I
106TH CONGRESS
1ST SESSION
H. R. 1928
To simplify certain provisions of the Internal Revenue Code of 1986.
IN THE HOUSE OF REPRESENTATIVES
MAY 25, 1999
Mr. HOUGHTON (for himself, Mrs. JOHNSON of Connecticut, and Mr.
ENGLISH) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To simplify certain provisions of the Internal Revenue Code
of 1986.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tax Simplification and Burden Reduction Act’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
TITLE I—ALTERNATIVE
MINIMUM TAX
SEC. 101. NONREFUNDABLE PERSONAL CREDITS ALLOWED
AGAINST ALTERNATIVE MINIMUM TAX.
(a) IN GENERAL.—Subsection (a) of section 26 (re-
lating to limitation based on tax liability; definition of tax
liability) is amended to read as follows:
‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The
aggregate amount of credits allowed by this subpart for
the taxable year shall not exceed the sum of—
‘‘(1) the taxpayer’s regular tax liability for the
taxable year, and
‘‘(2) the tax imposed for the taxable year by
section 55(a).’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (d) of section 24 is amended by
striking paragraph (2) and by redesignating para-
graph (3) as paragraph (2).
(2) Section 32 is amended by striking sub-
section (h).
(3) Section 904 is amended by striking sub-
section (h) and by redesignating subsections (i), (j),
and (k) as subsections (h), (i), and (j), respectively.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 102. EXEMPTION FROM ALTERNATIVE MINIMUM TAX
FOR INDIVIDUALS WHOSE MODIFIED AD-
JUSTED GROSS INCOME IS LESS THAN A
THRESHOLD AMOUNT.
(a) IN GENERAL.—Section 55 (relating to alternative
minimum tax imposed) is amended by adding at the end
the following new subsection:
‘‘(f) EXEMPTION FOR INDIVIDUALS.—
‘‘(1) IN GENERAL.—The tentative minimum tax
of any taxpayer (other than a corporation) shall be
zero for any taxable year if the modified adjusted
gross income of the taxpayer for such year does not
exceed the threshold amount.
‘‘(2) THRESHOLD AMOUNT.—For purposes of
paragraph (1), the threshold amount is—
‘‘(A) $120,000 in the case of a joint re-
turn,
‘‘(B) $85,000 in the case of an individual
who is not married, and
‘‘(C) one-half of the amount applicable
under subparagraph (A) in the case of a mar-
ried individual filing a separate return.
‘‘(3) MODIFIED
ADJUSTED
GROSS
INCOME.—
For purposes of paragraph (1), the term ‘modified
adjusted gross income’ means adjusted gross income
increased by any amount excluded from gross in-
come under section 911, 931, or 933.
‘‘(4) MARITAL STATUS.—For purposes of para-
graph (2), marital status shall be determined under
section 7703.
‘‘(5) ADJUSTMENT FOR INFLATION.—
‘‘(A) IN
GENERAL.—In the case of any
taxable year beginning in a calendar year after
2000, each dollar amount contained in para-
graph (2) shall be increased by an amount
equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins by substituting ‘calendar year 1999’
for ‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(B) ROUNDING.—If any increase deter-
mined under subparagraph (A) is not a multiple
of $50, such increase shall be rounded to the
next lowest multiple of $50.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 103. INCREASE IN AMOUNT OF GROSS RECEIPTS TEST
FOR 
EXEMPTION 
FOR 
SMALL 
CORPORA-
TIONS.
(a) IN GENERAL.—Paragraph (1) of section 55(e)
(relating to general rule for exemption for small corpora-
tions) is amended—
(1) 
in 
subparagraph 
(A) 
by 
striking
‘‘$7,500,000’’ each place it appears in the text and
heading and inserting ‘‘$10,000,000’’, and
(2) by striking subparagraph (B) and redesig-
nating subparagraphs (C) and (D) as subparagraphs
(B) and (C), respectively.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
TITLE II—PROVISIONS
RELATING TO INDIVIDUALS
SEC. 201. SIMPLIFICATION OF CAPITAL GAINS TAX.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 (relating to treatment of capital gains) is amended by
adding at the end the following new section:
‘‘SEC. 1203. CAPITAL GAINS DEDUCTION.
