[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 8
To amend the Internal Revenue Code of 1986 to phaseout the estate and
gift taxes over a 10-year period, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 14, 2001
Ms. Dunn (for herself, Mr. Tanner, Mr. Cox, Mr. Abercrombie, Mr. Brown
of South Carolina, Mr. Culberson, Mr. Everett, Mr. Goode, Mr. Cooksey,
Mr. Bachus, Mr. Pence, Mr. LaHood, Mr. Shadegg, Mr. Duncan, Mr.
Whitfield, Mr. Saxton, Mr. Bonilla, Mrs. Roukema, Mrs. Biggert, Mr.
Ferguson, Mr. Gilchrest, Mr. Radanovich, Mr. Shaw, Mr. Maloney of
Connecticut, Mr. Sam Johnson of Texas, Mr. Tancredo, Mr. Boucher, Mr.
Traficant, Mr. Keller, Mr. Burton of Indiana, Mr. Shows, Mr. Gary
Miller of California, Mr. Rogers of Michigan, Mr. Cunningham, Mr.
Royce, Mr. Greenwood, Mr. Smith of Texas, Mr. Foley, Mr. Hayworth, Mr.
Weller, Mr. Kirk, Mr. Young of Alaska, Mr. Baird, Mr. Wamp, Mr. Dooley
of California, Mr. Ehlers, Mr. Cantor, Mr. Pombo, Mr. Simmons, Mr.
Camp, Mr. McIntyre, Mr. Hayes, Mr. Nethercutt, Ms. Hart, Mr. Barton of
Texas, Mrs. Wilson, Mr. Hall of Texas, Mr. Hyde, Mr. Wolf, Mr. Sununu,
Mr. Grucci, Mr. Callahan, Mr. Ryan of Wisconsin, Mrs. Kelly, Mr.
Largent, Mr. Deal of Georgia, Mr. Cannon, Mr. Aderholt, Mr. Crane, Ms.
Granger, Mr. Blunt, Mr. Green of Wisconsin, Mr. Herger, Mr. English,
Mr. LoBiondo, Mr. Jenkins, Mr. Pitts, Mr. Lewis of California, Mr.
Oxley, Mr. Riley, Mr. Chambliss, Mr. Watts of Oklahoma, Mrs. Northup,
Mr. Ose, Mr. Smith of New Jersey, Mr. Lewis of Kentucky, Mr. Lucas of
Oklahoma, Mr. Simpson, Mr. Peterson of Pennsylvania, Mr. McCrery, Mrs.
Bono, Mr. Calvert, Mr. Ney, Mr. Doolittle, Mr. Hunter, Mr. Skeen, Mr.
Hoekstra, Mr. LaTourette, Mr. Shimkus, Mr. Fletcher, Mrs. Capito, Mr.
Ehrlich, Mr. Bishop, Mr. Rohrabacher, Mr. Boehlert, Mr. Ryun of Kansas,
Mr. Cramer, Mrs. Emerson, Mr. Schaffer, Mr. Sessions, Mr. Isakson, Ms.
Ros-Lehtinen, Mr. Burr of North Carolina, Mr. Barr of Georgia, Mr.
Hastings of Washington, Mr. Miller of Florida, Mr. Horn, Mr. Ramstad,
Mr. McHugh, Mr. Walsh, Mr. Crenshaw, Mr. Norwood, Mr. Coble, Mr.
Nussle, Mr. Platts, Mr. Jones of North Carolina, Mr. Gekas, Mr. Rogers
of Kentucky, Mr. Bass, Mr. Terry, Mr. Schrock, Mr. Goodlatte, Mr.
Toomey, Mr. Wicker, Mr. Portman, Mr. Tauzin, Mr. Hansen, Mr. Armey, Mr.
Hilleary, Mr. McInnis, Mr. Combest, Mr. DeLay, Mrs. Cubin, Mr. Linder,
Mr. Mica, Mrs. McCarthy of New York, Mr. Frelinghuysen, Mr. Berry, Mr.
