[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1398 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 1398

To amend the Internal Revenue Code of 1986 to provide individual income 
  tax rate reductions, tax relief to families with children, marriage 
  penalty relief, and to immediately eliminate the estate tax for two-
      thirds of all decedents currently subject to the estate tax.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 4, 2001

 Mr. Rangel (for himself, Mr. Bonior, Mrs. Mink of Hawaii, Mr. Pastor, 
Mr. Sawyer, Mr. McNulty, Mr. Pascrell, Mr. Matsui, Mr. Barrett, and Mr. 
    Levin) introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide individual income 
  tax rate reductions, tax relief to families with children, marriage 
  penalty relief, and to immediately eliminate the estate tax for two-
      thirds of all decedents currently subject to the estate tax.

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

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Tax Reduction Act 
of 2001''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Section 15 Not To Apply.--No amendment made by this Act shall 
be treated as a change in a rate of tax for purposes of section 15 of 
the Internal Revenue Code of 1986.

  TITLE I--INDIVIDUAL INCOME TAX RATE REDUCTIONS; EXPANSION OF EARNED 
                        INCOME CREDIT ASSISTANCE

SEC. 101. INDIVIDUAL INCOME TAX RATE REDUCTIONS.

    (a) In General.--Section 1 is amended by adding at the end the 
following new subsection:
    ``(i) 12 Percent Rate Bracket.--
            ``(1) In general.--In the case of taxable years beginning 
        after December 31, 2000--
                    ``(A) the rate of tax under subsections (a), (b), 
                (c), and (d) on taxable income not over the initial 
                bracket amount shall be 12 percent, and
                    ``(B) the 15 percent rate of tax shall apply only 
                to taxable income over the initial bracket amount.
            ``(2) Initial bracket amount.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the initial bracket amount is--
                            ``(i) $20,000 in the case of subsection 
                        (a),
                            ``(ii) 80 percent of the dollar amount in 
                        clause (i) in the case of subsection (b), and
                            ``(iii) 50 percent of the dollar amount in 
                        clause (i) in the case of subsections (c) and 
                        (d).
                    ``(B) Phasein.--The initial bracket amount is--
                            ``(i) \1/4\ the amount otherwise applicable 
                        under subparagraph (A) in the case of taxable 
                        years beginning during 2001, and
                            ``(ii) \1/2\ such amount otherwise 
                        applicable under subparagraph (A) in the case 
                        of taxable years beginning during 2002.
            ``(3) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2003, the $20,000 
                amount under paragraph (2)(A)(i) shall be increased by 
                an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under subsection (f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2002' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding rules.--If any amount after 
                adjustment under subparagraph (A) is not a multiple of 
                $50, such amount shall be rounded to the next lowest 
                multiple of $50.
            ``(4) Adjustment of tables.--The Secretary shall adjust the 
        tables prescribed under subsection (f) to carry out this 
        subsection.''
    (b) Adjustment in Computation of Alternative Minimum Tax.--
Paragraph (2) of section 55(a) is amended to read as follows:
            ``(2) the sum of--
                    ``(A) the regular tax for the taxable year, plus
                    ``(B) in the case of an individual, 3 percent of so 
                much of the individual's taxable income for the taxable 
                year as is taxed at 12 percent.''
    (c) Repeal of Reduction of Refundable Tax Credits.--
            (1) Subsection (d) of section 24 is amended by striking 
        paragraph (2) and redesignating paragraph (3) as paragraph (2).
            (2) Section 32 is amended by striking subsection (h).
    (d) Conforming Amendment.--Subclause (II) of section 1(g)(7)(B)(ii) 
is amended by striking ``15 percent'' and inserting ``12 percent''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.
    (f) Protection of Social Security and Medicare.--The amounts 
transferred to any trust fund under the Social Security Act shall be 
determined as if this Act had not been enacted.

SEC. 102. MODIFICATIONS TO EARNED INCOME TAX CREDIT.

