[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 347 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 347

    To amend the Internal Revenue Code of 1986 to promote long-term 
  investment and economic growth in the manufacturing sector, restore 
   capital gains incentives, encourage research and experimentation, 
    restore and make permanent the exclusion for employer-provided 
            educational assistance, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             February 4 (legislative day, January 5), 1993

  Mr. Riegle introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to promote long-term 
  investment and economic growth in the manufacturing sector, restore 
   capital gains incentives, encourage research and experimentation, 
    restore and make permanent the exclusion for employer-provided 
            educational assistance, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; REFERENCE.

    (a) Short Title.--This Act may be cited as the ``Manufacturing 
Revitalization Incentives Act of 1993''.
    (b) Reference.--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.

   TITLE I--PROMOTION OF ECONOMIC GROWTH IN THE MANUFACTURING SECTOR

SEC. 101. SPECIAL ALLOWANCE FOR MANUFACTURING EQUIPMENT.

    (a) In General.--Section 168 (relating to accelerated cost recovery 
system) is amended by adding at the end thereof the following new 
subsection:
    ``(j) Special Allowance for Certain Equipment Acquired After 
1992.--
            ``(1) Additional allowance.--In the case of any qualified 
        equipment--
                    ``(A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which such 
                equipment is placed in service shall include an 
                allowance equal to 15 percent of the adjusted basis of 
                the qualified equipment, and
                    ``(B) the adjusted basis of the qualified equipment 
                shall be reduced by the amount of such deduction before 
                computing the amount otherwise allowable as a 
                depreciation deduction under this chapter for such 
                taxable year and any subsequent taxable year.
            ``(2) Qualified equipment.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified equipment' 
                means property to which this section applies--
                            ``(i) which is section 1245 property 
                        (within the meaning of section 1245(a)(3)),
                            ``(ii) the original use of which commences 
                        with the taxpayer on or after February 1, 1993, 
                        and
                            ``(iii) which is acquired by the taxpayer 
                        on or after February 1, 1993, but only if no 
                        written binding contract for the acquisition 
                        was in effect before January 1, 1993.
                    ``(B) Special rule for computer software.--Computer 
                software which--
                            ``(i)(I) is used to control or monitor a 
                        manufacturing process, or
                            ``(II) is an integral part of the design or 
                        manufacturing process, and
                            ``(ii) with respect to which depreciation 
                        (or amortization in lieu of depreciation) is 
                        allowable,
                shall be treated as qualified equipment.
                    ``(C) Exceptions.--
                            ``(i) Alternative depreciation property.--
                        The term `qualified equipment' shall not 
                        include any property to which the alternative 
                        depreciation system under subsection (g) 
                        applies, determined--
                                    ``(I) without regard to paragraph 
                                (7) of subsection (g) (relating to 
                                election to have system apply), and
                                    ``(II) after application of section 
                                280F(b) (relating to listed property 
                                with limited business use).
                            ``(ii) Election out.--If a taxpayer makes 
                        an election under this clause with respect to 
                        any class of property for any taxable year, 
                        this subsection shall not apply to all property 
                        in such class placed in service during such 
                        taxable year.
                            ``(iii) Repaired or reconstructed 
                        property.--Except as otherwise provided in 
                        regulations, the term `qualified equipment' 
                        shall not include any repaired or reconstructed 
                        property.
                    ``(D) Special rules relating to original use.--
                            ``(i) Self-constructed property.--In the 
                        case of a taxpayer manufacturing, constructing, 
                        or producing property for the taxpayer's own 
                        use, the requirements of clause (iii) of 
                        subparagraph (A) shall be treated as met if the 
                        taxpayer begins manufacturing, constructing, or 
                        producing the property after January 31, 1993.
                            ``(ii) Sale-leasebacks.--For purposes of 
                        subparagraph (A)(ii), if property--
                                    ``(I) is originally placed in 
                                service on or after February 1, 1993, 
                                by a person, and
                                    ``(II) is sold and leased back by 
                                such person within 3 months after the 
                                date such property was originally 
                                placed in service,
                        such property shall be treated as originally 
                        placed in service not earlier than the date on 
                        which such property is used under the leaseback 
                        referred to in subclause (II).''
    (b) Effective Date.--The amendment made by this section apply to 
property placed in service on or after February 1, 1993.

SEC. 102. ADJUSTMENT IN COMPUTING ALTERNATIVE MINIMUM TAXABLE INCOME.

