[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1928 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 1928

  To simplify certain provisions of the Internal Revenue Code of 1986.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 25, 1999

    Mr. Houghton (for himself, Mrs. Johnson of Connecticut, and Mr. 
   English) introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To simplify certain provisions of the Internal Revenue Code of 1986.

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

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Tax Simplification 
and Burden Reduction Act''.
    (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.

                    TITLE I--ALTERNATIVE MINIMUM TAX

SEC. 101. NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST ALTERNATIVE 
              MINIMUM TAX.

    (a) In General.--Subsection (a) of section 26 (relating to 
limitation based on tax liability; definition of tax liability) is 
amended to read as follows:
    ``(a) Limitation Based on Amount of Tax.--The aggregate amount of 
credits allowed by this subpart for the taxable year shall not exceed 
the sum of--
            ``(1) the taxpayer's regular tax liability for the taxable 
        year, and
            ``(2) the tax imposed for the taxable year by section 
        55(a).''.
    (b) Conforming Amendments.--
            (1) Subsection (d) of section 24 is amended by striking 
        paragraph (2) and by redesignating paragraph (3) as paragraph 
        (2).
            (2) Section 32 is amended by striking subsection (h).
            (3) Section 904 is amended by striking subsection (h) and 
        by redesignating subsections (i), (j), and (k) as subsections 
        (h), (i), and (j), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 102. EXEMPTION FROM ALTERNATIVE MINIMUM TAX FOR INDIVIDUALS WHOSE 
              MODIFIED ADJUSTED GROSS INCOME IS LESS THAN A THRESHOLD 
              AMOUNT.

    (a) In General.--Section 55 (relating to alternative minimum tax 
imposed) is amended by adding at the end the following new subsection:
    ``(f) Exemption for Individuals.--
            ``(1) In general.--The tentative minimum tax of any 
        taxpayer (other than a corporation) shall be zero for any 
        taxable year if the modified adjusted gross income of the 
        taxpayer for such year does not exceed the threshold amount.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        threshold amount is--
                    ``(A) $120,000 in the case of a joint return,
                    ``(B) $85,000 in the case of an individual who is 
                not married, and
                    ``(C) one-half of the amount applicable under 
                subparagraph (A) in the case of a married individual 
                filing a separate return.
            ``(3) Modified adjusted gross income.--For purposes of 
        paragraph (1), the term `modified adjusted gross income' means 
        adjusted gross income increased by any amount excluded from 
        gross income under section 911, 931, or 933.
            ``(4) Marital status.--For purposes of paragraph (2), 
        marital status shall be determined under section 7703.
            ``(5) Adjustment for inflation.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2000, each dollar 
                amount contained in paragraph (2) shall 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 1999' for 
                        `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any increase determined under 
                subparagraph (A) is not a multiple of $50, such 
                increase shall be rounded to the next lowest multiple 
                of $50.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 103. INCREASE IN AMOUNT OF GROSS RECEIPTS TEST FOR EXEMPTION FOR 
              SMALL CORPORATIONS.

    (a) In General.--Paragraph (1) of section 55(e) (relating to 
general rule for exemption for small corporations) is amended--
            (1) in subparagraph (A) by striking ``$7,500,000'' each 
        place it appears in the text and heading and inserting 
        ``$10,000,000'', and
            (2) by striking subparagraph (B) and redesignating 
        subparagraphs (C) and (D) as subparagraphs (B) and (C), 
        respectively.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

              TITLE II--PROVISIONS RELATING TO INDIVIDUALS

SEC. 201. SIMPLIFICATION OF CAPITAL GAINS TAX.

    (a) In General.--Part I of subchapter P of chapter 1 (relating to 
treatment of capital gains) is amended by adding at the end the 
following new section:

``SEC. 1203. CAPITAL GAINS DEDUCTION.

