[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3101 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 3101

   To amend the Internal Revenue Code of 1986 to provide a temporary 
 reduction in the tax on capital gains and to provide for the indexing 
                           of certain assets.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 21, 1993

   Mr. Kyl 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 temporary 
 reduction in the tax on capital gains and to provide for the indexing 
                           of certain assets.

    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 ``Window of Opportunity Act''.

          TITLE I--TEMPORARY REDUCTION IN TAX ON CAPITAL GAINS

SEC. 101. TEMPORARY REDUCTION IN INDIVIDUAL CAPITAL GAINS TAX.

    Section 1 of the Internal Revenue Code of 1986 (relating to tax 
imposed on individuals) is amended by adding at the end thereof the 
following new subsection:
    ``(i) Temporary Reduction in Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has a moratorium period 
        gain for any taxable year--
                    ``(A) subsection (h) shall not apply to such 
                taxable year, and
                    ``(B) the tax imposed by this section for such 
                taxable year shall not exceed the sum of--
                            ``(i) a tax computed at the rates and in 
                        the same manner as if this subsection had not 
                        been enacted on taxable income reduced by the 
                        amount of the net capital gain,
                            ``(ii) 6 percent of the lesser of--
                                    ``(I) the moratorium period gain 
                                for the taxable year, or
                                    ``(II) the portion of the 
                                taxpayer's taxable income for the 
                                taxable year which would be taxed at a 
                                rate in excess of 28 percent 
                                (determined without regard to this 
                                subsection and subsection (h)),
                            ``(iii) 3 percent of the portion of the 
                        moratorium period gain for the taxable year 
                        which is not subject to tax under clause (ii), 
                        and
                            ``(iv) 28 percent of the excess (if any) of 
                        the net capital gain for the taxable year over 
                        the moratorium period gain.
            ``(2) Moratorium period gain.--For purposes of this 
        subsection, the term `moratorium period gain' means the lesser 
        of--
                    ``(A) the net capital gain for the taxable year 
                determined by only taking into account gain and loss 
                properly taken into account for the portion of the 
                taxable year within the moratorium period, or
                    ``(B) the net capital gain for the taxable year.
            ``(3) Moratorium period.--For purposes of this subsection, 
        the term `moratorium period' means the 1 year period beginning 
        on the date of the enactment of the Window of Opportunity Act.
            ``(4) Treatment of pass-thru entities.--
                    ``(A) In general.--In applying this subsection with 
                respect to any pass-thru entity, the determination of 
                the period for which any gain or loss is properly taken 
                into account shall be made at the entity level.
                    ``(B) Pass-thru entity.--For purposes of 
                subparagraph (A), the term `pass-thru entity' means--
                            ``(i) a regulated investment company,
                            ``(ii) a real estate investment trust,
                            ``(iii) an S corporation,
                            ``(iv) a partnership,
                            ``(v) an estate or trust, and
                            ``(vi) a common trust fund.''

SEC. 102. TEMPORARY REDUCTION IN CORPORATE CAPITAL GAINS TAX.

    Section 1201 of the Internal Revenue Code of 1986 (relating to 
alternative tax for corporations) is amended by redesignating 
subsection (b) as subsection (c) and by inserting after subsection (a) 
the following new subsection:
    ``(b) Temporary Reduction in Capital Gains Rate.--
            ``(1) In general.--If a corporation has a moratorium period 
        gain for any taxable year--
                    ``(A) subsection (a) shall not apply to such 
                taxable year, and
                    ``(B) in lieu of any tax imposed by section 11, 
                511, 801(a), or 831 (a) or (b), 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--
                            ``(i) a tax computed at the rates and in 
                        the same manner as if this subsection had not 
                        been enacted on taxable income reduced by the 
                        amount of the net capital gain,
                            ``(ii) 6 percent of the lesser of--
                                    ``(I) the moratorium period gain 
                                for the taxable year, or
                                    ``(II) the portion of the 
                                taxpayer's taxable income for the 
                                taxable year which would be taxed at a 
                                rate in excess of 25 percent 
                                (determined without regard to this 
                                subsection),
                            ``(iii) 3 percent of the portion of the 
                        moratorium period gain for the taxable year 
                        which is not subject to tax under clause (ii), 
                        and
                            ``(iv) 34 percent of the excess of the net 
                        capital gain for the taxable year over the 
                        moratorium period gain.
            ``(2) Moratorium period gain.--For purposes of this 
        subsection, the term `moratorium period gain' has the meaning 
        given such term by section 1(i)(2).''

