I 

111TH CONGRESS 

1ST SESSION H. R. 470 

To amend the Internal Revenue Code of 1986 to provide for permanent 

tax incentives for economic growth. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 13, 2009 

Mr. GARRETT of New Jersey (for himself, Mr. PRICE of Georgia, and Mr. 

JORDAN of Ohio) introduced the following bill; which was referred to the 

Committee on Ways and Means, and in addition to the Committee on Appropriations, for a period to be subsequently determined by the Speaker, 

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for permanent tax incentives for economic growth. 

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 ‘‘Economic Recovery and Middle-Class Tax Relief Act of 

6 2009’’. 

7 (b) TABLE OF CONTENTS.— 

Sec. 1. Short title. 

TITLE I—INCENTIVES FOR ECONOMIC GROWTH 


smartinez on PROD1PC64 with BILLS
2 

•HR 470 IH

Subtitle A—Income Tax Reductions 

Sec. 101. 2003 tax reductions made permanent. 

Sec. 102. 5 percent reduction in individual income tax rates. 

Sec. 103. Repeal of alternative minimum tax on individuals. 

Sec. 104. Reduction in corporate marginal income tax rates. 

Subtitle B—Reduction of Income Taxes on Capital Assets 

Sec. 111. Indexing of certain assets for purposes of determining gain or loss. 

Sec. 112. Reduced capital gains rate for corporations. 

Subtitle C—Other Provisions Related to Businesses 

Sec. 121. Repeal of certain limitations on the expensing of section 179 property. 

Sec. 122. Research credit made permanent. 

Sec. 123. 7-year carryback of net operating losses. 

Subtitle D—Other Provisions Relating to Individuals 

Sec. 131. Child tax credit increased and made permanent. 

Sec. 132. Distributions not required from individual retirement plans at age 

701⁄2. 

Sec. 133. No IRA distribution during 2009 included in gross income. 

TITLE II—ACROSS-THE-BOARD RESCISSIONS IN NON-DEFENSE 

DISCRETIONARY SPENDING FOR FISCAL YEAR 2009 

Sec. 201. Across-the-board rescissions in non-defense discretionary spending for 

fiscal year 2009. 

TITLE III—INCREASED INCENTIVES FOR EDUCATION 

Sec. 301. Increased deduction for qualified higher education expenses. 

Sec. 302. Increased deduction for interest on student loans. 

1 TITLE I—INCENTIVES FOR 

2 ECONOMIC GROWTH 

3 Subtitle A—Income Tax Reductions 

4 SEC. 101. 2003 TAX REDUCTIONS MADE PERMANENT. 

5 Section 303 of the Jobs and Growth Tax Relief Rec6 onciliation Act of 2003 is hereby repealed. 

7 SEC. 102. 5 PERCENT REDUCTION IN INDIVIDUAL INCOME 

8 TAX RATES. 

9 (a) IN GENERAL.—Section 1 of the Internal Revenue 

10 Code of 1986 (relating to tax imposed on individuals) is 


smartinez on PROD1PC64 with BILLS
3 

•HR 470 IH

1 amended by adding at the end the following new sub2 section: 

3 ‘‘(j) RATE REDUCTIONS AFTER 2007.— 

4 ‘‘(1) IN GENERAL.—In the case of taxable years 

5 beginning in a calendar year after 2007, the reduced 

6 percentage specified in the following table shall be 

7 substituted for the otherwise applicable tax rate in 

8 the tables under subsections (a), (b), (c), (d), and 

9 (e). 

‘‘Otherwise applicable tax rate Reduced percentage 

10 ........................................................................... 9.5 

15 ........................................................................... 14.25 

25 ........................................................................... 23.75 

28 ........................................................................... 26.6 

33 ........................................................................... 31.35 

35 ........................................................................... 33.25 

10 ‘‘(2) ADJUSTMENT OF TABLES.—The Secretary 

11 shall adjust the tables prescribed under subsection 

12 (f) to carry out this subsection.’’. 

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

14 this subsection shall apply to taxable years beginning after 

15 December 31, 2007. 

16 (c) REPEAL OF EGTRRA SUNSET OF RATE REDUC17 TIONS.—Title IX of the Economic Growth and Tax Relief 

18 Reconciliation Act of 2001 shall not apply to the amend19 ments made by section 101 of such Act. 


smartinez on PROD1PC64 with BILLS
4 

•HR 470 IH

1 SEC. 103. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDI2 VIDUALS. 

3 (a) IN GENERAL.—Section 55(a) of the Internal Rev4 enue Code of 1986 (relating to alternative minimum tax 

5 imposed) is amended by adding at the end the following 

6 new flush sentence: 

7 ‘‘For purposes of this title, the tentative minimum tax on 

8 any taxpayer other than a corporation for any taxable year 

9 beginning after December 31, 2008, shall be zero.’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2008. 

