[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2 Enrolled Bill (ENR)]

        H.R.2

                       One Hundred Eighth Congress

                                 of the

                        United States of America


                          AT THE FIRST SESSION

          Begun and held at the City of Washington on Tuesday,
           the seventh day of January, two thousand and three


                                 An Act


 
To provide for reconciliation pursuant to section 201 of the concurrent 
             resolution on the budget for fiscal year 2004.

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

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Jobs and Growth 
Tax Relief Reconciliation Act of 2003''.
    (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) Table of Contents.--The table of contents of this Act is as 
follows:
Sec. 1. Short title; references; table of contents.

   TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS

Sec. 101. Acceleration of increase in child tax credit.
Sec. 102. Acceleration of 15-percent individual income tax rate bracket 
          expansion for married taxpayers filing joint returns.
Sec. 103. Acceleration of increase in standard deduction for married 
          taxpayers filing joint returns.
Sec. 104. Acceleration of 10-percent individual income tax rate bracket 
          expansion.
Sec. 105. Acceleration of reduction in individual income tax rates.
Sec. 106. Minimum tax relief to individuals.
Sec. 107. Application of EGTRRA sunset to this title.

                TITLE II--GROWTH INCENTIVES FOR BUSINESS

Sec. 201. Increase and extension of bonus depreciation.
Sec. 202. Increased expensing for small business.

      TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS

Sec. 301. Reduction in capital gains rates for individuals; repeal of 5-
          year holding period requirement.
Sec. 302. Dividends of individuals taxed at capital gain rates.
Sec. 303. Sunset of title.

                 TITLE IV--TEMPORARY STATE FISCAL RELIEF

Sec. 401. Temporary State fiscal relief.

           TITLE V--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003

Sec. 501. Time for payment of corporate estimated taxes.

   TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS

SEC. 101. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.

    (a) In General.--The item relating to calendar years 2001 through 
2004 in the table contained in paragraph (2) of section 24(a) (relating 
to per child amount) is amended to read as follows:

    ``2003 or 2004............................................


                                                               $1,000''.

    (b) Advance Payment of Portion of Increased Credit in 2003.--
        (1) In general.--Subchapter B of chapter 65 (relating to 
    abatements, credits, and refunds) is amended by inserting after 
    section 6428 the following new section:

``SEC. 6429. ADVANCE PAYMENT OF PORTION OF INCREASED CHILD CREDIT FOR 
              2003.

    ``(a) In General.--Each taxpayer who was allowed a credit under 
section 24 on the return for the taxpayer's first taxable year 
beginning in 2002 shall be treated as having made a payment against the 
tax imposed by chapter 1 for such taxable year in an amount equal to 
the child tax credit refund amount (if any) for such taxable year.
    ``(b) Child Tax Credit Refund Amount.--For purposes of this 
section, the child tax credit refund amount is the amount by which the 
aggregate credits allowed under part IV of subchapter A of chapter 1 
for such first taxable year would have been increased if--
        ``(1) the per child amount under section 24(a)(2) for such year 
    were $1,000,
        ``(2) only qualifying children (as defined in section 24(c)) of 
    the taxpayer for such year who had not attained age 17 as of 
    December 31, 2003, were taken into account, and
        ``(3) section 24(d)(1)(B)(ii) did not apply.
    ``(c) Timing of Payments.--In the case of any overpayment 
attributable to this section, the Secretary shall, subject to the 
provisions of this title, refund or credit such overpayment as rapidly 
as possible and, to the extent practicable, before October 1, 2003. No 
refund or credit shall be made or allowed under this section after 
December 31, 2003.
    ``(d) Coordination With Child Tax Credit.--
        ``(1) In general.--The amount of credit which would (but for 
    this subsection and section 26) be allowed under section 24 for the 
    taxpayer's first taxable year beginning in 2003 shall be reduced 
    (but not below zero) by the payments made to the taxpayer under 
    this section. Any failure to so reduce the credit shall be treated 
    as arising out of a mathematical or clerical error and assessed 
    according to section 6213(b)(1).
        ``(2) Joint returns.--In the case of a payment under this 
    section with respect to a joint return, half of such payment shall 
    be treated as having been made to each individual filing such 
    return.
    ``(e) No Interest.--No interest shall be allowed on any overpayment 
attributable to this section.''.
        (2) Clerical amendment.--The table of sections for subchapter B 
    of chapter 65 is amended by adding at the end the following new 
    item:

        ``Sec. 6429. Advance payment of portion of increased child 
                  credit for 2003.''.