    ``If for any taxable year a taxpayer other than a corporation has a 
net capital gain, 50 percent of such gain shall be a deduction from 
gross income.''.
    (b) Deduction Allowable Whether or Not Taxpayer Itemizes Other 
Deductions.--
            (1) Subsection (b) of section 63 is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) the deduction allowed by section 1203.''.
            (2) Subsection (d) of section 63 is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) the deduction allowed by section 1203.''.
    (c) Minimum Tax Treatment.--
            (1) Paragraph (1) of section 56(b) is amended by adding at 
        the end the following new subparagraph:
                    ``(G) Capital gain deduction not applicable.--
                Section 1203 shall not apply.''.
            (2) Subsection (b) of section 55 is amended by striking 
        paragraph (3) and inserting the following new paragraphs:
            ``(3) Maximum tax on net capital gain.--The amount of tax 
        determined under the first sentence of paragraph (1)(A)(i) 
        shall not exceed the sum of--
                    ``(A) the amount determined under such first 
                sentence computed at the rates and in the same manner 
                as if this paragraph had not been enacted on the 
                taxable excess reduced by the net capital gain, plus
                    ``(B) a tax on the net capital gain determined by 
                using the regular tax capital gains tax rates.
            ``(4) Regular tax on net capital gain.--For purposes of 
        paragraph (3), the tax on the net capital gain determined by 
        using the regular tax capital gains tax rates is the excess 
        of--
                    ``(A) the tax that would be computed under section 
                1 if net capital gain were determined with the 
                adjustments under this part, over
                    ``(B) the tax that would be so computed under 
                section 1 if the taxable income were reduced by 50 
                percent of the net capital gain as so determined.''.
    (d) Repeal of Tax Preference for Exclusion on Small Business 
Stock.--
            (1) Subsection (a) of section 57 is amended by striking 
        paragraph (7).
            (2) Subclause (II) of section 53(d)(1)(B)(ii) is amended by 
        striking ``, (5), and (7)'' and inserting ``and (5)''.
    (e) Treatment of Collectibles.--
            (1) In general.--Section 1222 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 apply only to the extent the 
                gain or loss is taken into account in computing taxable 
                income.
                    ``(B) Treatment of certain sales of interests in 
                partnerships, 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)''.
    (f) Technical and Conforming Amendments.--
            (1) Section 1 is amended by striking subsection (h).
            (2) Subparagraph (E) of section 163(d)(4) is amended to 
        read as follows:
                    ``(E) Coordination with capital gains deduction.--
                The net capital gain taken into account under section 
                1203 for any taxable year shall be reduced (but not 
                below zero) by the amount which the taxpayer takes into 
                account as investment income under subparagraph 
                (B)(iii) for such year.''.
            (3) Paragraph (1) of section 170(e) is amended by striking 
        ``the amount of gain'' in the material following subparagraph 
        (B)(ii) and inserting ``50 percent (100 percent in the case of 
        a corporation) of the amount of gain''.
            (4) Subparagraph (B) of section 172(d)(2) is amended to 
        read as follows:
                    ``(B) the exclusion under section 1202 and the 
                deduction under section 1203 shall not be allowed.''.
            (5) The last sentence of section 453A(c)(3) is amended by 
        striking all that follows ``long-term capital gain,'' and 
        inserting ``the maximum rate on net capital gain under section 
        1201 or the deduction under section 1203 (whichever is 
        appropriate) shall be taken into account.''.
            (6)(A) Section 641(c)(2)(A) is amended by striking ``Except 
        as provided in section 1(h), the'' and inserting ``The''.
            (B) Section 641(c)(2)(C) is amended by inserting after 
        clause (iii) the following new clause:
                            ``(iv) The deduction under section 1203.''.
            (7) Paragraph (4) of section 642(c) is amended to read as 
        follows:
            ``(4) Adjustments.--To the extent that the amount otherwise 