John, Mr. Condit, Mr. Sandlin, Mr. Sweeney, Mr. Knollenberg, Mr.
Phelps, Mr. Carson of Oklahoma, Mr. Ganske, Mr. Thune, Mr. Kerns, Ms.
Pryce of Ohio, Mr. Stump, Mr. Sensenbrenner, Mr. Otter, Mr. Rahall, Mr.
Sisisky, Mr. Hulshof, Mr. Lucas of Kentucky, Mr. Walden of Oregon, Mr.
Wynn, Mr. Ford, Mr. Reynolds, Mr. Brady of Texas, Mr. Paul, Mr. Gordon,
Mrs. Jo Ann Davis of Virginia, Mr. Costello, Mr. Gillmor, Mr. Watkins,
Mr. Putnam, Mr. Gibbons, Mr. Akin, Mr. Issa, Mr. Farr of California,
Mr. Barcia, Mrs. Myrick, Mr. Bartlett of Maryland, Mr. Chabot, Mr.
Kingston, Mr. Hefley, Mr. Gallegly, Mr. Gilman, Mr. Goss, Mr. Weldon of
Florida, Mr. DeMint, Mr. Souder, Mr. Fossella, Mr. Kolbe, Mr.
Bilirakis, Mr. Latham, Mr. Tiahrt, Mr. Taylor of North Carolina, Mr.
Scarborough, Mr. Vitter, Mr. Hostettler, Mr. Graham, Mr. Spence, Mr.
Tom Davis of Virginia, Mr. Boehner, Mr. Osborne, Mr. Bryant, Mr.
Dreier, Mr. Pickering, Mr. Thornberry, Mr. Weldon of Pennsylvania, Mr.
Baker, Mr. King, Mr. Hutchinson, Mr. McKeon, Mr. Manzullo, Mr. Smith of
Washington, Mr. Lampson, and Mrs. Clayton) 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 phaseout the estate and
gift taxes over a 10-year period, 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 ``Death Tax Elimination Act''.
TITLE I--REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING TAXES.
SEC. 101. PHASEOUT OF ESTATE AND GIFT TAXES.
(a) 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, 2010.
(b) Phaseout of Tax.--Subsection (c) of section 2001 of such Code
(relating to imposition and rate of tax) is amended by adding at the
end the following new paragraph:
``(3) Phaseout of tax.--In the case of estates of decedents
dying, and gifts made, during any calendar year after 2000 and
before 2011--
``(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.......................................... 5
2002.......................................... 10
2003.......................................... 15
2004.......................................... 20
2005.......................................... 25
2006.......................................... 30
2007.......................................... 35
2008.......................................... 40
2009.......................................... 45
2010.......................................... 50.
``(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\1/2\
2002.......................................... 3
2003.......................................... 4\1/2\
2004.......................................... 6
2005.......................................... 7\1/2\
2006.......................................... 9
2007.......................................... 10\1/2\
2008.......................................... 12
2009.......................................... 13\1/2\
2010.......................................... 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 II--INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDIT.
SEC. 201. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDIT.
(a) In General.--The table in subsection (c) of section 2010 of the
Internal Revenue Code of 1986 (relating to applicable credit amount) is
amended to read as follows:
``In the case of estates of decedents
The applicable
dying, and gifts made, during:
exclusion amount is:
2001 or thereafter................. $1,300,000
(b) Effective Date.--The amendment made by this section shall apply
to estates of decedents dying, and gifts made, after December 31, 2000.
SEC. 202. REPEAL OF ESTATE TAX BENEFIT FOR FAMILY-OWNED BUSINESS
INTERESTS.
(a) In General.--Section 2057 of the Internal Revenue Code of 1986
(relating to family-owned business interests) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (10) of section 2031(c) of such Code is
amended by inserting ``(as in effect on the day before the date
of the enactment of the Death Tax Elimination Act)'' before the
period.
(2) The table of sections for part IV of subchapter A of
chapter 11 of such Code is amended by striking the item
relating to section 2057.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and gifts made, after December 31,
2000.