13 SEC. 104. REDUCTION IN CORPORATE MARGINAL INCOME 

14 TAX RATES. 

15 (a) GENERAL RULE.—Paragraph (1) of section 11(b) 

16 of the Internal Revenue Code of 1986 is amended— 

17 (1) by inserting ‘‘and’’ at the end of subpara18 graph (A), 

19 (2) by striking ‘‘but does not exceed $75,000,’’ 

20 in subparagraph (B) and inserting a period, 

21 (3) by striking subparagraphs (C) and (D), and 

22 (4) by striking the last 2 sentences. 

23 (b) PERSONAL SERVICE CORPORATIONS.—Para24 graph (2) of section 11(b) of such Code is amended by 

25 striking ‘‘35 percent’’ and inserting ‘‘25 percent’’. 


smartinez on PROD1PC64 with BILLS
5 

•HR 470 IH

1 (c) CONFORMING AMENDMENTS.—Paragraphs (1) 

2 and (2) of section 1445(e) of such Code are each amended 

3 by striking ‘‘35 percent’’ and inserting ‘‘25 percent’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2008, except that the amendments made 

7 by subsection (c) shall take effect on the date of the enact8 ment of this Act. 

9 Subtitle B—Reduction of Income 

10 Taxes on Capital Assets 

11 SEC. 111. INDEXING OF CERTAIN ASSETS FOR PURPOSES 

12 OF DETERMINING GAIN OR LOSS. 

13 (a) IN GENERAL.—Part II of subchapter O of chap14 ter 1 (relating to basis rules of general application) is 

15 amended by redesignating section 1023 as section 1024 

16 and by inserting after section 1022 the following new sec17 tion: 

18 ‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 

19 OF DETERMINING GAIN OR LOSS. 

20 ‘‘(a) GENERAL RULE.— 

21 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD22 JUSTED BASIS.—Solely for purposes of determining 

23 gain or loss on the sale or other disposition by a tax24 payer (other than a corporation) of an indexed asset 

25 which has been held for more than 3 years, the inVerDate Nov 24 2008 03:44 Jan 15, 2009 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H470.IH H470

smartinez on PROD1PC64 with BILLS
6 

•HR 470 IH

1 dexed basis of the asset shall be substituted for its 

2 adjusted basis. 

3 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.— 

4 The deductions for depreciation, depletion, and am5 ortization shall be determined without regard to the 

6 application of paragraph (1) to the taxpayer or any 

7 other person. 

8 ‘‘(3) WRITTEN DOCUMENTATION REQUIRE9 MENT.—Paragraph (1) shall apply only with respect 

10 to indexed assets for which the taxpayer has written 

11 documentation of the original purchase price paid or 

12 incurred by the taxpayer to acquire such asset. 

13 ‘‘(b) INDEXED ASSET.— 

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, the term ‘indexed asset’ means— 

16 ‘‘(A) common stock in a C corporation 

17 (other than a foreign corporation), or 

18 ‘‘(B) tangible property, 

19 which is a capital asset or property used in the trade 

20 or business (as defined in section 1231(b)). 

21 ‘‘(2) STOCK IN CERTAIN FOREIGN CORPORA22 TIONS INCLUDED.—For purposes of this section— 

23 ‘‘(A) IN GENERAL.—The term ‘indexed 

24 asset’ includes common stock in a foreign corVerDate Nov 24 2008 03:44 Jan 15, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H470.IH H470

smartinez on PROD1PC64 with BILLS
7 

•HR 470 IH

1 poration which is regularly traded on an estab2 lished securities market. 

3 ‘‘(B) EXCEPTION.—Subparagraph (A) 

4 shall not apply to— 

5 ‘‘(i) stock of a foreign investment 

6 company, 

7 ‘‘(ii) stock in a passive foreign invest8 ment company (as defined in section 

9 1296), 

10 ‘‘(iii) stock in a foreign corporation 

11 held by a United States person who meets 

12 the requirements of section 1248(a)(2), 

13 and 

14 ‘‘(iv) stock in a foreign personal hold15 ing company. 

16 ‘‘(C) TREATMENT OF AMERICAN DEPOSI17 TORY RECEIPTS.—An American depository re18 ceipt for common stock in a foreign corporation 

19 shall be treated as common stock in such cor20 poration. 

21 ‘‘(c) INDEXED BASIS.—For purposes of this sec22 tion— 

23 ‘‘(1) GENERAL RULE.—The indexed basis for 

24 any asset is— 


smartinez on PROD1PC64 with BILLS
8 

•HR 470 IH

1 ‘‘(A) the adjusted basis of the asset, in2 creased by 

3 ‘‘(B) the applicable inflation adjustment. 

4 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 

5 The applicable inflation adjustment for any asset is 

6 an amount equal to— 

7 ‘‘(A) the adjusted basis of the asset, multi8 plied by 

9 ‘‘(B) the percentage (if any) by which— 

10 ‘‘(i) the gross domestic product 

11 deflator for the last calendar quarter end12 ing before the asset is disposed of, exceeds 

13 ‘‘(ii) the gross domestic product 

14 deflator for the last calendar quarter end15 ing before the asset was acquired by the 

16 taxpayer. 

