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107TH CONGRESS

1ST SESSION H. R. 168

To amend the Internal Revenue Code of 1986 to allow individuals an exclusion

from gross income for certain amounts of capital gains distributions

from regulated investment companies.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 3, 2001

Mr. SAXTON (for himself, Mr. ARMEY, Mr. DELAY, Mr. ANDREWS, Mr. COX,

Mr. OXLEY, Mr. BALLENGER, Mrs. JOHNSON of Connecticut, Mr. JONES

of North Carolina, Mr. KINGSTON, Mr. KOLBE, Mr. NETHERCUTT, Mr.

SHAYS, Mr. WELDON of Florida, Mr. GILCHREST, Mr. SCHAFFER, and

Mr. FOSSELLA) 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 allow individuals an exclusion from gross income for certain

amounts of capital gains distributions from regulated

investment companies.

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. PARTIAL EXCLUSION OF CAPITAL GAINS DIS2 TRIBUTIONS FROM REGULATED INVESTMENT

3 COMPANIES.

4 (a) IN GENERAL.—Part III of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to

6 items specifically excluded from gross income) is amended

7 by inserting after section 115 the following new section:

8 ‘‘SEC. 116. PARTIAL EXCLUSION OF CAPITAL GAINS DIS9 TRIBUTIONS FROM REGULATED INVESTMENT

10 COMPANIES.

11 ‘‘(a) IN GENERAL.—In the case of an individual,

12 gross income shall not include any capital gain dividend—

13 ‘‘(1) which is distributed by a regulated invest14 ment company to which part I of subchapter M ap15 plies, and

16 ‘‘(2) which is automatically reinvested by the

17 company in the stock of such company with respect

18 to which the dividend is distributed.

19 ‘‘(b) MAXIMUM EXCLUSION.—The amount excluded

20 from gross income under subsection (a) for the taxable

21 year shall not exceed—

22 ‘‘(1) $3,000, or

23 ‘‘(2) in the case of a joint return, twice the

24 amount applicable under paragraph (1).

25 ‘‘(c) CAPITAL GAIN DIVIDEND.—For purposes of this

26 section, the term ‘capital gain dividend’ means—
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1 ‘‘(1) any capital gain dividend (as defined by

2 section 852(b)(3)(C)), and

3 ‘‘(2) the portion of any other dividend des4 ignated by the company (under rules similar to the

5 rules of such section) as representing such dividend’s

6 proportionate share of the net short-term capital

7 gain of the company.

8 ‘‘(d) INFLATION ADJUSTMENT OF MAXIMUM EXCLU9 SION.—

10 ‘‘(1) IN GENERAL.—In the case of any taxable

11 year beginning in a calendar year after 2000, the

12 $3,000 amount in subsection (b)(1) shall be in13 creased by an amount equal to—

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

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for the calendar

17 year in which the taxable year begins, deter18 mined by substituting ‘calendar year 1999’ for

19 ‘calendar year 1992’ in subparagraph (B)

20 thereof.

21 ‘‘(2) ROUNDING RULES.—If any amount after

22 adjustment under paragraph (1) is not a multiple of

23 $100, such amount shall be rounded to the nearest

24 multiple of $100.
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1 ‘‘(e) NO BASIS ADJUSTMENT.—No adjustment shall

2 be made to the taxpayer’s basis in the shares of the regu3 lated investment company by reason of any amount ex4 cluded from gross income under this section.’’

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

6 for part III of subchapter B of chapter 1 of such Code

7 is amended by inserting after the item relating to section

8 115 the following new item:

‘‘Sec. 116. Partial exclusion of capital gains distributions from

regulated investment companies.’’

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

10 this section shall apply to taxable years beginning after

11 December 31, 1999.

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