Text: H.R.2 — 108th Congress (2003-2004)All Information (Except Text)

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Public Law No: 108-27 (05/28/2003)

 
[108th Congress Public Law 27]
[From the U.S. Government Printing Office]


[DOCID: f:publ027.108]

[[Page 751]]

          JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003

[[Page 117 STAT. 752]]

Public Law 108-27
108th Congress

                                 An Act


 
To provide for reconciliation pursuant to section 201 of the concurrent 
     resolution on the budget for fiscal year 2004. <<NOTE: May 28, 
                           2003 -  [H.R. 2]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Jobs and Growth 
Tax Relief Reconciliation Act of 2003.>> 

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This <<NOTE: 26 USC 1 note.>> Act may be cited as 
the ``Jobs and Growth Tax Relief Reconciliation Act of 2003''.

    (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; references; table of contents.

   TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS

Sec. 101. Acceleration of increase in child tax credit.
Sec. 102. Acceleration of 15-percent individual income tax rate bracket 
           expansion for married taxpayers filing joint returns.
Sec. 103. Acceleration of increase in standard deduction for married 
           taxpayers filing joint returns.
Sec. 104. Acceleration of 10-percent individual income tax rate bracket 
           expansion.
Sec. 105. Acceleration of reduction in individual income tax rates.
Sec. 106. Minimum tax relief to individuals.
Sec. 107. Application of EGTRRA sunset to this title.

                TITLE II--GROWTH INCENTIVES FOR BUSINESS

Sec. 201. Increase and extension of bonus depreciation.
Sec. 202. Increased expensing for small business.

      TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS

Sec. 301. Reduction in capital gains rates for individuals; repeal of 5-
           year holding period requirement.
Sec. 302. Dividends of individuals taxed at capital gain rates.
Sec. 303. Sunset of title.

                 TITLE IV--TEMPORARY STATE FISCAL RELIEF

Sec. 401. Temporary State fiscal relief.

           TITLE V--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003

Sec. 501. Time for payment of corporate estimated taxes.

[[Page 117 STAT. 753]]

   TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS

SEC. 101. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.

    (a) In General.--The item relating to calendar years 2001 through 
2004 in the table contained in paragraph (2) of section 24(a) (relating 
to per child amount) <<NOTE: 26 USC 24.>> is amended to read as follows:

``2003 or 2004                                                 $1,000''.

    (b) Advance Payment of Portion of Increased Credit in 2003.--
            (1) In general.--Subchapter B of chapter 65 (relating to 
        abatements, credits, and refunds) is amended by inserting after 
        section 6428 the following new section:

``SEC. 6429. <<NOTE: 26 USC 6429.>> ADVANCE PAYMENT OF PORTION OF 
            INCREASED CHILD CREDIT FOR 2003.

    ``(a) In General.--Each taxpayer who was allowed a credit under 
section 24 on the return for the taxpayer's first taxable year beginning 
in 2002 shall be treated as having made a payment against the tax 
imposed by chapter 1 for such taxable year in an amount equal to the 
child tax credit refund amount (if any) for such taxable year.
    ``(b) Child Tax Credit Refund Amount.--For purposes of this section, 
the child tax credit refund amount is the amount by which the aggregate 
credits allowed under part IV of subchapter A of chapter 1 for such 
first taxable year would have been increased if--
            ``(1) the per child amount under section 24(a)(2) for such 
        year were $1,000,
            ``(2) only qualifying children (as defined in section 24(c)) 
        of the taxpayer for such year who had not attained age 17 as of 
        December 31, 2003, were taken into account, and
            ``(3) section 24(d)(1)(B)(ii) did not apply.

    ``(c) Timing of Payments.--In the case of any overpayment 
attributable to this section, the Secretary shall, subject to the 
provisions of this title, refund or credit such overpayment as rapidly 
as possible and, to the extent practicable, before October 1, 2003. No 
refund or credit shall be made or allowed under this section after 
December 31, 2003.
    ``(d) Coordination With Child Tax Credit.--
            ``(1) In general.--The amount of credit which would (but for 
        this subsection and section 26) be allowed under section 24 for 
        the taxpayer's first taxable year beginning in 2003 shall be 
        reduced (but not below zero) by the payments made to the 
        taxpayer under this section. Any failure to so reduce the credit 
        shall be treated as arising out of a mathematical or clerical 
        error and assessed according to section 6213(b)(1).
            ``(2) Joint returns.--In the case of a payment under this 
        section with respect to a joint return, half of such payment 
        shall be treated as having been made to each individual filing 
        such return.

    ``(e) No Interest.--No interest shall be allowed on any overpayment 
attributable to this section.''.

[[Page 117 STAT. 754]]

            (2) Clerical amendment.--The table of sections for 
        subchapter B of chapter 65 is amended by adding at the end the 
        following new item:

                ``Sec. 6429. Advance payment of portion of increased 
                                child credit for 2003.''.

    (c) Effective <<NOTE: 26 USC 24 note.>> Dates.--
            (1) In general.--Except <<NOTE: Applicability.>> as provided 
        in paragraph (2), the amendments made by this section shall 
        apply to taxable years beginning after December 31, 2002.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall take effect on the date of the enactment of this Act.

SEC. 102. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET 
            EXPANSION FOR MARRIED TAXPAYERS FILING JOINT RETURNS.

    (a) In General.--The table contained in subparagraph (B) of section 
1(f )(8) (relating to applicable percentage) <<NOTE: 26 USC 1.>> is 
amended by inserting before the item relating to 2005 the following new 
item:

                    ``2003 and 2004.............................  200''.