17 The percentage under subparagraph (B) shall be 

rounded to the nearest 1 18 ⁄10 of 1 percentage point. 

19 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 

20 The gross domestic product deflator for any cal21 endar quarter is the implicit price deflator for the 

22 gross domestic product for such quarter (as shown 

23 in the last revision thereof released by the Secretary 

24 of Commerce before the close of the following cal25 endar quarter). 


smartinez on PROD1PC64 with BILLS
9 

•HR 470 IH

1 ‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI2 MINISHED RISK OF LOSS; TREATMENT OF SHORT

3 SALES.— 

4 ‘‘(1) IN GENERAL.—If the taxpayer (or a re5 lated person) enters into any transaction which sub6 stantially reduces the risk of loss from holding any 

7 asset, such asset shall not be treated as an indexed 

8 asset for the period of such reduced risk. 

9 ‘‘(2) SHORT SALES.— 

10 ‘‘(A) IN GENERAL.—In the case of a short 

11 sale of an indexed asset with a short sale period 

12 in excess of 3 years, for purposes of this title, 

13 the amount realized shall be an amount equal 

14 to the amount realized (determined without re15 gard to this paragraph) increased by the appli16 cable inflation adjustment. In applying sub17 section (c)(2) for purposes of the preceding sen18 tence, the date on which the property is sold 

19 short shall be treated as the date of acquisition 

20 and the closing date for the sale shall be treat21 ed as the date of disposition. 

22 ‘‘(B) SHORT SALE PERIOD.—For purposes 

23 of subparagraph (A), the short sale period be24 gins on the day that the property is sold and 

25 ends on the closing date for the sale. 


smartinez on PROD1PC64 with BILLS
10 

•HR 470 IH

1 ‘‘(e) TREATMENT OF REGULATED INVESTMENT

2 COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 

3 ‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 

4 ‘‘(A) IN GENERAL.—Except as otherwise 

5 provided in this paragraph, the adjustment 

6 under subsection (a) shall be allowed to any 

7 qualified investment entity (including for pur8 poses of determining the earnings and profits of 

9 such entity). 

10 ‘‘(B) EXCEPTION FOR CORPORATE SHARE11 HOLDERS.—Under regulations— 

12 ‘‘(i) in the case of a distribution by a 

13 qualified investment entity (directly or in14 directly) to a corporation— 

15 ‘‘(I) the determination of whether 

16 such distribution is a dividend shall be 

17 made without regard to this section, 

18 and 

19 ‘‘(II) the amount treated as gain 

20 by reason of the receipt of any capital 

21 gain dividend shall be increased by the 

22 percentage by which the entity’s net 

23 capital gain for the taxable year (de24 termined without regard to this sec25 tion) exceeds the entity’s net capital 


smartinez on PROD1PC64 with BILLS
11 

•HR 470 IH

1 gain for such year determined with re2 gard to this section, and 

3 ‘‘(ii) there shall be other appropriate 

4 adjustments (including deemed distribu5 tions) so as to ensure that the benefits of 

6 this section are not allowed (directly or in7 directly) to corporate shareholders of quali8 fied investment entities. 

9 For purposes of the preceding sentence, any 

10 amount includible in gross income under section 

11 852(b)(3)(D) shall be treated as a capital gain 

12 dividend and an S corporation shall not be 

13 treated as a corporation. 

14 ‘‘(C) EXCEPTION FOR QUALIFICATION

15 PURPOSES.—This section shall not apply for 

16 purposes of sections 851(b) and 856(c). 

17 ‘‘(D) EXCEPTION FOR CERTAIN TAXES IM18 POSED AT ENTITY LEVEL.— 

19 ‘‘(i) TAX ON FAILURE TO DISTRIBUTE

20 ENTIRE GAIN.—If any amount is subject to 

21 tax under section 852(b)(3)(A) for any 

22 taxable year, the amount on which tax is 

23 imposed under such section shall be in24 creased by the percentage determined 

25 under subparagraph (B)(i)(II). A similar 


smartinez on PROD1PC64 with BILLS
12 

•HR 470 IH

1 rule shall apply in the case of any amount 

2 subject to tax under paragraph (2) or (3) 

3 of section 857(b) to the extent attributable 

4 to the excess of the net capital gain over 

5 the deduction for dividends paid deter6 mined with reference to capital gain divi7 dends only. The first sentence of this 

8 clause shall not apply to so much of the 

9 amount subject to tax under section 

10 852(b)(3)(A) as is designated by the com11 pany under section 852(b)(3)(D). 

12 ‘‘(ii) OTHER TAXES.—This section 

13 shall not apply for purposes of determining 

14 the amount of any tax imposed by para15 graph (4), (5), or (6) of section 857(b). 

