I 

109TH CONGRESS 

1ST SESSION H. R. 1500 

To amend the Internal Revenue Code of 1986 to make the 2003 reduction 

in the individual capital gains tax rates permanent and to further reduce 

and simplify such rates and to reduce the corporate capital gains rate. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 6, 2005 

Mr. DREIER (for himself and Mr. ENGLISH of Pennsylvania) 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 make 

the 2003 reduction in the individual capital gains tax 

rates permanent and to further reduce and simplify such 

rates and to reduce the corporate capital gains rate. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Investment Tax Sim5 plification Act of 2005’’. 
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1 SEC. 2. PERMANENT REDUCTION IN CAPITAL GAINS RATES 

2 FOR INDIVIDUALS AND CORPORATIONS. 

3 (a) REPEAL OF SUNSET OF REDUCTION IN CAPITAL

4 GAINS RATES FOR INDIVIDUALS.—Section 303 of the 

5 Jobs and Growth Tax Relief Reconciliation Act of 2003 

6 shall not apply to section 301 of such Act. 

7 (b) FURTHER REDUCTION IN AND SIMPLIFICATION

8 OF CAPITAL GAINS RATES FOR INDIVIDUALS.— 

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

10 1(h) of the Internal Revenue Code of 1986 is 

11 amended to read as follows: 

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

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

14 this section for such taxable year shall not exceed 

15 the sum of— 

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

17 the same manner as if this subsection had not 

18 been enacted on taxable income reduced by the 

19 net capital gain, and 

20 ‘‘(B) 15 percent of the excess (if any) of— 

21 ‘‘(i) the net capital gain (or, if less, 

22 taxable income), over 

23 ‘‘(ii) the amount of taxable income 

24 which would (without regard to this para25 graph) be taxed at a rate below 25 per26 cent.’’. 
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1 (2) ALTERNATIVE MINIMUM TAX.—Paragraph 

2 (3) of section 55(b) of such Code is amended to read 

3 as follows: 

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

5 GAIN OF NONCORPORATE TAXPAYERS.—The amount 

6 determined under the first sentence of paragraph 

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

8 ‘‘(A) the amount determined under such 

9 first sentence computed at the rates and in the 

10 same manner as if this paragraph had not been 

11 enacted on the taxable excess reduced by the 

12 net capital gain, plus 

13 ‘‘(B) the amount determined under section 

14 1(h)(1)(B).’’. 

15 (3) CONFORMING AMENDMENTS.— 

16 (A)(i) Subsection (h) of section 1 of such 

17 Code is amended by striking paragraphs (3) 

18 through (8) and by redesignating paragraphs 

19 (9), (10), and (11) as paragraphs (3), (4), and 

20 (5), respectively. 

21 (ii) Sections 163(d)(4)(B), 854(b)(5), and 

22 857(c)(2)(D) of such Code are each amended 

23 by striking ‘‘section 1(h)(11)(B)’’ and inserting 

24 ‘‘section 1(h)(5)(B)’’. 
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1 (iii) Sections 301(f)(4), 306(a)(1)(D), 

2 584(c), 702(a)(5), 854(a), and 854(b)(2) of 

3 such Code are each amended by striking ‘‘sec4 tion 1(h)(11)’’ and inserting ‘‘section 1(h)(5)’’. 

5 (iv) The heading of section 857(c)(2) of 

6 such Code is amended by striking ‘‘SECTION

7 1(h)(11)’’ and inserting ‘‘SECTION 1(h)(5)’’. 

8 (B) Section 4985(a)(1) of such Code is 

9 amended by striking ‘‘section 1(h)(1)(C)’’ and 

10 inserting ‘‘section 1(h)(1)(B)’’. 

11 (c) REDUCED CAPITAL GAINS RATE FOR CORPORA12 TIONS.— 

13 (1) IN GENERAL.—Section 1201 of such Code 

14 is amended by striking ‘‘35 percent’’ both places it 

15 appears and inserting ‘‘15 percent’’. 

16 (2) ALTERNATIVE MINIMUM TAX.—Section 

17 55(b) of such Code is amended by adding at the end 

18 the following new paragraph: 

19 ‘‘(4) MAXIMUM RATE OF TAX ON NET CAPITAL

20 GAIN OF CORPORATIONS.—The amount determined 

21 under paragraph (1)(B)(i) shall not exceed the sum 

22 of— 

23 ‘‘(A) the amount determined under such 

24 paragraph computed at the rates and in the 

25 same manner as if this paragraph had not been 
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1 enacted on the taxable excess reduced by the 

2 net capital gain, plus 

3 ‘‘(B) the amount determined under section 

4 1201.’’. 

5 (3) TECHNICAL AMENDMENTS.— 

6 (A) Section 1445(e)(1) of such Code is 

7 amended by striking ‘‘35 percent (or, to the ex8 tent provided in regulations, 15 percent)’’ and 

9 inserting ‘‘15 percent’’. 

10 (B) Section 1445(e)(2) of such Code is 

11 amended by striking ‘‘35 percent’’ and inserting 

12 ‘‘15 percent’’. 

13 (C) Section 7518(g)(6)(A) of such Code is 

14 amended by striking ‘‘(34 percent in the case of 

15 a corporation)’’. 

16 (D) Section 607(h)(6)(A) of the Merchant 

17 Marine Act, 1936 is amended by striking ‘‘(34 

18 percent in the case of a corporation)’’. 

19 (d) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the amendments made by this section 

22 shall apply to taxable years ending after the date of 

23 the enactment of this Act. 
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1 (2) WITHHOLDING.—The amendment made by 

2 subsection (c)(3)(B) shall apply to amounts paid 

3 after the date of the enactment of this Act. 

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