[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 798 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 798

  To amend the Internal Revenue Code of 1986 to allow small business 
 employers certain credits against income tax, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 30, 2001

 Mr. Lieberman 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 allow small business 
 employers certain credits against income tax, 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 ``Productivity, Opportunity, and 
Prosperity Act of 2001''.

SEC. 2. CREDIT FOR EXPENSES FOR REMEDIAL EDUCATION FOR EMPLOYEES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following new section:

``SEC. 45E. REMEDIAL EDUCATION CREDIT.

    ``(a) General Rule.--For purposes of section 38, the amount of the 
remedial education credit determined under this section with respect to 
any employer for any taxable year is an amount equal to 30 percent of 
the qualified remedial education expenditures of the taxpayer for such 
taxable year.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified remedial education expenditure.--The term 
        `qualified remedial education expenditure' means any amount 
        paid or incurred by the taxpayer for remedial education 
        provided for any employee of the taxpayer.
            ``(2) Remedial education.--The term `remedial education' 
        means a written plan of study and training in literacy and 
        numeracy, including the study of English as a second language.
    ``(c) Coordination With Other Credits.--The amount of credit 
otherwise allowable under sections 51(a) and 1396(a) with respect to 
any employee shall be reduced by the credit allowed by this section 
with respect to such employee.
    ``(d) Controlled Groups.--For purposes of this section, all persons 
treated as a single employer under subsection (b), (c), (m), or (o) of 
section 414 shall be treated as a single employer.''.
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38 of the Internal Revenue Code of 1986 (relating to general 
business credit) is amended by striking ``plus'' at the end of 
paragraph (12), by striking the period at the end of paragraph (13) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(14) in the case of an employer, the remedial education 
        credit determined under section 45E(a).''.
    (c) Denial of Double Benefit.--Section 280C of the Internal Revenue 
Code of 1986 (relating to certain expenses for which credits are 
allowable) is amended by adding at the end the following new 
subsection:
    ``(d) Remedial Education Credit.--No deduction shall be allowed for 
that portion of the expenses otherwise allowable as a deduction for the 
taxable year which is equal to the amount of the credit determined for 
the taxable year under section 45E(a).''.
    (d) 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 new item:

                              ``Sec. 45E. Remedial education credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in the taxable years beginning after 
the date of the enactment of this Act.

SEC. 3. INVESTMENT TAX CREDIT FOR QUALIFIED INFORMATION TECHNOLOGY 
              PROPERTY.

    (a) Allowance of Small Business Digital Divide Credit.--Section 46 
of the Internal Revenue Code of 1986 (relating to investment credits) 
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 after paragraph (3) the following new paragraph:
            ``(4) the small business digital divide credit.''.
    (b) Amount of Small Business Digital Divide Credit.--
            (1) In general.--Section 48 of the Internal Revenue Code of 
        1986 (relating to the energy credit and the reforestation 
        credit) is amended by adding at the end the following new 
        subsection:
    ``(c) Small Business Digital Divide Credit.--
            ``(1) In general.--For purposes of section 46, in the case 
        of a small business employer, the small business digital divide 
        credit for any taxable year is 10 percent of the taxpayer's 
        basis in qualified information technology property placed in 
        service during such taxable year.
            ``(2) Definitions.--For purposes of this subpart--
                    ``(A) Qualified information technology property.--
                The term `qualified information technology property' 
                means computer technology and equipment (as defined in 
                section 170(e)(6)(F)(i)).
                    ``(B) Small business employer.--
                            ``(i) In general.--The term `small business 
                        employer' means, with respect to any taxable 
                        year, any employer who employed an average of 
                        100 or fewer employees on business days during 
                        such taxable year.
                            ``(ii) Controlled groups.--For purposes of 
                        clause (i), all persons treated as a single 
                        employer under subsection (b), (c), (m), or (o) 
                        of section 414 shall be treated as a single 
                        employer.
            ``(3) Termination.--This subsection shall not apply to any 
        property placed in service after December 31, 2002.''.
    (c) Basis Adjustment To Reflect Investment Credit.--Paragraph (3) 
of section 50(c) of the Internal Revenue Code of 1986 (relating to 
basis adjustment to investment credit property) is amended by striking 
``energy credit or reforestation credit'' and inserting ``energy 
credit, reforestation credit, or small business digital divide 
credit''.
    (d) Application of At-Risk Rules.--Subparagraph (C) of section 
49(a)(1) of the Internal Revenue Code of 1986 (relating to certain 
nonrecourse financing excluded from credit basis) is amended by 
striking ``and'' at the end of clause (ii), by striking the period at 
the end of clause (iii) and inserting ``, and'', and by adding at the 
end the following new clause:
                            ``(iv) the basis of qualified information 
                        technology property.''.
    (e) Clerical Amendments.--
            (1) Section 48 of the Internal Revenue Code of 1986 is 
        amended by striking the heading and inserting the following:

``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; SMALL BUSINESS DIGITAL 
              DIVIDE CREDIT.''.

            (2) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the item relating to section 48 and inserting the following:

                              ``Sec. 48. Energy credit; reforestation 
                                        credit; small business digital 
                                        divide credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 4. INCREASED EXCLUSION AND OTHER MODIFICATIONS APPLICABLE TO 
              QUALIFIED SMALL BUSINESS STOCK.

    (a) Increased Exclusion.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to 50-percent exclusion 
        for gain from certain small business stock) is amended by 
        striking ``50 percent'' and inserting ``100 percent''.
            (2) Conforming amendments.--
                    (A) Subparagraph (A) of section 1(h)(5) of such 
                Code is amended to read as follows:
                    ``(A) collectibles gain, over''.
                    (B) Section 1(h) of such Code is amended by 
                striking paragraph (8).
                    (C) Paragraph (9) of section 1(h) of such Code is 
                amended by striking ``, gain described in paragraph 
                (7)(A)(i), and section 1202 gain'' and inserting ``and 
                gain described in paragraph (7)(A)(i)''.
                    (D) Section 1(h) of such Code is amended by 
                redesignating paragraphs (9) (as amended by 
                subparagraph (C)), (10), (11), (12), and (13) as 
                paragraphs (8), (9), (10), (11), and (12), 
                respectively.
                    (E) The heading for section 1202 of such Code is 
                amended by striking ``partial'' and inserting ``100-
                percent''.
                    (F) The table of sections for part I of subchapter 
                P of chapter 1 of such Code is amended by striking 
                ``Partial'' in the item relating to section 1202 and 
                inserting ``100-percent''.
    (b) Reduction in Holding Period.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to partial exclusion 
        for gains from certain small business stock) is amended by 
        striking ``5 years'' and inserting ``3 years''.
            (2) Conforming amendment.--Subsections (g)(2)(A) and 
        (j)(1)(A) of section 1202 of such Code are each amended by 
        striking ``5 years'' and inserting ``3 years''.
    (c) Exclusion Available to Corporations.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to partial exclusion 
        for gains from certain small business stock) is amended by 
        striking ``other than a corporation''.
            (2) Technical amendment.--Subsection (c) of section 1202 of 
        such Code is amended by adding at the end the following new 
        paragraph:
            ``(4) Stock held among members of controlled group not 
        eligible.--Stock of a member of a parent-subsidiary controlled 
        group (as defined in subsection (d)(3)) shall not be treated as 
        qualified small business stock while held by another member of 
        such group.''.
    (d) Repeal of Minimum Tax Preference.--
            (1) In general.--Subsection (a) of section 57 of the 
        Internal Revenue Code of 1986 (relating to items of tax 
        preference) is amended by striking paragraph (7).
            (2) Technical amendment.--Subclause (II) of section 
        53(d)(1)(B)(ii) of such Code is amended by striking ``, (5), 
        and (7)'' and inserting ``and (5)''.
    (e) Stock of Larger Businesses Eligible for Exclusion.--
            (1) In general.--Paragraph (1) of section 1202(d) of the 
        Internal Revenue Code of 1986 (defining qualified small 
        business) is amended by striking ``$50,000,000'' each place it 
        appears and inserting ``$300,000,000''.
            (2) Inflation adjustment.--Section 1202(d) of such Code 
        (defining qualified small business) is amended by adding at the 
        end the following:
            ``(4) Inflation adjustment of asset limitation.--In the 
        case of stock issued in any calendar year after 2002, the 
        $300,000,000 amount contained in 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 2001' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount  shall be rounded to the 
nearest multiple of $10,000.''.
    (f) Repeal of Per-Issuer Limitation.--Section 1202(b) of the 
Internal Revenue Code of 1986 (relating to per-issuer limitations on 
taxpayer's eligible gain) is repealed.
    (g) Other Modifications.--
            (1) Repeal of working capital limitation.--Section 
        1202(e)(6) of the Internal Revenue Code of 1986 (relating to 
        working capital) is amended--
                    (A) in subparagraph (B), by striking ``2 years'' 
                and inserting ``5 years''; and
                    (B) by striking the last sentence.
            (2) Exception from redemption rules where business 
        purpose.--Section 1202(c)(3) of such Code (relating to certain 
        purchases by corporation of its own stock) is amended by adding 
        at the end the following new subparagraph:
                    ``(D) Waiver where business purpose.--A purchase of 
                stock by the issuing corporation shall be disregarded 
                for purposes of subparagraph (B) if the issuing 
                corporation establishes that there was a business 
                purpose for such purchase and one of the principal 
                purposes of the purchase was not to avoid the 
                limitations of this section.''.
    (h) Qualified Trade or Business.--Section 1202(e)(3) of the 
Internal Revenue Code of 1986 (defining qualified trade or business) is 
amended by inserting ``and'' at the end of subparagraph (C), by 
striking ``, and'' at the end of subparagraph (D) and inserting a 
period, and by striking subparagraph (E).
    (i) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section apply to stock issued after the 
        date of the enactment of this Act.
            (2) Special rule.--The amendments made by subsections (a), 
        (c), (e), (f), and (g)(1) apply to stock issued after August 
        10, 1993.