TITLE III--MODIFICATIONS OF GENERATION-SKIPPING TRANSFER TAX
SEC. 301. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO
TRUSTS; RETROACTIVE ALLOCATIONS.
(a) In General.--Section 2632 of the Internal Revenue Code of 1986
(relating to special rules for allocation of GST exemption) is amended
by redesignating subsection (c) as subsection (e) and by inserting
after subsection (b) the following new subsections:
``(c) Deemed Allocation to Certain Lifetime Transfers to GST
Trusts.--
``(1) In general.--If any individual makes an indirect skip
during such individual's lifetime, any unused portion of such
individual's GST exemption shall be allocated to the property
transferred to the extent necessary to make the inclusion ratio
for such property zero. If the amount of the indirect skip
exceeds such unused portion, the entire unused portion shall be
allocated to the property transferred.
``(2) Unused portion.--For purposes of paragraph (1), the
unused portion of an individual's GST exemption is that portion
of such exemption which has not previously been--
``(A) allocated by such individual,
``(B) treated as allocated under subsection (b)
with respect to a direct skip occurring during or
before the calendar year in which the indirect skip is
made, or
``(C) treated as allocated under paragraph (1) with
respect to a prior indirect skip.
``(3) Definitions.--
``(A) Indirect skip.--For purposes of this
subsection, the term `indirect skip' means any transfer
of property (other than a direct skip) subject to the
tax imposed by chapter 12 made to a GST trust.
``(B) GST trust.--The term `GST trust' means a
trust that could have a generation-skipping transfer
with respect to the transferor unless--
``(i) the trust instrument provides that
more than 25 percent of the trust corpus must
be distributed to or may be withdrawn by one or
more individuals who are non-skip persons--
``(I) before the date that the
individual attains age 46,
``(II) on or before one or more
dates specified in the trust instrument
that will occur before the date that
such individual attains age 46, or
``(III) upon the occurrence of an
event that, in accordance with
regulations prescribed by the
Secretary, may reasonably be expected
to occur before the date that such
individual attains age 46;
``(ii) the trust instrument provides that
more than 25 percent of the trust corpus must
be distributed to or may be withdrawn by one or
more individuals who are non-skip persons and
who are living on the date of death of another
person identified in the instrument (by name or
by class) who is more than 10 years older than
such individuals;
``(iii) the trust instrument provides that,
if one or more individuals who are non-skip
persons die on or before a date or event
described in clause (i) or (ii), more than 25
percent of the trust corpus either must be
distributed to the estate or estates of one or
more of such individuals or is subject to a
general power of appointment exercisable by one
or more of such individuals;
``(iv) the trust is a trust any portion of
which would be included in the gross estate of
a non-skip person (other than the transferor)
if such person died immediately after the transfer;
``(v) the trust is a charitable lead
annuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
``(vi) the trust is a trust with respect to
which a deduction was allowed under section
2522 for the amount of an interest in the form
of the right to receive annual payments of a
fixed percentage of the net fair market value
of the trust property (determined yearly) and
which is required to pay principal to a non-
skip person if such person is alive when the
yearly payments for which the deduction was
allowed terminate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to be
includible in the gross estate of a non-skip person or
subject to a right of withdrawal by reason of such
person holding a right to withdraw so much of such
property as does not exceed the amount referred to in
section 2503(b) with respect to any transferor, and it
shall be assumed that powers of appointment held by
non-skip persons will not be exercised.
``(4) Automatic allocations to certain gst trusts.--For
purposes of this subsection, an indirect skip to which section
2642(f) applies shall be deemed to have been made only at the
close of the estate tax inclusion period. The fair market value
of such transfer shall be the fair market value of the trust
property at the close of the estate tax inclusion period.
``(5) Applicability and effect.--
``(A) In general.--An individual--
``(i) may elect to have this subsection not
apply to--
``(I) an indirect skip, or
``(II) any or all transfers made by
such individual to a particular trust,
and
``(ii) may elect to treat any trust as a
GST trust for purposes of this subsection with
respect to any or all transfers made by such
individual to such trust.
