[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 593 Introduced in Senate (IS)]
106th CONGRESS
1st Session
S. 593
To amend the Internal Revenue Code of 1986 to increase the maximum
taxable income for the 15 percent rate bracket, to provide a partial
exclusion from gross income for dividends and interest received by
individuals, to provide a long-term capital gains deduction for
individuals, to increase the traditional IRA contribution limit, and
for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 11, 1999
Mr. Coverdell (for himself, Mr. Torricelli, and Mr. Abraham) 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 increase the maximum
taxable income for the 15 percent rate bracket, to provide a partial
exclusion from gross income for dividends and interest received by
individuals, to provide a long-term capital gains deduction for
individuals, to increase the traditional IRA contribution limit, 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.
This Act may be cited as the ``Small Savers Act of 1999''.
SEC 2. INCREASE IN MAXIMUM TAXABLE INCOME FOR 15 PERCENT RATE BRACKET.
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 15 percent 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 1999, 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:
2000.......................................... $2,000
2001.......................................... $4,000
2002.......................................... $6,000
2003.......................................... $8,000
2004 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:
2000.......................................... $1,000
2001.......................................... $2,000
2002.......................................... $3,000
2003.......................................... $4,000
2004 and thereafter........................... $5,000.''
SEC. 3. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST RECEIVED BY
INDIVIDUALS.
(a) 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).''.
(b) Conforming Amendments.--
(1) The table of sections for part III of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 115 the following new item:
``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 new paragraph:
``(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 new subsection:
``(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.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 4. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.
(a) 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 new section:
``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.''
(b) 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).''
(c) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62 (defining adjusted gross income) is
amended by inserting after paragraph (17) the following new paragraph:
``(18) Long-term capital gains.--The deduction allowed by
section 1202.''
(d) 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 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 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 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) 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)''.
(e) 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 new subsection:
``(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
new subsection:
``(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 new items:
``Sec. 1202. Capital gains deduction.
``Sec. 1203. 50-percent exclusion for
gain from certain small
business stock.''
(f) 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, 1999.
(2) Collectibles.--The amendments made by subsection (d)
shall apply to sales and exchanges after December 31, 1999.
SEC. 5. INCREASE IN CONTRIBUTION LIMITS FOR TRADITIONAL IRAS.
(a) 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''.
(b) 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 new subsection:
``(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.''
(c) Conforming Amendments.--
(1) Section 408(a)(1) 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) is amended by striking ``$2,000''
and inserting ``the dollar amount in effect under section
219(b)(1)(A)''.
(3) Section 408(b) 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) is amended by striking ``$2,000''.
(5) Section 408(p)(8) 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''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
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