16 ‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN

17 ENTITY.— 

18 ‘‘(A) REGULATED INVESTMENT COMPA19 NIES.—Stock in a regulated investment com20 pany (within the meaning of section 851) shall 

21 be an indexed asset for any calendar quarter in 

22 the same ratio as— 

23 ‘‘(i) the average of the fair market 

24 values of the indexed assets held by such 


smartinez on PROD1PC64 with BILLS
13 

•HR 470 IH

1 company at the close of each month during 

2 such quarter, bears to 

3 ‘‘(ii) the average of the fair market 

4 values of all assets held by such company 

5 at the close of each such month. 

6 ‘‘(B) REAL ESTATE INVESTMENT

7 TRUSTS.—Stock in a real estate investment 

8 trust (within the meaning of section 856) shall 

9 be an indexed asset for any calendar quarter in 

10 the same ratio as— 

11 ‘‘(i) the fair market value of the in12 dexed assets held by such trust at the close 

13 of such quarter, bears to 

14 ‘‘(ii) the fair market value of all as15 sets held by such trust at the close of such 

16 quarter. 

17 ‘‘(C) RATIO OF 80 PERCENT OR MORE.—If 

18 the ratio for any calendar quarter determined 

19 under subparagraph (A) or (B) would (but for 

20 this subparagraph) be 80 percent or more, such 

21 ratio for such quarter shall be 100 percent. 

22 ‘‘(D) RATIO OF 20 PERCENT OR LESS.—If 

23 the ratio for any calendar quarter determined 

24 under subparagraph (A) or (B) would (but for 


smartinez on PROD1PC64 with BILLS
14 

•HR 470 IH

1 this subparagraph) be 20 percent or less, such 

2 ratio for such quarter shall be zero. 

3 ‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For 

4 purposes of this paragraph, a qualified invest5 ment entity which holds a partnership interest 

6 shall be treated (in lieu of holding a partnership 

7 interest) as holding its proportionate share of 

8 the assets held by the partnership. 

9 ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS10 TRIBUTIONS.—Except as otherwise provided by the 

11 Secretary, a distribution with respect to stock in a 

12 qualified investment entity which is not a dividend 

13 and which results in a reduction in the adjusted 

14 basis of such stock shall be treated as allocable to 

15 stock acquired by the taxpayer in the order in which 

16 such stock was acquired. 

17 ‘‘(4) QUALIFIED INVESTMENT ENTITY.—For 

18 purposes of this subsection, the term ‘qualified in19 vestment entity’ means— 

20 ‘‘(A) a regulated investment company 

21 (within the meaning of section 851), and 

22 ‘‘(B) a real estate investment trust (within 

23 the meaning of section 856). 

24 ‘‘(f) OTHER PASS-THRU ENTITIES.— 

25 ‘‘(1) PARTNERSHIPS.— 


smartinez on PROD1PC64 with BILLS
15 

•HR 470 IH

1 ‘‘(A) IN GENERAL.—In the case of a part2 nership, the adjustment made under subsection 

3 (a) at the partnership level shall be passed 

4 through to the partners. 

5 ‘‘(B) SPECIAL RULE IN THE CASE OF SEC6 TION 754 ELECTIONS.—In the case of a transfer 

7 of an interest in a partnership with respect to 

8 which the election provided in section 754 is in 

9 effect— 

10 ‘‘(i) the adjustment under section 

11 743(b)(1) shall, with respect to the trans12 feror partner, be treated as a sale of the 

13 partnership assets for purposes of applying 

14 this section, and 

15 ‘‘(ii) with respect to the transferee 

16 partner, the partnership’s holding period 

17 for purposes of this section in such assets 

18 shall be treated as beginning on the date 

19 of such adjustment. 

20 ‘‘(2) S CORPORATIONS.—In the case of an S 

21 corporation, the adjustment made under subsection 

22 (a) at the corporate level shall be passed through to 

23 the shareholders. This section shall not apply for 

24 purposes of determining the amount of any tax im25 posed by section 1374 or 1375. 


smartinez on PROD1PC64 with BILLS
16 

•HR 470 IH

1 ‘‘(3) COMMON TRUST FUNDS.—In the case of a 

2 common trust fund, the adjustment made under sub3 section (a) at the trust level shall be passed through 

4 to the participants. 

5 ‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

6 DETERMINING LOSS ON SALE OF INTEREST IN ENTI7 TY.—Notwithstanding the preceding provisions of 

8 this subsection, for purposes of determining the 

9 amount of any loss on a sale or exchange of an in10 terest in a partnership, S corporation, or common 

11 trust fund, the adjustment made under subsection 

12 (a) shall not be taken into account in determining 

13 the adjusted basis of such interest. 

14 ‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.— 

15 ‘‘(1) IN GENERAL.—This section shall not apply 

16 to any sale or other disposition of property between 

17 related persons except to the extent that the basis 

18 of such property in the hands of the transferee is a 

19 substituted basis. 

