(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
TITLE III—ESTATE TAX RELIEF.
SEC. 301. INCREASE IN EXEMPTION EQUIVALENT OF UNI-
FIED CREDIT.
(a) IN GENERAL.—Subsection (c) of section 2010
(relating to applicable credit amount) is amended by strik-
ing the table and inserting the following new table:
‘‘In the case of estates of decedents
The applicable
dying, and gifts made, during:
exclusion amount is:
2002 .......................................................................
$2,000,000
2003 and 2004 ......................................................
$2,100,000
2005 and 2006 ......................................................
$2,200,000
2007 and 2008 ......................................................
$2,300,000
2009 .......................................................................
$2,400,000
2010 or thereafter .................................................
$2,500,000.’’
(b) REPEAL
OF SPECIAL BENEFIT
FOR FAMILY-
OWNED BUSINESS INTERESTS.—
(1) Section 2057 is hereby repealed.
(2) Paragraph (10) of section 2031(c) is
amended by inserting ‘‘(as in effect on the day be-
fore the date of the enactment of this parenthet-
ical)’’ before the period.
(3) The table of sections for part IV of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2057.
(c) CORRECTION OF TECHNICAL ERROR AFFECTING
LARGEST ESTATES.—Paragraph (2) of section 2001(c) is
amended by striking ‘‘$10,000,000’’ and all that follows
and inserting ‘‘$10,000,000. The amount of the increase
under the preceding sentence shall not exceed the sum of
the applicable credit amount under section 2010(c) and
$359,200.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying, and
gifts made, after December 31, 2001.
SEC. 302. CREDIT FOR STATE DEATH TAXES REPLACED
WITH DEDUCTION FOR SUCH TAXES.
(a) REPEAL OF CREDIT.—Section 2011 (relating to
credit for State death taxes) is hereby repealed.
(b) DEDUCTION FOR STATE DEATH TAXES.—Part
IV of subchapter A of chapter 11 is amended by adding
at the end the following new section:
‘‘SEC. 2058. STATE DEATH TAXES.
‘‘(a) ALLOWANCE OF DEDUCTION.—For purposes of
the tax imposed by section 2001, the value of the taxable
estate shall be determined by deducting from the value
of the gross estate the amount of any estate, inheritance,
legacy, or succession taxes actually paid to any State or
the District of Columbia, in respect of any property in-
cluded in the gross estate (not including any such taxes
paid with respect to the estate of a person other than the
decedent).
‘‘(b) PERIOD OF LIMITATIONS.—The deduction al-
lowed by this section shall include only such taxes as were
actually paid and deduction therefor claimed within 4
years after the filing of the return required by section
6018, except that—
‘‘(1) If a petition for redetermination of a defi-
ciency has been filed with the Tax Court within the
time prescribed in section 6213(a), then within such
4-year period or before the expiration of 60 days
after the decision of the Tax Court becomes final.
‘‘(2) If, under section 6161 or 6166, an exten-
sion of time has been granted for payment of the tax
shown on the return, or of a deficiency, then within
such 4-year period or before the date of the expira-
tion of the period of the extension.
‘‘(3) If a claim for refund or credit of an over-
payment of tax imposed by this chapter has been
filed within the time prescribed in section 6511, then
within such 4-year period or before the expiration of
60 days from the date of mailing by certified mail
or registered mail by the Secretary to the taxpayer
of a notice of the disallowance of any part of such
claim, or before the expiration of 60 days after a de-
cision by any court of competent jurisdiction be-
comes final with respect to a timely suit instituted
upon such claim, whichever is later.
Refund based on the deduction may (despite the provisions
of sections 6511 and 6512) be made if claim therefor is
filed within the period above provided. Any such refund
shall be made without interest.’’
(c) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 2012 is amended
by striking ‘‘the credit for State death taxes pro-
vided by section 2011 and’’.
(2) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2011,’’.
(3) Paragraph (2) of section 2014(b) is amend-
ed by striking ‘‘, 2011,’’.
