

23 or

24 ‘‘(D) single purpose agricultural or horti25 cultural structures; or
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1 ‘‘(E) a storage facility (not including a

2 building and its structural components) used in

3 connection with the distribution of petroleum or

4 any primary product of petroleum.

5 Such term includes only property to which section

6 168 applies without regard to any useful life and

7 any other property with respect to which deprecia8 tion (or amortization in lieu of depreciation) is al9 lowable and having a useful life (determined as of

10 the time such property is placed in service) of 3

11 years or more.

12 ‘‘(4) COORDINATION WITH OTHER CREDITS.—

13 This subsection shall not apply to any property to

14 which the energy credit or rehabilitation credit

15 would apply unless the taxpayer elects to waive the

16 application of such credits to such property.

17 ‘‘(5) CERTAIN PROGRESS EXPENDITURE RULES

18 MADE APPLICABLE.—Rules similar to rules of sub19 section (c)(4) and (d) of section 46 (as in effect on

20 the day before the date of the enactment of the Rev21 enue Reconciliation Act of 1990) shall apply for pur22 poses of this subsection.’’

23 (c) TECHNICAL AMENDMENTS.—

24 (1) Subparagraph (C) of section 49(a)(1) is

25 amended by striking ‘‘and’’ at the end of clause (ii),
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1 by striking the period at the end of clause (iii) and

2 inserting ‘‘, and’’, and by adding at the end thereof

3 the following new clause:

4 ‘‘(iv) the basis of any new section 38

5 property and the cost of any used section

6 38 property.’’

7 (2) Subparagraph (E) of section 50(a)(2) is

8 amended by inserting ‘‘or 48(c)(5)’’ before the pe9 riod at the end thereof.

10 (3) Paragraph (5) of section 50(a) is amended

11 by adding at the end thereof the following new sub12 paragraph:

13 ‘‘(D) SPECIAL RULES FOR CERTAIN PROP14 ERTY.—In the case of any section 38 property

15 which is 3-year property (within the meaning of

16 section 168(e))—

17 ‘‘(i) the percentage set forth in clause

18 (ii) of the table contained in paragraph

19 (1)(B) shall be 66 percent,

20 ‘‘(ii) the percentage set forth in clause

21 (iii) of such table shall be 33 percent, and

22 ‘‘(iii) clauses (iv) and (v) of such table

23 shall not apply.’’

24 (4)(A) The section heading for section 48 is

25 amended to read as follows:
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1 ‘‘SEC. 48. OTHER CREDITS.’’

2 (B) The table of sections for subpart E of part

3 IV of subchapter A of chapter 1 is amended by

4 striking the item relating to section 48 and inserting

5 the following:

‘‘Sec. 48. Other credits.’’

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

7 this section shall apply to periods after the date of the

8 enactment of this Act under rules similar to the rules of

9 section 48(m) of the Internal Revenue Code of 1986 (as

10 in effect on the day before the date of the enactment of

11 the Revenue Reconciliation Act of 1990).

12 SEC. 5. 50 PERCENT DEDUCTION FOR CERTAIN CAPITAL

13 GAINS.

14 (a) TAXPAYERS OTHER THAN CORPORATIONS.—

15 Part I of subchapter P of chapter 1 (relating to treatment

16 of capital gains) is amended by adding at the end the fol17 lowing new section:

18 ‘‘SEC. 1202. DEDUCTION FOR CERTAIN CAPITAL GAINS.

19 ‘‘(a) GENERAL RULE.—If for any taxable year a tax20 payer other than a corporation has a qualified net capital

21 gain, there shall be allowed as a deduction from gross in22 come an amount equal to 50 percent of the qualified net

23 capital gain.

24 ‘‘(b) QUALIFIED NET CAPITAL GAIN.—For purposes

25 of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified net

2 capital gain’ means the lesser of—

3 ‘‘(A) the net capital gain for the taxable

4 year, or

5 ‘‘(B) the net capital gain for the taxable

6 year determined by taking into account only

7 gain or loss from qualified assets.

8 ‘‘(2) QUALIFIED ASSETS.—The term ‘qualified

9 asset’ means any property with a holding period of

10 at least 1 year at the time of disposition, other

11 than—

12 ‘‘(A) stock or securities for which there is

13 a market on an established securities market or

14 otherwise, and

15 ‘‘(B) property (other than stock or securi16 ties) of a kind regularly traded on an estab17 lished market.