SEC. 103. TEMPORARY REDUCTION IN MINIMUM TAX.

    Subsection (b) of section 55 of the Internal Revenue Code of 1986 
(defining tentative minimum tax) is amended by adding at the end 
thereof the following new paragraph:
            ``(3) Temporary reduction in tax on capital gains.--
                    ``(A) In general.--If the taxpayer has a moratorium 
                period gain for any taxable year, the amount determined 
                under subparagraph (A) of paragraph (1) shall not 
                exceed the sum of--
                            ``(i) the amount determined under 
                        subparagraph (A) on the amount of the taxable 
                        excess reduced by the moratorium period gain,
                            ``(ii) 6 percent of the moratorium period 
                        gain for the taxable year to the extent such 
                        gain does not exceed the amount subject to tax 
                        under section 1(i)(1)(B)(ii) or section 
                        1201(b)(1)(B)(ii), and
                            ``(iii) 3 percent of the portion of the 
                        moratorium period gain for the taxable year 
                        which is not subject to tax under clause (ii).
                    ``(B) Taxable excess.--For purposes of this 
                paragraph, the term `taxable excess' means the excess 
                of the alternative minimum taxable income for the 
                taxable year over the exemption amount.
                    ``(C) Moratorium period gain.--For purposes of this 
                paragraph, the term `moratorium period gain' has the 
                meaning given to such term by section 1(i)(2); except 
                that in no event shall the amount of the moratorium 
                period gain exceed the taxable excess.''

SEC. 104. EFFECTIVE DATE.

    The amendments made by this title shall apply to taxable years 
ending after the date of the enactment of this Act.

                  TITLE II--INDEXING OF CERTAIN ASSETS

SEC. 201. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN 
              OR LOSS.

    (a) In General.--Part II of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to basis rules of general 
application) is amended by inserting after section 1021 the following 
new section:

``SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING 
              GAIN OR LOSS.

