I 
108TH CONGRESS 
1ST SESSION 
H. R. 170
To amend the Internal Revenue Code of 1986 to simplify and reduce the 
capital gain rates for all taxpayers and to exclude from gross income 
55 percent of the dividends received by individuals, and for other pur-
poses. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 7, 2003
Mr. REYNOLDS (for himself, Mr. DOOLITTLE, Mr. ENGLISH, and Mr. 
SOUDER) introduced the following bill; which was referred to the Com-
mittee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to simplify 
and reduce the capital gain rates for all taxpayers and 
to exclude from gross income 55 percent of the dividends 
received by individuals, 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 ‘‘Restoring Investor 
Confidence Act of 2003’’.
SEC. 2. 55-PERCENT CAPITAL GAINS DEDUCTION FOR TAX-
PAYERS OTHER THAN CORPORATIONS. 
(a) IN GENERAL.—Section 1202 of the Internal Rev-
enue Code of 1986 is amended to read as follows: 
‘‘SEC. 1202. CAPITAL GAINS DEDUCTION. 
‘‘(a) GENERAL RULE.—If for any taxable year a tax-
payer other than a corporation has a net capital gain, 55 
percent of such gain shall be a deduction from gross in-
come. 
‘‘(b) ESTATES AND TRUSTS.—In the case of an es-
tate or trust, the deduction shall be computed by excluding 
the portion (if any) of the gains for the taxable year from 
sales or exchanges of capital assets which, under sections 
652 and 662 (relating to inclusions of amounts in gross 
income of beneficiaries of trusts), is includible by the in-
come beneficiaries as gain derived from the sale or ex-
change of capital assets. 
‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL 
GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—
For purposes of this section, the net capital gain for any 
taxable year shall be reduced (but not below zero) by the 
amount which the taxpayer takes into account as invest-
ment income under section 163(d)(4)(B)(iii). 
‘‘(d) TRANSITIONAL RULE.—
‘‘(1) IN GENERAL.—In the case of a taxable 
year which includes January 1 of the year following 
the date of enactment of this section—
‘‘(A) the amount taken into account as the 
net capital gain under subsection (a) shall not 
exceed the net capital gain determined by only 
taking into account gains and losses properly 
taken into account for the portion of the tax-
able year on or after such January 1, and 
‘‘(B) the amount of the net capital gain 
taken into account in applying section 1(h) for 
such year shall be reduced by the amount taken 
into account under subparagraph (A) for such 
year. 
‘‘(2) SPECIAL
RULES
FOR
PASS-THRU
ENTI-
TIES.—
‘‘(A) IN GENERAL.—In applying paragraph 
(1) with respect to any pass-thru entity, the de-
termination of when gains and losses are prop-
erly taken into account shall be made at the en-
tity level. 
‘‘(B) PASS-THRU ENTITY DEFINED.—For 
purposes of subparagraph (A), the term ‘pass-
thru entity’ means—
‘‘(i) a regulated investment company,
‘‘(ii) a real estate investment trust, 
‘‘(iii) an S corporation, 
‘‘(iv) a partnership, 
‘‘(v) an estate or trust, and 
‘‘(vi) a common trust fund.’’.
(b) DEDUCTION ALLOWABLE
IN COMPUTING AD-
JUSTED GROSS INCOME.—Section 62(a) of such Code (de-
fining adjusted gross income) is amended by inserting 
after paragraph (18) the following new paragraph: 
‘‘(19) LONG-TERM
CAPITAL
GAINS.—The de-
duction allowed by section 1202.’’. 
(c) CONFORMING AMENDMENTS.—
(1) Section 1 of such Code is amended by strik-
ing subsection (h). 
(2) Section 170(e)(1) of such Code is amended 
by striking ‘‘the amount of gain’’ in the material fol-
lowing subparagraph (B)(ii) and inserting ‘‘45 per-
cent (50 percent in the case of a corporation) of the 
amount of gain’’. 
(3) Section 172(d)(2)(B) of such Code is 
amended to read as follows: 
‘‘(B) the deduction under section 1202 
shall not be allowed.’’. 
(4) The last sentence of section 453A(c)(3) of 
such Code is amended by striking all that follows
‘‘long-term capital gain,’’ and inserting ‘‘the max-
imum rate on net capital gain under section 1201 or 
the deduction under section 1202 (whichever is ap-
propriate) shall be taken into account.’’.
(5) Section 642(c)(4) of such Code 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 deduction 
allowable to the estate or trust under section 1202 
(relating to capital gains deduction). In the case of 
a trust, the deduction allowed by this subsection 
shall be subject to section 681 (relating to unrelated 
business income).’’. 
(6) The last sentence of section 643(a)(3) of 
such Code is amended to read as follows: ‘‘The de-
duction under section 1202 (relating to capital gains 
deduction) shall not be taken into account.’’. 
(7) Section 643(a)(6)(C) of such Code is 
amended by inserting ‘‘(i)’’ before ‘‘there shall’’ and 
by inserting before the period ‘‘, and (ii) the deduc-
tion under section 1202 (relating to capital gains de-
duction) shall not be taken into account’’.
(8)(A) Section 904(b)(2) of such Code is 
amended by striking subparagraph (A), by redesig-
nating subparagraph (B) as subparagraph (A), and 
by inserting after subparagraph (A) (as so redesig-
nated) the following: 
‘‘(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) Section 904(b)(2)(A) of such Code, 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) in clause (i), by striking ‘‘in lieu of ap-
plying subparagraph (A),’’. 
(C) Section 904(b)(3) of such Code is amended 
by striking subparagraphs (D) and (E) and inserting 
the following: 
‘‘(D) RATE DIFFERENTIAL PORTION.—The 
rate differential portion of foreign source net 
capital gain, net capital gain, or the excess of