†
HR 2 EAS
(1) IN GENERAL.—Subchapter B of chapter 65
(relating to abatements, credits, and refunds) is
amended by adding at the end the following new sec-
tion:
‘‘SEC. 6429. ADVANCE PAYMENT OF PORTION OF IN-
CREASED CHILD CREDIT FOR 2003.
‘‘(a) IN GENERAL.—Each taxpayer who claimed a
credit under section 24 on the return for the taxpayer’s first
taxable year beginning in 2002 shall be treated as having
made a payment against the tax imposed by chapter 1 for
such taxable year in an amount equal to the child tax credit
refund amount (if any) for such taxable year.
‘‘(b) CHILD TAX CREDIT REFUND AMOUNT.—For pur-
poses of this section, the child tax credit refund amount is
the amount by which the aggregate credits allowed under
part IV of subchapter A of chapter 1 for such first taxable
year would have been increased if—
‘‘(1) the per child amount under section 24(a)(2)
for such year were $1,000,
‘‘(2) only qualifying children (as defined in sec-
tion 24(c)) of the taxpayer for such year who had not
attained age 17 as of December 31, 2003, were taken
into account, and
‘‘(3) section 24(d)(1)(B)(ii) did not apply.
†
HR 2 EAS
‘‘(c) TIMING OF PAYMENTS.—In the case of any over-
payment attributable to this section, the Secretary shall,
subject to the provisions of this title, refund or credit such
overpayment as rapidly as possible and, to the extent prac-
ticable, before October 1, 2003. No refund or credit shall
be made or allowed under this section after December 31,
2003.
‘‘(d) COORDINATION WITH CHILD TAX CREDIT.—
‘‘(1) IN GENERAL.—The amount of credit which
would (but for this subsection and section 26) be al-
lowed under section 24 for the taxpayer’s first taxable
year beginning in 2003 shall be reduced (but not
below zero) by the payments made to the taxpayer
under this section. Any failure to so reduce the credit
shall be treated as arising out of a mathematical or
clerical error and assessed according to section
6213(b)(1).
‘‘(2) JOINT RETURNS.—In the case of a payment
under this section with respect to a joint return, half
of such payment shall be treated as having been made
to each individual filing such return.
‘‘(e) NO INTEREST.—No interest shall be allowed on
any overpayment attributable to this section.’’.
†
HR 2 EAS
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter B of chapter 65 is amended by
adding at the end the following new item:
‘‘Sec. 6429. Advance payment of portion of increased child credit for 2003.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to taxable years beginning after December 31,
2002.
(2) SUBSECTION (c).—The amendments made by
subsection (c) shall take effect on the date of the enact-
ment of this Act.
SEC. 107. INCREASED EXPENSING FOR SMALL BUSINESS.
(a) IN GENERAL.—Paragraph (1) of section 179(b)
(relating to dollar limitation) is amended to read as follows:
‘‘(1) DOLLAR LIMITATION.—The aggregate cost
which may be taken into account under subsection (a)
for any taxable year shall not exceed $25,000
($100,000 in the case of taxable years beginning after
2002 and before 2008).’’.
(b) INCREASE IN QUALIFYING INVESTMENT AT WHICH
PHASEOUT BEGINS.—Paragraph (2) of section 179(b) (re-
lating to reduction in limitation) is amended by inserting
‘‘($400,000 in the case of taxable years beginning after 2002
and before 2008)’’ after ‘‘$200,000’’.
†
HR 2 EAS
(c) OFF-THE-SHELF COMPUTER SOFTWARE.—Para-
graph (1) of section 179(d) (defining 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 section
168 applies), or
‘‘(ii) computer software (as defined in
section 197(e)(3)(B)) which is described in
section 197(e)(3)(A)(i), to which section 167
applies, and which is placed in service in a
taxable year beginning after 2002 and be-
fore 2008,
‘‘(B) which is section 1245 property (as de-
fined 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 conditioning
or heating units.’’.
(d) ADJUSTMENT OF DOLLAR LIMIT AND PHASEOUT
THRESHOLD FOR INFLATION.—Subsection (b) of section
†
HR 2 EAS
179 (relating to limitations) is amended by adding at the
end the following new paragraph:
‘‘(5) INFLATION ADJUSTMENTS.—
‘‘(A) IN GENERAL.—In the case of any tax-
able year beginning in a calendar year after
2003 and before 2008, the $100,000 and
$400,000 amounts in paragraphs (1) and (2)
shall each 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.—
‘‘(i) 
DOLLAR
LIMITATION.—If 
the
amount in paragraph (1) as increased
under subparagraph (A) is not a multiple
of $1,000, such amount shall be rounded to
the nearest multiple of $1,000.
‘‘(ii) 
PHASEOUT
AMOUNT.—If 
the
amount in paragraph (2) as increased
under subparagraph (A) is not a multiple
†
HR 2 EAS
of $10,000, such amount shall be rounded to
the nearest multiple of $10,000.’’.
(e) REVOCATION OF ELECTION.—Paragraph (2) of sec-
tion 179(c) (relating to election irrevocable) is amended to
read as follows:
‘‘(2) REVOCATION
OF
ELECTION.—An election
under paragraph (1) with respect to any taxable year
beginning after 2002 and before 2008, and any speci-
fication contained in any such election, may be re-
voked by the taxpayer with respect to any property.
Such revocation, once made, shall be irrevocable.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2002.
SEC. 108. APPLICATION OF EGTRRA SUNSET TO THIS TITLE.
Each amendment made by this title (other than section
107) shall be subject to title IX of the Economic Growth
and Tax Relief Reconciliation Act of 2001 to the same ex-
tent and in the same manner as the provision of such Act
to which such amendment relates.
