I
105TH CONGRESS
1ST SESSION
H. R. 862
To amend the Internal Revenue Code of 1986 to provide a decrease in
the maximum rate of tax on capital gains which is based on the length
of time the taxpayer held the capital asset.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 27, 1997
Mr. BENTSEN 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 provide
a decrease in the maximum rate of tax on capital gains
which is based on the length of time the taxpayer held
the capital asset.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. DECREASE IN MAXIMUM CAPITAL GAINS RATE
BASED ON TAXPAYER’S HOLDING PERIOD.
(a) IN GENERAL.—Section 1(h) of the Internal Reve-
nue Code of 1986 (relating to maximum capital gains
rate) is amended to read as follows:
‘‘(h) MAXIMUM CAPITAL GAINS RATE.—
‘‘(1) IN GENERAL.—If a taxpayer has a net
capital gain for any taxable year, then the tax im-
posed by this section shall not exceed the sum of—
‘‘(A) a tax computed at the rates and in
the same manner as if this subsection had not
been enacted on the greater of—
‘‘(i) taxable income reduced by the
amount of the net capital gain, or
‘‘(ii) the 15-percent bracket amount,
plus
‘‘(B) a tax equal to the sum of the
amounts determined by applying the applicable
percentage to long-term capital gain taken into
account in computing net capital gain.
‘‘(2) 15-PERCENT
BRACKET
AMOUNT.—For
purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘15-percent
bracket amount’ means the amount of taxable
income taxed at a rate below 28 percent, deter-
mined without taking into account long-term
capital gain attributable to a capital asset for
which the taxpayers’ holding period exceeds 8
years.
‘‘(B) LIFO ORDERING
RULE.—For pur-
poses of applying paragraph (1)(B), the deter-
mination as to which long-term capital gain (if
any) was taken into account in determining the
15-percent bracket amount shall be made on
the basis of the holding period of the capital as-
sets to which such gain is attributable, begin-
ning with assets with the shortest holding pe-
riod.
‘‘(3) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1)—
‘‘(A) IN GENERAL.—The term ‘applicable
percentage’ means, with respect to any long-
term capital gain, 28 percent reduced (but not
below 14 percent) by 2 percentage points for
each year (or fraction thereof) by which the
taxpayer’s holding period for the capital asset
to which the gain is attributable exceeds 2
years.
‘‘(B) LIMITATION ON GAIN TO WHICH PER-
CENTAGE
APPLIES.—Subparagraph (A) shall
not apply to long-term capital gain on any sale
or exchange to the extent the gain exceeds the
excess (if any) of—
‘‘(i) net capital gain for the taxable
year, over
‘‘(ii) the sum of—
‘‘(I) that portion of the 15-per-
cent bracket amount which is attrib-
utable to net capital gain, plus
‘‘(II) other long-term capital gain
to which paragraph (1)(B) applies
and which is attributable to capital
assets for which the taxpayer’s hold-
ing period is longer.
‘‘(C) 
APPLICATION
TO
CLASSES
OF
GAIN.—Subject to such rules as the Secretary
may prescribe, all long-term capital gain from
the sale or exchange of capital assets with the
same holding period (determined on the basis of
the number of years or fractions thereof) shall
be treated as gain from the sale or exchange of
a single capital asset.
‘‘(4) INVESTMENT
INCOME.—For purposes of
this subsection, the net capital gain for any taxable
year shall be reduced (but not below zero) by the
amount which the taxpayer elects to take into ac-
count as investment income for the taxable year
under section 163(d)(4)(B)(iii).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
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