Text: H.R.3128 — 102nd Congress (1991-1992)All Information (Except Text)

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HR 3128 IH
102d CONGRESS
1st Session
 H. R. 3128
To amend the Internal Revenue Code of 1986 to provide for individuals a
capital gains preference based on the period the asset is held and to allow
individuals to exclude certain amounts of interest from gross income.
IN THE HOUSE OF REPRESENTATIVES
July 31, 1991
Mr. GALLO (for himself, Mr. MICHEL, Mr. LEWIS of California, Mr. EDWARDS of
Oklahoma, Mr. VANDER JAGT, Mr. SOLOMON, Mr. WALKER, Mr. COX of California,
Mr. HASTERT, Mr. ARMEY, Ms. MOLINARI, Mr. HUBBARD, Mr. WEBER, Mr. SAXTON,
Mr. TAUZIN, Mr. LEWIS of Florida, Mr. SHAYS, Mr. KYL, Mr. STUMP, Mr. RAVENEL,
Mr. DORNAN of California, Mr. COMBEST, Mr. ROBERTS, Mr. HAMMERSCHMIDT,
Mr. BAKER, Mr. HUNTER, Mr. LENT, Mr. SENSENBRENNER, Mr. LAGOMARSINO,
Mrs. VUCANOVICH, Mr. SPENCE, Mr. RITTER, Mr. BALLENGER, Mr. SCHAEFER,
Mr. DUNCAN, Mr. EMERSON, Mr. MARTIN, Mr. OXLEY, Mr. KASICH, Mr. ZIMMER,
Mr. LIVINGSTON, Mr. BURTON of Indiana, Mr. MCEWEN, Mr. SCHIFF, Mr. RHODES,
Mr. GUNDERSON, Mr. SLAUGHTER of Virginia, Mr. RAMSTAD, Mr. FRANKS
of Connecticut, Mr. MARLENEE, Mr. PACKARD, Mr. CUNNINGHAM, Mr. ALLARD,
Mr. WALSH, and Mr. KOLBE) 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 for individuals a
capital gains preference based on the period the asset is held and to allow
individuals to exclude certain amounts of interest from gross income.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. SHORT TITLE.
  This Act may be cited as the `All-Americans Savings and Investment Incentive
  Act of 1991'.
SEC. 2. CAPITAL GAINS DIFFERENTIAL.
  (a) IN GENERAL- Part I of subchapter P of chapter 1 of the Internal
  Revenue Code of 1986 (relating to treatment of capital gains) is amended
  by inserting after section 1201 the following new section:
`SEC. 1202. DEDUCTION FOR CAPITAL GAINS.
  `(a) DEDUCTION ALLOWED- If for any taxable year a taxpayer other than a
  corporation has a net capital gain, there shall be allowed as a deduction
  from gross income an amount equal to the sum of--
  `(1) 30 percent of the lesser of--
  `(A) the net capital gain, or
  `(B) the qualified 3-year net capital gain, plus
  `(2) 20 percent of the excess (if any) of--
  `(A) the net capital gain, over
  `(B) the qualified 2-year net capital gain, reduced by the amount taken
  into account under paragraph (1), plus
  `(3) 10 percent of the excess (if any) of--
  `(A) the net capital gain, over
  `(B) the amounts taken into account under paragraphs (1) and (2).
  `(b) QUALIFIED NET CAPITAL GAIN- For purposes of subsection (a)--
  `(1) QUALIFIED 3-YEAR NET CAPITAL GAIN- The term `qualified 3-year net
  capital gain' means the amount of net capital gain which would be computed
  for any taxable year if, in determining net long-term capital gain for
  such taxable year, only capital assets held by the taxpayer for at least
  3 years at the time of the sale or exchange were taken into account.
  `(2) QUALIFIED 2-YEAR NET CAPITAL GAIN- The term `qualified 2-year net
  capital gain' means the amount of net capital gain which would be computed
  for any taxable year if, in determining net long-term capital gain for
  such taxable year, only capital assets held by the taxpayer for at least
  2 years but less than 3 years at the time of the sale or exchange were
  taken into account.
