[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1379 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1379

 To amend the Internal Revenue Code of 1986 to provide broad based tax 
relief for all taxpaying families, to mitigate the marriage penalty, to 
expand retirement savings, to phase out gift and estate taxes, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 15, 1999

 Mr. Domenici 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 provide broad based tax 
relief for all taxpaying families, to mitigate the marriage penalty, to 
expand retirement savings, to phase out gift and estate taxes, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Share the Surplus 
Tax Reduction and Simplification Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                          TITLE I--TAX RELIEF

Sec. 11. Broad based tax relief for all taxpaying families.
Sec. 12. Marriage penalty mitigation and tax burden reduction.
               TITLE II--SAVING AND INVESTMENT PROVISIONS

Sec. 21. Dividend and interest tax relief.
Sec. 22. Long-term capital gains deduction for individuals.
Sec. 23. Increase in contribution limits for traditional IRAs.
               TITLE III--BUSINESS INVESTMENT PROVISIONS

Sec. 31. Repeal of alternative minimum tax on corporations.
Sec. 32. Increase in limit for expensing certain business assets.
                  TITLE IV--ESTATE AND GIFT TAX RELIEF

Sec. 41. Phaseout of estate and gift taxes.
          TITLE V--RESEARCH CREDIT EXTENSION AND MODIFICATION

Sec. 51. Purpose.
Sec. 52. Permanent extension of research credit.
Sec. 53. Improved alternative incremental credit.
Sec. 54. Modifications to credit for basic research.
Sec. 55. Credit for expenses attributable to certain collaborative 
                            research consortia.
Sec. 56. Improvement to credit for small businesses and research 
                            partnerships.
                     TITLE VI--ENERGY INDEPENDENCE

Sec. 61. Purposes.
Sec. 62. Tax credit for marginal domestic oil and natural gas well 
                            production.
Sec. 63. 10-year carryback for unused minimum tax credit.
Sec. 64. 10-year net operating loss carryback for losses attributable 
                            to oil servicing companies and mineral 
                            interests of oil and gas producers.
Sec. 65. Waiver of limitations.
Sec. 66. Election to expense geological and geophysical expenditures 
                            and delay rental payments.
                      TITLE VII--REVENUE PROVISION

Sec. 71. 4-year averaging for conversion of traditional IRA to Roth 
                            IRA.

                          TITLE I--TAX RELIEF

SEC. 11. BROAD BASED TAX RELIEF FOR ALL TAXPAYING FAMILIES.

    (a) Purpose.--The purpose of this section is to cut taxes for 
120,000,000 taxpaying families by lowering the 15 percent tax rate.
    (b) In General.--Section 1 of the Internal Revenue Code of 1986 
(relating to tax imposed) is amended--
            (1) by striking ``15%'' each place it appears in the tables 
        in subsections (a) through (e) and inserting ``The applicable 
        rate'', and
            (2) by adding at the end the following:
    ``(i) Applicable Rate.--For purposes of this section, the 
applicable rate for any taxable year shall be determined in accordance 
with the following table:

``In the case of any taxable year            The applicable rate is:
        beginning in--
    2002..........................................        14.9 percent 
    2003..........................................        14.8 percent 
    2004..........................................        14.7 percent 
    2005..........................................        14.1 percent 
    2006 and thereafter...........................      13.5 percent.''
    (b) Conforming Amendments.--
            (1) Section 1(f)(2) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by inserting ``except as provided in subsection 
                (i),'' before ``by not changing'' in subparagraph (B), 
                and
                    (B) by inserting ``and the adjustment in rates 
                under subsection (i)'' after ``rate brackets'' in 
                subparagraph (C).
            (2) Section 1(g)(7)(B)(ii)(II) of such Code is amended by 
        striking ``15 percent'' and inserting ``the applicable rate''.
            (3) Section 3402(p)(2) of such Code is amended by striking 
        ``15 percent'' and inserting ``the applicable rate in effect 
        under section 1(i) for the taxable year''.
    (c) New Tables.--Not later than 15 days after the date of enactment 
of this Act, the Secretary of the Treasury--
            (1) shall prescribe tables for taxable years beginning in 
        2002 which shall reflect the amendments made by this section 
        and which shall apply in lieu of the tables prescribed under 
        sections 1(f)(1) and 3(a) of the Internal Revenue Code of 1986 
        for such taxable years, and
            (2) shall modify the withholding tables and procedures for 
        such taxable years under section 3402(a)(1) of such Code to 
        take effect as if the reduction in the rate of tax under 
        section 1 of such Code (as amended by this section) was 
        attributable to such a reduction effective on such date of 
        enactment.
    (d) Section 15 Not To Apply.--No amendment made by this section 
shall be treated as a change in a rate of tax for purposes of section 
15 of the Internal Revenue Code of 1986.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 12. MARRIAGE PENALTY MITIGATION AND TAX BURDEN REDUCTION.

    (a) Purpose.--The purposes of this section are to return 7,000,000 
taxpaying families to the 15 percent tax bracket and to cut taxes for 
35,000,000 taxpaying families who will benefit from a tax cut of up to 
$1,300 per family by eliminating or mitigating the marriage penalty for 
many middle class taxpaying families.
    (b) In General.--Section 1(f) of the Internal Revenue Code of 1986 
(relating to adjustments in tax tables so that inflation will not 
result in tax increases) is amended--
            (1) in paragraph (2)--
                    (A) by redesignating subparagraphs (B) and (C) as 
                subparagraphs (C) and (D),
                    (B) by inserting after subparagraph (A) the 
                following:
                    ``(B) in the case of the tables contained in 
                subsections (a), (b), (c), and (d), by increasing the 
                maximum taxable income level for the lowest rate 
                bracket and the minimum taxable income level for the 28 
                percent rate bracket otherwise determined under 
                subparagraph (A) for taxable years beginning in any 
                calendar year after 2001, by the applicable dollar 
                amount for such calendar year,'', and
                    (C) by striking ``subparagraph (A)'' in 
                subparagraph (C) (as so redesignated) and inserting 
                ``subparagraphs (A) and (B)'', and
            (2) by adding at the end the following:
            ``(8) Applicable dollar amount.--For purposes of paragraph 
        (2)(B), the applicable dollar amount for any calendar year 
        shall be determined as follows:
                    ``(A) Joint returns and surviving spouses.--In the 
                case of the table contained in subsection (a)--

                                                             Applicable
``Calendar year:                                         Dollar Amount:
    2002..........................................              $2,000 
    2003..........................................              $4,000 
    2004..........................................              $6,000 
    2005..........................................              $8,000 
    2006 and thereafter...........................             $10,000.
                    ``(B) Other tables.--In the case of the table 
                contained in subsection (b), (c), or (d)--

                                                             Applicable
``Calendar year:                                         Dollar Amount:
    2002..........................................              $1,000 
    2003..........................................              $2,000 
    2004..........................................              $3,000 
    2005..........................................              $4,000 
    2006 and thereafter...........................           $5,000.''.

SEC. 13. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDIVIDUALS.