    (a) In General.--Section 56(a)(1)(A) (relating to depreciation) is 
amended by inserting immediately after clause (ii) the following new 
clauses:
                            ``(iii) Additional allowance under section 
                        168(j).--The additional allowance for qualified 
                        equipment under section 168(j) shall be 
                        allowed.
                            ``(iv) Depreciation methods for certain 
                        property placed in service after january 31, 
                        1993.--In the case of property placed in 
                        service after January 31, 1993 (other than 
                        property with respect to which section 168(b) 
                        (2), (3), or (5) applies or property for which 
                        depreciation is determined under section 
                        168(g)), clause (ii) shall be applied by 
                        substituting `200 percent' for `150 percent'.''
    (b) Conforming Amendments.--
            (1) Section 56(a)(1)(A)(i) (relating to depreciation 
        adjustments) is amended by inserting ``(iii), or (iv)'' after 
        ``clause (ii)''.
            (2) The flush sentence at the end of section 56(a)(1)(A) is 
        amended--
                    (A) by striking ``The preceding sentence'' and 
                inserting ``Clauses (ii), (iii), and (iv)'', and
                    (B) by adding at the end thereof the following: 
                ``For purposes of clause (iv), the applicable recovery 
                period shall be 80 percent of the recovery period 
                determined under section 168(g) (rounded to the nearest 
                half year), but shall not be less than the applicable 
                recovery period determined under section 168(c). If for 
                purposes of the regular tax, depreciation is determined 
                under section 168(g), the preceding sentence shall not 
                apply.''
            (3) Section 56(a)(1) is amended by adding at the end the 
        following new subparagraph:
                    ``(E) Rules similar to the rules of section 
                168(f)(5) shall apply with respect to property 
                described in subparagraph (A)(iv).''
    (c) Elimination of ACE Depreciation Adjustment.--Clause (i) of 
section 56(g)(4)(A) (relating to depreciation adjustments for computing 
adjusted current earnings) is amended by adding at the end the 
following new sentence: ``The preceding sentence shall not apply to 
property placed in service on or after February 1, 1993, and the 
depreciation deduction with respect to such property shall be 
determined under the rules of subsection (a)(1)(A).''
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to property placed 
        in service on or after February 1, 1993, in taxable years 
        ending after such date.
            (2) Coordination with transitional rules.--The amendments 
        made by subsection (c) shall not apply to any property to which 
        paragraph (1) of section 56(a) of the Internal Revenue Code of 
        1986 does not apply by reason of subparagraph (C)(i) of such 
        paragraph (1).

SEC. 103. ADJUSTMENTS TO AUTOMOBILE DEPRECIATION.

    (a) In General.--Clause (i) of section 168(e)(3)(B) (relating to 5-
year property) is amended to read as follows:
                            ``(i) any light general purpose truck which 
                        is rated at more than 6,000 pounds gross 
                        vehicle weight,''.
    (b) Limitation on Depreciation.--
            (1) In general.--Subparagraph (A) of section 280F(a)(1) 
        (relating to limitations on depreciation) is amended by 
        striking clauses (i), (ii), (iii), and (iv), and inserting the 
        following:
                            ``(i) $6,000 for the 1st taxable year in 
                        the recovery period,
                            ``(ii) $8,000 for the 2nd taxable year in 
                        the recovery period, and
                            ``(iii) $3,100 for each succeeding year in 
                        the recovery period.''
            (2) Conforming amendments.--
                    (A) Section 280F(a)(1)(B)(ii) is amended by 
                striking ``$1,475'' each place it appears in the text 
                and heading and inserting ``$3,100''.
                    (B) Section 280F(d)(7) is amended--
                            (i) by striking ``1988'' and inserting 
                        ``1994'' in subparagraph (A), and
                            (ii) by striking ``1987'' and inserting 
                        ``1993'' in subparagraph (B)(i)(II).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 1993.

                TITLE II--PROGRESSIVE CAPITAL GAIN RATES

SEC. 201. PROGRESSIVE CAPITAL GAIN RATES.

    (a) In General.--Section 1(h) (relating to maximum capital gains 
rate) is amended to read as follows:
    ``(h) Progressive Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has qualified capital gain 
        for any taxable year, then the tax imposed by this section 
        shall be equal to the sum of--
                    ``(A) 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 qualified 
                capital gain, plus
                    ``(B) the excess (if any) of--
                            ``(i) a tax computed under the substitute 
                        table on taxable income, over
                            ``(ii) a tax computed under the substitute 
                        table on taxable income reduced by the amount 
                        of qualified capital gain.
            ``(2) Substitute tables.--
                    ``(A) In general.--In the case of any taxable year 
                ending after January 31, 1993, the Secretary shall 
                prescribe a substitute table for each of the tables 
                under subsections (a), (b), (c), (d), and (e).
                    ``(B) Method of prescribing tables.--The tables 
                under subparagraph (A) for any taxable year shall be 
                the tables in effect without regard to this subsection, 
                adjusted by--
                            ``(i) substituting the capital gain rates 
                        for the rates of tax contained therein, and
                            ``(ii) modifying the amounts setting forth 
                        the tax to the extent necessary to reflect the 
                        adjustments under clause (i).
                    ``(C) Capital gain rates.--For purposes of 
                subparagraph (B)(i), the capital gain rates shall be 
                determined as follows:

                    ``If the rate of tax is:
                                              The capital gain rate is:
                            15 percent...............         0 percent
                            28 percent...............        14 percent
                            31 percent...............        21 percent
                            More than 31 percent.....       28 percent.
            ``(3) Qualified capital gain.--For purposes of this 
        subsection--
                    ``(A) In general.--The term qualified capital gain 
                means net capital gain determined without regard to any 
                gain taken into account in computing the exclusion 
                under section 1202 (relating to gain from sale of small 
                business stock).
                    ``(B) Transition rule.--In the case of any taxable 
                year beginning before February 1, 1993, and ending on 
                or after such date, qualified capital gain shall be 
                equal to the lesser of--
                            ``(i) net capital gain, or
                            ``(ii) net capital gain determined by 
                        taking into account only gain or loss properly 
                        taken into account for the portion of the 
                        taxable year after January 31, 1993.
                If the amount under clause (i) exceeds the amount under 
                clause (ii) for such taxable year, the rate of tax 
                under this section shall not exceed 28 percent with 
                respect to such excess.
                    ``(C) Special rule for pass-thru entities.--
                            ``(i) In general.--In applying subparagraph 
                        (B) with respect to any pass-thru entity, the 
                        determination of when gain is properly taken 
                        into account shall be made at the entity level.
                            ``(ii) Pass-thru entity defined.--For 
                        purposes of clause (i), 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.''
    (b) Treatment of Collectibles.--
            (1) In general.--Section 1222 (defining other terms 
        relating to capital gains and losses) is amended by inserting 
        after paragraph (11) the following new paragraph:
            ``(12) Special rule for collectibles.--
                    ``(A) In general.--Any gain or loss from the sale 
                or exchange of a collectible shall be treated as a 
                short-term capital gain or loss (as the case may be), 
                without regard to the period such asset was held. The 
                preceding sentence shall be applied to the extent the 
                gain or loss is taken into account in computing taxable 
                income.
                    ``(B) Treatment of certain sales of interest in 
                partnership, etc.--For purposes of subparagraph (A), 
                any gain from the sale or exchange of an interest in a 
                partnership, S corporation, or trust which is 
                attributable to unrealized appreciation in the value of 
                collectibles held by such entity shall be treated as 
                gain from the sale or exchange of a collectible. Rules 
                similar to the rules of section 751(f) shall apply for 
                purposes of the preceding sentence.
                    ``(C) Collectible.--For purposes of this paragraph, 
                the term collectible means any capital asset which is a 
                collectible (as defined in section 408(m) without 
                regard to paragraph (3) thereof).''
            (2) Charitable deduction not affected.--
                    (A) Paragraph (1) of section 170(e) is amended by 
                adding at the end thereof the following new sentence: 
                ``For purposes of this paragraph, section 1222 shall be 
                applied without regard to paragraph (12) thereof 
                (relating to special rule for collectibles).''
                    (B) Clause (iv) of section 170(b)(1)(C) is amended 
                by inserting before the period at the end thereof the 
                following: ``and section 1222 shall be applied without 
                regard to paragraph (12) thereof (relating to special 
                rule for collectibles)''.
    (c) Effective Dates.--
            (1) In general.--The amendment made by subsection (a) shall 
        apply to taxable years ending after January 31, 1993.
            (2) Collectibles.--The amendments made by subsection (b) 
        shall apply to dispositions after January 31, 1993.

SEC. 202. INCREASE IN HOLDING PERIOD REQUIRED FOR LONG-TERM CAPITAL 
              GAIN TREATMENT.