(4) Sections 2015 and 2016 are each amended
by striking ‘‘2011 or’’.
(5) Subsection (d) of section 2053 is amended
to read as follows:
‘‘(d) CERTAIN FOREIGN DEATH TAXES.—
‘‘(1) IN GENERAL.—Notwithstanding the provi-
sions of subsection (c)(1)(B) of this section, for pur-
poses of the tax imposed by section 2001, the value
of the taxable estate may be determined, if the ex-
ecutor so elects before the expiration of the period
of limitation for assessment provided in section
6501, by deducting from the value of the gross es-
tate the amount (as determined in accordance with
regulations prescribed by the Secretary) of any es-
tate, succession, legacy, or inheritance tax imposed
by and actually paid to any foreign country, in re-
spect of any property situated within such foreign
country and included in the gross estate of a citizen
or resident of the United States, upon a transfer by
the decedent for public, charitable, or religious uses
described in section 2055. The determination under
this paragraph of the country within which property
is situated shall be made in accordance with the
rules applicable under subchapter B (sec. 2101 and
following) in determining whether property is situ-
ated within or without the United States. Any elec-
tion under this paragraph shall be exercised in ac-
cordance with regulations prescribed by the Sec-
retary.
‘‘(2) CONDITION FOR ALLOWANCE OF DEDUC-
TION.—No deduction shall be allowed under para-
graph (1) for a foreign death tax specified therein
unless the decrease in the tax imposed by section
2001 which results from the deduction provided in
paragraph (1) will inure solely for the benefit of the
public, charitable, or religious transferees described
in section 2055 or section 2106(a)(2). In any case
where the tax imposed by section 2001 is equitably
apportioned among all the transferees of property
included in the gross estate, including those de-
scribed in sections 2055 and 2106(a)(2) (taking into
account any exemptions, credits, or deductions al-
lowed by this chapter), in determining such decrease,
there shall be disregarded any decrease in the Fed-
eral estate tax which any transferees other than
those described in sections 2055 and 2106(a)(2) are
required to pay.
‘‘(3) EFFECT ON CREDIT FOR FOREIGN DEATH
TAXES OF DEDUCTION UNDER THIS SUBSECTION.—
‘‘(A) ELECTION.—An election under this
subsection shall be deemed a waiver of the right
to claim a credit, against the Federal estate
tax, under a death tax convention with any for-
eign country for any tax or portion thereof in
respect of which a deduction is taken under this
subsection.
‘‘(B) CROSS REFERENCE.—
‘‘See section 2014(f) for the effect of a deduction
taken under this paragraph on the credit for foreign
death taxes.’’
(6) Subparagraph (A) of section 2056A(b)(10)
is amended—
(A) by striking ‘‘2011,’’, and
(B) by inserting ‘‘2058,’’ after ‘‘2056,’’.
(7)(A) Subsection (a) of section 2102 is amend-
ed to read as follows:
‘‘(a) IN GENERAL.—The tax imposed by section 2101
shall be credited with the amounts determined in accord-
ance with sections 2012 and 2013 (relating to gift tax and
tax on prior transfers).’’
(B) Section 2102 is amended by striking sub-
section (b) and by redesignating subsection (c) as
subsection (b).
(C) Section 2102(b)(5) (as redesignated by sub-
paragraph (B)) and section 2107(c)(3) are each
amended by striking ‘‘2011 to 2013, inclusive,’’ and
inserting ‘‘2012 and 2013’’.
(8) Subsection (a) of section 2106 is amended
by adding at the end the following new paragraph:
‘‘(4) STATE DEATH TAXES.—The amount which
bears the same ratio to the State death taxes as the
value of the property, as determined for purposes of
this chapter, upon which State death taxes were paid
and which is included in the gross estate under sec-
tion 2103 bears to the value of the total gross estate
under section 2103. For purposes of this paragraph,
the term ‘State death taxes’ means the taxes de-
scribed in section 2011(a).’’