    (a) Purposes.--The purposes of this section are--
            (1) to simplify the tax code so that millions of Americans 
        will no longer be required to calculate their income taxes 
        under 2 systems; and
            (2) to recognize that tax credits should not be denied to 
        individuals who are eligible for such credit.
    (b) In General.--Subsection (a) of section 55 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
flush sentence:
``For purposes of this title, the tentative minimum tax on any taxpayer 
other than a corporation for any taxable year beginning after December 
31, 2009, shall be zero.''
    (c) Reduction of Tax on Individuals Prior to Repeal.--Section 55 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(f) Phaseout of Tax on Individuals.--
            ``(1) In general.--The tax imposed by this section on a 
        taxpayer other than a corporation for any taxable year 
        beginning after December 31, 2004, and before January 1, 2010, 
        shall be the applicable percentage of the tax which would be 
        imposed but for this subsection.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage shall be determined in 
        accordance with the following table:

        ``For taxable years beginning
                                                         The applicable
          in calendar year--
                                                        percentage is--
            2005...........................................      80    
            2006...........................................      70    
            2007...........................................      60    
            2008 or 2009...................................   50.''    
    (d) Nonrefundable Personal Credits Fully Allowed Against Regular 
Tax Liability.--
            (1) In general.--Subsection (a) of section 26 of the 
        Internal Revenue Code of 1986 (relating to limitation based on 
        amount of tax) 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 taxpayer's regular tax liability for the taxable year.''
            (2) Child credit.--Subsection (d) of section 24 of such 
        Code is amended by striking paragraph (2) and by redesignating 
        paragraph (3) as paragraph (2).
    (e) Limitation on Use of Credit for Prior Year Minimum Tax 
Liability.--Subsection (c) of section 53 of the Internal Revenue Code 
of 1986 is amended to read as follows:
    ``(c) Limitation.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the credit allowable under subsection (a) for any 
        taxable year shall not exceed the excess (if any) of--
                    ``(A) the regular tax liability of the taxpayer for 
                such taxable year reduced by the sum of the credits 
                allowable under subparts A, B, D, E, and F of this 
                part, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
            ``(2) Taxable years beginning after 2009.--In the case of 
        any taxable year beginning after 2009, the credit allowable 
        under subsection (a) to a taxpayer other than a corporation for 
        any taxable year shall not exceed 90 percent of the excess (if 
        any) of--
                    ``(A) regular tax liability of the taxpayer for 
                such taxable year, over
                    ``(B) the sum of the credits allowable under 
                subparts A, B, D, E, and F of this part.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

               TITLE II--SAVING AND INVESTMENT PROVISIONS

SEC. 21. DIVIDEND AND INTEREST TAX RELIEF.

    (a) Purposes.--The purposes of this section are--
            (1) to provide an incremental step toward taxing income 
        that is consumed rather than income that is earned and saved;
            (2) to simplify the tax code by eliminating 67,000,000 
        hours spent on tax preparation;
            (3) to eliminate all income tax on savings for more than 
        30,000,000 middle class families;
            (4) to reduce income taxes on savings for 37,000,000 
        individuals; and
            (5) to allow a $10,000 nest egg to grow tax-free and let 
        individuals experience the miracle of compound interest.
    (b) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by inserting after section 115 
the following new section:

``SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST RECEIVED BY 
              INDIVIDUALS.

    ``(a) Exclusion From Gross Income.--Gross income does not include 
the sum of the amounts received during the taxable year by an 
individual as--
            ``(1) dividends from domestic corporations, or
            ``(2) interest.
    ``(b) Limitations.--
            ``(1) Maximum amount.--The aggregate amount excluded under 
        subsection (a) for any taxable year shall not exceed $250 ($500 
        in the case of a joint return).
            ``(2) Certain dividends excluded.--Subsection (a)(1) shall 
        not apply to any dividend from a corporation which, for the 
        taxable year of the corporation in which the distribution is 
        made, or for the next preceding taxable year of the 
        corporation, is a corporation exempt from tax under section 501 
        (relating to certain charitable, etc., organization) or section 
        521 (relating to farmers' cooperative associations).
    ``(c) Interest.--For purposes of this section, the term `interest' 
means--
            ``(1) interest on deposits with a bank (as defined in 
        section 581),
            ``(2) amounts (whether or not designated as interest) paid 
        in respect of deposits, investment certificates, or 
        withdrawable or repurchasable shares, by--
                    ``(A) a mutual savings bank, cooperative bank, 
                domestic building and loan association, industrial loan 
                association or bank, or credit union, or
                    ``(B) any other savings or thrift institution which 
                is chartered and supervised under Federal or State law,
        the deposits or accounts in which are insured under Federal or 
        State law or which are protected and guaranteed under State 
        law,
            ``(3) interest on--
                    ``(A) evidences of indebtedness (including bonds, 
                debentures, notes, and certificates) issued by a 
                domestic corporation in registered form, and
                    ``(B) to the extent provided in regulations 
                prescribed by the Secretary, other evidences of 
                indebtedness issued by a domestic corporation of a type 
                offered by corporations to the public,
            ``(4) interest on obligations of the United States, a 
        State, or a political subdivision of a State (not excluded from 
        gross income of the taxpayer under any other provision of law), 
        and
            ``(5) interest attributable to participation shares in a 
        trust established and maintained by a corporation established 
        pursuant to Federal law.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Distributions from regulated investment companies and 
        real estate investment trusts.--Subsection (a) shall apply with 
        respect to distributions by--
                    ``(A) regulated investment companies to the extent 
                provided in section 854(c), and
                    ``(B) real estate investment trusts to the extent 
                provided in section 857(c).
            ``(2) Distributions by a trust.--For purposes of subsection 
        (a), the amount of dividends and interest properly allocable to 
        a beneficiary under section 652 or 662 shall be deemed to have 
        been received by the beneficiary ratably on the same date that 
        the dividends and interest were received by the estate or 
        trust.
            ``(3) Certain nonresident aliens ineligible for 
        exclusion.--In the case of a nonresident alien individual, 
        subsection (a) shall apply only--
                    ``(A) in determining the tax imposed for the 
                taxable year pursuant to section 871(b)(1) and only in 
                respect of dividends and interest which are effectively 
                connected with the conduct of a trade or business 
                within the United States, or
                    ``(B) in determining the tax imposed for the 
                taxable year pursuant to section 877(b).''.
    (c) Conforming Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        inserting after the item relating to section 115 the following:

                              ``Sec. 116. Partial exclusion of 
                                        dividends and interest received 
                                        by individuals.''.
            (2) Paragraph (2) of section 265(a) of such Code is amended 
        by inserting before the period at the end the following: ``, or 
        to purchase or carry obligations or shares, or to make 
        deposits, to the extent the interest thereon is excludable from 
        gross income under section 116''.
            (3) Subsection (c) of section 584 of such Code is amended 
        by adding at the end the following new flush sentence:
``The proportionate share of each participant in the amount of 
dividends or interest received by the common trust fund and to which 
section 116 applies shall be considered for purposes of such section as 
having been received by such participant.''.
            (4) Subsection (a) of section 643 of such Code is amended 
        by redesignating paragraph (7) as paragraph (8) and by 
        inserting after paragraph (6) the following:
            ``(7) Dividends or interest.--There shall be included the 
        amount of any dividends or interest excluded from gross income 
        pursuant to section 116.''.
            (5) Section 854 of such Code is amended by adding at the 
        end the following:
    ``(c) Treatment Under Section 116.--
            ``(1) In general.--For purposes of section 116, in the case 
        of any dividend (other than a dividend described in subsection 
        (a)) received from a regulated investment company which meets 
        the requirements of section 852 for the taxable year in which 
        it paid the dividend--
                    ``(A) the entire amount of such dividend shall be 
                treated as a dividend if the sum of the aggregate 
                dividends and the aggregate interest received by such 
                company during the taxable year equals or exceeds 75 
                percent of its gross income, or
                    ``(B) if subparagraph (A) does not apply, there 
                shall be taken into account under section 116 only the 
                portion of such dividend which bears the same ratio to 
                the amount of such dividend as the sum of the aggregate 
                dividends received and aggregate interest received 
                bears to gross income.
        For purposes of the preceding sentence, gross income and 
        aggregate interest received shall each be reduced by so much of 
        the deduction allowable by section 163 for the taxable year as 
        does not exceed aggregate interest received for the taxable 
        year.
            ``(2) Notice to shareholders.--The amount of any 
        distribution by a regulated investment company which may be 
        taken into account as a dividend for purposes of the exclusion 
        under section 116 shall not exceed the amount so designated by 
        the company in a written notice to its shareholders mailed not 
        later than 60 days after the close of its taxable year.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Gross income.--The term `gross income' does 
                not include gain from the sale or other disposition of 
                stock or securities.
                    ``(B) Aggregate dividends.--The term `aggregate 
                dividends' includes only dividends received from 
                domestic corporations other than dividends described in 
                section 116(b)(2). In determining the amount of any 
                dividend for purposes of this subparagraph, the rules 
                provided in section 116(d)(1) (relating to certain 
                distributions) shall apply.
                    ``(C) Interest.--The term `interest' has the 
                meaning given such term by section 116(c).''.
            (6) Subsection (c) of section 857 of such Code is amended 
        to read as follows:
    ``(c) Limitations Applicable to Dividends Received From Real Estate 
Investment Trusts.--
            ``(1) In general.--For purposes of section 116 (relating to 
        an exclusion for dividends and interest received by 
        individuals) and section 243 (relating to deductions for 
        dividends received by corporations), a dividend received from a 
        real estate investment trust which meets the requirements of 
        this part shall not be considered as a dividend.
            ``(2) Treatment as interest.--For purposes of section 116, 
        in the case of a dividend (other than a capital gain dividend, 
        as defined in subsection (b)(3)(C)) received from a real estate 
        investment trust which meets the requirements of this part for 
        the taxable year in which it paid the dividend--
                    ``(A) such dividend shall be treated as interest if 
                the aggregate interest received by the real estate 
                investment trust for the taxable year equals or exceeds 
                75 percent of its gross income, or
                    ``(B) if subparagraph (A) does not apply, the 
                portion of such dividend which bears the same ratio to 
                the amount of such dividend as the aggregate interest 
                received bears to gross income shall be treated as 
                interest.
            ``(3) Adjustments to gross income and aggregate interest 
        received.--For purposes of paragraph (2)--
                    ``(A) gross income does not include the net capital 
                gain,
                    ``(B) gross income and aggregate interest received 
                shall each be reduced by so much of the deduction 
                allowable by section 163 for the taxable year (other 
                than for interest on mortgages on real property owned 
                by the real estate investment trust) as does not exceed 
                aggregate interest received by the taxable year, and
                    ``(C) gross income shall be reduced by the sum of 
                the taxes imposed by paragraphs (4), (5), and (6) of 
                section 857(b).
            ``(4) Interest.--The term `interest' has the meaning given 
        such term by section 116(c).
            ``(5) Notice to shareholders.--The amount of any 
        distribution by a real estate investment trust which may be 
        taken into account as interest for purposes of the exclusion 
        under section 116 shall not exceed the amount so designated by 
        the trust in a written notice to its shareholders mailed not 
        later than 60 days after the close of its taxable year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 22. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

    (a) Purposes.--The purposes of this section are--
            (1) to provide an incremental step toward shifting the 
        Internal Revenue Code away from taxing savings and investment,
            (2) to lower the cost of capital so that prosperity, better 
        paying jobs, and innovation will continue in the United States,
            (3) to eliminate capital gain taxes for 10,000,000 
        families, 75 percent of whom have annual incomes of $75,000 or 
        less, and
            (4) to simplify the tax code and thereby eliminate 
        70,000,000 hours of tax preparation.
    (b) General Rule.--Part I of subchapter P of chapter 1 of the 
Internal Revenue Code of 1986 (relating to treatment of capital gains) 
is amended by redesignating section 1202 as section 1203 and by 
inserting after section 1201 the following:

``SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction for the taxable year an amount equal to the 
lesser of--
            ``(1) the net capital gain of the taxpayer for the taxable 
        year, or
            ``(2) $5,000.
    ``(b) Sales Between Related Parties.--Gains from sales and 
exchanges to any related person (within the meaning of section 267(b) 
or 707(b)(1)) shall not be taken into account in determining net 
capital gain.
    ``(c) Special Rule for Section 1250 Property.--Solely for purposes 
of this section, in applying section 1250 to any disposition of section 
1250 property, all depreciation adjustments in respect of the property 
shall be treated as additional depreciation.
    ``(d) Section Not To Apply to Certain Taxpayers.--No deduction 
shall be allowed under this section to--
            ``(1) an individual with respect to whom a deduction under 
        section 151 is allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such individual's 
        taxable year begins,
            ``(2) a married individual (within the meaning of section 
        7703) filing a separate return for the taxable year, or
            ``(3) an estate or trust.
    ``(e) Special Rule for Pass-Thru Entities.--
            ``(1) In general.--In applying this section with respect to 
        any pass-thru entity, the determination of when the sale or 
        exchange occurs shall be made at the entity level.
            ``(2) Pass-thru entity defined.--For purposes of paragraph 
        (1), the term `pass-thru entity' means--
                    ``(A) a regulated investment company,
                    ``(B) a real estate investment trust,
                    ``(C) an S corporation,
                    ``(D) a partnership,
                    ``(E) an estate or trust, and
                    ``(F) a common trust fund.''.
    (c) Coordination With Maximum Capital Gains Rate.--Paragraph (3) of 
section 1(h) of the Internal Revenue Code of 1986 (relating to maximum 
capital gains rate) is amended to read as follows:
            ``(3) Coordination with other provisions.--For purposes of 
        this subsection, the amount of the net capital gain shall be 
        reduced (but not below zero) by the sum of--
                    ``(A) the amount of the net capital gain taken into 
                account under section 1202(a) for the taxable year, 
                plus
                    ``(B) the amount which the taxpayer elects to take 
                into account as investment income for the taxable year 
                under section 163(d)(4)(B)(iii).''.
    (d) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62 of the Internal Revenue Code of 1986 
(defining adjusted gross income) is amended by inserting after 
paragraph (17) the following:
            ``(18) Long-term capital gains.--The deduction allowed by 
        section 1202.''.
    (e) Treatment of Collectibles.--
            (1) In general.--Section 1222 of the Internal Revenue Code 
        of 1986 (relating to other terms relating to capital gains and 
        losses) is amended by inserting after paragraph (11) the 
        following:
            ``(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 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) of such Code is 
                amended by adding at the end the following: ``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) of such 
                Code is amended by inserting before the period at the 
                end the following: ``and section 1222 shall be applied 
                without regard to paragraph (12) thereof (relating to 
                special rule for collectibles)''.
    (f) Conforming Amendments.--
            (1) Section 57(a)(7) of the Internal Revenue Code of 1986 
        is amended by striking ``1202'' and inserting ``1203''.
            (2) Clause (iii) of section 163(d)(4)(B) of such Code is 
        amended to read as follows:
                            ``(iii) the sum of--
                                    ``(I) the portion of the net 
                                capital gain referred to in clause 
                                (ii)(II) (or, if lesser, the net 
                                capital gain referred to in clause 
                                (ii)(I)) taken into account under 
                                section 1202, reduced by the amount of 
                                the deduction allowed with respect to 
                                such gain under section 1202, plus
                                    ``(II) so much of the gain 
                                described in subclause (I) which is not 
                                taken into account under section 1202 
                                and which the taxpayer elects to take 
                                into account under this clause.''.
            (3) Subparagraph (B) of section 172(d)(2) of such Code is 
        amended to read as follows:
                    ``(B) the deduction under section 1202 and the 
                exclusion under section 1203 shall not be allowed.''.
            (4) Section 642(c)(4) of such Code is amended by striking 
        ``1202'' and inserting ``1203''.
            (5) Section 643(a)(3) of such Code is amended by striking 
        ``1202'' and inserting ``1203''.
            (6) Paragraph (4) of section 691(c) of such Code is amended 
        inserting ``1203,'' after ``1202,''.
            (7) The second sentence of section 871(a)(2) of such Code 
        is amended by inserting ``or 1203'' after ``section 1202''.
            (8) The last sentence of section 1044(d) of such Code is 
        amended by striking ``1202'' and inserting ``1203''.
            (9) Paragraph (1) of section 1402(i) of such Code is 
        amended by inserting ``, and the deduction provided by section 
        1202 and the exclusion provided by section 1203 shall not 
        apply'' before the period at the end.
            (10) Section 121 of such Code is amended by adding at the 
        end the following:
    ``(h) Cross Reference.--