    (c) 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, 2002.
        (2) Subsection (b).--The amendments made by subsection (b) 
    shall take effect on the date of the enactment of this Act.

SEC. 102. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET 
              EXPANSION FOR MARRIED TAXPAYERS FILING JOINT RETURNS.

    (a) In General.--The table contained in subparagraph (B) of section 
1(f)(8) (relating to applicable percentage) is amended by inserting 
before the item relating to 2005 the following new item:

            ``2003 and 2004...................................
                                                                  200''.

    (b) Conforming Amendments.--
        (1) Section 1(f)(8)(A) is amended by striking ``2004'' and 
    inserting ``2002''.
        (2) Section 302(c) of the Economic Growth and Tax Relief 
    Reconciliation Act of 2001 is amended by striking ``2004'' and 
    inserting ``2002''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 103. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR MARRIED 
              TAXPAYERS FILING JOINT RETURNS.

    (a) In General.--The table contained in paragraph (7) of section 
63(c) (relating to applicable percentage) is amended by inserting 
before the item relating to 2005 the following new item:

            ``2003 and 2004...................................
                                                                  200''.

    (b) Conforming Amendment.--Section 301(d) of the Economic Growth 
and Tax Relief Reconciliation Act of 2001 is amended by striking 
``2004'' and inserting ``2002''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 104. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET 
              EXPANSION.

    (a) In General.--Clause (i) of section 1(i)(1)(B) (relating to the 
initial bracket amount) is amended by striking ``($12,000 in the case 
of taxable years beginning before January 1, 2008)'' and inserting 
``($12,000 in the case of taxable years beginning after December 31, 
2004, and before January 1, 2008)''.
    (b) Inflation Adjustment.--Subparagraph (C) of section 1(i)(1) is 
amended to read as follows:
            ``(C) Inflation adjustment.--In prescribing the tables 
        under subsection (f) which apply with respect to taxable years 
        beginning in calendar years after 2000--
                ``(i) except as provided in clause (ii), the Secretary 
            shall make no adjustment to the initial bracket amounts for 
            any taxable year beginning before January 1, 2009,
                ``(ii) there shall be an adjustment under subsection 
            (f) of such amounts which shall apply only to taxable years 
            beginning in 2004, and such adjustment shall be determined 
            under subsection (f)(3) by substituting `2002' for `1992' 
            in subparagraph (B) thereof,
                ``(iii) the cost-of-living adjustment used in making 
            adjustments to the initial bracket amounts for any taxable 
            year beginning after December 31, 2008, shall be determined 
            under subsection (f)(3) by substituting `2007' for `1992' 
            in subparagraph (B) thereof, and
                ``(iv) the adjustments under clauses (ii) and (iii) 
            shall not apply to the amount referred to in subparagraph 
            (B)(iii).
        If any amount after adjustment under the preceding sentence is 
        not a multiple of $50, such amount shall be rounded to the next 
        lowest multiple of $50.''.
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to taxable years beginning after December 31, 2002.
        (2) Tables for 2003.--The Secretary of the Treasury shall 
    modify each table which has been prescribed under section 1(f) of 
    the Internal Revenue Code of 1986 for taxable years beginning in 
    2003 and which relates to the amendment made by subsection (a) to 
    reflect such amendment.

SEC. 105. ACCELERATION OF REDUCTION IN INDIVIDUAL INCOME TAX RATES.