    (b) Conforming Amendments.--
            (1) Section 1(f)(8)(A) is amended by striking ``2004'' and 
        inserting ``2002''.
            (2) Section 302(c) of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001 <<NOTE: 26 USC 1 note.>> is amended 
        by striking ``2004'' and inserting ``2002''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 1 
note.>> amendments made by this section shall apply to taxable years 
beginning after December 31, 2002.

SEC. 103. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR MARRIED 
            TAXPAYERS FILING JOINT RETURNS.

    (a) In General.--The table contained in paragraph (7) of section 
63(c) (relating to applicable percentage) is amended by inserting before 
the item relating to 2005 the following new item:

                    ``2003 and 2004.............................  200''.

    (b) Conforming Amendment.--Section 301(d) of the Economic Growth and 
Tax Relief Reconciliation Act of 2001 <<NOTE: 26 USC 1 note.>> is 
amended by striking ``2004'' and inserting ``2002''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 63 
note.>> amendments made by this section shall apply to taxable years 
beginning after December 31, 2002.

SEC. 104. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET 
            EXPANSION.

    (a) In General.--Clause (i) of section 1(i)(1)(B) (relating to the 
initial bracket amount) is amended by striking ``($12,000 in the case of 
taxable years beginning before January 1, 2008)'' and inserting 
``($12,000 in the case of taxable years beginning after December 31, 
2004, and before January 1, 2008)''.
    (b) Inflation Adjustment.--Subparagraph (C) of section 1(i)(1) is 
amended to read as follows:
                    ``(C) Inflation adjustment.--In prescribing the 
                tables under subsection (f) which apply with respect to 
                taxable years beginning in calendar years after 2000--
                          ``(i) except as provided in clause (ii), the 
                      Secretary shall make no adjustment to the initial 
                      bracket amounts for any taxable year beginning 
                      before January 1, 2009,

[[Page 117 STAT. 755]]

                          ``(ii) there shall be an adjustment under 
                      subsection (f) of such amounts which shall apply 
                      only to taxable years beginning in 2004, and such 
                      adjustment shall be determined under subsection 
                      (f)(3) by substituting `2002' for `1992' in 
                      subparagraph (B) thereof,
                          ``(iii) the cost-of-living adjustment used in 
                      making adjustments to the initial bracket amounts 
                      for any taxable year beginning after December 31, 
                      2008, shall be determined under subsection (f)(3) 
                      by substituting `2007' for `1992' in subparagraph 
                      (B) thereof, and
                          ``(iv) the adjustments under clauses (ii) and 
                      (iii) shall not apply to the amount referred to in 
                      subparagraph (B)(iii).
                If any amount after adjustment under the preceding 
                sentence is not a multiple of $50, such amount shall be 
                rounded to the next lowest multiple of $50.''.

    (c) Effective <<NOTE: 26 USC 1 note.>> Date.--
            (1) In general.--The <<NOTE: Applicability.>> amendments 
        made by this section shall apply to taxable years beginning 
        after December 31, 2002.
            (2) Tables for 2003.--The Secretary of the Treasury shall 
        modify each table which has been prescribed under section 1(f) 
        of the Internal Revenue Code of 1986 for taxable years beginning 
        in 2003 and which relates to the amendment made by subsection 
        (a) to reflect such amendment.

SEC. 105. ACCELERATION OF REDUCTION IN INDIVIDUAL INCOME TAX RATES.

    (a) In General.--The table contained in paragraph (2) of section 
1(i) (relating to <<NOTE: 26 USC 1.>> reductions in rates after June 30, 
2001) is amended to read as follows:

  

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             The corresponding percentages shall be substituted for the following percentages:
                         ``In the case of taxable years  -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                         beginning during calendar year:    28%      31%      36%                                                                                               39.6%
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        2001............................   27.5%    30.5%    35.5%                                                                                              39.1%
                        2002............................   27.0%    30.0%    35.0%                                                                                              38.6%
                        2003 and thereafter.............   25.0%    28.0%    33.0%                                                                                             35.0%''.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 1 
note.>> amendment made by this section shall apply to taxable years 
beginning after December 31, 2002.

SEC. 106. MINIMUM TAX RELIEF TO INDIVIDUALS.

    (a) In General.--
            (1) Subparagraph (A) of section 55(d)(1) is amended by 
        striking ``$49,000 in the case of taxable years beginning in 
        2001, 2002, 2003, and 2004'' and inserting ``$58,000 in the case 
        of taxable years beginning in 2003 and 2004''.
            (2) Subparagraph (B) of section 55(d)(1) is amended by 
        striking ``$35,750 in the case of taxable years beginning in 
        2001, 2002, 2003, and 2004'' and inserting ``$40,250 in the case 
        of taxable years beginning in 2003 and 2004''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 55 
note.>> amendments made by subsection (a) shall apply to taxable years 
beginning after December 31, 2002.

SEC. 107. <<NOTE: 26 USC 1 note.>> APPLICATION OF EGTRRA SUNSET TO THIS 
            TITLE.

    Each amendment made by this title shall be subject to title IX of 
the Economic Growth and Tax Relief Reconciliation Act of

[[Page 117 STAT. 756]]

2001 to the same extent and in the same manner as the provision of such 
Act to which such amendment relates.

                TITLE II--GROWTH INCENTIVES FOR BUSINESS

SEC. 201. INCREASE AND EXTENSION OF BONUS DEPRECIATION.