    (a) Increases in Percentages and Amounts Used to Determine Credit; 
Marriage Penalty Relief.--
            (1) In general.--Subsection (b) of section 32 is amended to 
        read as follows:
    ``(b) Percentages and Amounts.--
            ``(1) Percentages.--The credit percentage, the initial 
        phaseout percentage, and the final phaseout percentage shall be 
        determined as follows:


 
   ``In the case of an eligible                                 The initial phaseout       The final phaseout
         individual with:          The credit percentage is:       percentage is:            percentage is:
 
1 qualifying child...............              34                       15.98                     18.98
2 or more qualifying children....              40                       21.06                     24.06
No qualifying children...........             7.65                      7.65                      7.65
 

            ``(2) Amounts.--
                    ``(A) In general.--The earned income amount and the 
                initial phaseout amount shall be determined as follows:


 
``In the case of an eligible    The earned income   The initial phaseout
      individual with:             amount is:            amount is:
 
1 qualifying child..........         $8,140                $13,470
2 or more qualifying                 $11,120               $13,470
 children.
No qualifying children......         $4,900                $6,130.
 

                In the case of a joint return where there is at least 1 
                qualifying child, the initial phaseout amount shall be 
                $2,500 greater than the amount otherwise applicable 
                under the preceding sentence.
                    ``(B) Final phaseout amount.--The final phaseout 
                amount is $26,000 ($28,500 in the case of a joint 
                return).''
            (2) Modification of computation of phaseout.--Paragraph (2) 
        of section 32(a) is amended to read as follows:
            ``(2) Phaseout of credit.--The amount of the credit 
        allowable to a taxpayer under paragraph (1) for any taxable 
        year shall be reduced (but not below zero) by the sum of--
                    ``(A) the initial phaseout percentage of so much of 
                the total income (or, if greater, the earned income) of 
                the taxpayer for the taxable year as exceeds the 
                initial phaseout amount but does not exceed the final 
                phaseout amount, plus
                    ``(B) the final phaseout percentage of so much of 
                the total income (or, if greater, the earned income) of 
                the taxpayer for the taxable year as exceeds the final 
                phaseout amount.''
            (3) Total income.--Paragraph (5) of section 32(c) is 
        amended to read as follows:
            ``(5) Total income.--The term `total income' means adjusted 
        gross income determined without regard to--
                    ``(A) the deductions referred to in paragraphs (6), 
                (7), (9), (10), (15), (16), and (17) of section 62(a),
                    ``(B) the deduction allowed by section 162(l), and
                    ``(C) the deduction allowed by section 164(f).''
            (4) Conforming amendments.--
                    (A) Subsection (j) of section 32 is amended to read 
                as follows:
    ``(j) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2002, each of the dollar amounts in subsection 
        (b)(2) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3), for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2001' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any dollar amount, after being 
        increased under paragraph (1), is not a multiple of $10, such 
        dollar amount shall be rounded to the nearest multiple of 
        $10.''
                    (B) Subparagraph (C) of section 32(c)(1) is amended 
                by striking ``modified adjusted gross income'' and 
                inserting ``total income''.
                    (C) Paragraph (2) of section 32(f) is amended to 
                read as follows:
            ``(2) Requirements for tables.--
                    ``(A) In general.--The provisions of subsection 
                (a)(1) and the provisions of subsection (a)(2) shall be 
                reflected in separate tables prescribed under paragraph 
                (1).
                    ``(B) Subsection (a)(1) table.--The tables 
                prescribed under paragraph (1) to reflect the 
                provisions of subsection (a)(1) shall have income 
                brackets of not greater than $50 each for earned income 
                between $0 and the earned income amount.
                    ``(C) Subsection (a)(2) table.--The tables 
                prescribed under paragraph (1) to reflect the 
                provisions of subsection (a)(2) shall have income 
                brackets of not greater than $50 each for total income 
                (or, if greater, the earned income) above the initial 
                phaseout threshold.''
    (b) Repeal of Denial of Credit Where Investment Income.--Section 32 
is amended by striking subsection (i).
    (c) Earned Income To Include Only Amounts Includible in Gross 
Income.--
            (1) In general.--Section 32(c)(2)(A)(i) (defining earned 
        income) is amended by inserting ``, but only if such amounts 
        are includible in gross income for the taxable year'' after 
        ``other employee compensation''.
            (2) Conforming amendment.--Section 32(c)(2)(B) is amended 
        by striking ``and'' at the end of clause (iv), by striking the 
        period at the end of clause (v) and inserting ``, and'', and by 
        adding at the end the following new clause:
                        ``(vi) the requirement under subparagraph 
                        (A)(i) that an amount be includible in gross 
                        income shall not apply if such amount is exempt 
                        from tax under section 7873 or is derived 
                        directly from restricted and allotted land 
                        under the Act of February 8, 1887 (commonly 
                        known as the Indian General Allotment Act) (25 
                        U.S.C. 331 et seq.) or from land held under 
                        Acts or treaties containing an exception 
                        provision similar to the Indian General 
                        Allotment Act.''
    (d) Modification of Joint Return Requirement.--Subsection (d) of 
section 32 is amended to read as follows:
    ``(d) Married Individuals.--
            ``(1) In general.--If the taxpayer is married at the close 
        of the taxable year, the credit shall be allowed under 
        subsection (a) only if the taxpayer and his spouse file a joint 
        return for the taxable year.
            ``(2) Marital status.--For purposes of paragraph (1), an 
        individual legally separated from his spouse under a decree of 
        divorce or of separate maintenance shall not be considered as 
        married.
            ``(3) Certain married individuals living apart.--For 
        purposes of paragraph (1), if--
                    ``(A) an individual --
                            ``(i) is married and files a separate 
                        return, and
                            ``(ii) has a qualifying child who is a son, 
                        daughter, stepson, or stepdaughter of such 
                        individual, and
                    ``(B) during the last 6 months of such taxable 
                year, such individual and such individual's spouse do 
                not have the same principal place of abode,
        such individual shall not be considered as married.''
    (e) Expansion of Mathematical Error Authority.--Paragraph (2) of 
section 6213(g) is amended by striking ``and'' at the end of 
subparagraph (K), by striking the period at the end of subparagraph (L) 
and inserting ``, and'', and by inserting after subparagraph (L) the 
following new subparagraph:
                    ``(M) the entry on the return claiming the credit 
                under section 32 with respect to a child if, according 
                to the Federal Case Registry of Child Support Orders 
                established under section 453(h) of the Social Security 
                Act, the taxpayer is a noncustodial parent of such 
                child.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