    (a) In General.--The table contained in paragraph (2) of section 
1(i) (relating to reductions in rates after June 30, 2001) is amended 
to read as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                            The corresponding percentages shall be substituted for  the following percentages:
                                 ``In the case of taxable years  ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                beginning during calendar year:     28%      31%      36%                                                                                                                                                       39.6%
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2001.............................   27.5%    30.5%    35.5%                                                                                                                                                      39.1%
                               2002.............................   27.0%    30.0%    35.0%                                                                                                                                                      38.6%
                               2003 and thereafter..............   25.0%    28.0%    33.0%                                                                                                                                                     35.0%''.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2002.

SEC. 106. MINIMUM TAX RELIEF TO INDIVIDUALS.

    (a) In General.--
        (1) Subparagraph (A) of section 55(d)(1) is amended by striking 
    ``$49,000 in the case of taxable years beginning in 2001, 2002, 
    2003, and 2004'' and inserting ``$58,000 in the case of taxable 
    years beginning in 2003 and 2004''.
        (2) Subparagraph (B) of section 55(d)(1) is amended by striking 
    ``$35,750 in the case of taxable years beginning in 2001, 2002, 
    2003, and 2004'' and inserting ``$40,250 in the case of taxable 
    years beginning in 2003 and 2004''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to taxable years beginning after December 31, 2002.

SEC. 107. APPLICATION OF EGTRRA SUNSET TO THIS TITLE.

    Each amendment made by this title shall be subject to title IX of 
the Economic Growth and Tax Relief Reconciliation Act of 2001 to the 
same extent and in the same manner as the provision of such Act to 
which such amendment relates.

                TITLE II--GROWTH INCENTIVES FOR BUSINESS

SEC. 201. INCREASE AND EXTENSION OF BONUS DEPRECIATION.

    (a) In General.--Section 168(k) (relating to special allowance for 
certain property acquired after September 10, 2001, and before 
September 11, 2004) is amended by adding at the end the following new 
paragraph:
        ``(4) 50-percent bonus depreciation for certain property.--
            ``(A) In general.--In the case of 50-percent bonus 
        depreciation property--
                ``(i) paragraph (1)(A) shall be applied by substituting 
            `50 percent' for `30 percent', and
                ``(ii) except as provided in paragraph (2)(C), such 
            property shall be treated as qualified property for 
            purposes of this subsection.
            ``(B) 50-percent bonus depreciation property.--For purposes 
        of this subsection, the term `50-percent bonus depreciation 
        property' means property described in paragraph (2)(A)(i)--
                ``(i) the original use of which commences with the 
            taxpayer after May 5, 2003,
                ``(ii) which is acquired by the taxpayer after May 5, 
            2003, and before January 1, 2005, but only if no written 
            binding contract for the acquisition was in effect before 
            May 6, 2003, and
                ``(iii) which is placed in service by the taxpayer 
            before January 1, 2005, or, in the case of property 
            described in paragraph (2)(B) (as modified by subparagraph 
            (C) of this paragraph), before January 1, 2006.
            ``(C) Special rules.--Rules similar to the rules of 
        subparagraphs (B) and (D) of paragraph (2) shall apply for 
        purposes of this paragraph; except that references to September 
        10, 2001, shall be treated as references to May 5, 2003.
            ``(D) Automobiles.--Paragraph (2)(E) shall be applied by 
        substituting `$7,650' for `$4,600' in the case of 50-percent 
        bonus depreciation property.
            ``(E) Election of 30-percent bonus.--If a taxpayer makes an 
        election under this subparagraph with respect to any class of 
        property for any taxable year, subparagraph (A)(i) shall not 
        apply to all property in such class placed in service during 
        such taxable year.''.
     (b) Extension of Certain Dates for 30-Percent Bonus Depreciation 
Property.--
        (1) Portion of basis taken into account.--
            (A) Subparagraphs (B)(ii) and (D)(i) of section 168(k)(2) 
        are each amended by striking ``September 11, 2004'' each place 
        it appears in the text and inserting ``January 1, 2005''.
            (B) Clause (ii) of section 168(k)(2)(B) is amended by 
        striking ``pre-september 11, 2004'' in the heading and 
        inserting ``pre-january 1, 2005''.
        (2) Acquisition date.--Clause (iii) of section 168(k)(2)(A) is 
    amended by striking ``September 11, 2004'' each place it appears 
    and inserting ``January 1, 2005''.
        (3) Election.--Clause (iii) of section 168(k)(2)(C) is amended 
    by adding at the end the following: ``The preceding sentence shall 
    be applied separately with respect to property treated as qualified 
    property by paragraph (4) and other qualified property.''.
    (c) Conforming Amendments.--
        (1) The subsection heading for section 168(k) is amended by 
    striking ``September 11, 2004'' and inserting ``January 1, 2005''.
        (2) The heading for clause (i) of section 1400L(b)(2)(C) is 
    amended by striking ``30-percent additional allowance property'' 
    and inserting ``Bonus depreciation property under section 168(k)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after May 5, 2003.