        allowable as a deduction under this subsection consists of gain 
        from the sale or exchange of capital assets held for more than 
        1 year, proper adjustment shall be made for any exclusion 
        allowable under section 1202 and any deduction allowable under 
        section 1203 to the estate or trust. In the case of a trust, 
        the deduction allowed by this subsection shall be subject to 
        section 681 (relating to unrelated business income).''.
            (8) Section 642 is amended by adding at the end the 
        following new subsection:
    ``(j) Capital Gains Deduction.--The deduction under section 1203 to 
an estate or trust shall be computed by excluding the portion (if any) 
of the gains for the taxable year which is includible by the income 
beneficiaries under sections 652 and 662 (relating to inclusions of 
amounts in gross income of beneficiaries of trusts) as gain derived 
from the sale or exchange of capital assets.''.
            (9) The last sentence of section 643(a)(3) is amended to 
        read as follows: ``The exclusion under section 1202 and the 
        deduction under section 1203 shall not be taken into 
        account.''.
            (10) Subparagraph (C) of section 643(a)(6) is amended by 
        inserting ``(i)'' before ``there shall'' and by inserting 
        before the period ``, and (ii) the deduction under section 1203 
        (relating to capital gains deduction) shall not be taken into 
        account''.
            (11) Paragraph (4) of section 691(c) is amended by striking 
        ``1(h),'' and by inserting ``1203,'' after ``1202,''.
            (12) The second sentence of paragraph (2) of section 871(a) 
        is amended by striking ``section 1202'' and inserting 
        ``sections 1202 and 1203''.
            (13)(A) Paragraph (2) of section 904(b) is amended by 
        striking subparagraphs (A) and (C), by redesignating 
        subparagraph (B) as subparagraph (A), and by inserting after 
        subparagraph (A) (as so redesignated) the following new 
        subparagraph:
                    ``(B) Other taxpayers.--In the case of a taxpayer 
                other than a corporation, taxable income from sources 
                outside the United States shall include gain from the 
                sale or exchange of capital assets only to the extent 
                of foreign source capital gain net income.''.
            (B) Subparagraph (A) of section 904(b)(2), as so 
        redesignated, is amended--
                    (i) by striking all that precedes clause (i) and 
                inserting the following:
                    ``(A) Corporations.--In the case of a corporation--
                '', and
                    (ii) by striking in clause (i) ``in lieu of 
                applying subparagraph (A),''.
            (C) Paragraph (3) of section 904(b) is amended by striking 
        subparagraphs (D) and (E) and inserting the following new 
        subparagraph:
                    ``(D) Rate differential portion.--The rate 
                differential portion of foreign source net capital 
                gain, net capital gain, or the excess of net capital 
                gain from sources within the United States over net 
                capital gain, as the case may be, is the same 
                proportion of such amount as the excess of the highest 
                rate of tax specified in section 11(b) over the 
                alternative rate of tax under section 1201(a) bears to 
                the highest rate of tax specified in section 11(b).''.
            (14) Paragraph (1) of section 1402(i) is amended by 
        inserting ``, and the deduction provided by section 1203 shall 
        not apply'' before the period at the end thereof.
            (15) Paragraph (1) of section 1445(e) is amended by 
        striking ``20 percent'' and inserting ``19.8 percent''.
            (16)(A) The second sentence of section 7518(g)(6)(A) is 
        amended--
                    (i) by striking ``during a taxable year to which 
                section 1(h) or 1201(a) applies'', and
                    (ii) by striking ``20 percent'' and inserting 
                ``19.8 percent''.
            (B) The second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936, is amended--
                    (i) by striking ``during a taxable year to which 
                section 1(h) or 1201(a) of such Code applies'', and
                    (ii) by striking ``20 percent'' and inserting 
                ``19.8 percent''.
    (g) Clerical Amendment.--The table of sections for part I of 
subchapter P of chapter 1 is amended by adding at the end the following 
new item:

                              ``Sec. 1203. Capital gains deduction.''.
    (h) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 1999.
            (2) Withholding.--The amendments made by subsection (f)(15) 
        shall apply only to amounts paid after December 31, 1999.
            (3) Repeal of election.--Section 311 of the Taxpayer Relief 
        Act of 1997 is amended by striking subsection (e).
            (4) Coordination with prior transition rule.--Any amount 
        treated as long-term capital gain by reason of paragraph (3) of 
        section 1122(h) of the Tax Reform Act of 1986 shall not be 
        taken into account for purposes of applying section 1203 of the 
        Internal Revenue Code of 1986 (as added by this section).

SEC. 202. SIMPLIFICATION OF DEDUCTION FOR POINTS ON HOME MORTGAGE.

    (a) In General.--Paragraph (2) of section 461(g) (relating to 
prepaid interest) is amended by adding at the end the following new 
sentence: ``This subsection also shall not apply to points paid in 
respect of indebtedness secured by such residence resulting from the 
refinancing of indebtedness meeting the requirements of the preceding 
sentence (or this sentence), but only to the extent the amount of the 
indebtedness resulting from such refinancing does not exceed the amount 
of the refinanced indebtedness.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 203. INCREASE IN EXCLUSION FOR GROUP-TERM LIFE INSURANCE PURCHASED 
              FOR EMPLOYEES.

    (a) In General.--Paragraph (1) of section 79(a) (relating to group-
term life insurance purchased for employees) is amended by striking 
``$50,000'' and inserting ``$100,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 204. REPEAL OF PERCENTAGE LIMITATION ON CONTRIBUTIONS TO DEFINED 
              CONTRIBUTION PLANS.

    (a) In General.--Subparagraph (B) of section 415(c)(1) (relating to 
limitation for defined contribution plans) is amended by striking ``25 
percent of''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 205. REPEAL OF REQUIRED USE OF GRADUATED PERCENTAGE OF PRECEDING 
              YEAR'S TAX TO DETERMINE INSTALLMENTS OF ESTIMATED INCOME 
              TAX DUE FOR CERTAIN TAXPAYERS.

    (a) In General.--Paragraph (1) of section 6654(d) (relating to 
amount of installments) is amended by striking subparagraph (C).
    (b) Conforming Amendment.--Subparagraph (C) of section 6654(i)(1) 
is amended by striking ``and without regard to subparagraph (C) of 
subsection (d)(1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 206. STUDY ON RATIONALE FOR AND SIMPLIFICATION OF HEAD OF 
              HOUSEHOLD AND SURVIVING SPOUSE FILING STATUSES.

    (a) In General.--The Secretary of the Treasury shall conduct a 
study on whether the original rationale for providing tax benefits 
through the filing statuses of head of household and surviving spouse 
continues to apply, and, if so, whether such benefits can be more 
simply provided through other mechanisms.
    (b) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Secretary shall submit a report on the study conducted 
under subsection (a), together with recommendations thereon, to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate.

              TITLE III--PROVISIONS RELATING TO BUSINESSES

                     Subtitle A--General Provisions

SEC. 301. EXPENSING OF CERTAIN DEPRECIABLE BUSINESS ASSETS.

    (a) Certain Computer Software Eligible for Expensing.--Paragraph 
(1) of section 179(d) (relating to 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 described in 
                        section 197(e)(3)(A)(i),
                    ``(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.''.
    (b) Personal Property Used in Rental Property.--Paragraph (1) of 
section 179(d) (relating to section 179 property), as amended by 
subsection (a), is amended by inserting ``(other than paragraph (2) 
thereof)'' after ``section 50(b)''.
    (c) Adjustment for Inflation.--Subsection (b) of section 179 
(relating to limitations) is amended by adding at the end the following 
new paragraph:
            ``(5) Adjustment for inflation.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2003, the dollar 
                amount contained in the table in paragraph (1) 
                applicable to such taxable year shall 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.--If any increase determined under 
                subparagraph (A) is not a multiple of $50, such 
                increase shall be rounded to the next lowest multiple 
                of $50.''.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to property placed in service after December 31, 1999.

SEC. 302. CASH METHOD OF ACCOUNTING.