20 ‘‘(2) RELATED PERSONS DEFINED.—For pur21 poses of this section, the term ‘related persons’ 

22 means— 

23 ‘‘(A) persons bearing a relationship set 

24 forth in section 267(b), and 


smartinez on PROD1PC64 with BILLS
17 

•HR 470 IH

1 ‘‘(B) persons treated as single employer 

2 under subsection (b) or (c) of section 414. 

3 ‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST4 MENT.—If any person transfers cash, debt, or any other 

5 property to another person and the principal purpose of 

6 such transfer is to secure or increase an adjustment under 

7 subsection (a), the Secretary may disallow part or all of 

8 such adjustment or increase. 

9 ‘‘(i) SPECIAL RULES.—For purposes of this section— 

10 ‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If 

11 there is an addition to the adjusted basis of any tan12 gible property or of any stock in a corporation dur13 ing the taxable year by reason of an improvement to 

14 such property or a contribution to capital of such 

15 corporation— 

16 ‘‘(A) such addition shall never be taken 

17 into account under subsection (c)(1)(A) if the 

18 aggregate amount thereof during the taxable 

19 year with respect to such property or stock is 

20 less than $1,000, and 

21 ‘‘(B) such addition shall be treated as a 

22 separate asset acquired at the close of such tax23 able year if the aggregate amount thereof dur24 ing the taxable year with respect to such prop25 erty or stock is $1,000 or more. 


smartinez on PROD1PC64 with BILLS
18 

•HR 470 IH

1 A rule similar to the rule of the preceding sentence 

2 shall apply to any other portion of an asset to the 

3 extent that separate treatment of such portion is ap4 propriate to carry out the purposes of this section. 

5 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

6 THROUGHOUT HOLDING PERIOD.—The applicable in7 flation adjustment shall be appropriately reduced for 

8 periods during which the asset was not an indexed 

9 asset. 

10 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU11 TIONS.—A distribution with respect to stock in a 

12 corporation which is not a dividend shall be treated 

13 as a disposition. 

14 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

15 LOSS.—To the extent that (but for this paragraph) 

16 this section would create or increase a net ordinary 

17 loss to which section 1231(a)(2) applies or an ordi18 nary loss to which any other provision of this title 

19 applies, such provision shall not apply. The taxpayer 

20 shall be treated as having a long-term capital loss in 

21 an amount equal to the amount of the ordinary loss 

22 to which the preceding sentence applies. 

23 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

24 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1) 

25 WITH RESPECT TO THE TAXPAYER.—If there has 


smartinez on PROD1PC64 with BILLS
19 

•HR 470 IH

1 been a prior application of subsection (a)(1) to an 

2 asset while such asset was held by the taxpayer, the 

3 date of acquisition of such asset by the taxpayer 

4 shall be treated as not earlier than the date of the 

5 most recent such prior application. 

6 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

7 such regulations as may be necessary or appropriate to 

8 carry out the purposes of this section. 

9 ‘‘(k) TERMINATION.—For purposes of this section, 

10 the term ‘indexed asset’ shall not include any asset ac11 quired after December 31, 2009.’’. 

12 (b) CLERICAL AMENDMENT.—The table of sections 

13 for part II of subchapter O of chapter 1 is amended by 

14 striking the item relating to section 1023 and by inserting 

15 after the item relating to section 1022 the following new 

16 items: 

‘‘Sec. 1022. Indexing of certain assets for purposes of determining gain or loss. 

‘‘Sec. 1023. Cross references.’’. 

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

18 this section shall apply to sales and other dispositions of 

19 indexed assets after the date of the enactment of this Act, 

20 in taxable years ending after such date. 


smartinez on PROD1PC64 with BILLS
20 

•HR 470 IH

1 SEC. 112. REDUCED CAPITAL GAINS RATE FOR CORPORA2 TIONS. 

3 (a) IN GENERAL.—Section 1201 of the Internal Rev4 enue Code of 1986 is amended by striking ‘‘35 percent’’ 

5 both places it appears and inserting ‘‘15 percent’’. 

6 (b) ALTERNATIVE MINIMUM TAX.—Section 55(b) of 

7 such Code is amended by adding at the end the following 

8 new paragraph: 

9 ‘‘(5) MAXIMUM RATE OF TAX ON NET CAPITAL

10 GAIN OF CORPORATIONS.—The amount determined 

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

12 of— 

13 ‘‘(A) the amount determined under such 

14 paragraph computed at the rates and in the 

15 same manner as if this paragraph had not been 

16 enacted on the taxable excess reduced by the 

17 net capital gain, plus 

18 ‘‘(B) the amount determined under section 

19 1201.’’. 

20 (c) TECHNICAL AMENDMENTS.— 

21 (1) Section 1445(e)(1) of such Code, as amend22 ed by section 104, is amended by striking ‘‘25 per23 cent (or, to the extent provided in regulations, 15 

24 percent)’’ and inserting ‘‘15 percent’’. 


smartinez on PROD1PC64 with BILLS
21 

•HR 470 IH

1 (2) Section 1445(e)(2) of such Code, as so 

2 amended, is amended by striking ‘‘25 percent’’ and 

3 inserting ‘‘15 percent’’. 