                                ``For treatment of eligible gain not 
excluded under subsection (a), see section 1202.''.
            (11) Section 1203 of such Code, as redesignated by 
        subsection (a), is amended by adding at the end the following:
    ``(l) Cross Reference.--

                                ``For treatment of eligible gain not 
excluded under subsection (a), see section 1202.''.
            (12) The table of sections for part I of subchapter P of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 1202 and by inserting after the item relating to 
        section 1201 the following:

                              ``Sec. 1202. Capital gains deduction.
                              ``Sec. 1203. 50-percent exclusion for 
                                        gain from certain small 
                                        business stock.''.
    (g) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2000.
            (2) Collectibles.--The amendments made by subsection (d) 
        shall apply to sales and exchanges after December 31, 2000.

SEC. 23. INCREASE IN CONTRIBUTION LIMITS FOR TRADITIONAL IRAS.

    (a) Purposes.--The purposes of this section are--
            (1) to increase the savings rate for all Americans by 
        reforming the tax system to favorably treat income that is 
        invested for retirement, and
            (2) to provide targeted incentives to middle class families 
        to increase their retirement savings in a traditional IRA by 
        $1,000 per working member of the family per taxable year.
    (b) Increase in Contribution Limit.--Paragraph (1)(A) of section 
219(b) of the Internal Revenue Code of 1986 (relating to maximum amount 
of deduction) is amended by striking ``$2,000'' and inserting 
``$3,000''.
    (c) Inflation Adjustment.--Section 219 of the Internal Revenue Code 
of 1986 (relating to deduction for retirement savings) is amended by 
redesignating subsection (h) as subsection (i) and by inserting after 
subsection (g) the following:
    ``(h) Cost-of-Living Adjustment.--
            ``(1) Deductible amounts.--In the case of any taxable year 
        beginning in a calendar year after 2009, the $3,000 amount 
        under subsection (b)(1)(A) 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, determined by substituting 
                `calendar year 2008' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding rules.--If any amount after adjustment under 
        paragraph (1) is not a multiple of $100, such amount shall be 
        rounded to the next lower multiple of $100.''.
    (d) Conforming Amendments.--
            (1) Section 408(a)(1) of the Internal Revenue Code of 1986 
        is amended by striking ``in excess of $2,000 on behalf of any 
        individual'' and inserting ``on behalf of any individual in 
        excess of the amount in effect for such taxable year under 
        section 219(b)(1)(A)''.
            (2) Section 408(b)(2)(B) of such Code is amended by 
        striking ``$2,000'' and inserting ``the dollar amount in effect 
        under section 219(b)(1)(A)''.
            (3) Section 408(b) of such Code is amended by striking 
        ``$2,000'' in the matter following paragraph (4) and inserting 
        ``the dollar amount in effect under section 219(b)(1)(A)''.
            (4) Section 408(j) of such Code is amended by striking 
        ``$2,000''.
            (5) Section 408(p)(8) of such Code is amended by striking 
        ``$2,000'' and inserting ``the dollar amount in effect under 
        section 219(b)(1)(A)''.
            (6) Section 408A(c)(2)(A) of such Code is amended to read 
        as follows:
                    ``(A) $2,000, over''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

               TITLE III--BUSINESS INVESTMENT PROVISIONS

SEC. 31. REPEAL OF ALTERNATIVE MINIMUM TAX ON CORPORATIONS.

    (a) Purpose.--The purpose of this section is to eliminate one of 
the most misguided, anti-growth, anti-investment tax schemes ever 
devised.
    (b) In General.--The last sentence of section 55(a) of the Internal 
Revenue Code of 1986, as amended by section 13, is amended by striking 
``on any taxpayer other than a corporation''.
    (c) Repeal of 90 Percent Limitation on Foreign Tax Credit.--
            (1) In general.--Section 59(a) of the Internal Revenue Code 
        of 1986 (relating to alternative minimum tax foreign tax 
        credit) is amended by striking paragraph (2) and by 
        redesignating paragraphs (3) and (4) as paragraphs (2) and (3), 
        respectively.
            (2) Conforming amendment.--Section 53(d)(1)(B)(i)(II) of 
        such Code is amended by striking ``and if section 59(a)(2) did 
        not apply''.
    (d) Limitation on Use of Credit for Prior Year Minimum Tax 
Liability.--
            (1) In general.--Subsection (c) of section 53 of the 
        Internal Revenue Code of 1986, as amended by section 13, is 
        amended by redesignating paragraph (2) as paragraph (3) and by 
        inserting after paragraph (1) the following new paragraph:
            ``(2) Corporations for taxable years beginning after 
        2004.--In the case of corporation for any taxable year 
        beginning after 2004 and before 2010, the limitation under 
        paragraph (1) shall be increased by the applicable percentage 
        (determined in accordance with the following table) of the 
        tentative minimum tax for the taxable year.

        ``For taxable years beginning
                                                         The applicable
          in calendar year--
                                                        percentage is--
            2005...........................................      20    
            2006...........................................      30    
            2007...........................................      40    
            2008 or 2009...................................     50.    
        In no event shall the limitation determined under this 
        paragraph be greater than the sum of the tax imposed by section 
        55 and the regular tax reduced by the sum of the credits 
        allowed under subparts A, B, D, E, and F of this part.''
            (2) Conforming amendments.--
                    (A) Section 55(e) of such Code is amended by 
                striking paragraph (5).
                    (B) Paragraph (3) of section 53(c) of such Code, as 
                redesignated by paragraph (1), is amended by striking 
                ``to a taxpayer other than a corporation''.
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to taxable 
        years beginning after December 31, 2004.
            (2) Repeal of 90 percent limitation on foreign tax 
        credit.--The amendments made by subsection (c) shall apply to 
        taxable years beginning after December 31, 2003.
            (3) Subsection (d)(2)(A).--The amendment made by subsection 
        (d)(2)(A) shall apply to taxable years beginning after December 
        31, 2009.

SEC. 32. INCREASE IN LIMIT FOR ELECTION TO EXPENSE CERTAIN BUSINESS 
              ASSETS.