``(B) Elections.--
``(i) Elections with respect to indirect
skips.--An election under subparagraph
(A)(i)(I) shall be deemed to be timely if filed
on a timely filed gift tax return for the
calendar year in which the transfer was made or
deemed to have been made pursuant to paragraph
(4) or on such later date or dates as may be
prescribed by the Secretary.
``(ii) Other elections.--An election under
clause (i)(II) or (ii) of subparagraph (A) may
be made on a timely filed gift tax return for
the calendar year for which the election is to
become effective.
``(d) Retroactive Allocations.--
``(1) In general.--If--
``(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been
made,
``(B) such person--
``(i) is a lineal descendant of a
grandparent of the transferor or of a
grandparent of the transferor's spouse or
former spouse, and
``(ii) is assigned to a generation below
the generation assignment of the transferor,
and
``(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor's unused GST exemption to any previous transfer or
transfers to the trust on a chronological basis.
``(2) Special rules.--If the allocation under paragraph (1)
by the transferor is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for gifts made
within the calendar year within which the non-skip person's
death occurred--
``(A) the value of such transfer or transfers for
purposes of section 2642(a) shall be determined as if
such allocation had been made on a timely filed gift
tax return for each calendar year within which each
transfer was made,
``(B) such allocation shall be effective
immediately before such death, and
``(C) the amount of the transferor's unused GST
exemption available to be allocated shall be determined
immediately before such death.
``(3) Future interest.--For purposes of this subsection, a
person has a future interest in a trust if the trust may permit
income or corpus to be paid to such person on a date or dates
in the future.''.
(b) Conforming Amendment.--Paragraph (2) of section 2632(b) of such
Code is amended by striking ``with respect to a direct skip'' and
inserting ``or subsection (c)(1)''.
(c) Effective Dates.--
(1) Deemed allocation.--Section 2632(c) of the Internal
Revenue Code of 1986 (as added by subsection (a)), and the
amendment made by subsection (b), shall apply to transfers
subject to chapter 11 or 12 made after December 31, 1999, and
to estate tax inclusion periods ending after December 31, 1999.
(2) Retroactive allocations.--Section 2632(d) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to deaths of non-skip persons occurring after
December 31, 1999.
SEC. 302. SEVERING OF TRUSTS.
(a) In General.--Subsection (a) of section 2642 of the Internal
Revenue Code of 1986 (relating to inclusion ratio) is amended by adding
at the end the following new paragraph:
``(3) Severing of trusts.--
``(A) In general.--If a trust is severed in a
qualified severance, the trusts resulting from such
severance shall be treated as separate trusts
thereafter for purposes of this chapter.
``(B) Qualified severance.--For purposes of
subparagraph (A)--
``(i) In general.--The term `qualified
severance' means the division of a single trust
and the creation (by any means available under
the governing instrument or under local law) of
two or more trusts if--
``(I) the single trust was divided
on a fractional basis, and
``(II) the terms of the new trusts,
in the aggregate, provide for the same
succession of interests of
beneficiaries as are provided in the
original trust.
``(ii) Trusts with inclusion ratio greater
than zero.--If a trust has an inclusion ratio
of greater than zero and less than 1, a
severance is a qualified severance only if the
single trust is divided into two trusts, one of
which receives a fractional share of the total
value of all trust assets equal to the
applicable fraction of the single trust
immediately before the severance. In such case,
the trust receiving such fractional share shall
have an inclusion ratio of zero and the other
trust shall have an inclusion ratio of 1.
``(iii) Regulations.--The term `qualified
severance' includes any other severance
permitted under regulations prescribed by the
Secretary.
``(C) Timing and manner of severances.--A severance
pursuant to this paragraph may be made at any time. The
Secretary shall prescribe by forms or regulations the
manner in which the qualified severance shall be
reported to the Secretary.''.
