I

106TH CONGRESS

1ST SESSION H. R. 157

To amend the Internal Revenue Code of 1986 to reduce individual capital

gains tax rates.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 6, 1999

Mr. HEFLEY 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 reduce

individual capital gains tax rates.

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 ‘‘Economic Growth Act

5 of 1999’’.

6 SEC. 2. REDUCTION IN INDIVIDUAL CAPITAL GAINS TAX

7 RATES.

8 (a) IN GENERAL.—Subsection (h) of section 1 of the

9 Internal Revenue Code of 1986 is amended to read as fol10 lows:
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1 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—

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

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

4 this section for such taxable year shall not exceed

5 the sum of—

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

7 the same manner as if this subsection had not

8 been enacted on taxable income reduced by the

9 net capital gain,

10 ‘‘(B) 7.5 percent of so much of the net

11 capital gain (or, if less, taxable income) as does

12 not exceed the excess (if any) of—

13 ‘‘(i) the amount of taxable income

14 which would (without regard to this para15 graph) be taxed at a rate below 28 per16 cent, over

17 ‘‘(ii) the taxable income reduced by

18 the net capital gain, and

19 ‘‘(C) 15 percent of the amount of taxable

20 income in excess of the sum of the amounts on

21 which tax is determined under subparagraphs

22 (A) and (B).

23 ‘‘(2) NET CAPITAL GAIN TAKEN INTO ACCOUNT

24 AS INVESTMENT INCOME.—For purposes of this sub25 section, the net capital gain for any taxable year
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1 shall be reduced (but not below zero) by the amount

2 which the taxpayer takes into account as investment

3 income under section 163(d)(4)(B)(iii).’’.

4 (b) ALTERNATIVE MINIMUM TAX.—Paragraph (3) of

5 section 55(b) of such Code is amended to read as follows:

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

7 GAIN OF NONCORPORATE TAXPAYERS.—The amount

8 determined under the first sentence of paragraph

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

10 ‘‘(A) the amount determined under such

11 first sentence computed at the rates and in the

12 same manner as if this paragraph had not been

13 enacted on the taxable excess reduced by the

14 net capital gain,

15 ‘‘(B) 7.5 percent of so much of the net

16 capital gain (or, if less, taxable excess) as does

17 not exceed the amount on which a tax is deter18 mined under section 1(h)(1)(B), and

19 ‘‘(C) 15 percent of the amount of taxable

20 excess in excess of the sum of the amounts on

21 which tax is determined under subparagraphs

22 (A) and (B).’’.

23 (c) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (1) of section 1445(e) of such

2 Code is amended by striking ‘‘20 percent’’ and in3 serting ‘‘15 percent’’.

4 (2) The second sentence of section

5 7518(g)(6)(A) of such Code, and the second sen6 tence of section 607(h)(6)(A) of the Merchant Ma7 rine Act, 1936, are each amended by striking ‘‘20

8 percent’’ and inserting ‘‘15 percent’’.

9 (3) Section 311 of the Taxpayer Relief Act of

10 1997 is amended by striking subsection (e).

11 (4) Paragraph (7) of section 57(a) of such Code

12 (as amended by the Internal Revenue Service Re13 structuring and Reform Act of 1998) is amended by

14 striking the last sentence.

15 (5) Paragraphs (11) and (12) of section 1223,

16 and section 1235(a), of such Code (as amended by

17 the Internal Revenue Service Restructuring and Re18 form Act of 1998) are each amended by striking ‘‘18

19 months’’ each place it appears and inserting ‘‘1

20 year’’.

21 (d) TRANSITIONAL RULES FOR TAXABLE YEARS

22 WHICH INCLUDE JANUARY 6, 1999.—

23 (1) IN GENERAL.—Subsection (h) of section 1

24 of such Code (as amended by the Internal Revenue

25 Service Restructuring and Reform Act of 1998) is
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1 amended by adding at the end the following new

2 paragraph:

3 ‘‘(14) SPECIAL RULES FOR TAXABLE YEARS

4 WHICH INCLUDE JANUARY 6, 1999.—For purposes of

5 applying this subsection in the case of a taxable year

6 which includes January 6, 1999—

7 ‘‘(A) Gains or losses properly taken into

8 account for the period on or after such date

9 shall be disregarded in applying paragraph

10 (5)(A)(i), subclauses (I) and (II) of paragraph

11 (5)(A)(ii), paragraph (5)(B), paragraph (6),

12 and paragraph (7)(A).

13 ‘‘(B) The amount determined under sub14 paragraph (B) of paragraph (1) shall be the

15 sum of—

16 ‘‘(i) 7.5 percent of the amount which

17 would be determined under such subpara18 graph if the amount of gain taken into ac19 count under such subparagraph did not ex20 ceed the net capital gain taking into ac21 count only gain or loss properly taken into

22 account for the portion of the taxable year

23 on or after such date, plus

24 ‘‘(ii) 10 percent of the excess of the

25 amount determined under such subpara-
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1 graph (determined without regard to this

2 paragraph) over the amount determined

3 under clause (i).

4 ‘‘(C) The amount determined under sub5 paragraph (C) of paragraph (1) shall be the

6 sum of—

7 ‘‘(i) 15 percent of the amount which

8 would be determined under such subpara9 graph if the adjusted net capital gain did

10 not exceed the net capital gain taking into

11 account only gain or loss properly taken

12 into account for the portion of the taxable

13 year on or after such date, plus

14 ‘‘(ii) 20 percent of the excess of the

15 amount determined under such subpara16 graph (determined without regard to this

17 paragraph) over the amount determined

18 under clause (i).

19 ‘‘(D) Rules similar to the rules of para20 graph (13)(C) shall apply.’’.

21 (2) ALTERNATIVE MINIMUM TAX.—Paragraph

22 (3) of section 55(b) of such Code (as amended by

23 the Internal Revenue Service Restructuring and Re24 form Act of 1998) is amended by adding at the end

25 the following new sentence: ‘‘For purposes of apply-
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1 ing this paragraph for a taxable year which includes

2 January 6, 1999, rules similar to the rules of section

3 1(h)(14) shall apply.’’.

4 (e) EFFECTIVE DATES.—

5 (1) IN GENERAL.—Except as otherwise pro6 vided in this subsection, the amendments made by

7 this section shall apply to taxable years beginning on

8 or after January 6, 1999.

9 (2) TRANSITIONAL RULES FOR TAXABLE YEARS

10 WHICH INCLUDE JANUARY 6, 1999.—The amend11 ments made by subsection (d) shall apply to taxable

12 years beginning before such date and ending on or

13 after January 6, 1999.

14 (3) WITHHOLDING.—The amendment made by

15 subsection (c)(1) shall apply only to amounts paid

16 after the date of the enactment of this Act.

17 (4) CERTAIN CONFORMING AMENDMENTS.—The

18 amendments made by subsection (c)(5) shall take ef19 fect on January 6, 1999.

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