To amend the Internal Revenue Code of 1986 to allow the private sector to create robust levels of economic growth.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Economic Freedom Act of 2010''.

SEC. 2. ZERO PERCENT CAPITAL GAINS RATE FOR INDIVIDUALS AND 
              CORPORATIONS.

    (a) Zero Percent Capital Gains Rate for Individuals.--
            (1) In general.--Paragraph (1) of section 1(h) of the 
        Internal Revenue Code of 1986 is amended by striking 
        subparagraph (C), by redesignating subparagraphs (D) and (E) 
        and subparagraphs (C) and (D), respectively, and by amending 
        subparagraph (B) to read as follows:
                    ``(B) 0 percent of the adjusted net capital gain 
                (or, if less, taxable income);''.
            (2) Alternative minimum tax.--Paragraph (3) of section 
        55(b) is amended by striking subparagraph (C), by redesignating 
        subparagraph (D) as subparagraph (C), and by amending 
        subparagraph (B) to read as follows:
                    ``(B) 0 percent of the adjusted net capital gain 
                (or, if less, taxable excess), plus''.
            (3) Repeal of sunset of reduction in capital gains rates 
        for individuals.--Section 303 of the Jobs and Growth Tax Relief 
        Reconciliation Act of 2003 shall not apply to section 301 of 
        such Act.
    (b) Zero Percent Capital Gains Rate for Corporations.--
            (1) In general.--Section 1201 of the Internal Revenue Code 
        of 1986 is amended by redesignating subsection (b) as 
        subsection (c), and by striking subsection (a) and inserting 
        the following new subsections:
    ``(a) General Rule.--If for any taxable year a corporation has a 
net capital gain, then, in lieu of the tax imposed by sections 11, 511, 
821(a) or (c), and 831(a), there is hereby imposed a tax (if such tax 
is less than the tax imposed by such sections) which shall consist of 
the sum of--
            ``(1) a tax computed on the taxable income reduced by the 
        amount of the net capital gain, at the rates and in the manner 
        as if this subsection had not been enacted,
            ``(2) 0 percent of the adjusted net capital gain (or, if 
        less, taxable income),
            ``(3) 25 percent of the excess (if any) of--
                    ``(A) the unrecaptured section 1250 gain (or, if 
                less, the net capital gain (determined without regard 
                to subsection (b)(2)), over
                    ``(B) the excess (if any) of--
                            ``(i) the sum of the amount on which tax is 
                        determined under paragraph (1) plus the net 
                        capital gain, over
                            ``(ii) taxable income, plus
            ``(4) 28 percent of the amount of taxable income in excess 
        of the sum of the amounts on which tax is determined under the 
        preceding paragraphs of this subsection.
    ``(b) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) In general.--The terms `adjusted net capital gain' 
        and `unrecaptured section 1250 gain' shall have the respective 
        meanings given such terms in section 1(h).
            ``(2) Dividends taxed at net capital gain.--Except as 
        otherwise provided in this section, the term `net capital gain' 
        has the meaning given such term in section 1(h)(11).''.
            (2) Alternative minimum tax.--Section 55(b) of such Code is 
        amended by adding at the end the following new paragraph:
            ``(4) Maximum rate of tax on net capital gain of 
        corporations.--The amount determined under paragraph (1)(B)(i) 
        shall not exceed the sum of--
                    ``(A) the amount determined under such paragraph 
                computed at the rates and in the same manner as if this 
                paragraph had not been enacted on the taxable excess 
                reduced by the net capital gain, plus
                    ``(B) the amount determined under section 1201.''.
            (3) Technical amendments.--
                    (A) Section 1202(a) of such Code is amended by 
                striking ``50 percent'' and inserting ``100 percent''.
                    (B) Section 1445(e)(1) of such Code is amended by 
                striking ``35 percent (or, to the extent provided in 
                regulations, 15 percent)'' and inserting ``0 percent''.
                    (C) Section 1445(e)(2) of such Code is amended by 
                striking ``35 percent'' and inserting ``0 percent''.
                    (D) Section 7518(g)(6)(A) of such Code is amended 
                by striking ``15 percent (34 percent in the case of a 
                corporation)'' and inserting ``0 percent''.
                    (E) Section 607(h)(6)(A) of the Merchant Marine 
                Act, 1936 is amended by striking ``15 percent (34 
                percent in the case of a corporation)'' and inserting 
                ``0 percent''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2009.
            (2) Withholding.--The amendments made by subparagraphs (A) 
        and (B) of subsection (b)(3) shall take apply to dispositions 
        and distributions after the date of the enactment of this Act.