‘‘If for any taxable year a taxpayer other than a cor-
poration has a net capital gain, 50 percent of such gain
shall be a deduction from gross income.’’.
(b) DEDUCTION ALLOWABLE WHETHER
OR NOT
TAXPAYER ITEMIZES OTHER DEDUCTIONS.—
(1) Subsection (b) of section 63 is amended by
striking ‘‘and’’ at the end of paragraph (1), by strik-
ing the period at the end of paragraph (2) and in-
serting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph:
‘‘(3) the deduction allowed by section 1203.’’.
(2) Subsection (d) of section 63 is amended by
striking ‘‘and’’ at the end of paragraph (1), by strik-
ing the period at the end of paragraph (2) and in-
serting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph:
‘‘(3) the deduction allowed by section 1203.’’.
(c) MINIMUM TAX TREATMENT.—
(1) Paragraph (1) of section 56(b) is amended
by adding at the end the following new subpara-
graph:
‘‘(G) CAPITAL GAIN DEDUCTION NOT AP-
PLICABLE.—Section 1203 shall not apply.’’.
(2) Subsection (b) of section 55 is amended by
striking paragraph (3) and inserting the following
new paragraphs:
‘‘(3) MAXIMUM TAX ON NET CAPITAL GAIN.—
The amount of tax determined under the first sen-
tence of paragraph (1)(A)(i) shall not exceed the
sum of—
‘‘(A) the amount determined under such
first sentence computed at the rates and in the
same manner as if this paragraph had not been
enacted on the taxable excess reduced by the
net capital gain, plus
‘‘(B) a tax on the net capital gain deter-
mined by using the regular tax capital gains tax
rates.
‘‘(4) REGULAR TAX ON NET CAPITAL GAIN.—
For purposes of paragraph (3), the tax on the net
capital gain determined by using the regular tax
capital gains tax rates is the excess of—
‘‘(A) the tax that would be computed
under section 1 if net capital gain were deter-
mined with the adjustments under this part,
over
‘‘(B) the tax that would be so computed
under section 1 if the taxable income were re-
duced by 50 percent of the net capital gain as
so determined.’’.
(d) REPEAL OF TAX PREFERENCE FOR EXCLUSION
ON SMALL BUSINESS STOCK.—
(1) Subsection (a) of section 57 is amended by
striking paragraph (7).
(2) Subclause (II) of section 53(d)(1)(B)(ii) is
amended by striking ‘‘, (5), and (7)’’ and inserting
‘‘and (5)’’.
(e) TREATMENT OF COLLECTIBLES.—
(1) IN GENERAL.—Section 1222 is amended by
inserting after paragraph (11) the following new
paragraph:
‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—
‘‘(A) IN GENERAL.—Any gain or loss from
the sale or exchange of a collectible shall be
treated as a short-term capital gain or loss (as
the case may be), without regard to the period
such asset was held. The preceding sentence
shall apply only to the extent the gain or loss
is taken into account in computing taxable in-
come.
‘‘(B) TREATMENT OF CERTAIN SALES OF
INTERESTS IN PARTNERSHIPS, ETC.—For pur-
poses of subparagraph (A), any gain from the
sale or exchange of an interest in a partnership,
S corporation, or trust which is attributable to
unrealized appreciation in the value of collect-
ibles held by such entity shall be treated as gain
from the sale or exchange of a collectible. Rules
similar to the rules of section 751(f) shall apply
for purposes of the preceding sentence.
‘‘(C) COLLECTIBLE.—For purposes of this
paragraph, the term ‘collectible’ means any cap-
ital asset which is a collectible (as defined in
section 408(m) without regard to paragraph (3)
thereof).’’.