    (a) In General.--
            (1) Capital gain.--Paragraphs (1) and (3) of section 1222 
        (defining other terms relating to capital gains and losses) are 
        each amended by striking ``1 year'' and inserting ``5 years''.
            (2) Capital losses.--Paragraphs (2) and (4) of section 1222 
        are each amended by striking ``1 year'' and inserting ``5 
        years''.
    (b) Conforming Amendments.--The following provisions are each 
amended by striking ``1 year'' each place it appears and inserting ``5 
years'':
            (1) Section 166(d)(1)(B).
            (2) Section 422(a)(1).
            (3) Section 423(a)(1).
            (4) Section 584(c).
            (5) Subsections (a), (b), and (c) of section 631.
            (6) Section 642(c)(3).
            (7) Paragraphs (1) and (2) of section 702(a).
            (8) Section 818(b)(1).
            (9) Section 852(b)(3)(B).
            (10) Section 856(c)(4)(A).
            (11) Section 857(b)(3)(B).
            (12) Paragraphs (11) and (12) of section 1223.
            (13) Subsections (b), (d), and subparagraph (A) of 
        subsection (e)(4) of section 1233.
            (14) Section 1234(b)(1).
            (15) Section 1235(a).
            (16) Subsections (b) and (g)(2)(C) of section 1248.
    (c) Technical Amendments.--
            (1) Section 7518(g)(3)(B) is amended by striking ``6 
        months'' and inserting ``5 years''.
            (2) Section 1231(b)(3)(B) is amended by striking ``12 
        months'' and inserting ``24 months''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 203. RECAPTURE UNDER SECTION 1250 OF TOTAL AMOUNT OF DEPRECIATION.

    (a) General Rule.--Subsections (a) and (b) of section 1250 
(relating to gain from disposition of certain depreciable realty) are 
amended to read as follows:
    ``(a) General Rule.--Except as otherwise provided in this section, 
if section 1250 property is disposed of, the lesser of--
            ``(1) the depreciation adjustments in respect of such 
        property, or
            ``(2) the excess of--
                    ``(A) the amount realized (or, in the case of a 
                disposition other than sale, exchange, or involuntary 
                conversion, the fair market value of such property), 
                over
                    ``(B) the adjusted basis of such property, shall be 
                treated as gain which is ordinary income. Such gain 
                shall be recognized notwithstanding any other provision 
                of this subtitle.
    ``(b) Depreciation Adjustments.--For purposes of this section, the 
term depreciation adjustments means, in respect of any property, all 
adjustments attributable to periods after December 31, 1963, reflected 
in the adjusted basis of such property on account of deductions 
(whether in respect of the same or other property) allowed or allowable 
to the taxpayer or to any other person for exhaustion, wear and tear, 
obsolescence, or amortization (other than amortization under section 
168 (as in effect before its repeal by the Tax Reform Act of 1976), 
169, 185 (as in effect before its repeal by the Tax Reform Act of 
1986), 188 (as in effect before its repeal by the Revenue 
Reconciliation Act of 1990), 190, or 193). For purposes of the 
preceding sentence, if the taxpayer can establish by adequate records 
or other sufficient evidence that the amount allowed as a deduction for 
any period was less than the amount allowable, the amount taken into 
account for such period shall be the amount allowed.''
    (b) Maximum Rate on Recapture Amount.--Section 1 (relating to tax 
imposed) is amended by adding at the end the following new section:
    ``(i) Maximum Rate of Tax on Section 1250 Recapture Amounts.--If a 
taxpayer has any amount treated as ordinary income under section 1250 
for any taxable year, then the tax imposed by this section shall not 
exceed the sum of--
            ``(1) a tax computed at the rates and in the same manner as 
        if this subsection had not been enacted on the greater of--
                    ``(A) taxable income reduced by the amount treated 
                as ordinary income under section 1250, or
                    ``(B) the amount of taxable income taxed at a rate 
                below 28 percent, plus
            ``(2) a tax of 28 percent of the amount of taxable income 
        in excess of the amount determined under paragraph (1).''
    (c) Limitation in Case of Installment Sales.--Subsection (i) of 
section 453 is amended--
            (1) by striking ``1250'' the first place it appears and 
        inserting ``1250 (as in effect on December 31, 1992)'', and
            (2) by striking ``1250'' the second place it appears and 
        inserting ``1250 (as so in effect)''.
    (d) Conforming Amendments.--
            (1) Subparagraph (E) of section 1250(d)(4) is amended--
                    (A) by striking ``additional depreciation'' and 
                inserting ``amount of the depreciation adjustments'', 
                and
                    (B) by striking ``Additional depreciation'' in the 
                subparagraph heading and inserting ``Depreciation 
                adjustments''.
            (2) Subparagraph (B) of section 1250(d)(6) is amended to 
        read as follows:
                    ``(B) Depreciation adjustments.--In respect of any 
                property described in subparagraph (A), the amount of 
                the depreciation adjustments attributable to periods 
                before the distribution by the partnership shall be--
                            ``(i) the amount of gain to which 
                        subsection (a) would have applied if such 
                        property had been sold by the partnership 
                        immediately before the distribution at its fair 
                        market value at such time, reduced by
                            ``(ii) the amount of such gain to which 
                        section 751(b) applied.''
            (3) Subsection (d) of section 1250 is amended by striking 
        paragraph (10).
            (4) Section 1250 is amended by striking subsections (e) and 
        (f) and by redesignating subsections (g) and (h) as subsections 
        (e) and (f), respectively.
            (5) Paragraph (4) of section 50(c) is amended to read as 
        follows:
            ``(4) Recapture of reduction.--For purposes of sections 
        1245 and 1250, any reduction under this subsection shall be 
        treated as a deduction allowed for depreciation.''
            (6) Clause (i) of section 267(e)(5)(D) is amended by 
        striking ``section 1250(a)(1)(B)'' and inserting ``section 
        1250(a)(1)(B) (as in effect on December 31, 1992)''.
            (7)(A) Subsection (a) of section 291 is amended by striking 
        paragraph (1) and redesignating paragraphs (2), (3), (4), and 
        (5) as paragraphs (1), (2), (3), and (4), respectively.
            (B) Subsection (c) of section 291 is amended to read as 
        follows:
    ``(c) Special Rule for Pollution Control Facilities.--Section 168 
shall apply with respect to that portion of the basis of any property 
not taken into account under section 169 by reason of subsection 
(a)(4).''
            (C) Section 291 is amended by striking subsection (d) and 
        redesignating subsection (e) as subsection (d).
            (D) Paragraph (2) of section 291(d) (as redesignated by 
        subparagraph (C)) is hereby repealed.
            (E) Subparagraph (A) of section 265(b)(3) is amended by 
        striking ``291(e)(1)(B)'' and inserting ``291(d)(1)(B)''.
            (F) Subsection (c) of section 1277 is amended by striking 
        ``291(e)(1)(B)(ii)'' and inserting ``291(d)(1)(B)(ii)''.
            (8) Subsection (d) of section 1017 is amended to read as 
        follows:
    ``(d) Recapture of Deductions.--For purposes of sections 1245 and 
1250--
            ``(1) any property the basis of which is reduced under this 
        section and which is neither section 1245 property nor section 
        1250 property shall be treated as section 1245 property, and
            ``(2) any reduction under this section shall be treated as 
        a deduction allowed for depreciation.''
            (9) Paragraph (5) of section 7701(e) is amended by striking 
        ``(relating to low-income housing)'' and inserting ``(as in 
        effect on December 31, 1992)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to dispositions after January 31, 1993, in taxable years ending 
after such date.