18 ‘‘(c) ESTATES AND TRUSTS.—In the case of an estate

19 or trust, the deduction under subsection (a) shall be com20 puted by excluding the portion (if any) of the gains for

21 the taxable year from sales or exchanges of capital assets

22 which, under section 652 and 662 (relating to inclusions

23 of amounts in gross income of beneficiaries of trusts), is

24 includible by the income beneficiaries as gain derived from

25 the sale or exchange of capital assets.’’
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1 (b) CORPORATIONS.—Section 1201 (relating to alter2 native tax for corporations) is amended by redesignating

3 subsection (b) as subsection (c) and by inserting after sub4 section (a) the following new subsection:

5 ‘‘(b) DEDUCTION FOR CERTAIN CAPITAL GAINS.—

6 ‘‘(1) IN GENERAL.—If for any taxable year a

7 corporation has a qualified net capital gain, there

8 shall be allowed as a deduction from gross income

9 an amount equal to 50 percent of the qualified net

10 capital gain.

11 ‘‘(2) QUALIFIED NET CAPITAL GAIN.—For pur12 poses of this subsection, the term ‘qualified net cap13 ital gain’ has the meaning given such term in section

14 1202(b).’’

15 (c) CONFORMING AMENDMENTS.—

16 (1)(A) Subsection (h) of section 1 is amended

17 by inserting after ‘‘net capital gain’’ each place it

18 appears the following: ‘‘(other than qualified net

19 capital gain (within the meaning of section

20 1202(b))’’.

21 (B) Subsection (a) of section 1201 is amended

22 by inserting after ‘‘net capital gain’’ each place it

23 appears the following: ‘‘(other than qualified net

24 capital gain (within the meaning of section

25 1202(b))’’.
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1 (2) Subsection (a) of section 62 is amended by

2 adding at the end the following new paragraph:

3 ‘‘(15) QUALIFIED NET CAPITAL GAINS.—The

4 deduction allowed by section 1202.’’

5 (3)(A) The heading for section 1201 is amend6 ed to read as follows:

7 ‘‘SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS; DE8 DUCTION FOR CERTAIN CAPITAL GAINS.’’

9 (B) The item relating to section 1201 in the

10 table of sections for part I of subchapter P of chap11 ter 1 is amended to read as follows:

‘‘Sec. 1201. Alternative tax for corporations; deduction for certain capital gains.’’

12 (4) The table of sections for part I of sub13 chapter P of chapter 1 is amended by adding at the

14 end the following new item:

‘‘Sec. 1202. Deduction for certain capital gains.’’

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

16 this section shall apply to sales and exchanges after the

17 date of the enactment of this Act.

18 SEC. 6. INCREASE IN DEDUCTIBLE HEALTH INSURANCE

19 COSTS FOR SELF-EMPLOYED INDIVIDUALS.

20 (a) DEDUCTION MADE PERMANENT.—

21 (1) IN GENERAL.—Subsection (l) of section 162

22 (relating to special rules for health insurance costs
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1 of self-employed individuals) is amended by striking

2 paragraph (6).

3 (2) CONFORMING AMENDMENT.—Subsection (a)

4 of section 110 of the Tax Extension Act of 1991 is

5 amended by striking paragraph (2).

6 (3) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply to taxable years begin8 ning after December 31, 1991.

9 (b) DEDUCTION INCREASED TO 100 PERCENT.—

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

11 162(l) is amended by striking ‘‘25 percent’’ and in12 serting ‘‘100 percent’’.

13 (2) EFFECTIVE DATE.—The amendment made

14 by paragraph (1) shall apply to taxable years begin15 ning after December 31, 1992.

16 SEC. 7. RESTORATION OF INCOME AVERAGING.

17 (a) IN GENERAL.—Section 141 of the Tax Reform

18 Act of 1986 (and the amendments made by such section)

19 are hereby repealed, and the Internal Revenue Code of

20 1986 shall be applied and administered as if such section

21 (and amendments) had not been enacted.

22 (b) EFFECTIVE DATE.—The repeal made by this sec23 tion shall apply to taxable years beginning after Decem24 ber 31, 1993.
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1 SEC. 8. MODIFICATIONS IN SOCIAL SECURITY TAXES.

2 (a) REMOVAL OF CEILING ON WAGES SUBJECT TO

3 TAX.—

4 (1) FICA TAXES.—

5 (A) Section 3121(a) (defining wages) is

6 amended by striking paragraph (1).

7 (B) Section 3121 is amended by striking

8 subsection (x) (relating to applicable contribu9 tion base).

10 (2) SECA TAX.—

11 (A) Section 1402(b) (defining self-employ12 ment income) is amended—

13 (i) in the 1st sentence, by striking

14 paragraph (1), and

15 (ii) by striking the 2d sentence.