4 (3) Section 7518(g)(6)(A) of such Code is 

5 amended by striking ‘‘(34 percent in the case of a 

6 corporation)’’. 

7 (4) Section 607(h)(6)(A) of the Merchant Ma8 rine Act, 1936 is amended by striking ‘‘(34 percent 

9 in the case of a corporation)’’. 

10 (d) EFFECTIVE DATE.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section 

13 shall apply to taxable years beginning after Decem14 ber 31, 2008. 

15 (2) WITHHOLDING.—The amendment made by 

16 subsection (c)(2) shall apply to amounts paid after 

17 the date of the enactment of this Act. 

18 Subtitle C—Other Provisions 

19 Related to Businesses 

20 SEC. 121. REPEAL OF CERTAIN LIMITATIONS ON THE EX21 PENSING OF SECTION 179 PROPERTY. 

22 (a) IN GENERAL.—Section 179 of the Internal Rev23 enue Code of 1986 is amended by striking subsection (b) 

24 and by redesignating subsections (c), (d), and (e) as sub25 sections (b), (c), and (d), respectively. 


smartinez on PROD1PC64 with BILLS
22 

•HR 470 IH

1 (b) EXPENSING OF SECTION 1250 PROPERTY.—Sub2 paragraph (B) of section 179(c)(1) of such Code, as redes3 ignated by subsection (a), is amended by inserting ‘‘or sec4 tion 1250 property (as defined in section 1250(c))’’ after 

5 ‘‘section 1245 property (as defined in section 

6 1245(a)(3))’’. 

7 (c) CONFORMING AMENDMENTS.— 

8 (1) Subsection (c) of section 179 of such Code, 

9 as redesignated by subsection (a), is amended by 

10 striking paragraphs (6) and (8), and by redesig11 nating paragraphs (7), (9), and (10) as paragraphs 

12 (6), (7), and (8), respectively. 

13 (2) Paragraph (6) of section 179(c) of such 

14 Code, as redesignated by paragraph (1) and sub15 section (a), is amended by striking ‘‘paragraphs (2) 

16 and (6)’’ and inserting ‘‘paragraph (2)’’. 

17 (3) Section 179 of such Code, as amended by 

18 subsection (a), is amended by striking subsection 

19 (d). 

20 (4) Sections 42(d)(2)(B)(i), 1397D(d)(1), 

21 1400B(b)(4)(A)(i), and 1400F(b)(4)(A)(i) of such 

22 Code are each amended by striking ‘‘section 

23 179(d)(2)’’ and inserting ‘‘section 179(c)(2)’’. 

24 (5) Subclause (I) of section 42(d)(2)(D)(iii) of 

25 such Code is amended— 


smartinez on PROD1PC64 with BILLS
23 

•HR 470 IH

1 (A) by striking ‘‘section 179(d)’’ and in2 serting ‘‘section 179(c)’’, and 

3 (B) by striking ‘‘section 179(d)(7)’’ and 

4 inserting ‘‘section 179(c)(6)’’. 

5 (6)(A) Subpart B of part III of subchapter U 

6 of chapter 1 of such Code is hereby repealed. 

7 (B) The table of subparts for such part III is 

8 amended by striking the item relating to subpart B. 

9 (7)(A) Part III of subchapter X of chapter 1 of 

10 such Code is amended by striking section 1400J. 

11 (B) The table of sections for such part is 

12 amended by striking the item relating to section 

13 1400J. 

14 (C) Paragraph (3) of section 1400E(b) of such 

15 Code is amended by striking ‘‘sections 1400F and 

16 1400J’’ and inserting ‘‘section 1400F’’. 

17 (8) Clause (iv) of section 1400L(b)(2)(A) of 

18 such Code is amended by striking ‘‘section 179(d)’’ 

19 and inserting ‘‘section 179(c)’’. 

20 (9) Section 1400L of such Code is amended by 

21 striking subsection (f). 

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

23 this section shall apply to property placed in service in 

24 taxable years beginning after December 31, 2008. 


smartinez on PROD1PC64 with BILLS
24 

•HR 470 IH

1 SEC. 122. RESEARCH CREDIT MADE PERMANENT. 

2 (a) IN GENERAL.—Section 41 of the Internal Rev3 enue Code of 1986 (relating to credit for increasing re4 search activities) is amended by striking subsection (h). 

5 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

6 section 45C(b) of such Code is amended by striking sub7 paragraph (D). 

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

9 this section shall apply to amounts paid or incurred after 

10 December 31, 2009. 

11 SEC. 123. 7-YEAR CARRYBACK OF NET OPERATING LOSSES. 

12 (a) IN GENERAL.—Clause (i) section 172(b)(1)(A) of 

13 the Internal Revenue Code of 1986 is amended by striking 

14 ‘‘2 taxable years’’ and inserting ‘‘7 taxable years’’. 