                   TITLE II--MARRIAGE PENALTY RELIEF

SEC. 201. MARRIAGE PENALTY RELIEF.

    (a) Standard Deduction.--
            (1) In general.--Paragraph (2) of section 63(c) (relating 
        to standard deduction) is amended--
                    (A) by striking ``$5,000'' in subparagraph (A) and 
                inserting ``twice the dollar amount in effect under 
                subparagraph (C) for the taxable year'',
                    (B) by adding ``or'' at the end of subparagraph 
                (B),
                    (C) by striking ``in the case of'' and all that 
                follows in subparagraph (C) and inserting ``in any 
                other case.'', and
                    (D) by striking subparagraph (D).
            (2) Increase allowed as deduction in determining minimum 
        tax.--Subparagraph (E) of section 56(b)(1) is amended by adding 
        at the end the following new sentence: ``The preceding sentence 
        shall not apply to so much of the standard deduction under 
        subparagraph (A) of section 63(c)(2) as exceeds the amount 
        which would be such deduction but for the amendment made by 
        section 201(a)(1) of the Tax Reduction Act of 2001.
            (3) Technical amendments.--
                    (A) Subparagraph (B) of section 1(f)(6) is amended 
                by striking ``(other than with'' and all that follows 
                through ``shall be applied'' and inserting ``(other 
                than with respect to sections 63(c)(4) and 
                151(d)(4)(A)) shall be applied''.
                    (B) Paragraph (4) of section 63(c) is amended by 
                adding at the end the following flush sentence:
        ``The preceding sentence shall not apply to the amount referred 
        to in paragraph (2)(A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

                      TITLE III--ESTATE TAX RELIEF

SEC. 301. INCREASE IN EXEMPTION EQUIVALENT OF UNIFIED CREDIT.

    (a) In General.--Subsection (c) of section 2010 (relating to 
applicable credit amount) is amended by striking the table and 
inserting the following new table:

        ``In the case of estates of decedents
                                                         The applicable
          dying, and gifts made, during:
                                                   exclusion amount is:
                  2002...............................       $2,000,000 
                  2003 and 2004......................       $2,100,000 
                  2005 and 2006......................       $2,200,000 
                  2007 and 2008......................       $2,300,000 
                  2009...............................       $2,400,000 
                  2010 or thereafter.................     $2,500,000.''
    (b) Repeal of Special Benefit for Family-Owned Business 
Interests.--
            (1) Section 2057 is hereby repealed.
            (2) Paragraph (10) of section 2031(c) is amended by 
        inserting ``(as in effect on the day before the date of the 
        enactment of this parenthetical)'' before the period.
            (3) The table of sections for part IV of subchapter A of 
        chapter 11 is amended by striking the item relating to section 
        2057.
    (c) Correction of Technical Error Affecting Largest Estates.--
Paragraph (2) of section 2001(c) is amended by striking ``$10,000,000'' 
and all that follows and inserting ``$10,000,000. The amount of the 
increase under the preceding sentence shall not exceed the sum of the 
applicable credit amount under section 2010(c) and $359,200.''
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
2001.