    (a) Personal Service Corporations.--Subsection (b) of section 448 
(relating to exception to general rule on limitation on use of cash 
method of accounting) is amended--
            (1) by striking paragraph (2), and
            (2) by redesignating paragraph (3) as paragraph (2).
    (b) Increase in Gross Receipts Test Amount.--
            (1) In general.--Paragraph (2) of section 448(a) (relating 
        to entities with gross receipts of not more than $5,000,000), 
        as redesignated by subsection (a)(2), is amended--
                    (A) by striking ``$5,000,000'' in the heading and 
                inserting ``$10,000,000'', and
                    (B) by striking ``$5,000,000'' in the text.
            (2) Gross receipts test defined.--Subsection (c) of section 
        448 (relating to $5,000,000 gross receipts test) is amended--
                    (A) by striking ``$5,000,000'' in the heading and 
                the first place it appears in paragraph (1), and
                    (B) by striking ``$5,000,000'' the second place it 
                appears in paragraph (1) and inserting ``$10,000,000''.
    (c) Effective Dates.--
            (1) Personal service corporations.--The amendments made by 
        subsection (a) shall apply to taxable years beginning after 
        December 31, 1999.
            (2) Gross receipts test.--The amendments made by subsection 
        (b) shall apply to determinations of whether the requirement of 
        section 448(b)(2) of the Internal Revenue Code of 1986 (as 
        amended by this section) is met for any taxable year beginning 
        after December 31, 1999.

SEC. 303. GROSS RECEIPTS EXCEPTION TO INVENTORY COST CAPITALIZATION 
              RULES EXTENDED TO PROPERTY PRODUCED BY THE TAXPAYER.

    (a) In General.--Subsection (b) of section 263A (relating to 
property to which section applies) is amended to read as follows:
    ``(b) Property to Which Section Applies.--
            ``(1) In general.--Except as otherwise provided in this 
        section--
                    ``(A) Property produced by taxpayer.--This section 
                shall apply to--
                            ``(i) In general.--Real or tangible 
                        personal property produced by the taxpayer.
                            ``(ii) Tangible personal property.--For 
                        purposes of clause (i), the term `tangible 
                        personal property' shall include a film, sound 
                        recording, video tape, book, or similar 
                        property.
                    ``(B) Property acquired for resale.--This section 
                shall apply to real or personal property described in 
                section 1221(1) which is acquired by the taxpayer for 
                resale.
            ``(2) Exception for taxpayer with gross receipts of 
        $10,000,000 or less.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any personal property produced during any taxable year 
                by the taxpayer or acquired during any taxable year by 
                the taxpayer for resale if the average annual gross 
                receipts of the taxpayer (or any predecessor) for the 
                3-taxable year period ending with the taxable year 
                preceding such taxable year do not exceed $10,000,000.
                    ``(B) Aggregation rules, etc.--For purposes of 
                subparagraph (A), rules similar to the rules of 
                paragraphs (2) and (3) of section 448(c) shall 
                apply.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

                       Subtitle B--S Corporations

SEC. 311. REPEAL OF LIMITATION ON NUMBER OF SHAREHOLDERS OF S 
              CORPORATION SO LONG AS SUCH CORPORATION IS NOT PUBLICLY 
              TRADED.