  `(c) ESTATES AND TRUSTS- In the case of an estate or trust, the deduction
  under subsection (a) 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 section 652 and 662 (relating to inclusions of amounts in
  gross income of beneficiaries of trusts), is includible by the income
  beneficiaries as gain derived from the sale or exchange of capital assets.
  `(d) TRANSITIONAL PROVISIONS-
  `(1) SALES AND EXCHANGES DURING 1991- In the case of sales and exchanges
  after September 30, 1991, and before January 1, 1992, subsection (a)
  shall be applied by substituting `30 percent' for each of the percentages
  contained in paragraphs (2) and (3) thereof.
  `(2) SALES AND EXCHANGES DURING 1992- In the case of sales and exchanges
  during 1992, subsection (a) shall be applied--
  `(A) by substituting `30 percent' for `20 percent' in paragraph (2)
  thereof, and
  `(B) by substituting `20 percent' for `10 percent' in paragraph (3) thereof.'
  (b) CAPITAL ASSETS NOT TO INCLUDE COLLECTIBLES- Section 1221 of such Code
  is amended by--
  (1) by striking the period at the end of paragraph (5) and inserting `;
  and', and
  (2) by inserting after paragraph (5) the following new paragraph:
  `(6) any collectible (within the meaning of section 408(m)(2)).'
  (c) MINIMUM TAX- Section 57(a) of such Code is amended by adding at the
  end thereof the following new paragraph:
  `(8) CAPITAL GAINS- In the case of a taxpayer other than a corporation,
  the deduction under section 1202 for the taxable year.'
  (d) CONFORMING AMENDMENTS-
  (1) Section 1 of such Code is amended by striking subsection (h).
  (2) Section 62(a) of such Code is amended by adding after paragraph (13)
  the following new paragraph:
  `(14) LONG-TERM CAPITAL GAINS- The deduction allowed by section 1202.'
  (3) Subparagraph (B) of section 170(e)(1) of such Code is amended by
  inserting `100 percent minus the percentage described in each of the
  paragraphs of section 1201(a), whichever is applicable, of' before `the
  amount of gain'.
  (4) Section 172(d)(2) of such Code (relating to modifications with respect
  to net operating loss deduction) is amended to read as follows:
  `(2) CAPITAL GAINS AND LOSSES OF TAXPAYERS OTHER THAN CORPORATIONS- In
  the case of a taxpayer other than a corporation--
  `(A) the amount deductible on account of losses from sales or exchanges
  of capital assets shall not exceed the amount includible on account of
  gains from sales or exchanges of capital assets; and
  `(B) the deduction for long-term capital gains provided by section 1202
  shall not be allowed.'
  (5) Subparagraph (B) of section 172(d)(4) of such Code is amended by
  inserting `, (2)(B),' after `paragraph (1)'.
  (6)(A) Section 220 of such Code (relating to cross reference) is amended
  to read as follows:
`SEC. 220. CROSS REFERENCES.
  `(1) For deduction for long-term capital gains in the case of a taxpayer
  other than a corporation, see section 1202.
  `(2) For deductions in respect of a decedent, see section 691.'
  (B) The table of sections for part VII of subchapter B of chapter 1 of such
  Code is amended by striking `reference' in the item relating to section
  220 and inserting `references'.
  (7) Paragraph (4) of section 642(c) 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 exchange
  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 deduction for excess of capital gains over capital losses). In
  the case of a trust, the deduction allowed by this subsection shall be
  subject to section 681 (relating to unrelated business income).'
  (8) Paragraph (3) of section 643(a) of such Code is amended by adding at the
  end thereof the following new sentence: `The deduction under section 1202
  (relating to deduction for excess of capital gains over capital losses)
  shall not be taken into account.'
  (9) Paragraph (4) of section 691(c) of such Code is amended by striking
  `1(h), 1201, and 1211' and inserting `1201, 1202, and 1211, and for purposes
  of section 57(a)(8)'.
