I
107TH CONGRESS
2D SESSION
H. R. 5351
To amend the Internal Revenue Code of 1986 to encourage saving and
investment, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 9, 2002
Mr. HAYWORTH 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 encourage
saving and investment, 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 ‘‘Investment Incentives
Act of 2002’’.
SEC. 2. INCREASE IN LIMITATION ON CAPITAL LOSSES OF
INDIVIDUALS ALLOWABLE AGAINST ORDI-
NARY INCOME.
(a) IN GENERAL.—Paragraph (1) of section 1211(b)
of the Internal Revenue Code of 1986 (relating to limita-
tion on capital losses of taxpayers other than corporations)
is amended—
(1) 
by 
striking 
‘‘$3,000’’ 
and 
inserting
‘‘$20,000’’, and
(2) 
by 
striking 
‘‘$1,500’’ 
and 
inserting
‘‘$10,000’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3. ACCELERATION OF INCREASE IN CONTRIBUTIONS
TO CERTAIN RETIREMENT PLANS.
(a) IRAS.—
(1) IN GENERAL.—Subparagraph (A) of section
219(b)(5) of the Internal Revenue Code of 1986 (de-
fining deductible amount) is amended to read as fol-
lows:
‘‘(A) The deductible amount shall be
$5,000.’’.
(2) 
INFLATION
ADJUSTMENT.—Section
219(b)(5)(C) of such Code is amended—
(A) by striking ‘‘2008’’ and inserting
‘‘2002’’, and
(B) by striking ‘‘2007’’ and inserting
‘‘2001’’.
(b) 401(K) PLANS.—
(1) IN
GENERAL.—Paragraph (1) of section
402(g) of such Code is amended—
(A) by striking subparagraph (B),
(B) by striking ‘‘(A) LIMITATION.—’’ and
moving the text 2 ems to the left, and
(C) in such text by striking ‘‘the applicable
dollar amount’’ and inserting ‘‘$15,000’’.
(2) 
INFLATION
ADJUSTMENT.—Section
402(g)(4) of such Code is amended—
(A) by striking ‘‘2006’’ and inserting
‘‘2002’’, and
(B) by striking ‘‘2005’’ and inserting
‘‘2001’’.
(3) 
CONFORMING
AMENDMENT.—Section
401(a)(30) of such Code is amended by striking
‘‘section 
402(g)(1)(A)’’ 
and 
inserting 
‘‘section
402(g)(1)’’.
(c) 457 PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section
457(b)(2) of such Code is amended by striking ‘‘the
applicable dollar amount’’ and inserting ‘‘$15,000’’.
(2) 
INFLATION
ADJUSTMENT.—Section
457(e)(15) of such Code is amended to read as fol-
lows:
cludible in gross income which are received during the tax-
able year by an individual.
‘‘(b) LIMITATIONS.—
‘‘(1) 
MAXIMUM
AMOUNT.—The 
aggregate
amount excluded under subsection (a) for any tax-
able year shall not exceed $500 ($1,000 in the case
of a joint return).
‘‘(2) CERTAIN
DIVIDENDS
EXCLUDED.—Sub-
section (a) shall not apply to any dividend from a
corporation which for the taxable year of the cor-
poration in which the distribution is made is a cor-
poration exempt from tax under section 521 (relat-
ing to farmers’ cooperative associations).
‘‘(c) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) EXCLUSION NOT TO APPLY TO CAPITAL
GAIN
DIVIDENDS
FROM
REGULATED
INVESTMENT
COMPANIES
AND
REAL
ESTATE
INVESTMENT
TRUSTS.—
‘‘For treatment of capital gain dividends, see sec-
tions 854(a) and 857(c).
‘‘(2) CERTAIN
NONRESIDENT
ALIENS
INELI-
GIBLE
FOR
EXCLUSION.—In the case of a non-
resident alien individual, subsection (a) shall apply
only in determining the taxes imposed for the tax-
able year pursuant to sections 871(b)(1) and 877(b).
‘‘(3) DIVIDENDS FROM EMPLOYEE STOCK OWN-
ERSHIP PLANS.—Subsection (a) shall not apply to
any dividend described in section 404(k).’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (C) of section 32(c)(5) of
such Code is amended by striking ‘‘or’’ at the end
of clause (i), by striking the period at the end of
clause (ii) and inserting ‘‘; or’’, and by inserting
after clause (ii) the following new clause:
‘‘(iii) interest and dividends received
during the taxable year which are excluded
from gross income under section 116.’’.
(2) Subparagraph (A) of section 32(i)(2) of
such Code is amended by inserting ‘‘(determined
without regard to section 116)’’ before the comma.
(3) Subparagraph (B) of section 86(b)(2) of
such Code is amended to read as follows:
‘‘(B) increased by the sum of—
‘‘(i) the amount of interest received or
accrued by the taxpayer during the taxable
year which is exempt from tax, and
‘‘(ii) the amount of interest and divi-
dends received during the taxable year
which are excluded from gross income
under section 116.’’.
(4) Subsection (d) of section 135 of such Code
is amended by redesignating paragraph (4) as para-
graph (5) and by inserting after paragraph (3) the
following new paragraph:
‘‘(4) COORDINATION WITH SECTION 116.—This
section shall be applied before section 116.’’.
(5) Paragraph (2) of section 265(a) of such
Code is amended by inserting before the period ‘‘, or
to purchase or carry obligations or shares, or to
make deposits, to the extent the interest thereon is
excludable from gross income under section 116’’.
(6) Subsection (c) of section 584 of such Code
is amended by adding at the end the following new
flush sentence:
‘‘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.’’.
(7) 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.’’.
(8) Section 854(a) of such Code is amended by
inserting ‘‘section 116 (relating to partial exclusion
of dividends and interest received by individuals)
and’’ after ‘‘For purposes of’’.
(9) Section 857(c) of such Code is amended to
read as follows:
‘‘(c) RESTRICTIONS APPLICABLE TO DIVIDENDS RE-
CEIVED FROM REAL ESTATE INVESTMENT TRUSTS.—
‘‘(1) TREATMENT FOR SECTION 116.—For pur-
poses of section 116 (relating to partial exclusion of
dividends and interest received by individuals), 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 shall
not be considered as a dividend.
‘‘(2) TREATMENT FOR SECTION 243.—For pur-
poses of section 243 (relating to deductions for divi-
dends received by corporations), a dividend received
from a real estate investment trust which meets the
requirements of this part shall not be considered as
a dividend.’’.