I
106TH CONGRESS
1ST SESSION
H. R. 1840
To amend the Internal Revenue Code of 1986 to increase the maximum
taxable income for the 15 percent rate bracket, to provide a partial
exclusion from gross income for dividends and interest received by indi-
viduals, to provide a long-term capital gains deduction for individuals,
to increase the traditional IRA contribution limit, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 18, 1999
Mr. GRAHAM (for himself, Mr. JEFFERSON, and Mr. WEXLER) 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 increase
the maximum taxable income for the 15 percent rate
bracket, to provide a partial exclusion from gross income
for dividends and interest received by individuals, to pro-
vide a long-term capital gains deduction for individuals,
to increase the traditional IRA contribution limit, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Small Savers Act of
1999’’.
SEC 2. INCREASE IN MAXIMUM TAXABLE INCOME FOR 15
PERCENT RATE BRACKET.
Section 1(f) of the Internal Revenue Code of 1986
(relating to adjustments in tax tables so that inflation will
not result in tax increases) is amended—
(1) in paragraph (2)—
(A) by redesignating subparagraphs (B)
and (C) as subparagraphs (C) and (D),
(B) by inserting after subparagraph (A)
the following:
‘‘(B) in the case of the tables contained in
subsections (a), (b), (c), and (d), by increasing
the maximum taxable income level for the 15
percent rate bracket and the minimum taxable
income level for the 28 percent rate bracket
otherwise determined under subparagraph (A)
for taxable years beginning in any calendar year
after 1999, by the applicable dollar amount for
such calendar year,’’, and
(C) by striking ‘‘subparagraph (A)’’ in
subparagraph (C) (as so redesignated) and in-
serting ‘‘subparagraphs (A) and (B)’’, and
(2) by adding at the end the following:
‘‘(8) APPLICABLE DOLLAR AMOUNT.—For pur-
poses of paragraph (2)(B), the applicable dollar
amount for any calendar year shall be determined as
follows:
‘‘(A) JOINT
RETURNS
AND
SURVIVING
SPOUSES.—In the case of the table contained in
subsection (a)—
Applicable
‘‘Calendar year:
Dollar Amount:
2000 .........................................................................................
$2,000
2001 .........................................................................................
$4,000
2002 .........................................................................................
$6,000
2003 .........................................................................................
$8,000
2004 and thereafter .................................................................
$10,000.
‘‘(B) OTHER TABLES.—In the case of the
table contained in subsection (b), (c), or (d)—
Applicable
‘‘Calendar year:
Dollar Amount:
2000 .........................................................................................
$1,000
2001 .........................................................................................
$2,000
2002 .........................................................................................
$3,000
2003 .........................................................................................
$4,000
2004 and thereafter .................................................................
$5,000.’’
SEC. 3. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST
RECEIVED BY INDIVIDUALS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
amounts specifically excluded from gross income) is
amended by inserting after section 115 the following new
section:
‘‘SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTER-
EST RECEIVED BY INDIVIDUALS.
‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in-
come does not include the sum of the amounts received
during the taxable year by an individual as—
‘‘(1) dividends from domestic corporations, or
‘‘(2) interest.
‘‘(b) LIMITATIONS.—
‘‘(1) 
MAXIMUM
AMOUNT.—The 
aggregate
amount excluded under subsection (a) for any tax-
able year shall not exceed $250 ($500 in the case of
a joint return).
‘‘(2) CERTAIN
DIVIDENDS
EXCLUDED.—Sub-
section (a)(1) shall not apply to any dividend from
a corporation which, for the taxable year of the cor-
poration in which the distribution is made, or for the
next preceding taxable year of the corporation, is a
corporation exempt from tax under section 501 (re-
lating to certain charitable, etc., organization) or
section 521 (relating to farmers’ cooperative associa-
tions).
‘‘(c) INTEREST.—For purposes of this section, the
term ‘interest’ means—
‘‘(1) interest on deposits with a bank (as de-
fined in section 581),
‘‘(2) amounts (whether or not designated as in-
terest) paid in respect of deposits, investment certifi-
cates, or withdrawable or repurchasable shares, by—
‘‘(A) a mutual savings bank, cooperative
bank, domestic building and loan association,
industrial loan association or bank, or credit
union, or
‘‘(B) any other savings or thrift institution
which is chartered and supervised under Fed-
eral or State law,
the deposits or accounts in which are insured under
Federal or State law or which are protected and
guaranteed under State law,
‘‘(3) interest on—
‘‘(A) evidences of indebtedness (including
bonds, debentures, notes, and certificates)
issued by a domestic corporation in registered
form, and
‘‘(B) to the extent provided in regulations
prescribed by the Secretary, other evidences of
indebtedness issued by a domestic corporation
of a type offered by corporations to the public,
‘‘(4) interest on obligations of the United
States, a State, or a political subdivision of a State
‘‘The proportionate share of each participant in the
amount of dividends or interest received by the common
trust fund and to which section 116 applies shall be con-
sidered for purposes of such section as having been re-
ceived by such participant.’’.