(2) 
CHARITABLE
DEDUCTION
NOT
AF-
FECTED.—
(A) Paragraph (1) of section 170(e) is
amended by adding at the end thereof the fol-
lowing new sentence: ‘‘For purposes of this
paragraph, section 1222 shall be applied with-
out regard to paragraph (12) thereof (relating
to special rule for collectibles).’’.
(B) Clause (iv) of section 170(b)(1)(C) is
amended by inserting before the period at the
end thereof the following: ‘‘and section 1222
shall be applied without regard to paragraph
(12) thereof (relating to special rule for collect-
ibles)’’.
(f) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Section 1 is amended by striking subsection
(h).
(2) Subparagraph (E) of section 163(d)(4) is
amended to read as follows:
‘‘(E) COORDINATION WITH CAPITAL GAINS
DEDUCTION.—The net capital gain taken into
account under section 1203 for any taxable
year shall be reduced (but not below zero) by
the amount which the taxpayer takes into ac-
count as investment income under subpara-
graph (B)(iii) for such year.’’.
(3) Paragraph (1) of section 170(e) is amended
by striking ‘‘the amount of gain’’ in the material fol-
lowing subparagraph (B)(ii) and inserting ‘‘50 per-
cent (100 percent in the case of a corporation) of
the amount of gain’’.
(4) Subparagraph (B) of section 172(d)(2) is
amended to read as follows:
‘‘(B) the exclusion under section 1202 and
the deduction under section 1203 shall not be
allowed.’’.
(5) The last sentence of section 453A(c)(3) is
amended by striking all that follows ‘‘long-term cap-
ital gain,’’ and inserting ‘‘the maximum rate on net
capital gain under section 1201 or the deduction
under section 1203 (whichever is appropriate) shall
be taken into account.’’.
(6)(A) Section 641(c)(2)(A) is amended by
striking ‘‘Except as provided in section 1(h), the’’
and inserting ‘‘The’’.
(B) Section 641(c)(2)(C) is amended by insert-
ing after clause (iii) the following new clause:
‘‘(iv) The deduction under section
1203.’’.
(7) Paragraph (4) of section 642(c) is amended
to read as follows:
‘‘(4) ADJUSTMENTS.—To the extent that the
amount otherwise allowable as a deduction under
this subsection consists of gain from the sale or ex-
change of capital assets held for more than 1 year,
proper adjustment shall be made for any exclusion
allowable under section 1202 and any deduction al-
lowable under section 1203 to the estate or trust. In
the case of a trust, the deduction allowed by this
subsection shall be subject to section 681 (relating
to unrelated business income).’’.
(8) Section 642 is amended by adding at the
end the following new subsection:
‘‘(j) CAPITAL GAINS DEDUCTION.—The deduction
under section 1203 to an estate or trust shall be computed
by excluding the portion (if any) of the gains for the tax-
able year which is includible by the income beneficiaries
under sections 652 and 662 (relating to inclusions of
amounts in gross income of beneficiaries of trusts) as gain
derived from the sale or exchange of capital assets.’’.
(9) The last sentence of section 643(a)(3) is
amended to read as follows: ‘‘The exclusion under
section 1202 and the deduction under section 1203
shall not be taken into account.’’.
(10) Subparagraph (C) of section 643(a)(6) is
amended by inserting ‘‘(i)’’ before ‘‘there shall’’ and
by inserting before the period ‘‘, and (ii) the deduc-
tion under section 1203 (relating to capital gains de-
duction) shall not be taken into account’’.
(11) Paragraph (4) of section 691(c) is amend-
ed by striking ‘‘1(h),’’ and by inserting ‘‘1203,’’
after ‘‘1202,’’.
(12) The second sentence of paragraph (2) of
section 871(a) is amended by striking ‘‘section
1202’’ and inserting ‘‘sections 1202 and 1203’’.