15 (b) CONFORMING AMENDMENTS.— 

16 (1) Paragraph (1) of section 172(b) of such 

17 Code is amended by striking subparagraphs (F), 

18 (G), (H), (I), and (J). 

19 (2) Section 172 of such Code is amended by 

20 striking subsections (i), (j), and (k) and by redesig21 nating subsection (l) as subsection (i). 

22 (c) EFFECTIVE DATE.— 

23 (1) IN GENERAL.—Except as provided in para24 graph (2), the amendments made by this section 

25 shall apply to net operating losses for taxable years 

26 ending after December 31, 2007. 


smartinez on PROD1PC64 with BILLS
25 

•HR 470 IH

1 (2) ELECTION.—In the case of a net operating 

2 loss for a taxable year ending during 2008, any elec3 tion made under section 172(b)(3) of the Internal 

4 Revenue Code of 1986 may (notwithstanding such 

5 section) be revoked before January 1, 2010. 

6 Subtitle D—Other Provisions 

7 Relating to Individuals 

8 SEC. 131. CHILD TAX CREDIT INCREASED AND MADE PER9 MANENT. 

10 (a) INCREASED CREDIT.—Subsection (a) of section 

11 24 of the Internal Revenue Code of 1986 is amended by 

12 striking ‘‘$1,000’’ and inserting ‘‘$5,000’’. 

13 (b) INCREASED CREDIT NOT REFUNDABLE.—Sub14 paragraph (A) of section 24(d)(1) of such Code is amend15 ed to read as follows: 

16 ‘‘(A) the credit which would be allowed 

17 under this section— 

18 ‘‘(i) without regard to this subsection 

19 and the limitation under section 26(a)(2) 

20 or subsection (b)(3), as the case may be, 

21 and 

22 ‘‘(ii) if subsection (a) were applied by 

23 substituting ‘$1,000’ for ‘$5,000’, or’’. 


smartinez on PROD1PC64 with BILLS
26 

•HR 470 IH

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

2 this section shall apply to taxable years beginning after 

3 December 31, 2008. 

4 SEC. 132. DISTRIBUTIONS NOT REQUIRED FROM INDIVIDUAL RETIREMENT PLANS AT AGE 701 5 ⁄2. 

6 Paragraph (9) of section 401(a) of the Internal Rev7 enue Code of 1986 (relating to required distributions) is 

8 amended by adding at the end the following new subpara9 graph: 

10 ‘‘(I) EXCEPTION FOR INDIVIDUAL RETIRE11 MENT PLANS.—The requirements of this para12 graph shall not apply to any individual retire13 ment plan for any calendar year after 2009.’’. 

14 SEC. 133. NO IRA DISTRIBUTION DURING 2009 INCLUDED IN 

15 GROSS INCOME. 

16 Subsection (d) of section 408 of the Internal Revenue 

17 Code of 1986 (relating to individual retirement accounts) 

18 is amended by adding at the end the following new para19 graph: 

20 ‘‘(10) DISTRIBUTIONS DURING 2009.— 

21 ‘‘(A) IN GENERAL.—Gross income of an 

22 individual for the taxable year does not include 

23 any distribution during 2009 from an individual 

24 retirement plan (other than a plan described in 

25 subsection (k) or (p)) to the extent such disVerDate Nov 24 2008 03:44 Jan 15, 2009 Jkt 079200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H470.IH H470

smartinez on PROD1PC64 with BILLS
27 

•HR 470 IH

1 tribution is otherwise includible in gross in2 come. 

3 ‘‘(B) APPLICATION OF SECTION 72.—Not4 withstanding section 72, in determining the ex5 tent to which an amount is treated as otherwise 

6 includible in gross income for purposes of sub7 paragraph (A), the aggregate amount distrib8 uted from an individual retirement plan shall be 

9 treated as includible in gross income to the ex10 tent that such amount does not exceed the ag11 gregate amount which would have been so in12 cludible if all amounts from all individual retire13 ment plans were distributed. Proper adjust14 ments shall be made in applying section 72 to 

15 other distributions in such taxable year and 

16 subsequent taxable years.’’. 


smartinez on PROD1PC64 with BILLS
28 

•HR 470 IH

1 TITLE II—ACROSS-THE-BOARD 

2 RESCISSIONS IN NON-DE3 FENSE DISCRETIONARY 

4 SPENDING FOR FISCAL YEAR 

5 2009 

6 SEC. 201. ACROSS-THE-BOARD RESCISSIONS IN NON-DE7 FENSE DISCRETIONARY SPENDING FOR FIS8 CAL YEAR 2009. 

9 (a) ACROSS-THE-BOARD RESCISSIONS.—There is 

10 hereby rescinded an amount equal to 1 percent of— 

11 (1) the budget authority provided (or obligation 

12 limitation imposed) for fiscal year 2009 for any non13 defense discretionary account in any fiscal year 2009 

14 appropriation Act; 

15 (2) the budget authority provided in any ad16 vance appropriation for fiscal year 2009 for any 

17 non-defense discretionary account in any prior fiscal 

18 year appropriation Act; and 

19 (3) the contract authority provided in fiscal 

20 year 2009 for any program that is subject to a limi21 tation contained in any fiscal year 2009 appropria22 tion Act for any non-defense discretionary account. 