SEC. 302. CREDIT FOR STATE DEATH TAXES REPLACED WITH DEDUCTION FOR SUCH 
              TAXES.

    (a) Repeal of Credit.--Section 2011 (relating to credit for State 
death taxes) is hereby repealed.
    (b) Deduction for State Death Taxes.--Part IV of subchapter A of 
chapter 11 is amended by adding at the end the following new section:

``SEC. 2058. STATE DEATH TAXES.

    ``(a) Allowance of Deduction.--For purposes of the tax imposed by 
section 2001, the value of the taxable estate shall be determined by 
deducting from the value of the gross estate the amount of any estate, 
inheritance, legacy, or succession taxes actually paid to any State or 
the District of Columbia, in respect of any property included in the 
gross estate (not including any such taxes paid with respect to the 
estate of a person other than the decedent).
    ``(b) Period of Limitations.--The deduction allowed by this section 
shall include only such taxes as were actually paid and deduction 
therefor claimed within 4 years after the filing of the return required 
by section 6018, except that--
            ``(1) If a petition for redetermination of a deficiency has 
        been filed with the Tax Court within the time prescribed in 
        section 6213(a), then within such 4-year period or before the 
        expiration of 60 days after the decision of the Tax Court 
        becomes final.
            ``(2) If, under section 6161 or 6166, an extension of time 
        has been granted for payment of the tax shown on the return, or 
        of a deficiency, then within such 4-year period or before the 
        date of the expiration of the period of the extension.
            ``(3) If a claim for refund or credit of an overpayment of 
        tax imposed by this chapter has been filed within the time 
        prescribed in section 6511, then within such 4-year period or 
        before the expiration of 60 days from the date of mailing by 
        certified mail or registered mail by the Secretary to the 
        taxpayer of a notice of the disallowance of any part of such 
        claim, or before the expiration of 60 days after a decision by 
        any court of competent jurisdiction becomes final with respect 
        to a timely suit instituted upon such claim, whichever is 
        later.
Refund based on the deduction may (despite the provisions of sections 
6511 and 6512) be made if claim therefor is filed within the period 
above provided. Any such refund shall be made without interest.''
    (c) Conforming Amendments.--
            (1) Subsection (a) of section 2012 is amended by striking 
        ``the credit for State death taxes provided by section 2011 
        and''.
            (2) Subparagraph (A) of section 2013(c)(1) is amended by 
        striking ``2011,''.
            (3) Paragraph (2) of section 2014(b) is amended by striking 
        ``, 2011,''.
            (4) Sections 2015 and 2016 are each amended by striking 
        ``2011 or''.
            (5) Subsection (d) of section 2053 is amended to read as 
        follows:
    ``(d) Certain Foreign Death Taxes.--
            ``(1) In general.--Notwithstanding the provisions of 
        subsection (c)(1)(B) of this section, for purposes of the tax 
        imposed by section 2001, the value of the taxable estate may be 
        determined, if the executor so elects before the expiration of 
        the period of limitation for assessment provided in section 
        6501, by deducting from the value of the gross estate the 
        amount (as determined in accordance with regulations prescribed 
        by the Secretary) of any estate, succession, legacy, or 
        inheritance tax imposed by and actually paid to any foreign 
        country, in respect of any property situated within such 
        foreign country and included in the gross estate of a citizen 
        or resident of the United States, upon a transfer by the 
        decedent for public, charitable, or religious uses described in 
        section 2055. The determination under this paragraph of the 
        country within which property is situated shall be made in 
        accordance with the rules applicable under subchapter B (sec. 
        2101 and following) in determining whether property is situated 
        within or without the United States. Any election under this 
        paragraph shall be exercised in accordance with regulations 
        prescribed by the Secretary.
            ``(2) Condition for allowance of deduction.--No deduction 
        shall be allowed under paragraph (1) for a foreign death tax 
        specified therein unless the decrease in the tax imposed by 
        section 2001 which results from the deduction provided in 
        paragraph (1) will inure solely for the benefit of the public, 
        charitable, or religious transferees described in section 2055 
        or section 2106(a)(2). In any case where the tax imposed by 
        section 2001 is equitably apportioned among all the transferees 
        of property included in the gross estate, including those 
        described in sections 2055 and 2106(a)(2) (taking into account 
        any exemptions, credits, or deductions allowed by this 
        chapter), in determining such decrease, there shall be 
        disregarded any decrease in the Federal estate tax which any 
        transferees other than those described in sections 2055 and 
        2106(a)(2) are required to pay.
            ``(3) Effect on credit for foreign death taxes of deduction 
        under this subsection.--
                    ``(A) Election.--An election under this subsection 
                shall be deemed a waiver of the right to claim a 
                credit, against the Federal estate tax, under a death 
                tax convention with any foreign country for any tax or 
                portion thereof in respect of which a deduction is 
                taken under this subsection.
                    ``(B) Cross reference.--