    (a) In General.--Section 168(k) (relating to <<NOTE: 26 USC 
168.>> special allowance for certain property acquired after September 
10, 2001, and before September 11, 2004) is amended by adding at the end 
the following new paragraph:
            ``(4) 50-percent bonus depreciation for certain property.--
                    ``(A) In general.--In the case of 50-percent bonus 
                depreciation property--
                          ``(i) paragraph 
                      (1)(A) <<NOTE: Applicability.>> shall be applied 
                      by substituting `50 percent' for `30 percent', and
                          ``(ii) except as provided in paragraph (2)(C), 
                      such property shall be treated as qualified 
                      property for purposes of this subsection.
                    ``(B) 50-percent bonus depreciation property.--For 
                purposes of this subsection, the term `50-percent bonus 
                depreciation property' means property described in 
                paragraph (2)(A)(i)--
                          ``(i) the original use of which commences with 
                      the taxpayer after May 5, 2003,
                          ``(ii) which is acquired by the taxpayer after 
                      May 5, 2003, and before January 1, 2005, but only 
                      if no written binding contract for the acquisition 
                      was in effect before May 6, 2003, and
                          ``(iii) which is placed in service by the 
                      taxpayer before January 1, 2005, or, in the case 
                      of property described in paragraph (2)(B) (as 
                      modified by subparagraph (C) of this paragraph), 
                      before January 1, 2006.
                    ``(C) Special rules.--
                Rules <<NOTE: Applicability.>> similar to the rules of 
                subparagraphs (B) and (D) of paragraph (2) shall apply 
                for purposes of this paragraph; except that references 
                to September 10, 2001, shall be treated as references to 
                May 5, 2003.
                    ``(D) Automobiles.--Paragraph 
                (2)(E) <<NOTE: Applicability.>> shall be applied by 
                substituting `$7,650' for `$4,600' in the case of 50-
                percent bonus depreciation property.
                    ``(E) Election of 30-percent bonus.--If a taxpayer 
                makes an election under this subparagraph with respect 
                to any class of property for any taxable year, 
                subparagraph (A)(i) shall not apply to all property in 
                such class placed in service during such taxable 
                year.''.

     (b) Extension of Certain Dates for 30-Percent Bonus Depreciation 
Property.--
            (1) Portion of basis taken into account.--
                    (A) Subparagraphs (B)(ii) and (D)(i) of section 
                168(k)(2) are each amended by striking ``September 11, 
                2004'' each place it appears in the text and inserting 
                ``January 1, 2005''.

[[Page 117 STAT. 757]]

                    (B) Clause (ii) <<NOTE: 26 USC 168.>> of section 
                168(k)(2)(B) is amended by striking ``pre-september 11, 
                2004'' in the heading and inserting ``pre-january 1, 
                2005''.
            (2) Acquisition date.--Clause (iii) of section 168(k)(2)(A) 
        is amended by striking ``September 11, 2004'' each place it 
        appears and inserting ``January 1, 2005''.
            (3) Election.--Clause (iii) <<NOTE: Applicability.>> of 
        section 168(k)(2)(C) is amended by adding at the end the 
        following: ``The preceding sentence shall be applied separately 
        with respect to property treated as qualified property by 
        paragraph (4) and other qualified property.''.

    (c) Conforming Amendments.--
            (1) The subsection heading for section 168(k) is amended by 
        striking ``September 11, 2004'' and inserting ``January 1, 
        2005''.
            (2) The heading for clause (i) of section 1400L(b)(2)(C) is 
        amended by striking ``30-percent additional allowance property'' 
        and inserting ``Bonus depreciation property under section 
        168(k)''.

    (d) Effective Date.--The <<NOTE: Applicability. 26 USC 168 
note.>> amendments made by this section shall apply to taxable years 
ending after May 5, 2003.

SEC. 202. INCREASED EXPENSING FOR SMALL BUSINESS.

    (a) In General.--Paragraph (1) of section 179(b) (relating to dollar 
limitation) is amended to read as follows:
            ``(1) Dollar limitation.--The aggregate cost which may be 
        taken into account under subsection (a) for any taxable year 
        shall not exceed $25,000 ($100,000 in the case of taxable years 
        beginning after 2002 and before 2006).''.

    (b) Increase in Qualifying Investment at Which Phaseout Begins.--
Paragraph (2) of section 179(b) (relating to reduction in limitation) is 
amended by inserting ``($400,000 in the case of taxable years beginning 
after 2002 and before 2006)'' after ``$200,000''.
    (c) Off-the-Shelf Computer Software.--Paragraph (1) of section 
179(d) (defining section 179 property) is amended to read as follows:
            ``(1) Section 179 property.--For purposes of this section, 
        the term `section 179 property' means 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, and which is placed in service in a 
                      taxable year beginning after 2002 and before 2006,
                    ``(B) which is section 1245 property (as defined in 
                section 1245(a)(3)), 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.''.

    (d) Adjustment of Dollar Limit and Phaseout Threshold for 
Inflation.--Subsection (b) of section 179 (relating to limitations) is 
amended by adding at the end the following new paragraph:
            ``(5) Inflation adjustments.--

[[Page 117 STAT. 758]]

                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2003 and before 2006, 
                the $100,000 and $400,000 amounts in paragraphs (1) and 
                (2) shall each be increased by an amount equal to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under section 1(f)(3) for the calendar 
                      year in which the taxable year begins, by 
                      substituting `calendar year 2002' for `calendar 
                      year 1992' in subparagraph (B) thereof.
                    ``(B) Rounding.--
                          ``(i) Dollar limitation.--If the amount in 
                      paragraph (1) as increased under subparagraph (A) 
                      is not a multiple of $1,000, such amount shall be 
                      rounded to the nearest multiple of $1,000.
                          ``(ii) Phaseout amount.--If the amount in 
                      paragraph (2) as increased under subparagraph (A) 
                      is not a multiple of $10,000, such amount shall be 
                      rounded to the nearest multiple of $10,000.''.

    (e) Revocation of Election.--Paragraph (2) <<NOTE: 26 USC 179.>> of 
section 179(c) (relating to election irrevocable) is amended by adding 
at the end the following new sentence: ``Any such election or 
specification with respect to any taxable year beginning after 2002 and 
before 2006 may be revoked by the taxpayer with respect to any property, 
and such revocation, once made, shall be irrevocable.''.

