I 

109TH CONGRESS 

1ST SESSION H. R. 221 

To amend the Internal Revenue Code of 1986 to exclude from gross income 

certain interest amounts received by individuals. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 4, 2005 

Mr. STEARNS 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 exclude 

from gross income certain interest amounts received by 

individuals. 

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 ‘‘Simple Savings Tax 

5 Relief Act of 2005’’. 

6 SEC. 2. EXEMPTION OF CERTAIN INTEREST INCOME FROM 

7 TAX. 

8 (a) IN GENERAL.—Part III of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to 

10 amounts specifically excluded from gross income) is 
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1 amended by inserting after section 115 the following new 

2 section: 

3 ‘‘SEC. 116. PARTIAL EXCLUSION OF INTEREST RECEIVED BY 

4 INDIVIDUALS. 

5 ‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in6 come does not include interest otherwise includible in 

7 gross income which is received during the taxable year by 

8 an individual. 

9 ‘‘(b) LIMITATIONS.— 

10 ‘‘(1) MAXIMUM AMOUNT.—The aggregate 

11 amount excluded under subsection (a) for any tax12 able year shall not exceed— 

13 ‘‘(A) in the case of any taxable year begin14 ning in 2005, $200 ($400 in the case of a joint 

15 return), and 

16 ‘‘(B) in the case of any taxable year begin17 ning after 2005, $400 (twice such amount in 

18 the case of a joint return). 

19 ‘‘(2) INFLATION ADJUSTMENT.—In the case of 

20 any taxable year beginning after 2006, the $400 

21 amount contained in paragraph (1)(B) shall be in22 creased by an amount equal to— 

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

24 ‘‘(B) the cost-of-living adjustment deter25 mined under section 1(f)(3) for such calendar 
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1 year by substituting ‘calendar year 2005’ for 

2 ‘calendar year 1992’ in subparagraph (B) 

3 thereof. 

4 If any increase under the preceding sentence is 

5 not a multiple of $10, such increase shall be 

6 rounded to the nearest multiple of $10. 

7 ‘‘(c) INTEREST.—For purposes of this section, the 

8 term ‘interest’ means— 

9 ‘‘(1) interest on deposits with a bank (as de10 fined in section 581), 

11 ‘‘(2) amounts (whether or not designated as in12 terest) paid in respect of deposits, investment certifi13 cates, or withdrawable or repurchasable shares, by— 

14 ‘‘(A) a mutual savings bank, cooperative 

15 bank, domestic building and loan association, 

16 industrial loan association or bank, or credit 

17 union, or 

18 ‘‘(B) any other savings or thrift institution 

19 which is chartered and supervised under Fed20 eral or State law, 

21 the deposits or accounts in which are insured under 

22 Federal or State law or which are protected and 

23 guaranteed under State law. 

24 ‘‘(d) CERTAIN NONRESIDENT ALIENS INELIGIBLE

25 FOR EXCLUSION.—For purposes of this section, in the 
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1 case of a nonresident alien individual, subsection (a) shall 

2 apply only in determining the taxes imposed for the tax3 able year pursuant to sections 871(b)(1) and 877(b).’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Subparagraph (A) of section 32(i)(2) of 

6 such Code is amended by inserting ‘‘(determined 

7 without regard to section 116)’’ before the comma. 

8 (2) Subparagraph (B) of section 86(b)(2) of 

9 such Code is amended to read as follows: 

10 ‘‘(B) increased by the sum of— 

11 ‘‘(i) the amount of interest received or 

12 accrued by the taxpayer during the taxable 

13 year which is exempt from tax, and 

14 ‘‘(ii) the amount of interest received 

15 during the taxable year which is excluded 

16 from gross income under section 116.’’. 

17 (3) Subsection (d) of section 135 of such Code 

18 is amended by redesignating paragraph (4) as para19 graph (5) and by inserting after paragraph (3) the 

20 following new paragraph: 

21 ‘‘(4) COORDINATION WITH SECTION 116.—This 

22 section shall be applied before section 116.’’. 

23 (4) Paragraph (2) of section 265(a) of such 

24 Code is amended by inserting before the period ‘‘, or 

25 to purchase or carry obligations or shares, or to 
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1 make deposits, to the extent the interest thereon is 

2 excludable from gross income under section 116’’. 

3 (5) Subsection (c) of section 584 of such Code 

4 is amended by adding at the end the following new 

5 flush sentence: 

6 ‘‘The proportionate share of each participant in the 

7 amount of interest received by the common trust fund and 

8 to which section 116 applies shall be considered for pur9 poses of such section as having been received by such par10 ticipant.’’. 

11 (6) Subsection (a) of section 643 of such Code 

12 is amended by redesignating paragraph (7) as para13 graph (8) and by inserting after paragraph (6) the 

14 following new paragraph: 

15 ‘‘(7) INTEREST.—There shall be included the 

16 amount of any interest excluded from gross income 

17 pursuant to section 116.’’. 

18 (7) The table of sections for part III of sub19 chapter B of chapter 1 of such Code is amended by 

20 inserting after the item relating to section 115 the 

21 following new item: 

‘‘Sec. 116. Partial exclusion of dividends and interest received by individuals.’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2004. 

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