SEC. 303. VALUATION RULES FOR CERTAIN TRANSFERS OF
NONBUSINESS ASSETS; LIMITATION ON MI-
NORITY DISCOUNTS.
(a) IN GENERAL.—Section 2031 (relating to defini-
tion of gross estate) is amended by redesignating sub-
section (d) as subsection (f) and by inserting after sub-
section (c) the following new subsections:
‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS
OF NONBUSINESS ASSETS.—For purposes of this chapter
and chapter 12—
‘‘(1) IN GENERAL.—In the case of the transfer
of any interest in an entity other than an interest
which is actively traded (within the meaning of sec-
tion 1092)—
‘‘(A) the value of any nonbusiness assets
held by the entity shall be determined as if the
transferor had transferred such assets directly
to the transferee (and no valuation discount
shall be allowed with respect to such nonbusi-
ness assets), and
‘‘(B) the nonbusiness assets shall not be
taken into account in determining the value of
the interest in the entity.
‘‘(2) NONBUSINESS ASSETS.—For purposes of
this subsection—
‘‘(A) IN
GENERAL.—The term ‘nonbusi-
ness asset’ means any asset which is not used
in the active conduct of 1 or more trades or
businesses.
‘‘(B) EXCEPTION
FOR
CERTAIN
PASSIVE
ASSETS.—Except as provided in subparagraph
(C), a passive asset shall not be treated for pur-
poses of subparagraph (A) as used in the active
conduct of a trade or business unless—
‘‘(i) the asset is property described in
paragraph (1) or (4) of section 1221(a) or
is a hedge with respect to such property,
or
‘‘(ii) the asset is real property used in
the active conduct of 1 or more real prop-
erty trades or businesses (within the mean-
ing of section 469(c)(7)(C)) in which the
transferor materially participates and with
respect to which the transferor meets the
requirements of section 469(c)(7)(B)(ii).
For purposes of clause (ii), material participa-
tion shall be determined under the rules of sec-
tion 469(h), except that section 469(h)(3) shall
be applied without regard to the limitation to
farming activity.
‘‘(C) EXCEPTION
FOR
WORKING
CAP-
ITAL.—Any asset (including a passive asset)
which is held as a part of the reasonably re-
quired working capital needs of a trade or busi-
ness shall be treated as used in the active con-
duct of a trade or business.
‘‘(3) PASSIVE
ASSET.—For purposes of this
subsection, the term ‘passive asset’ means any—
‘‘(A) cash or cash equivalents,
‘‘(B) except to the extent provided by the
Secretary, stock in a corporation or any other
equity, profits, or capital interest in any entity,
‘‘(C) evidence of indebtedness, option, for-
ward or futures contract, notional principal con-
tract, or derivative,
‘‘(D) asset described in clause (iii), (iv), or
(v) of section 351(e)(1)(B),
‘‘(E) annuity,
‘‘(F) real property used in 1 or more real
property trades or businesses (as defined in sec-
tion 469(c)(7)(C)),
‘‘(G) asset (other than a patent, trade-
mark, or copyright) which produces royalty in-
come,
‘‘(H) commodity,
‘‘(I) collectible (within the meaning of sec-
tion 401(m)), or
‘‘(J) any other asset specified in regula-
tions prescribed by the Secretary.
‘‘(4) LOOK-THRU RULES.—
‘‘(A) IN GENERAL.—If a nonbusiness asset
of an entity consists of a 10-percent interest in
any other entity, this subsection shall be ap-
plied by disregarding the 10-percent interest
and by treating the entity as holding directly its
ratable share of the assets of the other entity.
This subparagraph shall be applied successively
to any 10-percent interest of such other entity
in any other entity.
‘‘(B) 10-PERCENT
INTEREST.—The term
‘10-percent interest’ means—
‘‘(i) in the case of an interest in a cor-
poration, ownership of at least 10 percent
(by vote or value) of the stock in such cor-
poration,
‘‘(ii) in the case of an interest in a
partnership, ownership of at least 10 per-
cent of the capital or profits interest in the
partnership, and