    (f) Effective Date.--The <<NOTE: Applicability. 26 USC 179 
note.>> amendments made by this section shall apply to taxable years 
beginning after December 31, 2002.

      TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS

SEC. 301. REDUCTION IN CAPITAL GAINS RATES FOR INDIVIDUALS; REPEAL OF 5-
            YEAR HOLDING PERIOD REQUIREMENT.

    (a) In General.--
            (1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by 
        striking ``10 percent'' and inserting ``5 percent (0 percent in 
        the case of taxable years beginning after 2007)''.
            (2) The following sections are each amended by striking ``20 
        percent'' and inserting ``15 percent'':
                    (A) Section 1(h)(1)(C).
                    (B) Section 55(b)(3)(C).
                    (C) Section 1445(e)(1).
                    (D) The second sentence of section 7518(g)(6)(A).
                    (E) The second sentence of section 607(h)(6)(A) of 
                the Merchant <<NOTE: 46 USC app. 1177.>> Marine Act, 
                1936.

    (b) Conforming Amendments.--
            (1) Section 1(h) is amended--
                    (A) by striking paragraphs (2) and (9),
                    (B) by redesignating paragraphs (3) through (8) as 
                paragraphs (2) through (7), respectively, and
                    (C) by redesignating paragraphs (10), (11), and (12) 
                as paragraphs (8), (9), and (10), respectively.
            (2) Paragraph (3) of section 55(b) is amended by striking 
        ``In the case of taxable years beginning after December 31, 
        2000, rules similar to the rules of section 1(h)(2) shall apply 
        for purposes of subparagraphs (B) and (C).''.

[[Page 117 STAT. 759]]

            (3) Paragraph (7) <<NOTE: 26 USC 57.>> of section 57(a) is 
        amended--
                    (A) by striking ``42 percent'' the first place it 
                appears and inserting ``7 percent'', and
                    (B) by striking the last sentence.

    (c) Transitional Rules <<NOTE: 26 USC 1 note.>> for Taxable Years 
Which Include May 6, 2003.--For purposes of applying section 1(h) of the 
Internal Revenue Code of 1986 in the case of a taxable year which 
includes May 6, 2003--
            (1) The amount of tax determined under subparagraph (B) of 
        section 1(h)(1) of such Code shall be the sum of--
                    (A) 5 percent of the lesser of--
                          (i) the net capital gain determined by taking 
                      into account only gain or loss properly taken into 
                      account for the portion of the taxable year on or 
                      after May 6, 2003 (determined without regard to 
                      collectibles gain or loss, gain described in 
                      section 1(h)(6)(A)(i) of such Code, and section 
                      1202 gain), or
                          (ii) the amount on which a tax is determined 
                      under such subparagraph (without regard to this 
                      subsection),
                    (B) 8 percent of the lesser of--
                          (i) the qualified 5-year gain (as defined in 
                      section 1(h)(9) of the Internal Revenue Code of 
                      1986, as in effect on the day before the date of 
                      the enactment of this Act) properly taken into 
                      account for the portion of the taxable year before 
                      May 6, 2003, or
                          (ii) the excess (if any) of--
                                    (I) the amount on which a tax is 
                                determined under such subparagraph 
                                (without regard to this subsection), 
                                over
                                    (II) the amount on which a tax is 
                                determined under subparagraph (A), plus
                    (C) 10 percent of the excess (if any) of--
                          (i) the amount on which a tax is determined 
                      under such subparagraph (without regard to this 
                      subsection), over
                          (ii) the sum of the amounts on which a tax is 
                      determined under subparagraphs (A) and (B).
            (2) The amount of tax determined under subparagraph (C) of 
        section (1)(h)(1) of such Code shall be the sum of--
                    (A) 15 percent of the lesser of--
                          (i) the excess (if any) of the amount of net 
                      capital gain determined under subparagraph (A)(i) 
                      of paragraph (1) of this subsection over the 
                      amount on which a tax is determined under 
                      subparagraph (A) of paragraph (1) of this 
                      subsection, or
                          (ii) the amount on which a tax is determined 
                      under such subparagraph (C) (without regard to 
                      this subsection), plus
                    (B) 20 percent of the excess (if any) of--
                          (i) the amount on which a tax is determined 
                      under such subparagraph (C) (without regard to 
                      this subsection), over
                          (ii) the amount on which a tax is determined 
                      under subparagraph (A) of this paragraph.
            (3) For <<NOTE: Applicability.>> purposes of applying 
        section 55(b)(3) of such Code, rules similar to the rules of 
        paragraphs (1) and (2) of this subsection shall apply.

[[Page 117 STAT. 760]]

            (4) In applying this subsection with respect to any pass-
        thru entity, the determination of when gains and losses are 
        properly taken into account shall be made at the entity level.
            (5) For purposes of applying section 1(h)(11) of such Code, 
        as added by section 302 of this Act, to this subsection, 
        dividends which are qualified dividend income shall be treated 
        as gain properly taken into account for the portion of the 
        taxable year on or after May 6, 2003.
            (6) Terms used in this subsection which are also used in 
        section 1(h) of such Code shall have the respective meanings 
        that such terms have in such section.

    (d) Effective <<NOTE: Applicability. 26 USC 1 note.>> Dates.--
            (1) In general.--Except as otherwise provided by this 
        subsection, the amendments made by this section shall apply to 
        taxable years ending on or after May 6, 2003.
            (2) Withholding.--The amendment made by subsection (a)(2)(C) 
        shall apply to amounts paid after the date of the enactment of 
        this Act.
            (3) Small business stock.--The amendments made by subsection 
        (b)(3) shall apply to dispositions on or after May 6, 2003.