(4) Subsection (a) of section 643 of such Code
is amended by redesignating paragraph (7) as para-
graph (8) and by inserting after paragraph (6) the
following new paragraph:
‘‘(7) DIVIDENDS OR INTEREST.—There shall be
included the amount of any dividends or interest ex-
cluded from gross income pursuant to section 116.’’.
(5) Section 854 of such Code is amended by
adding at the end the following new subsection:
‘‘(c) TREATMENT UNDER SECTION 116.—
‘‘(1) IN
GENERAL.—For purposes of section
116, in the case of any dividend (other than a divi-
dend described in subsection (a)) received from a
regulated investment company which meets the re-
quirements of section 852 for the taxable year in
which it paid the dividend—
‘‘(A) the entire amount of such dividend
shall be treated as a dividend if the sum of the
aggregate dividends and the aggregate interest
received by such company during the taxable
year equals or exceeds 75 percent of its gross
income, or
‘‘(B) if subparagraph (A) does not apply,
there shall be taken into account under section
116 only the portion of such dividend which
bears the same ratio to the amount of such div-
idend as the sum of the aggregate dividends re-
ceived and aggregate interest received bears to
gross income.
For purposes of the preceding sentence, gross in-
come and aggregate interest received shall each be
reduced by so much of the deduction allowable by
section 163 for the taxable year as does not exceed
aggregate interest received for the taxable year.
‘‘(2) NOTICE TO SHAREHOLDERS.—The amount
of any distribution by a regulated investment com-
pany which may be taken into account as a dividend
for purposes of the exclusion under section 116 shall
not exceed the amount so designated by the com-
pany in a written notice to its shareholders mailed
not later than 60 days after the close of its taxable
year.
‘‘(3) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) GROSS INCOME.—The term ‘gross in-
come’ does not include gain from the sale or
other disposition of stock or securities.
‘‘(B) AGGREGATE DIVIDENDS.—The term
‘aggregate dividends’ includes only dividends re-
ceived from domestic corporations other than
dividends described in section 116(b)(2). In de-
termining the amount of any dividend for pur-
poses of this subparagraph, the rules provided
in section 116(d)(1) (relating to certain dis-
tributions) shall apply.
‘‘(C) INTEREST.—The term ‘interest’ has
the meaning given such term by section
116(c).’’.
(6) Subsection (c) of section 857 of such Code
is amended to read as follows:
‘‘(c) LIMITATIONS APPLICABLE TO DIVIDENDS RE-
CEIVED FROM REAL ESTATE INVESTMENT TRUSTS.—
‘‘(1) IN
GENERAL.—For purposes of section
116 (relating to an exclusion for dividends and inter-
est received by individuals) and section 243 (relating
to deductions for dividends received by corpora-
tions), a dividend received from a real estate invest-
ment trust which meets the requirements of this
part shall not be considered as a dividend.
‘‘(2) TREATMENT AS INTEREST.—For purposes
of section 116, in the case of a dividend (other than
a capital gain dividend, as defined in subsection
(b)(3)(C)) received from a real estate investment
trust which meets the requirements of this part for
the taxable year in which it paid the dividend—
‘‘(A) such dividend shall be treated as in-
terest if the aggregate interest received by the
real estate investment trust for the taxable year
equals or exceeds 75 percent of its gross in-
come, or
‘‘(B) if subparagraph (A) does not apply,
the portion of such dividend which bears the
same ratio to the amount of such dividend as
the aggregate interest received bears to gross
income shall be treated as interest.
‘‘(3) ADJUSTMENTS TO GROSS INCOME AND AG-
GREGATE
INTEREST
RECEIVED.—For purposes of
paragraph (2)—
‘‘(A) gross income does not include the net
capital gain,
‘‘(B) gross income and aggregate interest
received shall each be reduced by so much of
the deduction allowable by section 163 for the
taxable year (other than for interest on mort-
gages on real property owned by the real estate
investment trust) as does not exceed aggregate
interest received by the taxable year, and
‘‘(C) gross income shall be reduced by the
sum of the taxes imposed by paragraphs (4),
(5), and (6) of section 857(b).
‘‘(4) INTEREST.—The term ‘interest’ has the
meaning given such term by section 116(c).
