Text: H.R.4268 — 102nd Congress (1991-1992)All Information (Except Text)

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HR 4268 IH
102d CONGRESS
2d Session
 H. R. 4268
To amend the Internal Revenue Code of 1986 to provide a partial exclusion
of dividends and interest received by individuals.
IN THE HOUSE OF REPRESENTATIVES
February 19, 1992
Mr. JOHNSON of Texas 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 partial exclusion
of dividends and interest received by individuals.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. EXEMPTION OF CERTAIN INTEREST AND DIVIDEND INCOME FROM TAX.
  (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 DIVIDENDS AND INTEREST RECEIVED BY INDIVIDUALS.
  `(a) EXCLUSION FROM GROSS INCOME- Gross income does not include the sum
  of the amounts received during the taxable year by an individual as--
  `(1) dividends from domestic corporations, or
  `(2) interest.
  `(b) LIMITATIONS-
  `(1) MAXIMUM AMOUNT- The aggregate amount excluded under subsection (a)
  for any taxable year shall not exceed $5,000 ($10,000 in the case of a
  joint return).
  `(2) CERTAIN DIVIDENDS EXCLUDED- Subsection (a)(1) shall not apply to any
  dividend from a corporation which, for the taxable year of the corporation
  in which the distribution is made, or for the next preceding taxable
  year of the corporation, is a corporation exempt from tax under section
  501 (relating to certain charitable, etc., organization) or section 521
  (relating to farmers' cooperative associations).
  `(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
  dividends and 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 dividends and interest were 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 dividends and 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 dividends and interest received by
individuals.'
  (2) 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 dividends or
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 of such Code is amended by inserting
  after paragraph (6) the following new paragraph:
  `(7) DIVIDENDS OR INTEREST- There shall be included the amount of any
  dividends or 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 a dividend if
  the aggregate dividends and interest received by such company during the
  taxable year equal or exceed 75 percent of its gross income, or
  `(B) if subparagraph (A) does not apply, a portion of such dividend shall
  be treated as a dividend (and a portion of such dividend shall be treated
  as interest) based on the portion of the company's gross income which
  consists of aggregate dividends or aggregate interest, as the case may be.
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 a dividend 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) DEFINITIONS- For purposes of this subsection--
  `(A) The term `gross income' does not include gain from the sale or other
  disposition of stock or securities.
  `(B) The term `aggregate dividends received' includes only dividends
  received from domestic corporations other than dividends described in
  section 116(b)(2). In determining the amount of any dividend for purposes
  of this subparagraph, the rules provided in section 116(c)(1) (relating
  to certain distributions) shall apply.'
  (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.