                TITLE III--RESEARCH AND EXPERIMENTATION

SEC. 301. CREDIT FOR RESEARCH AND EXPERIMENTATION.

    (a) Permanent Credit.--Section 41 (relating to the credit for 
increasing research activities) is amended by striking subsection (h).
    (b) Conforming Amendment.--Paragraph (1) of section 28(b) is 
amended by striking subparagraph (D).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after June 30, 1992.

SEC. 302. ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

    (a) Extension.--Paragraph (5) of section 864(f) (relating to 
allocation of research and experimental expenditures) is amended to 
read as follows:
            ``(5) Years to which rule applies.--This subsection shall 
        apply to taxable years beginning after August 1, 1989.''
    (b) Effective Date.--The amendment made by this section applies to 
taxable years beginning after August 1, 1989.

           TITLE IV--EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE

SEC. 401. EMPLOYEE EDUCATIONAL ASSISTANCE.

    (a) Extension.--
            (1) In general.--Section 127 (relating to educational 
        assistance programs) is amended by striking subsection (d) and 
        by redesignating subsection (e) as subsection (d).
            (2) Conforming amendment.--Paragraph (2) of section 103(a) 
        of the Tax Extension Act of 1991 is hereby repealed.
    (b) Increase in, and Indexing of, Maximum Exclusion.--
            (1) In general.--Paragraph (2) of section 127(a) is amended 
        by striking ``$5,250'' each place it appears and inserting 
        ``$6,000''.
            (2) Adjustment for inflation.--Subsection (a) of section 
        127 is amended by adding at the end thereof the following new 
        paragraph:
            ``(3) Cost-of-living adjustment of maximum exclusion.--In 
        the case of any taxable year beginning in a calendar year after 
        1993, the dollar amount contained in paragraph (2) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) 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 
                1992' for `calendar year 1989' in subparagraph (B) 
                thereof.''
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 1992.
            (2) Extension of section 127.--The amendments made by 
        subsection (a) shall apply to taxable years ending after June 
        30, 1992.

                                 <all>

S 347 IS----2