    ``(a) General Rule.--
            ``(1) Indexed basis substituted for adjusted basis.--Except 
        as provided in paragraph (2), if an indexed asset which has 
        been held for more than 1 year is sold or otherwise disposed 
        of, for purposes of this title the indexed basis of the asset 
        shall be substituted for its adjusted basis.
            ``(2) Exception for depreciation, etc.--The deduction for 
        depreciation, depletion, and amortization shall be determined 
        without regard to the application of paragraph (1) to the 
        taxpayer or any other person.
    ``(b) Indexed Asset.--
            ``(1) In general.--For purposes of this section, the term 
        `indexed asset' means--
                    ``(A) stock in a corporation, and
                    ``(B) tangible property (or any interest therein),
        which is a capital asset or property used in the trade or 
        business (as defined in section 1231(b)).
            ``(2) Certain property excluded.--For purposes of this 
        section, the term `indexed asset' does not include--
                    ``(A) Creditor's interest.--Any interest in 
                property which is in the nature of a creditor's 
                interest.
                    ``(B) Options.--Any option or other right to 
                acquire an interest in property.
                    ``(C) Net lease property.--In the case of a lessor, 
                net lease property (within the meaning of subsection 
                (h)(1)).
                    ``(D) Certain preferred stock.--Stock which is 
                fixed and preferred as to dividends and does not 
                participate in corporate growth to any significant 
                extent.
                    ``(E) Stock in foreign corporations.--Stock in a 
                foreign corporation.
            ``(3) Exception for stock in foreign corporation which is 
        regularly traded on national or regional exchange.--Paragraph 
        (2)(E) shall not apply to stock in a foreign corporation the 
        stock of which is listed on the New York Stock Exchange, the 
        American Stock Exchange, or any domestic regional exchange for 
        which quotations are published on a regular basis other than--
                    ``(A) stock of a foreign investment company (within 
                the meaning of section 1246(b)), and
                    ``(B) stock in a foreign corporation held by a 
                United States person who meets the requirements of 
                section 1248(a)(2).
    ``(c) Indexed Basis.--For purposes of this section--
            ``(1) Indexed basis.--The indexed basis for any asset is--
                    ``(A) the adjusted basis of the asset, multiplied 
                by
                    ``(B) the applicable inflation ratio.
            ``(2) Applicable inflation ratio.--The applicable inflation 
        ratio for any asset is the percentage arrived at by dividing--
                    ``(A) the gross national product deflator the 
                calendar quarter in which the disposition takes place, 
                by
                    ``(B) the gross national product deflator for the 
                calendar quarter in which the asset was acquired by the 
                taxpayer (or, if later, the calendar quarter ending 
                December 31, 1993).
        The applicable inflation ratio shall not be taken into account 
        unless it is greater than 1. The applicable inflation ratio for 
        any asset shall be rounded to the nearest one-tenth of 1 
        percent.
            ``(3) Gross national product deflator.--The gross national 
        product deflator for any calendar quarter is the implicit price 
        deflator for the gross national product for such quarter (as 
        shown in the first revision thereof).
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Treatment as separate asset.--In the case of any 
        asset, the following shall be treated as a separate asset:
                    ``(A) a substantial improvement to property,
                    ``(B) in the case of stock of a corporation, a 
                substantial contribution to capital, and
                    ``(C) any other portion of an asset to the extent 
                that separate treatment of such portion is appropriate 
                to carry out the purposes of this section.
            ``(2) Assets which are not indexed assets throughout 
        holding period.--
                    ``(A) In general.--The applicable inflation ratio 
                shall be appropriately reduced for calendar months at 
                any time during which the asset was not an indexed 
                asset.
                    ``(B) Certain short sales.--For purposes of 
                applying subparagraph (A), an asset shall be treated as 
                not an indexed asset for any short sale period during 
                which the taxpayer or the taxpayer's spouse sells short 
                property substantially identical to the asset. For 
                purposes of the preceding sentence, the short sale 
                period begins on the day after the substantially 
                identical property is sold and ends on the closing date 
                for the sale.
            ``(3) Treatment of certain distributions.--A distribution 
        with respect to stock in a corporation which is not a dividend 
        shall be treated as a disposition.
            ``(4) Section cannot increase ordinary loss.--To the extent 
        that (but for this paragraph) this section would create or 
        increase a net ordinary loss to which section 1231(a)(2) 
        applies or an ordinary loss to which any other provision of 
        this title applies, such provision shall not apply. The 
        taxpayer shall be treated as having a long-term capital loss in 
        an amount equal to the amount of the ordinary loss to which the 
        preceding sentence applies.