16 (B) Section 1402 is amended by striking

17 subsection (k) (relating to applicable contribu18 tion base).

19 (b) REDUCTION IN SOCIAL SECURITY TAXES.—

20 (1) EMPLOYEE TAX.—Subsection (a) of section

21 3101 (relating to rate of tax on employees) is

22 amended to read as follows:

23 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR24 ANCE.—In addition to other taxes, there is hereby imposed

25 on the income of every individual a tax equal to 4.55 per26 cent of the wages (as defined in section 3121(a)) received
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1 by the individual with respect to employment (as defined

2 in section 3121(b)).’’

3 (2) EMPLOYER TAX.—Subsection (a) of section

4 3111 (relating to rate of tax on employers) is

5 amended to read as follows:

6 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR7 ANCE.—In addition to other taxes, there is hereby imposed

8 on every employer an excise tax equal to 4.55 percent of

9 the wages (as defined in section 3121(a)) paid by the em10 ployer with respect to employment (as defined in section

11 3121(b)).’’

12 (3) SELF-EMPLOYMENT TAX.—Subsection (a)

13 of section 1401 (relating to rate of tax on self-em14 ployment income) is amended to read as follows:

15 ‘‘(a) OLD-AGE, SURVIVORS, AND DISABILITY INSUR16 ANCE.—In addition to other taxes, there is hereby imposed

17 for each taxable year, on the self-employment income of

18 every individual, a tax equal to 6.82 percent of the amount

19 of the self-employment income for the taxable year.’’

20 (c) CONFORMING AMENDMENTS.—

21 (1)(A) Paragraphs (2) and (3) of section

22 3121(i) (relating to computation of wages in certain

23 cases) are each amended by striking ‘‘, subject to

24 the provisions of subsection (a)(1) of this section,’’.
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1 (B) Paragraph (4) of section 3121(i) is amend2 ed by striking ‘‘, subject to the provisions of sub3 section (a)(1),’’.

4 (C) Section 3121(s) (relating to concurrent em5 ployment by 2 or more employers) is amended by

6 striking ‘‘3102, 3111, and 3121(a)(1)’’ and insert7 ing ‘‘3102 and 3111’’.

8 (2) Section 3122 (relating to Federal service) is

9 amended by striking the 3d sentence.

10 (3) Subsections (a), (b), (c), and (d) of section

11 3125 (relating to returns in the case of govern12 mental employees in the States, Guam, American

13 Samoa, and the District of Columbia) are each

14 amended by striking the last sentence.

15 (4)(A) Clause (i) of section 3231(e)(2)(A) is

16 amended by striking ‘‘The’’ and inserting ‘‘In the

17 case of the taxes imposed by sections 3201(b),

18 3211(a)(2), and 3221(b), the’’.

19 (B) Subparagraph (B) of section 3231(e)(2) is

20 amended to read as follows:

21 ‘‘(B) APPLICABLE BASE.—For purposes of

22 subparagraph (A), the term ‘applicable base’

23 means for any calendar year the contribution

24 and benefit base determined under section 230

25 of the Social Security Act for such calendar
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1 year; except that, for such purposes and for

2 purposes of computing average monthly com3 pensation under section 3(j) of the Railroad Re4 tirement Act of 1974 (except with respect to

5 annuity amounts determined under subsection

6 (a) or (f)(3) of section 3 of such Act), clause

7 (2) of the first sentence, and the second sen8 tence, of section 230(c) of the Social Security

9 Act shall be disregarded.’’

10 (C) Subparagraph (C) of section 3231(e)(2)

11 (defining compensation for purposes of railroad re12 tirement tax) is amended by inserting after ‘‘employ13 ers)’’ the following: ‘‘, as such section was in effect

14 immediately before its repeal by the Farm and Small

15 Business Tax Equity Act of 1993,’’.

16 (D) The heading of paragraph (2) of section

17 3231(e) is amended by striking ‘‘BASES’’ and insert18 ing ‘‘BASE TO TIER 2 TAXES’’.

19 (5) Section 6413 is amended by striking sub20 section (c) (relating to special refunds for employees

21 receiving wages from more than 1 employer).

22 (6) Section 230(c) of the Social Security Act

23 (42 U.S.C. 430(c)) is amended by striking ‘‘and sec24 tions 1402, 3121, 3122, 3125, 6413, and 6654 of

25 the Internal Revenue Code of 1954’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to remuneration paid

3 after December 31, 1993, and with respect to earnings

4 from self-employment attributable to taxable years begin5 ning after such date.

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