    (a) In General.--Paragraph (1) of section 1361(b) (relating to 
small business corporation) is amended by striking subparagraph (A) and 
redesignating subparagraphs (B), (C), and (D) as subparagraphs (A), 
(B), and (C), respectively.
    (b) Not Publicly Traded Requirement.--
            (1) In general.--Paragraph (2) of section 1361(b) (defining 
        ineligible corporation) is amended by striking ``or'' at the 
        end of subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, or'' and by inserting after 
        subparagraph (D) the following new subparagraph:
                    ``(E) a publicly traded corporation.''.
            (2) Publicly traded corporation defined.--Subsection (b) of 
        section 1361 (relating to small business corporation) is 
        amended by adding at the end the following new paragraph:
            ``(4) Publicly traded corporation.--For purposes of 
        paragraph (2)(E), a corporation is a publicly traded 
        corporation if the stock of such corporation is readily 
        tradable on an established securities market.''.
    (c) Conforming Amendments.--
            (1) Subsection (c) of section 1361 is amended by striking 
        paragraph (1) and redesignating paragraphs (2) through (6) as 
        paragraphs (1) through (5), respectively.
            (2) Paragraphs (1), (2), and (5) of section 1361(c) (as so 
        redesignated) are each amended by striking ``subsection 
        (b)(1)(B)'' each place it appears and inserting ``subsection 
        (b)(1)(A)''.
            (3) Paragraphs (3) and (4) of section 1361(c) (as so 
        redesignated) are each amended by striking ``subsection 
        (b)(1)(D)'' both places it appears and inserting ``subsection 
        (b)(1)(C)''.
            (4) Subparagraph (A) of section 1361(d)(1) is amended by 
        striking ``subsection (c)(2)(A)(i)'' and inserting ``subsection 
        (c)(1)(A)(i)''.
            (5) Clause (i) of section 280G(b)(5)(A) is amended by 
        striking ``paragraph (1)(C)'' and inserting ``paragraph 
        (1)(B)''.
            (6) Paragraph (1) of section 512(e) is amended by striking 
        ``section 1361(c)(6)'' and inserting ``section 1361(c)(5)''.

SEC. 312. ISSUANCE OF PREFERRED STOCK BY S CORPORATIONS PERMITTED.

    (a) In General.--Section 1361 (defining S corporation) is amended 
by adding at the end the following new subsection:
    ``(f) Treatment of Qualified Preferred Stock.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) qualified preferred stock shall not be 
                treated as a second class of stock, and
                    ``(B) no person shall be treated as a shareholder 
                of the corporation by reason of holding qualified 
                preferred stock.
            ``(2) Qualified preferred stock defined.--For purposes of 
        this subsection, the term `qualified preferred stock' means 
        stock which meets the requirements of subparagraphs (A), (B), 
        and (C) of section 1504(a)(4). Stock shall not fail to be 
        treated as qualified preferred stock merely because it is 
        convertible into other stock.
            ``(3) Distributions.--A distribution (not in part or full 
        payment in exchange for stock) made by the corporation with 
        respect to qualified preferred stock shall be includible as 
        ordinary income of the holder and deductible to the corporation 
        as an expense in computing taxable income under section 1363(b) 
        in the year such distribution is received.''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 1361(b) is amended by 
        inserting '', except as provided in subsection (f),'' before 
        ``which does not''.
            (2) Subsection (a) of section 1366 is amended by adding at 
        the end the following new paragraph:
            ``(3) Allocation with respect to qualified preferred 
        stock.--The holders of qualified preferred stock (as defined in 
        section 1361(f)) shall not, with respect to such stock, be 
        allocated any of the items described in paragraph (1).''.
            (3) So much of clause (ii) of section 354(a)(2)(C) as 
        precedes subclause (II) is amended to read as follows:
                            ``(ii) Recapitalization of family-owned 
                        corporations and s corporations.--
                                    ``(I) In general.--Clause (i) shall 
                                not apply in the case of a 
                                recapitalization under section 
                                368(a)(I)(E) of a family-owned 
                                corporation or S corporation.''.
            (4) Subsection (a) of section 1373 is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) no amount of an expense deductible under this 
        subchapter by reason of section 1361(f)(3) shall be apportioned 
        or allocated to such income.''.

SEC. 313. ELECTION TO BECOME S CORPORATION EXTENDED TO DATE RETURN IS 
              FILED.

    (a) In General.--Subsection (b) of section 1362 (relating to when 
election made) is amended to read as follows:
    ``(b) When Made.--An election under subsection (a) may be made by a 
small business corporation for any taxable year on or before the due 
date (including extensions) for filing the return of tax for such 
taxable year.''.
    (b) Conforming Amendment.--Subparagraph (A) of section 1362(f)(1) 
is amended by striking ``(determined without regard to subsection 
(b)(2))''.
    (c) Effective Date.--The amendment made by this section shall apply 
with respect to elections for taxable years beginning after December 
31, 1999.