†
HR 2 EAS
TITLE II—PARTIAL EXCLUSION
OF DIVIDENDS
SEC. 201. PARTIAL EXCLUSION OF DIVIDENDS RECEIVED BY
INDIVIDUALS.
(a) GENERAL RULE.—Part III of subchapter B of
chapter 1 is amended by inserting after section 115 the fol-
lowing new section:
‘‘SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS RECEIVED
BY INDIVIDUALS.
‘‘(a) EXCLUSION FROM GROSS INCOME.—
‘‘(1) IN GENERAL.—Gross income does not in-
clude the applicable percentage of qualified dividend
income received during the taxable year by an indi-
vidual.
‘‘(2) APPLICABLE
PERCENTAGE.—For purposes
of this subsection, the applicable percentage is—
‘‘(A) 50 percent in the case of taxable years
beginning in 2003,
‘‘(B) 100 percent in the case of taxable
years beginning in 2004, 2005, and 2006, and
‘‘(C) zero percent in the case of any other
taxable year.
‘‘(b) QUALIFIED DIVIDEND INCOME.—For purposes of
this subsection—
†
HR 2 EAS
‘‘(1) IN GENERAL.—The term ‘qualified dividend
income’ means dividends received with respect to any
share of stock of—
‘‘(A) any domestic corporation, or
‘‘(B) any foreign corporation but only if
such share of stock is readily tradable on an es-
tablished securities market.
‘‘(2) CERTAIN
DIVIDENDS
EXCLUDED.—Such
term shall not include—
‘‘(A) any dividend from a corporation
which for the taxable year of the corporation in
which the distribution is made, or the preceding
taxable year, is a corporation exempt from tax
under section 501 or 521,
‘‘(B) any amount allowed as a deduction
under section 591 (relating to deduction for divi-
dends paid by mutual savings banks, etc.), and
‘‘(C) any dividend described in section
404(k).
‘‘(3) EXCLUSION OF DIVIDENDS OF CERTAIN FOR-
EIGN CORPORATIONS.—Such term shall not include
any dividend from a foreign corporation which for
the taxable year of the corporation in which the dis-
tribution was made, or the preceding taxable year, is
a foreign personal holding company (as defined in
†
HR 2 EAS
section 552), a foreign investment company (as de-
fined in section 1246(b)), or a passive foreign invest-
ment company (as defined in section 1297).
‘‘(4) COORDINATION WITH SECTION 246(C).—Such
term shall not include any dividend on any share of
stock—
‘‘(A) with respect to which the holding pe-
riod requirements of section 246(c) are not met,
or
‘‘(B) to the extent that the taxpayer is
under an obligation (whether pursuant to a short
sale or otherwise) to make related payments with
respect to positions in substantially similar or
related property.
‘‘(c) SPECIAL RULES.—
‘‘(1) AMOUNTS TAKEN INTO ACCOUNT AS INVEST-
MENT INCOME.—Qualified dividend income shall not
include any amount which the taxpayer takes into ac-
count 
as 
investment 
income 
under 
section
163(d)(4)(B).
‘‘(2) COORDINATION WITH FOREIGN TAX CREDIT
AND DEDUCTION.—No credit shall be allowed under
section 901, and no deduction shall be allowed under
this chapter, for any taxes paid or accrued with re-
spect to any income excludable under this section.
†
HR 2 EAS
‘‘(3) CERTAIN NONRESIDENT ALIENS INELIGIBLE
FOR EXCLUSION.—In the case of a nonresident alien
individual, subsection (a) shall apply only in deter-
mining the tax imposed for the taxable year by sec-
tions 871(b)(1) and 877(b).
‘‘(4) EXCLUSION DISREGARDED IN DETERMINING
INCOME
FOR
CERTAIN
PURPOSES.—Subsection (a)
shall not apply for purposes of determining amounts
of income under sections 32(i), 86(b), 135(b), 137(b),
219(g), 221(b), 222(b), 408A(c)(3), 469(i), and 530(c),
or subpart A of part IV of subchapter A.
‘‘(5) TREATMENT
OF
DIVIDENDS
FROM
REGU-
LATED INVESTMENT COMPANIES AND REAL ESTATE
INVESTMENT TRUSTS.—A dividend from a regulated
investment company or real estate investment trust
shall be subject to the limitations prescribed in sec-
tions 854 and 857.’’.
(b) EXCLUSION OF DIVIDENDS FROM INVESTMENT IN-
COME.—Subparagraph (B) of section 163(d)(4) (defining
net investment income) is amended by adding at the end
the following flush sentence:
‘‘Such term shall include qualified dividend in-
come (as defined in section 116(b)) only to the
extent the taxpayer elects to treat such income as
†
HR 2 EAS
investment income for purposes of this sub-
section.’’.
(c) TREATMENT OF DIVIDENDS FROM REGULATED IN-
VESTMENT COMPANIES.—
(1) Subsection (a) of section 854 (relating to
dividends received from regulated investment compa-
nies) is amended by inserting ‘‘section 116 (relating
to partial exclusion of dividends received by individ-
uals) and’’ after ‘‘For purposes of’’.
(2) Paragraph (1) of section 854(b) (relating to
other dividends) is amended by redesignating sub-
paragraph (B) as subparagraph (C) and by inserting
after subparagraph (A) the following new subpara-
graph:
‘‘(B) EXCLUSION UNDER SECTION 116.—
‘‘(i) IN
GENERAL.—If the aggregate
dividends received by a regulated invest-
ment company during any taxable year are
less than 95 percent of its gross income,
then, in computing the exclusion under sec-
tion 116, rules similar to the rules of sub-
paragraph (A) shall apply.
‘‘(ii) GROSS INCOME.—For purposes of
clause (i), in the case of 1 or more sales or
other dispositions of stock or securities, the