SEC. 302. DIVIDENDS OF INDIVIDUALS TAXED AT CAPITAL GAIN RATES.

    (a) In General.--Section <<NOTE: 26 USC 1.>> 1(h) (relating to 
maximum capital gains rate), as amended by section 301, is amended by 
adding at the end the following new paragraph:
            ``(11) Dividends taxed as net capital gain.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `net capital gain' means net capital gain 
                (determined without regard to this paragraph) increased 
                by qualified dividend income.
                    ``(B) Qualified dividend income.--For purposes of 
                this paragraph--
                          ``(i) In general.--The term `qualified 
                      dividend income' means dividends received during 
                      the taxable year from--
                                    ``(I) domestic corporations, and
                                    ``(II) qualified foreign 
                                corporations.
                          ``(ii) Certain dividends excluded.--Such term 
                      shall not include--
                                    ``(I) any dividend from a 
                                corporation which for the taxable year 
                                of the corporation in which the 
                                distribution is made, or the preceding 
                                taxable year, is a corporation exempt 
                                from tax under section 501 or 521,
                                    ``(II) any amount allowed as a 
                                deduction under section 591 (relating to 
                                deduction for dividends paid by mutual 
                                savings banks, etc.), and
                                    ``(III) any dividend described in 
                                section 404(k).
                          ``(iii) Coordination with section 246(c).--
                      Such term shall not include any dividend on any 
                      share of stock--
                                    ``(I) with respect to which the 
                                holding period requirements of section 
                                246(c) are not met (determined by 
                                substituting in section 246(c)(1) `60 
                                days' for `45 days' each place it 
                                appears and by substituting `120-day 
                                period' for `90-day period'), or

[[Page 117 STAT. 761]]

                                    ``(II) to the extent that the 
                                taxpayer is under an obligation (whether 
                                pursuant to a short sale or otherwise) 
                                to make related payments with respect to 
                                positions in substantially similar or 
                                related property.
                    ``(C) Qualified foreign corporations.--
                          ``(i) In general.--Except as otherwise 
                      provided in this paragraph, the term `qualified 
                      foreign corporation' means any foreign corporation 
                      if--
                                    ``(I) such corporation is 
                                incorporated in a possession of the 
                                United States, or
                                    ``(II) such corporation is eligible 
                                for benefits of a comprehensive income 
                                tax treaty with the United States which 
                                the Secretary determines is satisfactory 
                                for purposes of this paragraph and which 
                                includes an exchange of information 
                                program.
                          ``(ii) Dividends on stock readily tradable on 
                      united states securities market.--A foreign 
                      corporation not otherwise treated as a qualified 
                      foreign corporation under clause (i) shall be so 
                      treated with respect to any dividend paid by such 
                      corporation if the stock with respect to which 
                      such dividend is paid is readily tradable on an 
                      established securities market in the United 
                      States.
                          ``(iii) Exclusion of dividends of certain 
                      foreign corporations.--Such term shall not include 
                      any foreign corporation which for the taxable year 
                      of the corporation in which the dividend was paid, 
                      or the preceding taxable year, is a foreign 
                      personal holding company (as defined in section 
                      552), a foreign investment company (as defined in 
                      section 1246(b)), or a passive foreign investment 
                      company (as defined in section 1297).
                          ``(iv) Coordination 
                      with <<NOTE: Applicability.>> foreign tax credit 
                      limitation.--Rules similar to the rules of section 
                      904(b)(2)(B) shall apply with respect to the 
                      dividend rate differential under this paragraph.
                    ``(D) Special rules.--
                          ``(i) Amounts taken into account as investment 
                      income.--Qualified dividend income shall not 
                      include any amount which the taxpayer takes into 
                      account as investment income under section 
                      163(d)(4)(B).
                          ``(ii) Extraordinary dividends.--If an 
                      individual receives, with respect to any share of 
                      stock, qualified dividend income from 1 or more 
                      dividends which are extraordinary dividends 
                      (within the meaning of section 1059(c)), any loss 
                      on the sale or exchange of such share shall, to 
                      the extent of such dividends, be treated as long-
                      term capital loss.
                          ``(iii) Treatment of dividends from regulated 
                      investment companies and real estate investment 
                      trusts.--A dividend received from a regulated 
                      investment company or a real estate investment 
                      trust shall be subject to the limitations 
                      prescribed in sections 854 and 857.''.

[[Page 117 STAT. 762]]

    (b) Exclusion of Dividends From Investment Income.--Subparagraph (B) 
of <<NOTE: 26 USC 163.>> section 163(d)(4) (defining net investment 
income) is amended by adding at the end the following flush sentence:
                ``Such term shall include qualified dividend income (as 
                defined in section 1(h)(11)(B)) only to the extent the 
                taxpayer elects to treat such income as investment 
                income for purposes of this subsection.''.

