I 

108TH CONGRESS 

1ST SESSION H. R. 971

To amend the Internal Revenue Code of 1986 to exclude $100 of interest 

from gross income and to raise the threshhold for reporting interest 

paid to $100. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 27, 2003

Mr. BACHUS 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 

$100 of interest from gross income and to raise the 

threshhold for reporting interest paid to $100.

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 ‘‘Small Savers Relief 

5 Act of 2003’’. 

6 SEC. 2. EXCLUSION OF INTEREST RECEIVED BY INDIVID7 UALS. 

8 (a) IN GENERAL.—Part III of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to 
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1 amounts specifically excluded from gross income) is 

2 amended by inserting after section 115 the following new 

3 section: 

4 ‘‘SEC. 116. EXCLUSION OF INTEREST RECEIVED BY INDIVID5 UALS. 

6 ‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in7 come does not include interest received during the taxable 

8 year by an individual. 

9 ‘‘(b) LIMITATION.—The aggregate amount excluded 

10 under subsection (a) for any taxable year shall not exceed 

11 $100 ($200 in the case of a joint return). 

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

13 term ‘interest’ means—

14 ‘‘(1) interest on deposits with a bank (as de15 fined in section 581), 

16 ‘‘(2) amounts (whether or not designated as in17 terest) paid in respect of deposits, investment certifi18 cates, or withdrawable or repurchasable shares, by—

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

20 bank, domestic building and loan association, 

21 industrial loan association or bank, or credit 

22 union, or 

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

24 which is chartered and supervised under Fed25 eral or State law, 
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1 the deposits or accounts in which are insured under 

2 Federal or State law or which are protected and 

3 guaranteed under State law, 

4 ‘‘(3) interest on—

5 ‘‘(A) evidences of indebtedness (including 

6 bonds, debentures, notes, and certificates) 

7 issued by a domestic corporation in registered 

8 form, and 

9 ‘‘(B) to the extent provided in regulations 

10 prescribed by the Secretary, other evidences of 

11 indebtedness issued by a domestic corporation 

12 of a type offered by corporations to the public, 

13 ‘‘(4) interest on obligations of the United 

14 States, a State, or a political subdivision of a State 

15 (not excluded from gross income of the taxpayer 

16 under any other provision of law), and 

17 ‘‘(5) interest attributable to participation shares 

18 in a trust established and maintained by a corpora19 tion established pursuant to Federal law. 

20 ‘‘(d) SPECIAL RULES.—For purposes of this sec21 tion—

22 ‘‘(1) DISTRIBUTIONS FROM REGULATED IN23 VESTMENT COMPANIES AND REAL ESTATE INVEST24 MENT TRUSTS.—Subsection (a) shall apply with re25 spect to distributions by—
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1 ‘‘(A) regulated investment companies to 

2 the extent provided in section 854(c), and 

3 ‘‘(B) real estate investment trusts to the 

4 extent provided in section 857(c). 

5 ‘‘(2) DISTRIBUTIONS BY A TRUST.—For pur6 poses of subsection (a), the amount of interest prop7 erly allocable to a beneficiary under section 652 or 

8 662 shall be deemed to have been received by the 

9 beneficiary ratably on the same date that the inter10 est was received by the estate or trust. 

11 ‘‘(3) CERTAIN NONRESIDENT ALIENS INELI12 GIBLE FOR EXCLUSION.—In the case of a non13 resident alien individual, subsection (a) shall apply 

14 only—

15 ‘‘(A) in determining the tax imposed for 

16 the taxable year pursuant to section 871(b)(1) 

17 and only in respect of interest which are effec18 tively connected with the conduct of a trade or 

19 business within the United States, or 

20 ‘‘(B) in determining the tax imposed for 

21 the taxable year pursuant to section 877(b).’’

22 (b) CLERICAL AND CONFORMING AMENDMENTS.—

23 (1) The table of sections for part III of sub24 chapter B of chapter 1 of such Code is amended by 
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1 inserting after the item relating to section 115 the 

2 following new item:

‘‘Sec. 116. Exclusion of interest received by individuals who have 

attained age 65.’’

3 (2) Paragraph (2) of section 265(a) of such 

4 Code is amended by inserting before the period at 

5 the end thereof the following: ‘‘, or to purchase or 

6 carry obligations or shares, or to make deposits, to 

7 the extent the interest thereon is excludable from 

8 gross income under section 116’’. 

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

10 is amended by adding at the end thereof the fol11 lowing new sentence: 

12 ‘‘The proportionate share of each participant in the 

13 amount of interest received by the common trust fund and 

14 to which section 116 applies shall be considered for pur15 poses of such section as having been received by such par16 ticipant.’’