‘‘(5) NOTICE TO SHAREHOLDERS.—The amount
of any distribution by a real estate investment trust
which may be taken into account as interest for pur-
poses of the exclusion under section 116 shall not
exceed the amount so designated by the trust in a
written notice to its shareholders mailed not later
than 60 days after the close of its taxable year.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 4. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDI-
VIDUALS.
(a) GENERAL RULE.—Part I of subchapter P of
chapter 1 of the Internal Revenue Code of 1986 (relating
to treatment of capital gains) is amended by redesignating
section 1202 as section 1203 and by inserting after section
1201 the following new section:
‘‘SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.
‘‘(a) IN GENERAL.—In the case of an individual,
there shall be allowed as a deduction for the taxable year
an amount equal to the lesser of—
‘‘(1) the net capital gain of the taxpayer for the
taxable year, or
‘‘(2) $5,000.
‘‘(b) SALES BETWEEN RELATED PARTIES.—Gains
from sales and exchanges to any related person (within
the meaning of section 267(b) or 707(b)(1)) shall not be
taken into account in determining net capital gain.
‘‘(c) SPECIAL RULE
FOR SECTION 1250 PROP-
ERTY.—Solely for purposes of this section, in applying sec-
tion 1250 to any disposition of section 1250 property, all
depreciation adjustments in respect of the property shall
be treated as additional depreciation.
‘‘(d) SECTION NOT TO APPLY TO CERTAIN TAX-
PAYERS.—No deduction shall be allowed under this section
to—
‘‘(1) an individual with respect to whom a de-
duction under section 151 is allowable to another
taxpayer for a taxable year beginning in the cal-
endar year in which such individual’s taxable year
begins,
‘‘(2) a married individual (within the meaning
of section 7703) filing a separate return for the tax-
able year, or
‘‘(3) an estate or trust.
‘‘(e) SPECIAL RULE FOR PASS-THRU ENTITIES.—
‘‘(1) IN
GENERAL.—In applying this section
with respect to any pass-thru entity, the determina-
tion of when the sale or exchange occurs shall be
made at the entity level.
‘‘(2) PASS-THRU ENTITY DEFINED.—For pur-
poses of paragraph (1), the term ‘pass-thru entity’
means—
‘‘(A) a regulated investment company,
‘‘(B) a real estate investment trust,
‘‘(C) an S corporation,
‘‘(D) a partnership,
‘‘(E) an estate or trust, and
‘‘(F) a common trust fund.’’
(b) COORDINATION WITH MAXIMUM CAPITAL GAINS
RATE.—Paragraph (3) of section 1(h) of the Internal Rev-
enue Code of 1986 (relating to maximum capital gains
rate) is amended to read as follows:
‘‘(3) COORDINATION
WITH
OTHER
PROVI-
SIONS.—For purposes of this subsection, the amount
of the net capital gain shall be reduced (but not
below zero) by the sum of—
‘‘(A) the amount of the net capital gain
taken into account under section 1202(a) for
the taxable year, plus
‘‘(B) the amount which the taxpayer elects
to take into account as investment income for
the 
taxable 
year 
under 
section
163(d)(4)(B)(iii).’’
(c) DEDUCTION ALLOWABLE
IN COMPUTING AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of
the Internal Revenue Code of 1986 (defining adjusted
gross income) is amended by inserting after paragraph
(17) the following new paragraph:
‘‘(18) LONG-TERM
CAPITAL
GAINS.—The de-
duction allowed by section 1202.’’
(d) TREATMENT OF COLLECTIBLES.—
(1) IN GENERAL.—Section 1222 of the Internal
Revenue Code of 1986 (relating to other terms relat-
ing to capital gains and losses) is amended by in-
serting after paragraph (11) the following new para-
graph:
‘‘(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
INTEREST
IN
PARTNERSHIP, 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) of
such Code is amended by adding at the end the
following 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) of
such Code is amended by inserting before the
period at the end the following: ‘‘and section
1222 shall be applied without regard to para-
graph (12) thereof (relating to special rule for
collectibles)’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 57(a)(7) of the Internal Revenue
Code of 1986 is amended by striking ‘‘1202’’ and in-
serting ‘‘1203’’.
(2) Clause (iii) of section 163(d)(4)(B) of such
Code is amended to read as follows:
‘‘(iii) the sum of—
‘‘(I) the portion of the net capital
gain referred to in clause (ii)(II) (or,
if lesser, the net capital gain referred
to in clause (ii)(I)) taken into account
under section 1202, reduced by the
amount of the deduction allowed with
respect to such gain under section
1202, plus