(13)(A) Paragraph (2) of section 904(b) is
amended by striking subparagraphs (A) and (C), by
redesignating subparagraph (B) as subparagraph
(A), and by inserting after subparagraph (A) (as so
redesignated) the following new subparagraph:
‘‘(B) OTHER TAXPAYERS.—In the case of
a taxpayer other than a corporation, taxable in-
come from sources outside the United States
shall include gain from the sale or exchange of
capital assets only to the extent of foreign
source capital gain net income.’’.
(B) Subparagraph (A) of section 904(b)(2), as
so redesignated, is amended—
(i) by striking all that precedes clause (i)
and inserting the following:
‘‘(A) CORPORATIONS.—In the case of a
corporation—’’, and
(ii) by striking in clause (i) ‘‘in lieu of ap-
plying subparagraph (A),’’.
(C) Paragraph (3) of section 904(b) is amended
by striking subparagraphs (D) and (E) and inserting
the following new subparagraph:
‘‘(D) RATE DIFFERENTIAL PORTION.—The
rate differential portion of foreign source net
capital gain, net capital gain, or the excess of
net capital gain from sources within the United
States over net capital gain, as the case may
be, is the same proportion of such amount as
the excess of the highest rate of tax specified in
section 11(b) over the alternative rate of tax
under section 1201(a) bears to the highest rate
of tax specified in section 11(b).’’.
(14) Paragraph (1) of section 1402(i) is amend-
ed by inserting ‘‘, and the deduction provided by sec-
tion 1203 shall not apply’’ before the period at the
end thereof.
(15) Paragraph (1) of section 1445(e) is
amended by striking ‘‘20 percent’’ and inserting
‘‘19.8 percent’’.
(16)(A) 
The 
second 
sentence 
of 
section
7518(g)(6)(A) is amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) applies’’, and
(ii) by striking ‘‘20 percent’’ and inserting
‘‘19.8 percent’’.
(B) 
The 
second 
sentence 
of 
section
607(h)(6)(A) of the Merchant Marine Act, 1936, is
amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) of such Code ap-
plies’’, and
(ii) by striking ‘‘20 percent’’ and inserting
‘‘19.8 percent’’.
(g) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter P of chapter 1 is amended by
adding at the end the following new item:
‘‘Sec. 1203. Capital gains deduction.’’.
(h) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to taxable years beginning
after December 31, 1999.
(2) WITHHOLDING.—The amendments made by
subsection (f)(15) shall apply only to amounts paid
after December 31, 1999.
(3) REPEAL OF ELECTION.—Section 311 of the
Taxpayer Relief Act of 1997 is amended by striking
subsection (e).
(4) COORDINATION
WITH
PRIOR
TRANSITION
RULE.—Any amount treated as long-term capital
gain by reason of paragraph (3) of section 1122(h)
of the Tax Reform Act of 1986 shall not be taken
into account for purposes of applying section 1203
of the Internal Revenue Code of 1986 (as added by
this section).
SEC. 202. SIMPLIFICATION OF DEDUCTION FOR POINTS ON
HOME MORTGAGE.
(a) IN GENERAL.—Paragraph (2) of section 461(g)
(relating to prepaid interest) is amended by adding at the
end the following new sentence: ‘‘This subsection also shall
not apply to points paid in respect of indebtedness secured
by such residence resulting from the refinancing of indebt-
edness meeting the requirements of the preceding sentence
(or this sentence), but only to the extent the amount of
the indebtedness resulting from such refinancing does not
exceed the amount of the refinanced indebtedness.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 203. INCREASE IN EXCLUSION FOR GROUP-TERM LIFE
INSURANCE PURCHASED FOR EMPLOYEES.
(a) IN GENERAL.—Paragraph (1) of section 79(a)
(relating to group-term life insurance purchased for em-
ployees) is amended by striking ‘‘$50,000’’ and inserting
‘‘$100,000’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 204. REPEAL OF PERCENTAGE LIMITATION ON CON-
TRIBUTIONS 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined contribution
plans) is amended by striking ‘‘25 percent of’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1999.