SEC. 202. INCREASED EXPENSING FOR SMALL BUSINESS.

    (a) In General.--Paragraph (1) of section 179(b) (relating to 
dollar limitation) is amended to read as follows:
        ``(1) Dollar limitation.--The aggregate cost which may be taken 
    into account under subsection (a) for any taxable year shall not 
    exceed $25,000 ($100,000 in the case of taxable years beginning 
    after 2002 and before 2006).''.
    (b) Increase in Qualifying Investment at Which Phaseout Begins.--
Paragraph (2) of section 179(b) (relating to reduction in limitation) 
is amended by inserting ``($400,000 in the case of taxable years 
beginning after 2002 and before 2006)'' after ``$200,000''.
    (c) Off-the-Shelf Computer Software.--Paragraph (1) of section 
179(d) (defining section 179 property) is amended to read as follows:
        ``(1) Section 179 property.--For purposes of this section, the 
    term `section 179 property' means property--
            ``(A) which is--
                ``(i) tangible property (to which section 168 applies), 
            or
                ``(ii) computer software (as defined in section 
            197(e)(3)(B)) which is described in section 
            197(e)(3)(A)(i), to which section 167 applies, and which is 
            placed in service in a taxable year beginning after 2002 
            and before 2006,
            ``(B) which is section 1245 property (as defined in section 
        1245(a)(3)), and
            ``(C) which is acquired by purchase for use in the active 
        conduct of a trade or business.
    Such term shall not include any property described in section 50(b) 
    and shall not include air conditioning or heating units.''.
    (d) Adjustment of Dollar Limit and Phaseout Threshold for 
Inflation.--Subsection (b) of section 179 (relating to limitations) is 
amended by adding at the end the following new paragraph:
        ``(5) Inflation adjustments.--
            ``(A) In general.--In the case of any taxable year 
        beginning in a calendar year after 2003 and before 2006, the 
        $100,000 and $400,000 amounts in paragraphs (1) and (2) shall 
        each be increased by an amount equal to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for the calendar year in which the taxable 
            year begins, by substituting `calendar year 2002' for 
            `calendar year 1992' in subparagraph (B) thereof.
            ``(B) Rounding.--
                ``(i) Dollar limitation.--If the amount in paragraph 
            (1) as increased under subparagraph (A) is not a multiple 
            of $1,000, such amount shall be rounded to the nearest 
            multiple of $1,000.
                ``(ii) Phaseout amount.--If the amount in paragraph (2) 
            as increased under subparagraph (A) is not a multiple of 
            $10,000, such amount shall be rounded to the nearest 
            multiple of $10,000.''.
    (e) Revocation of Election.--Paragraph (2) of section 179(c) 
(relating to election irrevocable) is amended by adding at the end the 
following new sentence: ``Any such election or specification with 
respect to any taxable year beginning after 2002 and before 2006 may be 
revoked by the taxpayer with respect to any property, and such 
revocation, once made, shall be irrevocable.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

      TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS

SEC. 301. REDUCTION IN CAPITAL GAINS RATES FOR INDIVIDUALS; REPEAL OF 
              5-YEAR HOLDING PERIOD REQUIREMENT.