    (a) In General.--Section 179(b)(1) of the Internal Revenue Code of 
1986 (relating to dollar limitation) is amended by striking the last 
item in the table and inserting the following new items:

    ``2003 or 2004................................              25,000 
    ``2005 or thereafter..........................           250,000.''
    (b) Index.--Section 179(b) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new paragraph:
            ``(5) Inflation adjustment.--In the case of a taxable year 
        beginning after 2005, the $25,000 amount under paragraph (1) 
        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, determined by substituting 
                `calendar year 2004' for `calendar year 1992' in 
                subparagraph (B) thereof.''
    (c) Increase in Limitation on Cost of Property Placed in Service.--
Section 179(b)(2) of the Internal Revenue Code of 1986 (relating to 
reduction in limitation) is amended by striking ``$200,000'' and 
inserting ``$4,000,000''.

                  TITLE IV--ESTATE AND GIFT TAX RELIEF

SEC. 41. PHASEOUT OF ESTATE AND GIFT TAXES.

    (a) Purpose.--The purpose of this section is to begin phasing out 
the confiscatory gift and estate tax by reducing the rate of tax.
    (b) Repeal of Estate and Gift Taxes.--Subtitle B of the Internal 
Revenue Code of 1986 (relating to estate and gift taxes) is repealed 
effective with respect to estates of decedents dying, and gifts made, 
after December 31, 2009.
    (c) Phaseout of Tax.--Subsection (c) of section 2001 of the 
Internal Revenue Code of 1986 (relating to imposition and rate of tax) 
is amended by adding at the end the following:
            ``(3) Phaseout of tax.--In the case of estates of decedents 
        dying, and gifts made, during any calendar year after 1999 and 
        before 2010--
                    ``(A) In general.--The tentative tax under this 
                subsection shall be determined by using a table 
                prescribed by the Secretary (in lieu of using the table 
                contained in paragraph (1)) which is the same as such 
                table; except that--
                            ``(i) each of the rates of tax shall be 
                        reduced (but not below zero) by the number of 
                        percentage points determined under subparagraph 
                        (B), and
                            ``(ii) the amounts setting forth the tax 
                        shall be adjusted to the extent necessary to 
                        reflect the adjustments under clause (i).
                    ``(B) Percentage points of reduction.--

                                                          The number of
``For calendar year:                              percentage points is:
    2001..........................................                   1 
    2002..........................................                   2 
    2003..........................................                   3 
    2004..........................................                   4 
    2005..........................................                   5 
    2006..........................................                   7 
    2007..........................................                   9 
    2008..........................................                  11 
    2009..........................................                  15.
                    ``(C) Coordination with paragraph (2).--Paragraph 
                (2) shall be applied by reducing the 55 percent 
                percentage contained therein by the number of 
                percentage points determined for such calendar year 
                under subparagraph (B).
                    ``(D) Coordination with credit for state death 
                taxes.--Rules similar to the rules of subparagraph (A) 
                shall apply to the table contained in section 2011(b) 
                except that the number of percentage points referred to 
                in subparagraph (A)(i) shall be determined under the 
                following table:

                                                          The number of
``For calendar year:                              percentage points is:
    2001..........................................                   1 
    2002..........................................                   2 
    2003..........................................                   3 
    2004..........................................                   4 
    2005..........................................                   5 
    2006..........................................                   7 
    2007..........................................                   9 
    2008..........................................                  11 
    2009..........................................               15.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
2000.

          TITLE V--RESEARCH CREDIT EXTENSION AND MODIFICATION

SEC. 51. PURPOSE.

    The purpose of this title is to make the research credit permanent 
and make certain modifications to the credit.

SEC. 52. PERMANENT EXTENSION OF RESEARCH CREDIT.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 
(relating to credit for increasing research activities) is amended by 
striking subsection (h).
    (b) Conforming Amendment.--Section 45C(b)(1) of the Internal 
Revenue Code of 1986 is amended by striking subparagraph (D).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2000.

SEC. 53. IMPROVED ALTERNATIVE INCREMENTAL CREDIT.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 
(relating to credit for increasing research activities), as amended by 
section 52, is amended by adding at the end the following:
    ``(h) Election of Alternative Incremental Credit.--
            ``(1) In general.--At the election of the taxpayer, the 
        credit under subsection (a)(1) shall be determined under this 
        section by taking into account the modifications provided by 
        this subsection.
            ``(2) Determination of base amount.--
                    ``(A) In general.--In computing the base amount 
                under subsection (c)--
                            ``(i) notwithstanding subsection (c)(3), 
                        the fixed-base percentage shall be equal to 80 
                        percent of the percentage which the aggregate 
                        qualified research expenses of the taxpayer for 
                        the base period is of the aggregate gross 
                        receipts of the taxpayer for the base period, 
                        and
                            ``(ii) the minimum base amount under 
                        subsection (c)(2) shall not apply.
                    ``(B) Start-up and small taxpayers.--In computing 
                the base amount under subsection (c), the gross 
                receipts of a taxpayer for any taxable year in the base 
                period shall be treated as at least equal to 
                $1,000,000.
                    ``(C) Base period.--For purposes of this 
                subsection, the base period is the 8-taxable year 
                period preceding the taxable year (or, if shorter, the 
                period the taxpayer (and any predecessor) has been in 
                existence).
            ``(3) Election.--An election under this subsection shall 
        apply to the taxable year for which made and all succeeding 
        taxable years unless revoked with the consent of the 
        Secretary.''.
    (b) Conforming Amendment.--Section 41(c) of the Internal Revenue 
Code of 1986 is amended by striking paragraph (4) and by redesignating 
paragraphs (5) and (6) as paragraphs (4) and (5), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 54. MODIFICATIONS TO CREDIT FOR BASIC RESEARCH.

    (a) Elimination of Incremental Requirement.--
            (1) In general.--Paragraph (1) of section 41(e) of the 
        Internal Revenue Code of 1986 (relating to credit allowable 
        with respect to certain payments to qualified organizations for 
        basic research) is amended to read as follows:
            ``(1) In general.--The amount of basic research payments 
        taken into account under subsection (a)(2) shall be determined 
        in accordance with this subsection.''.
            (2) Conforming amendments.--
                    (A) Section 41(a)(2) of the Internal Revenue Code 
                of 1986 is amended by striking ``determined under 
                subsection (e)(1)(A)'' and inserting ``for the taxable 
                year''.
                    (B) Section 41(e) of such Code is amended by 
                striking paragraphs (3), (4), and (5) and by 
                redesignating paragraphs (6) and (7) as paragraphs (3) 
                and (4), respectively.
                    (C) Section 41(e)(4) of such Code, as redesignated 
                by subparagraph (B), is amended by striking 
                subparagraph (B) and by redesignating subparagraphs 
                (C), (D), and (E) as subparagraphs (B), (C), and (D), 
                respectively.
                    (D) Clause (i) of section 170(e)(4)(B) of such Code 
                is amended by striking ``section 41(e)(6)'' and 
                inserting ``section 41(e)(3)''.
    (b) Basic Research.--
            (1) Specific commercial objective.--Section 41(e)(4) of the 
        Internal Revenue Code of 1986 (relating to definitions and 
        special rules), as redesignated by subsection (a)(2)(B), is 
        amended by adding at the end the following:
                    ``(E) Specific commercial objective.--For purposes 
                of subparagraph (A), research shall not be treated as 
                having a specific commercial objective if the results 
                of such research are to be published in a timely manner 
                as to be available to the general public prior to their 
                use for a commercial purpose.''.
            (2) Exclusions from basic research.--Clause (ii) of section 
        41(e)(4)(A) of such Code (relating to definitions and special 
        rules), as redesignated by subsection (a), is amended to read 
        as follows:
                            ``(ii) basic research in the arts and 
                        humanities.''.
    (c) Expansion of Credit to Research Done at Federal Laboratories.--
Section 41(e)(3) of the Internal Revenue Code of 1986, as redesignated 
by subsection (a), is amended by adding at the end the following new 
subparagraph:
                    ``(E) Federal laboratories.--Any organization which 
                is a Federal laboratory (as defined in section 4(6) of 
                the Stevenson-Wydler Technology Innovation Act of 1980 
                (15 U.S.C. 3703(6)).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 55. CREDIT FOR EXPENSES ATTRIBUTABLE TO CERTAIN COLLABORATIVE 
              RESEARCH CONSORTIA.