SEC. 205. REPEAL OF REQUIRED USE OF GRADUATED PER-
CENTAGE OF PRECEDING YEAR’S TAX TO DE-
TERMINE INSTALLMENTS OF ESTIMATED IN-
COME TAX DUE FOR CERTAIN TAXPAYERS.
(a) IN GENERAL.—Paragraph (1) of section 6654(d)
(relating to amount of installments) is amended by strik-
ing subparagraph (C).
(b) CONFORMING AMENDMENT.—Subparagraph (C)
of section 6654(i)(1) is amended by striking ‘‘and without
regard to subparagraph (C) of subsection (d)(1)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 206. STUDY ON RATIONALE FOR AND SIMPLIFICATION
OF HEAD OF HOUSEHOLD AND SURVIVING
SPOUSE FILING STATUSES.
(a) IN GENERAL.—The Secretary of the Treasury
shall conduct a study on whether the original rationale for
providing tax benefits through the filing statuses of head
of household and surviving spouse continues to apply, and,
if so, whether such benefits can be more simply provided
through other mechanisms.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Secretary shall submit
a report on the study conducted under subsection (a), to-
gether with recommendations thereon, to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate.
TITLE III—PROVISIONS
RELATING TO BUSINESSES
Subtitle A—General Provisions
SEC. 301. EXPENSING OF CERTAIN DEPRECIABLE BUSINESS
ASSETS.
(a) CERTAIN COMPUTER SOFTWARE ELIGIBLE FOR
EXPENSING.—Paragraph (1) of section 179(d) (relating
to section 179 property) is amended to read as follows:
‘‘(1) SECTION 179 PROPERTY.—For purposes of
this section, the term ‘section 179 property’ means
property—
‘‘(A) which is—
‘‘(i) tangible property (to which sec-
tion 168 applies), or
‘‘(ii) computer software described in
section 197(e)(3)(A)(i),
‘‘(B) which is section 1245 property (as
defined in section 1245(a)(3)), and
‘‘(C) which is acquired by purchase for use
in the active conduct of a trade or business.
Such term shall not include any property described
in section 50(b) and shall not include air condi-
tioning or heating units.’’.
(b) PERSONAL PROPERTY USED IN RENTAL PROP-
ERTY.—Paragraph (1) of section 179(d) (relating to sec-
tion 179 property), as amended by subsection (a), is
amended by inserting ‘‘(other than paragraph (2) there-
of)’’ after ‘‘section 50(b)’’.
(c) ADJUSTMENT FOR INFLATION.—Subsection (b)
of section 179 (relating to limitations) is amended by add-
ing at the end the following new paragraph:
‘‘(5) ADJUSTMENT FOR INFLATION.—
‘‘(A) IN
GENERAL.—In the case of any
taxable year beginning in a calendar year after
2003, the dollar amount contained in the table
in paragraph (1) applicable to such taxable year
shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins by substituting ‘calendar year 2002’
for ‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(B) ROUNDING.—If any increase deter-
mined under subparagraph (A) is not a multiple
of $50, such increase shall be rounded to the
next lowest multiple of $50.’’.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to property placed in
service after December 31, 1999.
SEC. 302. CASH METHOD OF ACCOUNTING.
(a) 
PERSONAL
SERVICE
CORPORATIONS.—Sub-
section (b) of section 448 (relating to exception to general
rule on limitation on use of cash method of accounting)
is amended—
(1) by striking paragraph (2), and
(2) by redesignating paragraph (3) as para-
graph (2).
(b) INCREASE IN GROSS RECEIPTS TEST AMOUNT.—
(1) IN
GENERAL.—Paragraph (2) of section
448(a) (relating to entities with gross receipts of not
more than $5,000,000), as redesignated by sub-
section (a)(2), is amended—
(A) by striking ‘‘$5,000,000’’ in the heading
and inserting ‘‘$10,000,000’’, and
(B) by striking ‘‘$5,000,000’’ in the text.