    (a) In General.--
        (1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by 
    striking ``10 percent'' and inserting ``5 percent (0 percent in the 
    case of taxable years beginning after 2007)''.
        (2) The following sections are each amended by striking ``20 
    percent'' and inserting ``15 percent'':
            (A) Section 1(h)(1)(C).
            (B) Section 55(b)(3)(C).
            (C) Section 1445(e)(1).
            (D) The second sentence of section 7518(g)(6)(A).
            (E) The second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936.
    (b) Conforming Amendments.--
        (1) Section 1(h) is amended--
            (A) by striking paragraphs (2) and (9),
            (B) by redesignating paragraphs (3) through (8) as 
        paragraphs (2) through (7), respectively, and
            (C) by redesignating paragraphs (10), (11), and (12) as 
        paragraphs (8), (9), and (10), respectively.
        (2) Paragraph (3) of section 55(b) is amended by striking ``In 
    the case of taxable years beginning after December 31, 2000, rules 
    similar to the rules of section 1(h)(2) shall apply for purposes of 
    subparagraphs (B) and (C).''.
        (3) Paragraph (7) of section 57(a) is amended--
            (A) by striking ``42 percent'' the first place it appears 
        and inserting ``7 percent'', and
            (B) by striking the last sentence.
    (c) Transitional Rules for Taxable Years Which Include May 6, 
2003.--For purposes of applying section 1(h) of the Internal Revenue 
Code of 1986 in the case of a taxable year which includes May 6, 2003--
        (1) The amount of tax determined under subparagraph (B) of 
    section 1(h)(1) of such Code shall be the sum of--
            (A) 5 percent of the lesser of--
                (i) the net capital gain determined by taking into 
            account only gain or loss properly taken into account for 
            the portion of the taxable year on or after May 6, 2003 
            (determined without regard to collectibles gain or loss, 
            gain described in section 1(h)(6)(A)(i) of such Code, and 
            section 1202 gain), or
                (ii) the amount on which a tax is determined under such 
            subparagraph (without regard to this subsection),
            (B) 8 percent of the lesser of--
                (i) the qualified 5-year gain (as defined in section 
            1(h)(9) of the Internal Revenue Code of 1986, as in effect 
            on the day before the date of the enactment of this Act) 
            properly taken into account for the portion of the taxable 
            year before May 6, 2003, or
                (ii) the excess (if any) of--

                    (I) the amount on which a tax is determined under 
                such subparagraph (without regard to this subsection), 
                over
                    (II) the amount on which a tax is determined under 
                subparagraph (A), plus

            (C) 10 percent of the excess (if any) of--
                (i) the amount on which a tax is determined under such 
            subparagraph (without regard to this subsection), over
                (ii) the sum of the amounts on which a tax is 
            determined under subparagraphs (A) and (B).
        (2) The amount of tax determined under subparagraph (C) of 
    section (1)(h)(1) of such Code shall be the sum of--
            (A) 15 percent of the lesser of--
                (i) the excess (if any) of the amount of net capital 
            gain determined under subparagraph (A)(i) of paragraph (1) 
            of this subsection over the amount on which a tax is 
            determined under subparagraph (A) of paragraph (1) of this 
            subsection, or
                (ii) the amount on which a tax is determined under such 
            subparagraph (C) (without regard to this subsection), plus
            (B) 20 percent of the excess (if any) of--
                (i) the amount on which a tax is determined under such 
            subparagraph (C) (without regard to this subsection), over
                (ii) the amount on which a tax is determined under 
            subparagraph (A) of this paragraph.
        (3) For purposes of applying section 55(b)(3) of such Code, 
    rules similar to the rules of paragraphs (1) and (2) of this 
    subsection shall apply.
        (4) In applying this subsection with respect to any pass-thru 
    entity, the determination of when gains and losses are properly 
    taken into account shall be made at the entity level.
        (5) For purposes of applying section 1(h)(11) of such Code, as 
    added by section 302 of this Act, to this subsection, dividends 
    which are qualified dividend income shall be treated as gain 
    properly taken into account for the portion of the taxable year on 
    or after May 6, 2003.
        (6) Terms used in this subsection which are also used in 
    section 1(h) of such Code shall have the respective meanings that 
    such terms have in such section.
    (d) Effective Dates.--
        (1) In general.--Except as otherwise provided by this 
    subsection, the amendments made by this section shall apply to 
    taxable years ending on or after May 6, 2003.
        (2) Withholding.--The amendment made by subsection (a)(2)(C) 
    shall apply to amounts paid after the date of the enactment of this 
    Act.
        (3) Small business stock.--The amendments made by subsection 
    (b)(3) shall apply to dispositions on or after May 6, 2003.