                                ``See section 2014(f) for the effect of 
a deduction taken under this paragraph on the credit for foreign death 
taxes.''
            (6) Subparagraph (A) of section 2056A(b)(10) is amended--
                    (A) by striking ``2011,'', and
                    (B) by inserting ``2058,'' after ``2056,''.
            (7)(A) Subsection (a) of section 2102 is amended to read as 
        follows:
    ``(a) In General.--The tax imposed by section 2101 shall be 
credited with the amounts determined in accordance with sections 2012 
and 2013 (relating to gift tax and tax on prior transfers).''
            (B) Section 2102 is amended by striking subsection (b) and 
        by redesignating subsection (c) as subsection (b).
            (C) Section 2102(b)(5) (as redesignated by subparagraph 
        (B)) and section 2107(c)(3) are each amended by striking ``2011 
        to 2013, inclusive,'' and inserting ``2012 and 2013''.
            (8) Subsection (a) of section 2106 is amended by adding at 
        the end the following new paragraph:
            ``(4) State death taxes.--The amount which bears the same 
        ratio to the State death taxes as the value of the property, as 
        determined for purposes of this chapter, upon which State death 
        taxes were paid and which is included in the gross estate under 
        section 2103 bears to the value of the total gross estate under 
        section 2103. For purposes of this paragraph, the term `State 
        death taxes' means the taxes described in section 2011(a).''
            (9) Section 2201 is amended--
                    (A) by striking ``as defined in section 2011(d)'', 
                and
                    (B) by adding at the end the following new flush 
                sentence:
``For purposes of this section, the additional estate tax is the 
difference between the tax imposed by section 2001 or 2101 and the 
amount equal to 125 percent of the maximum credit provided by section 
2011(b), as in effect before its repeal by the Tax Reduction Act of 
2001.''
            (10) Paragraph (2) of section 6511(i) is amended by 
        striking ``2011(c), 2014(b),'' and inserting ``2014(b)''.
            (11) Subsection (c) of section 6612 is amended by striking 
        ``section 2011(c) (relating to refunds due to credit for State 
        taxes),''.
            (12) The table of sections for part II of subchapter A of 
        chapter 11 is amended by striking the item relating to section 
        2011.
            (13) The table of sections for part IV of subchapter A of 
        chapter 11 is amended by adding at the end the following new 
        item:

                              ``Sec. 2058. State death taxes.''
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 2001.

SEC. 303. VALUATION RULES FOR CERTAIN TRANSFERS OF NONBUSINESS ASSETS; 
              LIMITATION ON MINORITY DISCOUNTS.