            ``(5) Acquisition date where there has been prior 
        application of subsection (a)(1) with respect to the 
        taxpayer.--If there has been a prior application of subsection 
        (a)(1) to an asset while such asset was held by the taxpayer, 
        the date of acquisition of such asset by the taxpayer shall be 
        treated as not earlier than the date of the most recent such 
        prior application.
            ``(6) Collapsible corporations.--The application of section 
        341(a) (relating to collapsible corporations) shall be 
        determined without regard to this section.
    ``(e) Certain Conduit Entities.--
            ``(1) Regulated investment companies; real estate 
        investment trusts; common trust funds.--
                    ``(A) In general.--Stock in a qualified investment 
                entity shall be an indexed asset for any calendar month 
                in the same ratio as the fair market value of the 
                assets held by such entity at the close of such month 
                which are indexed assets bears to the fair market value 
                of all assets of such entity at the close of such 
                month.
                    ``(B) Ratio of 90 percent or more.--If the ratio 
                for any calendar month determined under subparagraph 
                (A) would (but for this subparagraph) be 90 percent or 
                more, such ratio for such month shall be 100 percent.
                    ``(C) Ratio of 10 percent or less.--If the ratio 
                for any calendar month determined under subparagraph 
                (A) would (but for this subparagraph) be 10 percent or 
                less, such ratio for such month shall be zero.
                    ``(D) Valuation of assets in case of real estate 
                investment trusts.--Nothing in this paragraph shall 
                require a real estate investment trust to value its 
                assets more frequently than once each 36 months (except 
                where such trust ceases to exist). The ratio under 
                subparagraph (A) for any calendar month for which there 
                is no valuation shall be the trustee's good faith 
                judgment as to such valuation.
                    ``(E) Qualified investment entity.--For purposes of 
                this paragraph, the term `qualified investment entity' 
                means--
                            ``(i) a regulated investment company 
                        (within the meaning of section 851),
                            ``(ii) a real estate investment trust 
                        (within the meaning of section 856), and
                            ``(iii) a common trust fund (within the 
                        meaning of section 584).
            ``(2) Partnerships.--In the case of a partnership, the 
        adjustment made under subsection (a) at the partnership level 
        shall be passed through to the partners.
    ``(f) Dispositions Between Related Persons.--
            ``(1) In general.--This section shall not apply to any sale 
        or other disposition of property between related persons except 
        to the extent that the basis of such property in the hands of 
        the transferee is a substituted basis.
            ``(2) Related persons defined.--For purposes of this 
        section, the term `related persons' means--
                    ``(A) persons bearing a relationship set forth in 
                section 267(b), and
                    ``(B) persons treated as single employer under 
                subsection (b) or (c) of section 414.
    ``(g) Transfers To Increase Indexing Adjustment.--If any person 
transfers cash, debt, or any other property to another person and the 
principal purpose of such transfer is to secure or increase an 
adjustment under subsection (a), the Secretary may disallow part or all 
of such adjustment or increase.
    ``(h) Definitions.--For purposes of this section--
            ``(1) Net lease property defined.--The term `net lease 
        property' means leased real property where--
                    ``(A) the term of the lease (taking into account 
                options to renew) was 50 percent or more of the useful 
                life of the property, and
                    ``(B) for the period of the lease, the sum of the 
                deductions with respect to such property which are 
                allowable to the lessor solely by reason of section 162 
                (other than rents and reimbursed amounts with respect 
                to such property) is 15 percent or less of the rental 
                income produced by such property.
            ``(2) Stock includes interest in common trust fund.--The 
        term `stock in a corporation' includes any interest in a common 
        trust fund (as defined in section 584(a)).
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter O of such chapter 1 is amended by inserting after the item 
relating to section 1021 the following new item:

                              ``Sec. 1022. Indexing of certain assets 
                                        for purposes of determining 
                                        gain or loss.''
    (c) Adjustment To Apply for Purposes of Determining Earnings and 
Profits.--Subsection (f) of section 312 (relating to effect on earnings 
and profits of gain or loss and of receipt of tax-free distributions) 
is amended by adding at the end thereof the following new paragraph:
            ``(3) Effect on earnings and profits of indexed basis.--

                                For substitution of indexed basis for 
adjusted basis in the case of the disposition of certain assets after 
December 31, 1993 see section 1022(a)(1).''

SEC. 202. EFFECTIVE DATE.

    The amendments made by section 201 shall apply to dispositions 
after December 31, 1993, in taxable years ending after such date.

                                 <all>

HR 3101 IH----2