SEC. 3. REDUCTION IN CORPORATE INCOME TAX RATES.

    (a) In General.--Subsection (b) of section 11 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be 12.5 percent of taxable income.''.
    (b) Conforming Amendments.--
            (1) Section 55(b)(1)(B)(i) of such Code is amended by 
        striking ``20 percent'' and inserting ``12.5 percent''.
            (2) Section 280C(c)(3)(B)(ii)(II) of such Code is amended 
        by striking ``maximum rate of tax under section 11(b)(1)'' and 
        inserting ``rate of tax under section 11(b)''.
            (3) Section 832(b)(1) of such Code is amended by striking 
        ``rates provided in section 11(b)'' and inserting ``rate 
        provided in section 11(b)''.
            (4) Sections 244(a)(2)(B), 247(a)(2)(B), 527(b)(1), 835(e), 
        852(b)(1), 857(b)(4)(A), 860G(c)(1), 904(b)(3)(E)(ii)(II), and 
        1375(a) of such Code is amended by striking ``highest rate of 
        tax'' and inserting ``rate of tax''.
            (5) Sections 860E(e)(2)(B), 860E(e)(6)(A)(ii), 
        860K(d)(2)(A)(ii), 860K(e)(1)(B)(ii), 1446(b)(2)(B), and 
        7874(e)(1)(B) of such Code are each amended by striking 
        ``highest rate of tax specified in section 11(b)(1)'' and 
        inserting ``rate of tax specified in section 11(b)''.
            (6) Section 904(b)(3)(D)(ii) of such Code is amended by 
        striking ``(determined without regard to the last sentence of 
        section 11(b)(1))''.
            (7) Section 962 of such Code is amended by striking 
        subsection (c) and by redesignating subsection (d) as 
        subsection (c).
            (8) Section 1201(a) of such Code is amended--
                    (A) by striking ``35 percent (determined without 
                regard to the last 2 sentences of section 11(b)(1))'' 
                and inserting ``15 percent'', and
                    (B) by striking ``35 percent'' in paragraph (2) and 
                inserting ``15 percent''.
            (9) Section 1561(a) of such Code is amended--
                    (A) by striking paragraph (1) and by redesignating 
                paragraphs (2), (3), and (4) as paragraphs (1), (2), 
                and (3), respectively,
                    (B) by striking ``The amounts specified in 
                paragraph (1), the'' and inserting ``The'',
                    (C) by striking ``paragraph (2)'' and inserting 
                ``paragraph (1)'',
                    (D) by striking ``paragraph (3)'' both places it 
                appears and inserting ``paragraph (2)'',
                    (E) by striking ``paragraph (4)'' and inserting 
                ``paragraph (3)'', and
                    (F) by striking the fourth sentence.
            (10) Subsection (b) of section 1561 of such Code is amended 
        to read as follows:
    ``(b) Certain Short Taxable Years.--If a corporation has a short 
taxable year which does not include a December 31 and is a component 
member of a controlled group of corporations with respect to such 
taxable year, then for purposes of this subtitle, the amount to be used 
in computing the accumulated earnings credit under section 535(c)(2) 
and (3) of such corporation for such taxable year shall be the amount 
specified in subsection (a)(1) divided by the number of corporations 
which are component members of such group on the last day of such 
taxable year. For purposes of the preceding sentence, section 1563(b) 
shall be applied as if such last day were substituted for December 
31.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 4. ESTATE TAX REPEAL MADE PERMANENT.