17 (4) Subsection (a) of section 643 of such Code 

18 is amended by redesignating paragraph (7) as para19 graph (8) and by inserting after paragraph (6) the 

20 following new paragraph:

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

22 amount of any interest excluded from gross income 

23 pursuant to section 116.’’
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1 (5) Section 854 of such Code is amended by 

2 adding at the end thereof the following new sub3 section: 

4 ‘‘(c) TREATMENT UNDER SECTION 116.—

5 ‘‘(1) IN GENERAL.—For purposes of section 

6 116, in the case of any dividend (other than a divi7 dend described in subsection (a)) received from a 

8 regulated investment company which meets the re9 quirements of section 852 for the taxable year in 

10 which it paid the dividend—

11 ‘‘(A) the entire amount of such dividend 

12 shall be treated as interest if the aggregate in13 terest received by such company during the tax14 able year equals or exceeds 75 percent of its 

15 gross income, or 

16 ‘‘(B) if subparagraph (A) does not apply, 

17 a portion of such dividend shall be treated as 

18 interest based on the portion of the company’s 

19 gross income which consists of aggregate inter20 est. 

21 For purposes of the preceding sentence, gross in22 come and aggregate interest received shall each be 

23 reduced by so much of the deduction allowable by 

24 section 163 for the taxable year as does not exceed 

25 aggregate interest received for the taxable year. 
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1 ‘‘(2) NOTICE TO SHAREHOLDERS.—The amount 

2 of any distribution by a regulated investment com3 pany which may be taken into account as interest 

4 for purposes of the exclusion under section 116 shall 

5 not exceed the amount so designated by the com6 pany in a written notice to its shareholders mailed 

7 not later than 45 days after the close of its taxable 

8 year. 

9 ‘‘(3) DEFINITIONS.—For purposes of this sub10 section—

11 ‘‘(A) The term ‘gross income’ does not in12 clude gain from the sale or other disposition of 

13 stock or securities. 

14 ‘‘(B) The term ‘aggregate interest re15 ceived’ includes only interest described in sec16 tion 116(c).’’

17 (6) Subsection (c) of section 857 of such Code 

18 is amended to read as follows: 

19 ‘‘(c) LIMITATIONS APPLICABLE TO DIVIDENDS RE20 CEIVED FROM REAL ESTATE INVESTMENT TRUSTS.—

21 ‘‘(1) DENIAL OF DIVIDENDS RECEIVED DEDUC22 TION.—For purposes of section 243 (relating to de23 ductions for dividends received by corporations), a 

24 dividend received from a real estate investment trust 
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1 which meets the requirements of this part shall not 

2 be considered as a dividend. 

3 ‘‘(2) TREATMENT AS INTEREST.—For purposes 

4 of section 116, in the case of a dividend (other than 

5 a capital gain dividend, as defined in subsection 

6 (b)(3)(C)) received from a real estate investment 

7 trust which meets the requirements of this part for 

8 the taxable year in which it paid the dividend—

9 ‘‘(A) such dividend shall be treated as in10 terest if the aggregate interest received by the 

11 real estate investment trust for the taxable year 

12 equals or exceeds 75 percent of its gross in13 come, or 

14 ‘‘(B) if subparagraph (A) does not apply, 

15 the portion of such dividend which bears the 

16 same ratio to the amount of such dividend as 

17 the aggregate interest received bears to gross 

18 income shall be treated as interest. 

19 ‘‘(3) ADJUSTMENTS TO GROSS INCOME AND AG20 GREGATE INTEREST RECEIVED.—For purposes of 

21 paragraph (2)—

22 ‘‘(A) gross income does not include the net 

23 capital gain, 

24 ‘‘(B) gross income and aggregate interest 

25 received shall each be reduced by so much of 
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1 the deduction allowable by section 163 for the 

2 taxable year (other than for interest on mort3 gages on real property owned by the real estate 

4 investment trust) as does not exceed aggregate 

5 interest received by the taxable year, and 

6 ‘‘(C) gross income shall be reduced by the 

7 sum of the taxes imposed by paragraphs (4), 

8 (5), and (6) of section 857(b). 

9 ‘‘(4) AGGREGATE INTEREST RECEIVED.—The 

10 term ‘aggregate interest received’ includes only in11 terest described in section 116(b). 

12 ‘‘(5) NOTICE TO SHAREHOLDERS.—The amount 

13 of any distribution by a real estate investment trust 

14 which may be taken into account as interest for pur15 poses of the exclusion under section 116 shall not 

16 exceed the amount so designated by the trust in a 

17 written notice to its shareholders mailed not later 

18 than 45 days after the close of its taxable year.’’

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

20 this section shall apply with respect to taxable years begin21 ning after December 31, 2002. 

22 SEC. 3. INCREASE IN MINIMUM AMOUNT OF INTEREST RE23 QUIRED TO BE REPORTED. 

24 (a) IN GENERAL.—Subsection (a) of section 6049 of 

25 the Internal Revenue Code of 1986 (relating to require-
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1 ments for reporting) is amended by striking ‘‘$10’’ each 

2 place it appears and inserting ‘‘$100’’. 

3 (b) CONFORMING AMENDMENT.—Section 

4 6049(d)(5)(C) of such Code is amended—

5 (1) in the text by striking ‘‘$10’’ and inserting 

6 ‘‘$100’’, and 

7 (2) in the heading by striking ‘‘$10’’ and insert8 ing ‘‘$100’’. 

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

10 this section shall apply with respect to taxable years begin11 ning after December 31, 2002.

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