(b) Effective Date.--The amendment made by this section shall apply
to severances after December 31, 1999.
SEC. 303. MODIFICATION OF CERTAIN VALUATION RULES.
(a) Gifts for Which Gift Tax Return Filed or Deemed Allocation
Made.--Paragraph (1) of section 2642(b) of such Code (relating to
valuation rules, etc.) is amended to read as follows:
``(1) Gifts for which gift tax return filed or deemed
allocation made.--If the allocation of the GST exemption to any
transfers of property is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for such transfer
or is deemed to be made under section 2632 (b)(1) or (c)(1)--
``(A) the value of such property for purposes of
subsection (a) shall be its value as finally determined
for purposes of chapter 12 (within the meaning of
section 2001(f)(2)), or, in the case of an allocation
deemed to have been made at the close of an estate tax
inclusion period, its value at the time of the close of
the estate tax inclusion period, and
``(B) such allocation shall be effective on and
after the date of such transfer, or, in the case of an
allocation deemed to have been made at the close of an
estate tax inclusion period, on and after the close of
such estate tax inclusion period.''.
(b) Transfers at Death.--Subparagraph (A) of section 2642(b)(2) of
such Code is amended to read as follows:
``(A) Transfers at death.--If property is
transferred as a result of the death of the transferor,
the value of such property for purposes of subsection
(a) shall be its value as finally determined for
purposes of chapter 11; except that, if the
requirements prescribed by the Secretary respecting
allocation of post-death changes in value are not met,
the value of such property shall be determined as of
the time of the distribution concerned.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers subject to chapter 11 or 12 of the Internal Revenue
Code of 1986 made after December 31, 1999.
SEC. 304. RELIEF PROVISIONS.
(a) In General.--Section 2642 of such Code is amended by adding at
the end the following new subsection:
``(g) Relief Provisions.--
``(1) Relief from late elections.--
``(A) In general.--The Secretary shall by
regulation prescribe such circumstances and procedures
under which extensions of time will be granted to make--
``(i) an allocation of GST exemption
described in paragraph (1) or (2) of subsection
(b), and
``(ii) an election under subsection (b)(3)
or (c)(5) of section 2632.
Such regulations shall include procedures for
requesting comparable relief with respect to transfers
made before the date of the enactment of this
paragraph.
``(B) Basis for determinations.--In determining
whether to grant relief under this paragraph, the
Secretary shall take into account all relevant
circumstances, including evidence of intent contained
in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant. For
purposes of determining whether to grant relief under
this paragraph, the time for making the allocation (or
election) shall be treated as if not expressly
prescribed by statute.
``(2) Substantial compliance.--An allocation of GST
exemption under section 2632 that demonstrates an intent to
have the lowest possible inclusion ratio with respect to a
transfer or a trust shall be deemed to be an allocation of so
much of the transferor's unused GST exemption as produces the
lowest possible inclusion ratio. In determining whether there
has been substantial compliance, all relevant circumstances
shall be taken into account, including evidence of intent
contained in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant.''.
(b) Effective Dates.--
(1) Relief from late elections.--Section 2642(g)(1) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to requests pending on, or filed after, December
31, 1999.
(2) Substantial compliance.--Section 2642(g)(2) of such
Code (as so added) shall apply to transfers subject to chapter
11 or 12 of the Internal Revenue Code of 1986 made after
December 31, 1999. No implication is intended with respect to
the availability of relief from late elections or the
application of a rule of substantial compliance on or before
such date.
TITLE IV--EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX
SEC. 401. INCREASE IN NUMBER OF ALLOWABLE PARTNERS AND SHAREHOLDERS IN
CLOSELY HELD BUSINESSES.
(a) In General.--Paragraphs (1)(B)(ii), (1)(C)(ii), and
(9)(B)(iii)(I) of section 6166(b) of the Internal Revenue Code of 1986
(relating to definitions and special rules) are each amended by
striking ``15'' and inserting ``75''.
(b) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and gifts made, after December 31,
2000.
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