    (a) In General.--Section 2031 (relating to definition of gross 
estate) is amended by redesignating subsection (d) as subsection (f) 
and by inserting after subsection (c) the following new subsections:
    ``(d) Valuation Rules for Certain Transfers of Nonbusiness 
Assets.--For purposes of this chapter and chapter 12--
            ``(1) In general.--In the case of the transfer of any 
        interest in an entity other than an interest which is actively 
        traded (within the meaning of section 1092)--
                    ``(A) the value of any nonbusiness assets held by 
                the entity shall be determined as if the transferor had 
                transferred such assets directly to the transferee (and 
                no valuation discount shall be allowed with respect to 
                such nonbusiness assets), and
                    ``(B) the nonbusiness assets shall not be taken 
                into account in determining the value of the interest 
                in the entity.
            ``(2) Nonbusiness assets.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `nonbusiness asset' 
                means any asset which is not used in the active conduct 
                of 1 or more trades or businesses.
                    ``(B) Exception for certain passive assets.--Except 
                as provided in subparagraph (C), a passive asset shall 
                not be treated for purposes of subparagraph (A) as used 
                in the active conduct of a trade or business unless--
                            ``(i) the asset is property described in 
                        paragraph (1) or (4) of section 1221(a) or is a 
                        hedge with respect to such property, or
                            ``(ii) the asset is real property used in 
                        the active conduct of 1 or more real property 
                        trades or businesses (within the meaning of 
                        section 469(c)(7)(C)) in which the transferor 
                        materially participates and with respect to 
                        which the transferor meets the requirements of 
                        section 469(c)(7)(B)(ii).
                For purposes of clause (ii), material participation 
                shall be determined under the rules of section 469(h), 
                except that section 469(h)(3) shall be applied without 
                regard to the limitation to farming activity.
                    ``(C) Exception for working capital.--Any asset 
                (including a passive asset) which is held as a part of 
                the reasonably required working capital needs of a 
                trade or business shall be treated as used in the 
                active conduct of a trade or business.
            ``(3) Passive asset.--For purposes of this subsection, the 
        term `passive asset' means any--
                    ``(A) cash or cash equivalents,
                    ``(B) except to the extent provided by the 
                Secretary, stock in a corporation or any other equity, 
                profits, or capital interest in any entity,
                    ``(C) evidence of indebtedness, option, forward or 
                futures contract, notional principal contract, or 
                derivative,
                    ``(D) asset described in clause (iii), (iv), or (v) 
                of section 351(e)(1)(B),
                    ``(E) annuity,
                    ``(F) real property used in 1 or more real property 
                trades or businesses (as defined in section 
                469(c)(7)(C)),
                    ``(G) asset (other than a patent, trademark, or 
                copyright) which produces royalty income,
                    ``(H) commodity,
                    ``(I) collectible (within the meaning of section 
                401(m)), or
                    ``(J) any other asset specified in regulations 
                prescribed by the Secretary.
            ``(4) Look-thru rules.--
                    ``(A) In general.--If a nonbusiness asset of an 
                entity consists of a 10-percent interest in any other 
                entity, this subsection shall be applied by 
                disregarding the 10-percent interest and by treating 
                the entity as holding directly its ratable share of the 
                assets of the other entity. This subparagraph shall be 
                applied successively to any 10-percent interest of such 
                other entity in any other entity.
                    ``(B) 10-percent interest.--The term `10-percent 
                interest' means--
                            ``(i) in the case of an interest in a 
                        corporation, ownership of at least 10 percent 
                        (by vote or value) of the stock in such 
                        corporation,
                            ``(ii) in the case of an interest in a 
                        partnership, ownership of at least 10 percent 
                        of the capital or profits interest in the 
                        partnership, and
                            ``(iii) in any other case, ownership of at 
                        least 10 percent of the beneficial interests in 
                        the entity.
            ``(5) Coordination with subsection (b).--Subsection (b) 
        shall apply after the application of this subsection.
    ``(e) Limitation on Minority Discounts.--For purposes of this 
chapter and chapter 12, in the case of the transfer of any interest in 
an entity other than an interest which is actively traded (within the 
meaning of section 1092), no discount shall be allowed by reason of the 
fact that the transferee does not have control of such entity if the 
transferee and members of the family (as defined in section 
2032A(e)(2)) of the transferee have control of such entity.''
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers after the date of the enactment of this Act.

SEC. 304. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASEMENTS.

    (a) Repeal of Location Requirement.--Subparagraph (A) of section 
2031(c)(8) (defining land subject to a conservation easement) is 
amended by striking clause (i) and redesignating clauses (ii) and (iii) 
as clauses (i) and (ii), respectively.
    (b) Clarification of Date for Determining Value of Land and 
Easement.--Section 2031(c)(2) (defining applicable percentage) is 
amended by adding at the end the following new sentence: ``The values 
taken into account under the preceding sentence shall be such values as 
of the date of the contribution referred to in paragraph (8)(B).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 2000.
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