    Section 901 of the Economic Growth and Tax Relief Reconciliation 
Act of 2001 shall not apply to title V of such Act.

SEC. 5. ELECTION TO EXPENSE BUSINESS ASSETS.

    (a) In General.--Section 179 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 179. ELECTION TO EXPENSE CERTAIN DEPRECIABLE BUSINESS ASSETS.

    ``(a) Treatment as Expenses.--A taxpayer may elect to treat the 
cost of any property to which this section applies as an expense which 
is not chargeable to capital account. Any cost so treated shall be 
allowed as a deduction for the taxable year in which such property is 
placed in service.
    ``(b) Property to Which Section Applies.--
            ``(1) In general.--This section shall apply to property--
                    ``(A) which is--
                            ``(i) tangible property (to which section 
                        168 applies), or
                            ``(ii) computer software (as defined in 
                        section 197(e)(3)(B)) which is described in 
                        section 197(e)(3)(A)(i), to which section 167 
                        applies,
                    ``(B) which is section 1245 property (as defined in 
                section 1245(a)(3)) or 1250 property (as defined in 
                section 1250(c)), and
                    ``(C) which is acquired by purchase for use in the 
                active conduct of a trade or business.
        Such term shall not include any property described in section 
        50(b) and shall not include air conditioning or heating units.
            ``(2) Purchase defined.--For purposes of paragraph (1), the 
        term `purchase' means any acquisition of property, but only 
        if--
                    ``(A) the property is not acquired from a person 
                whose relationship to the person acquiring it would 
                result in the disallowance of losses under section 267 
                or 707(b) (but, in applying section 267(b) and (c) for 
                purposes of this section, paragraph (4) of section 
                267(c) shall be treated as providing that the family of 
                an individual shall include only his spouse, ancestors, 
                and lineal descendants),
                    ``(B) the property is not acquired by one component 
                member of a controlled group from another component 
                member of the same controlled group, and
                    ``(C) the basis of the property in the hands of the 
                person acquiring it is not determined--
                            ``(i) in whole or in part by reference to 
                        the adjusted basis of such property in the 
                        hands of the person from whom acquired, or
                            ``(ii) under section 1014(a) (relating to 
                        property acquired from a decedent).
            ``(3) Cost.--For purposes of this section, the cost of 
        property does not include so much of the basis of such property 
        as is determined by reference to the basis of other property 
        held at any time by the person acquiring such property.
            ``(4) Controlled group defined.--For purposes of this 
        section, the term `controlled group' has the meaning assigned 
        to it by section 1563(a), except that, for such purposes, the 
        phrase `more than 50 percent' shall be substituted for the 
        phrase `at least 80 percent' each place it appears in section 
        1563(a)(1).
            ``(5) Coordination with section 38.--No credit shall be 
        allowed under section 38 with respect to any amount for which a 
        deduction is allowed under subsection (a).
            ``(6) Recapture in certain cases.--The Secretary shall, by 
        regulations, provide for recapturing the benefit under any 
        deduction allowable under subsection (a) with respect to any 
        property which is not used predominantly in a trade or business 
        at any time.
    ``(c) Election.--
            ``(1) In general.--An election under this section for any 
        taxable year shall--
                    ``(A) specify the items of property to which the 
                election applies, and
                    ``(B) be made on the taxpayer's return of the tax 
                imposed by this chapter for the taxable year.
        Such election shall be made in such manner as the Secretary may 
        by regulations prescribe.
            ``(2) Election irrevocable.--Any election made under this 
        section, and any specification contained in any such election, 
        may not be revoked except with the consent of the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after the date of the enactment of this 
Act.

SEC. 6. PAYROLL TAX DECREASE FOR 2010.