    (a) Credit for Expenses Attributable to Certain Collaborative 
Research Consortia.--Subsection (a) of section 41 of the Internal 
Revenue Code of 1986 (relating to credit for increasing research 
activities) is amended by striking ``and'' at the end of paragraph (1), 
striking the period at the end of paragraph (2) and inserting ``, and 
'', and by adding at the end the following:
            ``(3) 20 percent of the amounts paid or incurred by the 
        taxpayer in carrying on any trade or business of the taxpayer 
        during the taxable year (including as contributions) to a 
        qualified research consortium.''.
    (b) Qualified Research Consortium Defined.--Subsection (f) of 
section 41 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following:
            ``(6) Qualified research consortium.--The term `qualified 
        research consortium' means any organization--
                    ``(A) which is--
                            ``(i) described in section 501(c)(3) and is 
                        exempt from tax under section 501(a) and is 
                        organized and operated primarily to conduct 
                        scientific or engineering research, or
                            ``(ii) organized and operated primarily to 
                        conduct scientific or engineering research in 
                        the public interest (within the meaning of 
                        section 501(c)(3)),
                    ``(B) which is not a private foundation,
                    ``(C) to which at least 5 unrelated persons paid or 
                incurred during the calendar year in which the taxable 
                year of the organization begins amounts (including as 
                contributions) to such organization for scientific or 
                engineering research, and
                    ``(D) to which no single person paid or incurred 
                (including as contributions) during such calendar year 
                an amount equal to more than 50 percent of the total 
                amounts received by such organization during such 
                calendar year for scientific or engineering research.
        All persons treated as a single employer under subsection (a) 
        or (b) of section 52 shall be treated as related persons for 
        purposes of subparagraph (C) and as a single person for 
        purposes of subparagraph (D).''.
    (c) Conforming Amendment.--Paragraph (3) of section 41(b) of the 
Internal Revenue Code of 1986 is amended by striking subparagraph (C).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 56. IMPROVEMENT TO CREDIT FOR SMALL BUSINESSES AND RESEARCH 
              PARTNERSHIPS.

    (a) Assistance to Small and Start-Up Businesses.--The Secretary of 
the Treasury or the Secretary's delegate shall take such actions as are 
appropriate to--
            (1) provide assistance to small and start-up businesses in 
        complying with the requirements of section 41 of the Internal 
        Revenue Code of 1986, and
            (2) reduce the costs of such compliance.
    (b) Repeal of Limitation on Contract Research Expenses Paid to 
Small Businesses, Universities, and Federal Laboratories.--Section 
41(b)(3) of the Internal Revenue Code of 1986, as amended by section 
55(c), is amended by adding at the end the following:
                    ``(C) Amounts paid to eligible small businesses, 
                universities, and federal laboratories.--
                            ``(i) In general.--In the case of amounts 
                        paid by the taxpayer to an eligible small 
                        business, an institution of higher education 
                        (as defined in section 3304(f)), or an 
                        organization which is a Federal laboratory (as 
                        defined in subsection (e)(3)(E)), subparagraph 
                        (A) shall be applied by substituting `100 
                        percent' for `65 percent'.
                            ``(ii) Eligible small business.--For 
                        purposes of this subparagraph, the term 
                        `eligible small business' means a small 
                        business with respect to which the taxpayer 
                        does not own (within the meaning of section 
                        318) 50 percent or more of--
                                    ``(I) in the case of a corporation, 
                                the outstanding stock of the 
                                corporation (either by vote or value), 
                                and
                                    ``(II) in the case of a small 
                                business which is not a corporation, 
                                the capital and profits interests of 
                                the small business.
                            ``(iii) Small business.--For purposes of 
                        this subparagraph--
                                    ``(I) In general.--The term `small 
                                business' means, with respect to any 
                                calendar year, any person if the annual 
                                average number of employees employed by 
                                such person during either of the 2 
                                preceding calendar years was 500 or 
                                fewer. For purposes of the preceding 
                                sentence, a preceding calendar year may 
                                be taken into account only if the 
                                person was in existence throughout the 
                                year.
                                    ``(II) Startups, controlled groups, 
                                and predecessors.--Rules similar to the 
                                rules of subparagraphs (B) and (D) of 
                                section 220(c)(4) shall apply for 
                                purposes of this clause.''.
    (c) Credit For Patent Filing Fees.--Section 41(a) of the Internal 
Revenue Code of 1986, as amended by section 55(a), is amended by 
striking ``and'' at the end of paragraph (2), by striking the period at 
the end of paragraph (3) and inserting ``, and'', and by adding at the 
end the following:
            ``(4) 20 percent of the patent filing fees paid or incurred 
        by a small business (as defined in subsection (b)(3)(C)(iii)) 
        to the United States or to any foreign government in carrying 
        on any trade or business.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

                     TITLE VI--ENERGY INDEPENDENCE

SEC. 61. PURPOSES.

    The purposes of this title are--
            (1) to prevent the abandonment of marginal oil and gas 
        wells owned and operated by independent oil and gas producers, 
        which are responsible for half of the United States' domestic 
        production, and
            (2) to transform earned tax credits and other benefits into 
        working capital for the cash-strapped domestic oil and gas 
        producers and service companies.

SEC. 62. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL 
              PRODUCTION.

    (a) Credit for Producing Oil and Gas From Marginal Wells.--Subpart 
D of part IV of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 (relating to business credits) is amended by adding at the end 
the following:

``SEC. 45D. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.