    (c) Treatment of Dividends From Regulated Investment Companies.--
            (1) Subsection (a) of section 854 (relating to dividends 
        received from regulated investment companies) is amended by 
        inserting ``section 1(h)(11) (relating to maximum rate of tax on 
        dividends) and'' after ``For purposes of''.
            (2) Paragraph (1) of section 854(b) (relating to other 
        dividends) is amended by redesignating subparagraph (B) as 
        subparagraph (C) and by inserting after subparagraph (A) the 
        following new subparagraph:
                    ``(B) Maximum rate under section 1(h).--
                          ``(i) In general.--
                      If <<NOTE: Applicability.>> the aggregate 
                      dividends received by a regulated investment 
                      company during any taxable year are less than 95 
                      percent of its gross income, then, in computing 
                      the maximum rate under section 1(h)(11), rules 
                      similar to the rules of subparagraph (A) shall 
                      apply.
                          ``(ii) Gross income.--For purposes of clause 
                      (i), in the case of 1 or more sales or other 
                      dispositions of stock or securities, the term 
                      `gross income' includes only the excess of--
                                    ``(I) the net short-term capital 
                                gain from such sales or dispositions, 
                                over
                                    ``(II) the net long-term capital 
                                loss from such sales or dispositions.
                          ``(iii) Dividends from real estate investment 
                      trusts.--For purposes of clause (i)--
                                    ``(I) paragraph (3)(B)(ii) shall not 
                                apply, and
                                    ``(II) in the case of a distribution 
                                from a trust described in such 
                                paragraph, the amount of such 
                                distribution which is a dividend shall 
                                be subject to the limitations under 
                                section 857(c).
                          ``(iv) Dividends from qualified foreign 
                      corporations.--For purposes of clause (i), 
                      dividends received from qualified foreign 
                      corporations (as defined in section 1(h)(11)) 
                      shall also be taken into account in computing 
                      aggregate dividends received.''.
            (3) Subparagraph (C) of section 854(b)(1), as redesignated 
        by paragraph (2), is amended by striking ``subparagraph (A)'' 
        and inserting ``subparagraph (A) or (B)''.
            (4) Paragraph (2) of section 854(b) is amended by inserting 
        ``the maximum rate under section 1(h)(11) and'' after ``for 
        purposes of''.
            (5) Subsection (b) of section 854 is amended by adding at 
        the end the following new paragraph:
            ``(5) Coordination with section 1(h)(11).--For purposes of 
        paragraph (1)(B), an amount shall be treated as a dividend only 
        if the amount is qualified dividend income (within the meaning 
        of section 1(h)(11)(B)).''.

[[Page 117 STAT. 763]]

    (d) Treatment of Dividends Received From Real Estate Investment 
Trusts.--Section 857(c) (relating <<NOTE: 26 USC 857.>> to restrictions 
applicable to dividends received from real estate investment trusts) is 
amended to read as follows:

    ``(c) Restrictions Applicable to Dividends Received From Real Estate 
Investment Trusts.--
            ``(1) Section 243.--For purposes of 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 a dividend.
            ``(2) Section 1(h)(11).--For purposes of section 1(h)(11) 
        (relating to maximum rate of tax on dividends)--
                    ``(A) <<NOTE: Applicability.>> rules similar to the 
                rules of subparagraphs (B) and (C) of section 854(b)(1) 
                shall apply to dividends received from a real estate 
                investment trust which meets the requirements of this 
                part, and
                    ``(B) for purposes of such rules, such a trust shall 
                be treated as receiving qualified dividend income during 
                any taxable year in an amount equal to the sum of--
                          ``(i) the excess of real estate investment 
                      trust taxable income computed under section 
                      857(b)(2) for the preceding taxable year over the 
                      tax payable by the trust under section 857(b)(1) 
                      for such preceding taxable year, and
                          ``(ii) the excess of the income subject to tax 
                      by reason of the application of the regulations 
                      under section 337(d) for the preceding taxable 
                      year over the tax payable by the trust on such 
                      income for such preceding taxable year.''.

    (e) Conforming Amendments.--
            (1) Paragraph (3) of section 1(h), as redesignated by 
        section 301, is amended to read as follows:
            ``(3) Adjusted net capital gain.--For purposes of this 
        subsection, the term `adjusted net capital gain' means the sum 
        of--
                    ``(A) net capital gain (determined without regard to 
                paragraph (11)) reduced (but not below zero) by the sum 
                of--
                          ``(i) unrecaptured section 1250 gain, and
                          ``(ii) 28-percent rate gain, plus
                    ``(B) qualified dividend income (as defined in 
                paragraph (11)).''.
            (2) Subsection (f) of section 301 is amended adding at the 
        end the following new paragraph:
            ``(4) For taxation of dividends received by individuals at 
        capital gain rates, see section 1(h)(11).''.
            (3) Paragraph (1) of section 306(a) is amended by adding at 
        the end the following new subparagraph:
                    ``(D) Treatment as dividend.--For purposes of 
                section 1(h)(11) and such other provisions as the 
                Secretary may specify, any amount treated as ordinary 
                income under this paragraph shall be treated as a 
                dividend received from the corporation.''.
            (4)(A) Subpart C of part II of subchapter C of chapter 1 
        (relating to collapsible <<NOTE: 26 USC 341.>> corporations) is 
        repealed.
            (B)(i) Section 338(h) is amended by striking paragraph (14).

[[Page 117 STAT. 764]]

            (ii) Sections 467(c)(5)(C), 1255(b)(2), and 
        1257(d) <<NOTE: 26 USC 467, 1255, 1257.>> are each amended by 
        striking ``, 341(e)(12),''.
            (iii) The table of subparts for part II of subchapter C of 
        chapter 1 is amended by striking the item related to subpart C.
            (5) Section 531 is amended by striking ``equal to'' and all 
        that follows and inserting ``equal to 15 percent of the 
        accumulated taxable income.''.
            (6) Section 541 is amended by striking ``equal to'' and all 
        that follows and inserting ``equal to 15 percent of the 
        undistributed personal holding company income.''.
            (7) Section 584(c) is amended by adding at the end the 
        following new flush sentence:

``The proportionate share of each participant in the amount of dividends 
received by the common trust fund and to which section 1(h)(11) applies 
shall be considered for purposes of such paragraph as having been 
received by such participant.''.
            (8) Paragraph (5) of section 702(a) is amended to read as 
        follows:
            ``(5) dividends with respect to which section 1(h)(11) or 
        part VIII of subchapter B applies,''.