23 (b) NON-DEFENSE DISCRETIONARY ACCOUNT.—For 

24 purposes of subsection (a), the term ‘‘non-defense discreVerDate Nov 24 2008 03:44 Jan 15, 2009 Jkt 079200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\H470.IH H470

smartinez on PROD1PC64 with BILLS
29 

•HR 470 IH

1 tionary account’’ means any discretionary account, other 

2 than— 

3 (1) any account included in a Department of 

4 Defense Appropriations Act; 

5 (2) any account included in a Military Quality 

6 of Life and Veterans Affairs Appropriations Act; or 

7 (3) any account for Department of Energy de8 fense activities included in an Energy and Water 

9 Development Appropriations Act. 

10 (c) PROPORTIONATE APPLICATION.—Any rescission 

11 made by subsection (a) shall be applied proportionately— 

12 (1) to each discretionary account and each item 

13 of budget authority described in such subsection; 

14 and 

15 (2) within each such account and item, to each 

16 program, project, and activity (with programs, 

17 projects, and activities as delineated in the appro18 priation Act or accompanying reports for the rel19 evant fiscal year covering such account or item, or 

20 for accounts and items not included in appropriation 

21 Acts, as delineated in the most recently submitted 

22 President’s budget). 

23 (d) SUBSEQUENT APPROPRIATION LAWS.—In the 

24 case of any fiscal year 2009 appropriation Act enacted 

25 after the enactment of this section, any rescission required 


smartinez on PROD1PC64 with BILLS
30 

•HR 470 IH

1 by subsection (a) shall take effect immediately after the 

2 enactment of such Act. 

3 (e) OMB REPORT.—Within 30 days after the enact4 ment of this section (or, if later, 30 days after the enact5 ment of any fiscal year 2009 appropriation Act), the Di6 rector of the Office of Management and Budget shall sub7 mit to the Committees on Appropriations of the House 

8 of Representatives and the Senate a report specifying the 

9 account and amount of each rescission made pursuant to 

10 subsection (a). 

11 TITLE III—INCREASED 

12 INCENTIVES FOR EDUCATION 

13 SEC. 301. INCREASED DEDUCTION FOR QUALIFIED HIGHER 

14 EDUCATION EXPENSES. 

15 (a) IN GENERAL.—Paragraph (2) of section 222(b) 

16 of the Internal Revenue Code of 1986 (relating to dollar 

17 limitations on qualified tuition and related expenses) is 

18 amended to read as follows: 

19 ‘‘(2) DOLLAR LIMITATIONS.— 

20 ‘‘(A) IN GENERAL.—In the case of any 

21 taxable year beginning after 2008, the applica22 ble dollar amount shall be equal to— 

23 ‘‘(i) in the case of a taxpayer whose 

24 adjusted gross income for the taxable year 


smartinez on PROD1PC64 with BILLS
31 

•HR 470 IH

1 does not exceed $75,000 ($150,000 in the 

2 case of a joint return), $6,000, 

3 ‘‘(ii) in the case of a taxpayer not de4 scribed in clause (i) whose adjusted gross 

5 income for the taxable year does not ex6 ceed $90,000 ($180,000 in the case of a 

7 joint return), $2,000, and 

8 ‘‘(iii) in the case of any other tax9 payer, zero. 

10 ‘‘(B) ADJUSTED GROSS INCOME.—For 

11 purposes of this paragraph, adjusted gross in12 come shall be determined— 

13 ‘‘(i) without regard to this section and 

14 sections 199, 911, 931, and 933, and 

15 ‘‘(ii) after application of sections 86, 

16 135, 137, 219, 221, and 469.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2008. 

20 SEC. 302. INCREASED DEDUCTION FOR INTEREST ON STU21 DENT LOANS. 

22 (a) INCREASED DEDUCTION.—Paragraph (1) of sec23 tion 223(b) of the Internal Revenue Code of 1986 (relat24 ing to interest on education loans) is amended to read as 

25 follows: 


smartinez on PROD1PC64 with BILLS
32 

•HR 470 IH

1 ‘‘(1) MAXIMUM DEDUCTION.—Except as pro2 vided in paragraph (2), the deduction allowed by 

3 subsection (a) for the taxable year shall not exceed 

4 $3,750.’’. 

5 (b) EXPANDED INCOME ELIGIBILITY.—Subclause 

6 (II) of section 223(b)(2)(B)(i) of such Code is amended 

7 by striking ‘‘$50,000 ($100,000’’ and inserting ‘‘$75,000 

8 ($150,000’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2008. 

Æ 


smartinez on PROD1PC64 with BILLS