(2) GROSS
RECEIPTS
TEST
DEFINED.—Sub-
section (c) of section 448 (relating to $5,000,000
gross receipts test) is amended—
(A) by striking ‘‘$5,000,000’’ in the head-
ing and the first place it appears in paragraph
(1), and
(B) by striking ‘‘$5,000,000’’ the second
place it appears in paragraph (1) and inserting
‘‘$10,000,000’’.
(c) EFFECTIVE DATES.—
(1) PERSONAL SERVICE CORPORATIONS.—The
amendments made by subsection (a) shall apply to
taxable years beginning after December 31, 1999.
(2) GROSS RECEIPTS TEST.—The amendments
made by subsection (b) shall apply to determinations
of whether the requirement of section 448(b)(2) of
the Internal Revenue Code of 1986 (as amended by
this section) is met for any taxable year beginning
after December 31, 1999.
SEC. 303. GROSS RECEIPTS EXCEPTION TO INVENTORY
COST CAPITALIZATION RULES EXTENDED TO
PROPERTY PRODUCED BY THE TAXPAYER.
(a) IN GENERAL.—Subsection (b) of section 263A
(relating to property to which section applies) is amended
to read as follows:
‘‘(b) PROPERTY TO WHICH SECTION APPLIES.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section—
‘‘(A) PROPERTY
PRODUCED
BY
TAX-
PAYER.—This section shall apply to—
‘‘(i) IN GENERAL.—Real or tangible
personal property produced by the tax-
payer.
‘‘(ii) 
TANGIBLE
PERSONAL
PROP-
ERTY.—For purposes of clause (i), the
term ‘tangible personal property’ shall in-
clude a film, sound recording, video tape,
book, or similar property.
‘‘(B) PROPERTY ACQUIRED FOR RESALE.—
This section shall apply to real or personal
property described in section 1221(1) which is
acquired by the taxpayer for resale.
‘‘(2) EXCEPTION FOR TAXPAYER WITH GROSS
RECEIPTS OF $10,000,000 OR LESS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any personal property produced
during any taxable year by the taxpayer or ac-
quired during any taxable year by the taxpayer
for resale if the average annual gross receipts
of the taxpayer (or any predecessor) for the 3-
taxable year period ending with the taxable year
preceding such taxable year do not exceed
$10,000,000.
‘‘(B) AGGREGATION
RULES, 
ETC.—For
purposes of subparagraph (A), rules similar to
the rules of paragraphs (2) and (3) of section
448(c) shall apply.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
Subtitle B—S Corporations
SEC. 311. REPEAL OF LIMITATION ON NUMBER OF SHARE-
HOLDERS OF S CORPORATION SO LONG AS
SUCH CORPORATION IS NOT PUBLICLY TRAD-
ED.
(a) IN GENERAL.—Paragraph (1) of section 1361(b)
(relating to small business corporation) is amended by
striking subparagraph (A) and redesignating subpara-
graphs (B), (C), and (D) as subparagraphs (A), (B), and
(C), respectively.
(b) NOT PUBLICLY TRADED REQUIREMENT.—
(1) IN
GENERAL.—Paragraph (2) of section
1361(b) (defining ineligible corporation) is amended
by striking ‘‘or’’ at the end of subparagraph (C), by
striking the period at the end of subparagraph (D)
and inserting ‘‘, or’’ and by inserting after subpara-
graph (D) the following new subparagraph:
‘‘(E) a publicly traded corporation.’’.
(2) PUBLICLY
TRADED
CORPORATION
DE-
FINED.—Subsection (b) of section 1361 (relating to
small business corporation) is amended by adding at
the end the following new paragraph:
‘‘(4) PUBLICLY
TRADED
CORPORATION.—For
purposes of paragraph (2)(E), a corporation is a
publicly traded corporation if the stock of such cor-
poration is readily tradable on an established securi-
ties market.’’.
(c) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 1361 is amended
by striking paragraph (1) and redesignating para-
graphs (2) through (6) as paragraphs (1) through
(5), respectively.