    (f) Effective <<NOTE: Applicability. 26 USC 1 note.>> 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, 2002.
            (2) Regulated investment companies and real estate 
        investment trusts.--In the case of a regulated investment 
        company or a real estate investment trust, the amendments made 
        by this section shall apply to taxable years ending after 
        December 31, 2002; except that dividends received by such a 
        company or trust on or before such date shall not be treated as 
        qualified dividend income (as defined in section 1(h)(11)(B) of 
        the Internal Revenue Code of 1986, as added by this Act).

SEC. 303. <<NOTE: 26 USC 1 note.>> SUNSET OF TITLE.

    All provisions of, and amendments made by, this title shall not 
apply to taxable years beginning after December 31, 2008, and the 
Internal Revenue Code of 1986 shall be applied and administered to such 
years as if such provisions and amendments had never been enacted.

                 TITLE IV--TEMPORARY STATE FISCAL RELIEF

SEC. 401. <<NOTE: 42 USC 1396d note.>> TEMPORARY STATE FISCAL RELIEF.

    (a) $10,000,000,000 for a Temporary Increase of the Medicaid FMAP.--
            (1) Permitting maintenance of fiscal year 2002 fmap for last 
        2 calendar quarters of fiscal year 2003.--Subject to paragraph 
        (5), if the FMAP determined without regard to this subsection 
        for a State for fiscal year 2003 is less than the FMAP as so 
        determined for fiscal year 2002, the FMAP for the State for 
        fiscal year 2002 shall be substituted for the State's FMAP for 
        the third and fourth calendar quarters of fiscal year 2003, 
        before the application of this subsection.

[[Page 117 STAT. 765]]

            (2) Permitting maintenance of fiscal year 2003 fmap for 
        first 3 quarters of fiscal year 2004.--Subject to paragraph (5), 
        if the FMAP determined without regard to this subsection for a 
        State for fiscal year 2004 is less than the FMAP as so 
        determined for fiscal year 2003, the FMAP for the State for 
        fiscal year 2003 shall be substituted for the State's FMAP for 
        the first, second, and third calendar quarters of fiscal year 
        2004, before the application of this subsection.
            (3) General 2.95 percentage points increase for last 2 
        calendar quarters of fiscal year 2003 and first 3 calendar 
        quarters of fiscal year 2004.--Subject to paragraphs (5), (6), 
        and (7), for each State for the third and fourth calendar 
        quarters of fiscal year 2003 and for the first, second, and 
        third calendar quarters of fiscal year 2004, the FMAP (taking 
        into account the application of paragraphs (1) and (2)) shall be 
        increased by 2.95 percentage points.
            (4) Increase in cap on medicaid payments to territories.--
        Subject to paragraphs (6) and (7), with respect to the third and 
        fourth calendar quarters of fiscal year 2003 and the first, 
        second, and third calendar quarters of fiscal year 2004, the 
        amounts otherwise determined for Puerto Rico, the Virgin 
        Islands, Guam, the Northern Mariana Islands, and American Samoa 
        under subsections (f) and (g) of section 1108 of the Social 
        Security Act (42 U.S.C. 1308) shall each be increased by an 
        amount equal to 5.90 percent of such amounts.
            (5) Scope of application.--The increases in the FMAP for a 
        State under this subsection shall apply only for purposes of 
        title XIX of the Social Security Act and shall not apply with 
        respect to--
                    (A) disproportionate share hospital payments 
                described in section 1923 of such Act (42 U.S.C. 1396r-
                4);
                    (B) payments under title IV or XXI of such Act (42 
                U.S.C. 601 et seq. and 1397aa et seq.); or
                    (C) any payments under XIX of such Act that are 
                based on the enhanced FMAP described in section 2105(b) 
                of such Act (42 U.S.C. 1397ee(b)).
            (6) State eligibility.--
                    (A) In general.--Subject to subparagraph (B), a 
                State is eligible for an increase in its FMAP under 
                paragraph (3) or an increase in a cap amount under 
                paragraph (4) only if the eligibility under its State 
                plan under title XIX of the Social Security Act 
                (including any waiver under such title or under section 
                1115 of such Act (42 U.S.C. 1315)) is no more 
                restrictive than the eligibility under such plan (or 
                waiver) as in effect on September 2, 2003.
                    (B) State reinstatement of eligibility permitted.--A 
                State that has restricted eligibility under its State 
                plan under title XIX of the Social Security Act 
                (including any waiver under such title or under section 
                1115 of such Act (42 U.S.C. 1315)) after September 2, 
                2003, is eligible for an increase in its FMAP under 
                paragraph (3) or an increase in a cap amount under 
                paragraph (4) in the first calendar quarter (and 
                subsequent calendar quarters) in which the State has 
                reinstated eligibility that is no more restrictive than 
                the eligibility under such plan (or waiver) as in effect 
                on September 2, 2003.

[[Page 117 STAT. 766]]

                    (C) Rule of construction.--Nothing in subparagraph 
                (A) or (B) shall be construed as affecting a State's 
                flexibility with respect to benefits offered under the 
                State medicaid program under title XIX of the Social 
                Security Act (42 U.S.C. 1396 et seq.) (including any 
                waiver under such title or under section 1115 of such 
                Act (42 U.S.C. 1315)).
            (7) Requirement for certain states.--In the case of a State 
        that requires political subdivisions within the State to 
        contribute toward the non-Federal share of expenditures under 
        the State medicaid plan required under section 1902(a)(2) of the 
        Social Security Act (42 U.S.C. 1396a(a)(2)), the State shall not 
        require that such political subdivisions pay a greater 
        percentage of the non-Federal share of such expenditures for the 
        third and fourth calendar quarters of fiscal year 2003 and the 
        first, second and third calendar quarters of fiscal year 2004, 
        than the percentage that was required by the State under such 
        plan on April 1, 2003, prior to application of this subsection.
            (8) Definitions.--In this subsection:
                    (A) FMAP.--The term ``FMAP'' means the Federal 
                medical assistance percentage, as defined in section 
                1905(b) of the Social Security Act (42 U.S.C. 1396d(b)).
                    (B) State.--The term ``State'' has the meaning given 
                such term for purposes of title XIX of the Social 
                Security Act (42 U.S.C. 1396 et seq.).
            (9) Repeal.--Effective <<NOTE: Effective date.>> as of 
        October 1, 2004, this subsection is repealed.