    ``(a) General Rule.--For purposes of section 38, the marginal well 
production credit for any taxable year is an amount equal to the 
product of--
            ``(1) the credit amount, and
            ``(2) the qualified crude oil production and the qualified 
        natural gas production which is attributable to the taxpayer.
    ``(b) Credit Amount.--For purposes of this section--
            ``(1) In general.--The credit amount is--
                    ``(A) $3 per barrel of qualified crude oil 
                production, and
                    ``(B) 50 cents per 1,000 cubic feet of qualified 
                natural gas production.
            ``(2) Reduction as oil and gas prices increase.--
                    ``(A) In general.--The $3 and 50 cents amounts 
                under paragraph (1) shall each be reduced (but not 
                below zero) by an amount which bears the same ratio to 
                such amount (determined without regard to this 
                paragraph) as--
                            ``(i) the excess (if any) of the applicable 
                        reference price over $14 ($1.56 for qualified 
                        natural gas production), bears to
                            ``(ii) $3 ($0.33 for qualified natural gas 
                        production).
                The applicable reference price for a taxable year is 
                the reference price for the calendar year preceding the 
                calendar year in which the taxable year begins.
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2000, 
                each of the dollar amounts contained in subparagraph 
                (A) shall be increased to an amount equal to such 
                dollar amount multiplied by the inflation adjustment 
                factor for such calendar year (determined under section 
                43(b)(3)(B) by substituting `1999' for `1990').
                    ``(C) Reference price.--For purposes of this 
                paragraph, the term `reference price' means, with 
                respect to any calendar year--
                            ``(i) in the case of qualified crude oil 
                        production, the reference price determined 
                        under section 29(d)(2)(C), and
                            ``(ii) in the case of qualified natural gas 
                        production, the Secretary's estimate of the 
                        annual average wellhead price per 1,000 cubic 
                        feet for all domestic natural gas.
    ``(c) Qualified Crude Oil and Natural Gas Production.--For purposes 
of this section--
            ``(1) In general.--The terms `qualified crude oil 
        production' and `qualified natural gas production' mean 
        domestic crude oil or natural gas which is produced from a 
        marginal well.
            ``(2) Limitation on amount of production which may 
        qualify.--
                    ``(A) In general.--Crude oil or natural gas 
                produced during any taxable year from any well shall 
                not be treated as qualified crude oil production or 
                qualified natural gas production to the extent 
                production from the well during the taxable year 
                exceeds 1,095 barrels or barrel equivalents.
                    ``(B) Proportionate reductions.--
                            ``(i) Short taxable years.--In the case of 
                        a short taxable year, the limitations under 
                        this paragraph shall be proportionately reduced 
                        to reflect the ratio which the number of days 
                        in such taxable year bears to 365.
                            ``(ii) Wells not in production entire 
                        year.--In the case of a well which is not 
                        capable of production during each day of a 
                        taxable year, the limitations under this 
                        paragraph applicable to the well shall be 
                        proportionately reduced to reflect the ratio 
                        which the number of days of production bears to 
                        the total number of days in the taxable year.
            ``(3) Definitions.--
                    ``(A) Marginal well.--The term `marginal well' 
                means a domestic well--
                            ``(i) the production from which during the 
                        taxable year is treated as marginal production 
                        under section 613A(c)(6), or
                            ``(ii) which, during the taxable year--
                                    ``(I) has average daily production 
                                of not more than 25 barrel equivalents, 
                                and
                                    ``(II) produces water at a rate not 
                                less than 95 percent of total well 
                                effluent.
                    ``(B) Crude oil, etc.--The terms `crude oil', 
                `natural gas', `domestic', and `barrel' have the 
                meanings given such terms by section 613A(e).
                    ``(C) Barrel equivalent.--The term `barrel 
                equivalent' means, with respect to natural gas, a 
                conversion ratio of 6,000 cubic feet of natural gas to 
                1 barrel of crude oil.
    ``(d) Other Rules.--
            ``(1) Production attributable to the taxpayer.--In the case 
        of a marginal well in which there is more than one owner of 
        operating interests in the well and the crude oil or natural 
        gas production exceeds the limitation under subsection (c)(2), 
        qualifying crude oil production or qualifying natural gas 
        production attributable to the taxpayer shall be determined on 
        the basis of the ratio which taxpayer's revenue interest in the 
        production bears to the aggregate of the revenue interests of 
        all operating interest owners in the production.
            ``(2) Operating interest required.--Any credit under this 
        section may be claimed only on production which is attributable 
        to the holder of an operating interest.
            ``(3) Production from nonconventional sources excluded.--In 
        the case of production from a marginal well which is eligible 
        for the credit allowed under section 29 for the taxable year, 
        no credit shall be allowable under this section unless the 
        taxpayer elects not to claim the credit under section 29 with 
        respect to the well.''.
    (b) Credit Treated as Business Credit.--Section 38(b) of the 
Internal Revenue Code of 1986 is amended by striking ``plus'' at the 
end of paragraph (11), by striking the period at the end of paragraph 
(12) and inserting ``, plus'', and by adding at the end the following:
            ``(13) the marginal oil and gas well production credit 
        determined under section 45D(a).''.
    (c) Credit Allowed Against Regular and Minimum Tax.--
            (1) In general.--Subsection (c) of section 38 of the 
        Internal Revenue Code of 1986 (relating to limitation based on 
        amount of tax) is amended by redesignating paragraph (3) as 
        paragraph (4) and by inserting after paragraph (2) the 
        following:
            ``(3) Special rules for marginal oil and gas well 
        production credit.--
                    ``(A) In general.--In the case of the marginal oil 
                and gas well production credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the marginal 
                                oil and gas well production credit).
                    ``(B) Marginal oil and gas well production 
                credit.--For purposes of this subsection, the term 
                `marginal oil and gas well production credit' means the 
                credit allowable under subsection (a) by reason of 
                section 45D(a).''.
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) of such Code is amended by inserting ``or the 
        marginal oil and gas well production credit'' after 
        ``employment credit''.
    (d) Carryback.--Subsection (a) of section 39 of the Internal 
Revenue Code of 1986 (relating to carryback and carryforward of unused 
credits generally) is amended by adding at the end the following:
            ``(3) 10-year carryback for marginal oil and gas well 
        production credit.--In the case of the marginal oil and gas 
        well production credit--
                    ``(A) this section shall be applied separately from 
                the business credit (other than the marginal oil and 
                gas well production credit),
                    ``(B) paragraph (1) shall be applied by 
                substituting `10 taxable years' for `1 taxable years' 
                in subparagraph (A) thereof, and
                    ``(C) paragraph (2) shall be applied--
                            ``(i) by substituting `31 taxable years' 
                        for `21 taxable years' in subparagraph (A) 
                        thereof, and
                            ``(ii) by substituting `30 taxable years' 
                        for `20 taxable years' in subparagraph (B) 
                        thereof.''.
    (e) Coordination With Section 29.--Section 29(a) of the Internal 
Revenue Code of 1986 is amended by striking ``There'' and inserting 
``At the election of the taxpayer, there''.
    (f) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following:

                              ``45D. Credit for producing oil and gas 
                                        from marginal wells.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to production after December 31, 2000.

SEC. 63. 10-YEAR CARRYBACK FOR UNUSED MINIMUM TAX CREDIT.

    (a) In General.--Section 53(c) of the Internal Revenue Code of 1986 
(relating to limitation) is amended by adding at the end the following:
            ``(2) Special rule for taxpayers with unused energy minimum 
        tax credits.--
                    ``(A) In general.--If, during the 10-taxable year 
                period ending with the current taxable year, a taxpayer 
                has an unused energy minimum tax credit for any taxable 
                year in such period (determined without regard to the 
                application of this paragraph to the current taxable 
                year)--
                            ``(i) paragraph (1) shall not apply to each 
                        of the taxable years in such period for which 
                        the taxpayer has an unused energy minimum tax 
                        credit (as so determined), and
                            ``(ii) the credit allowable under 
                        subsection (a) for each of such taxable years 
                        shall be equal to the excess (if any) of--
                                    ``(I) the sum of the regular tax 
                                liability and the net minimum tax for 
                                such taxable year, over
                                    ``(II) the sum of the credits 
                                allowable under subparts A, B, D, E, 
                                and F of this part.
                    ``(B) Energy minimum tax credit.--For purposes of 
                this paragraph, the term `energy minimum tax credit' 
                means the minimum tax credit which would be computed 
                with respect to any taxable year if the adjusted net 
                minimum tax were computed by only taking into account 
                items attributable to--
                            ``(i) the taxpayer's mineral interests in 
                        oil and gas property, and
                            ``(ii) the taxpayer's active conduct of a 
                        trade or business of providing tools, products, 
                        personnel, and technical solutions on a 
                        contractual basis to persons engaged in oil and 
                        gas exploration and production.''.
    (b) Conforming Amendments.--Section 53(c) of the Internal Revenue 
Code of 1986 (as in effect before the amendment made by subsection (a)) 
is amended--
            (1) by striking ``The'' and inserting:
            ``(1) In general.--Except as provided in paragraph (2), the 
        '', and
            (2) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000, and to any 
taxable year beginning on or before such date to the extent necessary 
to apply section 53(c)(2) of the Internal Revenue Code of 1986 (as 
added by subsection (a)).