  (10) Clause (iii) of section 852(b)(3)(D) of such Code is amended by
  striking `66 percent' and inserting `the rate differential portion (within
  the meaning of section 904(b)(3)(E))'.
  (11) The second sentence of paragraph (2) of section 871(a) of such Code
  is amended by inserting `such gains and losses shall be determined without
  regard to section 1202 (relating to deduction for excess of capital gains
  over capital losses) and' after `except that'.
  (12) Section 1402(i)(1) is amended to read as follows:
  `(1) IN GENERAL- In determining the net earnings from self-employment of
  any options dealer or commodities dealer--
  `(A) notwithstanding subsection (a)(3)(A), there shall not be excluded any
  gain or loss (in the normal course of the taxpayer's activity of dealing in
  or trading section 1256 contracts) from section 1256 contracts or property
  related to such contracts, and
  `(B) the deduction provided by section 1202 shall not apply.'
  (13) Section 1445(e)(1) is amended by striking `34 percent (or, to the
  extent provided in regulations, 28 percent)' and inserting `34 percent (or,
  to the extent provided in regulations, the alternative tax rate determined
  under section 904(b)(3)(E)(iii))'.
  (e) EFFECTIVE DATE- The amendments made by this section shall apply to
  sales and exchanges after September 30, 1991.
SEC. 3. PARTIAL EXCLUSION OF INTEREST RECEIVED BY INDIVIDUALS.
  (a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue
  Code of 1986 (relating to amounts specifically excluded from gross income)
  is amended by inserting after section 115 the following new section:
`SEC. 116. PARTIAL EXCLUSION OF INTEREST RECEIVED BY INDIVIDUALS.
  `(a) EXCLUSION FROM GROSS INCOME- Gross income does not include interest
  received during the taxable year by an individual.
  `(b) LIMITATION-
  `(1) MAXIMUM AMOUNT- The aggregate amount excluded under subsection (a) for
  any taxable year shall not exceed $350 ($700 in the case of a joint return).
  `(2) PHASEOUT OF EXCLUSION-
  `(A) IN GENERAL- If the adjusted gross income of the taxpayer for the
  taxable year exceeds $50,000 ($25,000 in the case of a marrried individual
  filing a separate return), each dollar amount under paragraph (1) shall
  be reduced (but not below zero) by an amount which bears the same ratio
  to such dollar amount as such excess bears to $10,000.
  `(B) ADJUSTED GROSS INCOME- For purposes of this paragraph, the adjusted
  gross income of the taxpayer shall be determined without regard to this
  section and--
  `(i) after the application of sections 86, 135, 219, and 469, and
  `(ii) for purposes of such sections, without regard to this section.
  `(c) SPECIAL RULES- For purposes of this section--
  `(1) DISTRIBUTIONS FROM REGULATED INVESTMENT COMPANIES AND REAL ESTATE
  INVESTMENT TRUSTS- Subsection (a) shall apply with respect to distributions
  by--
  `(A) regulated investment companies to the extent provided in section
  854(c), and
  `(B) real estate investment trusts to the extent provided in section 857(c).
  `(2) DISTRIBUTIONS BY A TRUST- For purposes of subsection (a), the amount
  of interest properly allocable to a beneficiary under section 652 or 662
  shall be deemed to have been received by the beneficiary ratably on the
  same date that the interest was received by the estate or trust.
  `(3) CERTAIN NONRESIDENT ALIENS INELIGIBLE FOR EXCLUSION- In the case of
  a nonresident alien individual, subsection (a) shall apply only--
  `(A) in determining the tax imposed for the taxable year pursuant to section
  871(b)(1) and only in respect of interest which are effectively connected
  with the conduct of a trade or business within the United States, or
  `(B) in determining the tax imposed for the taxable year pursuant to
  section 877(b).'
  (b) CLERICAL AND CONFORMING AMENDMENTS-
  (1) The table of sections for part III of subchapter B of chapter 1 of
  such Code is amended by inserting after the item relating to section 115
  the following new item:
`Sec. 116. Partial exclusion of interest received by individuals.'