   TITLE IV--PROVISIONS RELATING TO INFORMATION REPORTING AND FILING

SEC. 401. INCREASE IN REPORTING THRESHOLD FOR DIVIDEND AND INTEREST 
              PAYMENTS.

    (a) Dividend Payments.--Subsection (a) of section 6042 (relating to 
requirements for reporting) is amended by striking ``$10'' each place 
it appears and inserting ``$25''.
    (b) Interest Payments.--Subsections (a) and (d)(5)(C) of section 
6049 (relating to requirements for reporting) are each amended by 
striking ``$10'' each place it appears in the text and headings and 
inserting ``$25''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 1999.

SEC. 402. POSTMARK DATE TREATED AS FILING DATE FOR PURPOSES OF ALL 
              FILINGS.

    (a) In General.--Paragraph (2) of section 7502(a) (relating to 
mailing requirements with respect to date of delivery) is amended to 
read as follows:
            ``(2) Mailing requirements.--This subsection shall apply 
        only if the return, claim, statement, or other document, or 
        payment was deposited in the mail in the United States in an 
        envelope or other appropriate wrapper, postage prepaid, 
        properly addressed to the agency, officer, or office with which 
        the return, claim, statement, or other document is required to 
        be filed, or to which such payment is required to be made.''.
    (b) Mailing of Deposits.--Paragraph (2) of section 7502(e) 
(relating to mailing requirements with respect to mailing of deposits) 
is amended to read as follows:
            ``(2) Mailing requirements.--Paragraph (1) shall apply only 
        if the person required to make the deposit establishes that the 
        deposit was mailed in the United States in an envelope or other 
        appropriate wrapper, postage prepaid, properly addressed to the 
        bank, trust company, domestic building and loan association, or 
        credit union authorized to receive such deposit. In applying 
        subsection (c) for purposes of this subsection, the term 
        `payment' includes `deposit', and the reference to the postmark 
        date refers to the date of mailing.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns, claims, statements, and other documents required to 
be filed and payments and deposits required to be made after the date 
of the enactment of this Act.

SEC. 403. REDUCTION OF RECORDKEEPING BURDEN.

    (a) In General.--Section 6001 (relating to notice or regulations 
requiring records, statements, and special returns) is amended--
            (1) by striking ``Every'' and inserting ``(a) In General.--
        Every'', and
            (2) by adding at the end the following new subsection:
    ``(b) Period For Which Records Must Be Kept.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), in the case of a trade or business, records required to be 
        kept under subsection (a) for a taxable year need not be kept 
        after the 6th year after the return of tax is filed for such 
        taxable year.
            ``(2) Exception for types of records.--Paragraph (1) shall 
        not apply to--
                    ``(A) records which are general ledgers, journals 
                or books of original entry, financial statements, and 
                year-end adjustments to general ledgers, whether in 
                paper or electronic form,
                    ``(B) records from which the records described in 
                subparagraph (A) are derived if the records described 
                in subparagraph (A) are not prepared in accordance with 
                generally accepted accounting principles, and
                    ``(C) records which are unique to the industry in 
                which the taxpayer is engaged.
            ``(3) Other exceptions.--Paragraph (1) shall not apply to--
                    ``(A) records relating to a taxable year with 
                respect to which section 6501(c) applies,
                    ``(B) records relating to a taxable year with 
                respect to which the period of limitations is suspended 
                for as long as such period is suspended,
                    ``(C) records relating to a taxable year of a 
                taxpayer with respect to which the Secretary is 
                conducting an audit or other investigation, and
                    ``(D) records relating to a taxable year with 
                respect to which a case is pending in Federal or State 
                court.
            ``(4) Failure to keep records not a defense in certain 
        cases.--Paragraph (1) shall not be a defense in the case of 
        failure to keep records for a year in connection with--
                    ``(A) a false or fraudulent return with the intent 
                to evade tax,
                    ``(B) a willful attempt in any manner to defeat or 
                evade tax imposed by this title, or
                    ``(C) failure to file a return.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.
                                 <all>