SEC. 64. 10-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE 
              TO OIL SERVICING COMPANIES AND MINERAL INTERESTS OF OIL 
              AND GAS PRODUCERS.

    (a) In General.--Paragraph (1) of section 172(b) of the Internal 
Revenue Code of 1986 (relating to years to which loss may be carried) 
is amended by adding at the end the following:
                    ``(H) Losses on operating mineral interests of oil 
                and gas producers and oilfield servicing companies.--In 
                the case of a taxpayer which has an eligible oil and 
                gas loss (as defined in subsection (j)) for a taxable 
                year, such eligible oil and gas loss shall be a net 
                operating loss carryback to each of the 10 taxable 
                years preceding the taxable year of such loss.''.
    (b) Eligible Oil and Gas Loss.--Section 172 of the Internal Revenue 
Code of 1986 is amended by redesignating subsection (j) as subsection 
(k) and by inserting after subsection (i) the following:
    ``(j) Eligible Oil and Gas Loss.--For purposes of this section--
            ``(1) In general.--The term `eligible oil and gas loss' 
        means the lesser of--
                    ``(A) the amount which would be the net operating 
                loss for the taxable year if only income and deductions 
                attributable to--
                            ``(i) mineral interests in oil and gas 
                        wells, and
                            ``(ii) the active conduct of a trade or 
                        business of providing tools, products, 
                        personnel, and technical solutions on a 
                        contractual basis to persons engaged in oil and 
                        gas exploration and production,
                are taken into account, and
                    ``(B) the amount of the net operating loss for such 
                taxable year.
            ``(2) Coordination with subsection (b)(2).--For purposes of 
        applying subsection (b)(2), an eligible oil and gas loss for 
        any taxable year shall be treated in a manner similar to the 
        manner in which a specified liability loss is treated.
            ``(3) Election.--Any taxpayer entitled to a 10-year 
        carryback under subsection (b)(1)(H) from any loss year may 
        elect to have the carryback period with respect to such loss 
        year determined without regard to subsection (b)(1)(H). Such 
        election shall be made in such manner as may be prescribed by 
        the Secretary and shall be made by the due date (including 
        extensions of time) for filing the taxpayer's return for the 
        taxable year of the net operating loss. Such election, once 
        made for any taxable year, shall be irrevocable for such 
        taxable year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to net operating losses for taxable years beginning after 
December 31, 1999, and to any taxable year beginning on or before such 
date to the extent necessary to apply section 172(b)(1)(H) of the 
Internal Revenue Code of 1986 (as added by subsection (a)).

SEC. 65. WAIVER OF LIMITATIONS.

    If refund or credit of any overpayment of tax resulting from the 
application of the amendments made by sections 63 and 64 is prevented 
at any time before the close of the 1-year period beginning on the date 
of the enactment of this Act by the operation of any law or rule of law 
(including res judicata), such refund or credit may nevertheless be 
made or allowed if claim therefor is filed before the close of such 
period.

SEC. 66. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES 
              AND DELAY RENTAL PAYMENTS.

    (a) Purpose.--The purpose of this section is to recognize that 
geological and geophysical expenditures and delay rentals are ordinary 
and necessary business expenses that should be deducted in the year the 
expense is incurred.
    (b) Election To Expense Geological and Geophysical Expenditures.--
            (1) In general.--Section 263 of the Internal Revenue Code 
        of 1986 (relating to capital expenditures) is amended by adding 
        at the end the following:
    ``(j) Geological and Geophysical Expenditures for Domestic Oil and 
Gas Wells.--Notwithstanding subsection (a), a taxpayer may elect to 
treat geological and geophysical expenses incurred in connection with 
the exploration for, or development of, oil or gas within the United 
States (as defined in section 638) as expenses which are not chargeable 
to capital account. Any expenses so treated shall be allowed as a 
deduction in the taxable year in which paid or incurred.''.
            (2) Conforming amendment.--Section 263A(c)(3) of such Code 
        is amended by inserting ``263(j),'' after ``263(i),''.
            (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to expenses paid or incurred 
                after December 31, 2000.
                    (B) Transition rule.--In the case of any expenses 
                described in section 263(j) of the Internal Revenue 
                Code of 1986, as added by this subsection, which were 
                paid or incurred on or before December 31, 2000, the 
                taxpayer may elect, at such time and in such manner as 
                the Secretary of the Treasury may prescribe, to 
                amortize the unamortized portion of such expenses over 
                the 36-month period beginning with the month of 
                January, 2001. For purposes of this subparagraph, the 
                unamortized portion of any expense is the amount 
                remaining unamortized as of the first day of the 36-
                month period.
    (c) Election To Expense Delay Rental Payments.--
            (1) In general.--Section 263 of the Internal Revenue Code 
        of 1986 (relating to capital expenditures), as amended by 
        subsection (b)(1), is amended by adding at the end the 
        following:
    ``(k) Delay Rental Payments for Domestic Oil and Gas Wells.--
            ``(1) In general.--Notwithstanding subsection (a), a 
        taxpayer may elect to treat delay rental payments incurred in 
        connection with the development of oil or gas within the United 
        States (as defined in section 638) as payments which are not 
        chargeable to capital account. Any payments so treated shall be 
        allowed as a deduction in the taxable year in which paid or 
        incurred.
            ``(2) Delay rental payments.--For purposes of paragraph 
        (1), the term `delay rental payment' means an amount paid for 
        the privilege of deferring development of an oil or gas 
        well.''.
            (2) Conforming amendment.--Section 263A(c)(3) of the 
        Internal Revenue Code of 1986, as amended by subsection (b)(2), 
        is amended by inserting ``263(k),'' after ``263(j),''.
            (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to payments made or incurred 
                after December 31, 2000.
                    (B) Transition rule.--In the case of any payments 
                described in section 263(k) of the Internal Revenue 
                Code of 1986, as added by this subsection, which were 
                made or incurred on or before December 31, 2000, the 
                taxpayer may elect, at such time and in such manner as 
                the Secretary of the Treasury may prescribe, to 
                amortize the unamortized portion of such payments over 
                the 36-month period beginning with the month of 
                January, 2001. For purposes of this subparagraph, the 
                unamortized portion of any payment is the amount 
                remaining unamortized as of the first day of the 36-
                month period.

                      TITLE VII--REVENUE PROVISION

SEC. 71. 4-YEAR AVERAGING FOR CONVERSION OF TRADITIONAL IRA TO ROTH 
              IRA.

    (a) In General.--Section 408A(d)(3)(A)(iii) of the Internal Revenue 
Code of 1986 is amended by striking ``January 1, 1999,'' and inserting 
``January 1, 2004,''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions made after December 31, 2000.
                                 <all>