  (2) The first sentence of paragraph (2) of section 265(a) of such Code is
  amended by inserting before the period at the end thereof the following:
  `, 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'.
  (3) Subsection (c) of section 584 of such Code is amended by adding at
  the end thereof the following new sentence:
`The proportionate share of each participant in the amount of interest received
by the common trust fund and to which section 116 applies shall be considered
for purposes of such section as having been received by such participant.'
  (4) Subsection (a) of section 643(a) of such Code is amended by inserting
  after paragraph (6) the following new paragraph:
  `(7) INTEREST- There shall be included the amount of any interest excluded
  from gross income pursuant to section 116.'
  (5) Section 854 of such Code is amended by adding at the end thereof the
  following new subsection:
  `(c) TREATMENT UNDER SECTION 116-
  `(1) IN GENERAL- For purposes of section 116, in the case of any dividend
  (other than a dividend described in subsection (a)) received from a
  regulated investment company which meets the requirements of section 852
  for the taxable year in which it paid the dividend--
  `(A) the entire amount of such dividend shall be treated as interest if
  the aggregate interest received by such company during the taxable year
  equals or exceeds 75 percent of its gross income, or
  `(B) if subparagraph (A) does not apply, the portion of such dividend
  which bears the same ratio to the amount of such dividend as the aggregate
  interest received bears to gross income shall be treated as interest.
For purposes of the preceding sentence, gross income and aggregate interest
received shall each be reduced by so much of the deduction allowable by
section 163 for the taxable year as does not exceed aggregate interest
received for the taxable year.
  `(2) NOTICE TO SHAREHOLDERS- The amount of any distribution by a regulated
  investment company which may be taken into account as interest for purposes
  of the exclusion under section 116 shall not exceed the amount so designated
  by the company in a written notice to its shareholders mailed not later
  than 45 days after the close of its taxable year.
  `(3) SPECIAL RULE FOR DETERMINING GROSS INCOME- For purposes of this
  subsection, the term `gross income' does not include gain from the sale
  or other disposition of stock or securities.'
  (6) Subsection (c) of section 857 of such Code is amended to read as follows:
  `(c) LIMITATIONS APPLICABLE TO DIVIDENDS RECEIVED FROM REAL ESTATE
  INVESTMENT TRUSTS-
  `(1) IN GENERAL- For purposes of section 116 (relating to an exclusion for
  dividends and interest received by individuals) and section 243 (relating
  to deductions for dividends 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.
  `(2) TREATMENT AS INTEREST- In the case of a dividend (other than 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 for the
  taxable year in which it paid the dividend--
  `(A) such dividend shall be treated as interest if the aggregate interest
  received by the real estate investment trust for the taxable year equals
  or exceeds 75 percent of its gross income, or
  `(B) if subparagraph (A) does not apply, the portion of such dividend
  which bears the same ratio to the amount of such dividend as the aggregate
  interest received bears to gross income shall be treated as interest.
  `(3) ADJUSTMENTS TO GROSS INCOME AND AGGREGATE INTEREST RECEIVED- For
  purposes of paragraph (2)--
  `(A) gross income does not include the net capital gain,
  `(B) gross income and aggregate interest received shall each be reduced
  by so much of the deduction allowable by section 163 for the taxable year
  (other than for interest on mortgages on real property owned by the real
  estate investment trust) as does not exceed aggregate interest received
  by the taxable year, and
  `(C) gross income shall be reduced by the sum of the taxes imposed by
  paragraphs (4), (5), and (6) of section 857(b).
  `(4) NOTICE TO SHAREHOLDERS- The amount of any distribution by a real
  estate investment trust which may be taken into account as interest for
  purposes of the exclusion under section 116 shall not exceed the amount
  so designated by the trust in a written notice to its shareholders mailed
  not later than 45 days after the close of its taxable year.'
  (c) EFFECTIVE DATE- The amendments made by this section shall apply with
  respect to taxable years beginning after December 31, 1991.