    (a) Employees.--Section 3101 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(d) Reduction in Tax Rate for 2010.--In the case of wages 
received during calendar year 2010--
            ``(1) subsection (a) shall be applied by substituting `3.1 
        percent' for `6.2 percent' in the table contained therein, and
            ``(2) subsection (b) shall be applied by substituting 
        `0.725 percent' for `1.45 percent' in paragraph (6) thereof.''.
    (b) Employers.--Section 3111 of such Code is amended by adding at 
the end the following new subsection:
    ``(d) Reduction in Tax Rate for 2010.--In the case of wages paid 
during calendar year 2010--
            ``(1) subsection (a) shall be applied by substituting `3.1 
        percent' for `6.2 percent' in the table contained therein, and
            ``(2) subsection (b) shall be applied by substituting 
        `0.725 percent' for `1.45 percent' in paragraph (6) thereof.''.
    (c) Self-Employment.--Section 1401 of such Code is amended by 
adding at the end the following new subsection:
    ``(d) Reduction in Tax Rate for 2010.--In the case of a taxable 
year beginning in 2010--
            ``(1) subsection (a) shall be applied by substituting `6.2 
        percent' for `12.4 percent' in the table contained therein, and
            ``(2) subsection (b) shall be applied by substituting `1.45 
        percent' for `2.90 percent' in paragraph (6) thereof.''.
    (d) Effective Date.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply with respect to 
        remuneration paid after December 31, 2009.
            (2) Self-employment.--The amendment made by subsection (c) 
        shall apply to taxable years beginning after December 31, 2009.

SEC. 7. RESCISSION AND REPEAL IN ARRA.

    (a) Rescission.--Of the discretionary appropriations made available 
in division A of the American Recovery and Reinvestment Act of 2009 
(Public Law 111-5), all unobligated balances are rescinded.
    (b) Repeal.--Subtitles B and C of title II and titles III through 
VII of division B of the American Recovery and Reinvestment Act of 2009 
(Public Law 111-5) are repealed.

SEC. 8. TERMINATION OF TARP AUTHORITY.

    Section 120 of the Emergency Economic Stabilization Act of 2008 (12 
U.S.C. 5230) is amended to read as follows:

``SEC. 120. TERMINATION OF AUTHORITY.

    ``The authorities provided under sections 101(a), excluding section 
101(a)(3), and 102 shall terminate on the date of the enactment of the 
Economic Freedom Act of 2010.''.

SEC. 9. REQUIRING THE SALE OF STOCK AND WARRANTS RECEIVED UNDER TARP.

    Not later than the end of the 1-year period beginning on the date 
of the enactment of this Act, the Secretary of the Treasury shall sell 
all stock and warrants acquired by the Secretary under the Troubled 
Asset Relief Program under title I of the Emergency Economic 
Stabilization Act of 2008 (12 U.S.C. 5211 et seq.).

Summary: Economic Freedom Act of 2010 - Amends the Internal Revenue Code to: (1) eliminate the tax on the capital gains of individuals and corporations; (2) reduce the maximum corporate income tax rate to 12.5%; (3) allow a permanent and unlimited expensing allowance for depreciable business assets; and (4) reduce payroll tax rates for employers, employees, and self-employed individuals in 2010.

Makes permanent the repeal of the estate and generation-skipping transfer taxes.

Rescinds unobligated balances available in the American Recovery and Reinvestment Act of 2009. Repeals provisions of such Act relating to the Temporary Assistance to Needy Families program, economic recovery payments, premium assistance for COBRA (health insurance continuation benefits) payments, Medicare and Medicaid health information technology, state fiscal relief, broadband technology, and limits on executive compensation.

Amends the Emergency Economic Stabilization Act to repeal the authority for the Troubled Asset Relief Program (TARP).

Requires the Secretary of the Treasury to sell all stock and warrants acquired by the Secretary under TARP.