    (b) $10,000,000,000 to Assist States in Providing Government 
Services.--The Social Security Act (42 U.S.C. 301 et seq.) is amended by 
inserting after title V the following:

                ``TITLE VI--TEMPORARY STATE FISCAL RELIEF

``SEC. 601. <<NOTE: 42 USC 801.>> TEMPORARY STATE FISCAL RELIEF.

    ``(a) Appropriation.--There is authorized to be appropriated and is 
appropriated for making payments to States under this section, 
$5,000,000,000 for each of fiscal years 2003 and 2004.
    ``(b) <<NOTE: Deadlines.>> Payments.--
            ``(1) Fiscal year 2003.--From the amount appropriated under 
        subsection (a) for fiscal year 2003, the Secretary of the 
        Treasury shall, not later than the later of the date that is 45 
        days after the date of enactment of this Act or the date that a 
        State provides the certification required by subsection (e) for 
        fiscal year 2003, pay each State the amount determined for the 
        State for fiscal year 2003 under subsection (c).
            ``(2) Fiscal year 2004.--From the amount appropriated under 
        subsection (a) for fiscal year 2004, the Secretary of the 
        Treasury shall, not later than the later of October 1, 2003, or 
        the date that a State provides the certification required by 
        subsection (e) for fiscal year 2004, pay each State the amount 
        determined for the State for fiscal year 2004 under subsection 
        (c).

    ``(c) Payments Based on Population.--
            ``(1) In general.--Subject to paragraph (2), the amount 
        appropriated under subsection (a) for each of fiscal years 2003

[[Page 117 STAT. 767]]

        and 2004 shall be used to pay each State an amount equal to the 
        relative population proportion amount described in paragraph (3) 
        for such fiscal year.
            ``(2) Minimum payment.--
                    ``(A) In general.--No State shall receive a payment 
                under this section for a fiscal year that is less than--
                          ``(i) in the case of 1 of the 50 States or the 
                      District of Columbia, \1/2\ of 1 percent of the 
                      amount appropriated for such fiscal year under 
                      subsection (a); and
                          ``(ii) in the case of the Commonwealth of 
                      Puerto Rico, the United States Virgin Islands, 
                      Guam, the Commonwealth of the Northern Mariana 
                      Islands, or American Samoa, \1/10\ of 1 percent of 
                      the amount appropriated for such fiscal year under 
                      subsection (a).
                    ``(B) Pro rata adjustments.--The Secretary of the 
                Treasury shall adjust on a pro rata basis the amount of 
                the payments to States determined under this section 
                without regard to this subparagraph to the extent 
                necessary to comply with the requirements of 
                subparagraph (A).
            ``(3) Relative population proportion amount.--The relative 
        population proportion amount described in this paragraph is the 
        product of--
                    ``(A) the amount described in subsection (a) for a 
                fiscal year; and
                    ``(B) the relative State population proportion (as 
                defined in paragraph (4)).
            ``(4) Relative state population proportion defined.--For 
        purposes of paragraph (3)(B), the term `relative State 
        population proportion' means, with respect to a State, the 
        amount equal to the quotient of--
                    ``(A) the population of the State (as reported in 
                the most recent decennial census); and
                    ``(B) the total population of all States (as 
                reported in the most recent decennial census).

    ``(d) Use of Payment.--
            ``(1) In general.--Subject to paragraph (2), a State shall 
        use the funds provided under a payment made under this section 
        for a fiscal year to--
                    ``(A) provide essential government services; or
                    ``(B) cover the costs to the State of complying with 
                any Federal intergovernmental mandate (as defined in 
                section 421(5) of the Congressional Budget Act of 1974) 
                to the extent that the mandate applies to the State, and 
                the Federal Government has not provided funds to cover 
                the costs.
            ``(2) Limitation.--A State may only use funds provided under 
        a payment made under this section for types of expenditures 
        permitted under the most recently approved budget for the State.

    ``(e) Certification.--In order to receive a payment under this 
section for a fiscal year, the State shall provide the Secretary of the 
Treasury with a certification that the State's proposed uses of the 
funds are consistent with subsection (d).
    ``(f) Definition of State.--In this section, the term `State' means 
the 50 States, the District of Columbia, the Commonwealth of Puerto 
Rico, the United States Virgin Islands, Guam, the

[[Page 117 STAT. 768]]

Commonwealth of the Northern Mariana Islands, and American Samoa.
    ``(g) Repeal.--Effective <<NOTE: Effective date.>> as of October 1, 
2004, this title is repealed.''.

           TITLE V--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003

SEC. 501. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

    Notwithstanding section 6655 of the Internal Revenue Code of 1986, 
25 percent of the amount of any required installment of corporate 
estimated tax which is otherwise due in September 2003 shall not be due 
until October 1, 2003.

    Approved May 28, 2003.

LEGISLATIVE HISTORY--H.R. 2 (S. 2) (S. 1054):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 108-94 (Comm. on Ways and Means) and 108-126 
(Comm. of Conference).
CONGRESSIONAL RECORD, Vol. 149 (2003):
            May 9, considered and passed House.
            May 14, 15, considered and passed Senate, amended, in lieu 
                of S. 1054.
            May 22, House agreed to conference report.
            May 23, Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 39 (2003):
            May 28, Presidential remarks.

                                  <all>