SEC. 5. REPEAL OF MINIMUM TAX PREFERENCE FOR EXCLUSION FOR INCENTIVE 
              STOCK OPTIONS.

    (a) In General.--Subsection (b) of section 56 of the Internal 
Revenue Code of 1986 (relating to adjustments in computing alternative 
minimum taxable income) is amended by striking paragraph (3).
    (b) Effective Date.--The amendment made by this section shall apply 
to options exercised in calendar years beginning after the date of the 
enactment of this Act.

SEC. 6. 3-YEAR DEPRECIABLE LIFE FOR SEMICONDUCTOR MANUFACTURING 
              EQUIPMENT.

    (a) In General.--Subparagraph (A) of section 168(e)(3) of the 
Internal Revenue Code of 1986 (relating to classification of property) 
is amended by striking ``and'' at the end of clause (ii), by striking 
the period at the end of clause (iii) and inserting ``, and'', and by 
adding at the end the following new clause:
                    ``(iv) any semiconductor manufacturing equipment.''
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 168(e)(3) of the Internal 
        Revenue Code of 1986 is amended--
                    (A) by striking clause (ii),
                    (B) by redesignating clauses (iii) through (vi) as 
                clauses (ii) through (v), respectively, and
                    (C) by striking ``clause (vi)(I)'' in the last 
                sentence and inserting ``clause (v)(I)''.
            (2) Subparagraph (B) of section 168(g)(3) of such Code is 
        amended by striking the items relating to subparagraph (B)(ii) 
        and subparagraph (B)(iii) and inserting the following:

                        ``(A)(iv)..............................      3 
                        ``(B)(ii)..............................  9.5''.
    (c) Effective Date.--The amendments made by this section shall 
apply to equipment placed in service after the date of the enactment of 
this Act.
                                 <all>