SEC. 302. DIVIDENDS OF INDIVIDUALS TAXED AT CAPITAL GAIN RATES.

    (a) In General.--Section 1(h) (relating to maximum capital gains 
rate), as amended by section 301, is amended by adding at the end the 
following new paragraph:
        ``(11) Dividends taxed as net capital gain.--
            ``(A) In general.--For purposes of this subsection, the 
        term `net capital gain' means net capital gain (determined 
        without regard to this paragraph) increased by qualified 
        dividend income.
            ``(B) Qualified dividend income.--For purposes of this 
        paragraph--
                ``(i) In general.--The term `qualified dividend income' 
            means dividends received during the taxable year from--

                    ``(I) domestic corporations, and
                    ``(II) qualified foreign corporations.

                ``(ii) Certain dividends excluded.--Such term shall not 
            include--

                    ``(I) any dividend from a corporation which for the 
                taxable year of the corporation in which the 
                distribution is made, or the preceding taxable year, is 
                a corporation exempt from tax under section 501 or 521,
                    ``(II) any amount allowed as a deduction under 
                section 591 (relating to deduction for dividends paid 
                by mutual savings banks, etc.), and
                    ``(III) any dividend described in section 404(k).

                ``(iii) Coordination with section 246(c).--Such term 
            shall not include any dividend on any share of stock--

                    ``(I) with respect to which the holding period 
                requirements of section 246(c) are not met (determined 
                by substituting in section 246(c)(1) `60 days' for `45 
                days' each place it appears and by substituting `120-
                day period' for `90-day period'), or
                    ``(II) to the extent that the taxpayer is under an 
                obligation (whether pursuant to a short sale or 
                otherwise) to make related payments with respect to 
                positions in substantially similar or related property.

            ``(C) Qualified foreign corporations.--
                ``(i) In general.--Except as otherwise provided in this 
            paragraph, the term `qualified foreign corporation' means 
            any foreign corporation if--

                    ``(I) such corporation is incorporated in a 
                possession of the United States, or
                    ``(II) such corporation is eligible for benefits of 
                a comprehensive income tax treaty with the United 
                States which the Secretary determines is satisfactory 
                for purposes of this paragraph and which includes an 
                exchange of information program.

                ``(ii) Dividends on stock readily tradable on united 
            states securities market.--A foreign corporation not 
            otherwise treated as a qualified foreign corporation under 
            clause (i) shall be so treated with respect to any dividend 
            paid by such corporation if the stock with respect to which 
            such dividend is paid is readily tradable on an established 
            securities market in the United States.
                ``(iii) Exclusion of dividends of certain foreign 
            corporations.--Such term shall not include any foreign 
            corporation which for the taxable year of the corporation 
            in which the dividend was paid, or the preceding taxable 
            year, is a foreign personal holding company (as defined in 
            section 552), a foreign investment company (as defined in 
            section 1246(b)), or a passive foreign investment company 
            (as defined in section 1297).
                ``(iv) Coordination with foreign tax credit 
            limitation.--Rules similar to the rules of section 
            904(b)(2)(B) shall apply with respect to the dividend rate 
            differential under this paragraph.
            ``(D) Special rules.--
                ``(i) Amounts taken into account as investment 
            income.--Qualified dividend income shall not include any 
            amount which the taxpayer takes into account as investment 
            income under section 163(d)(4)(B).
                ``(ii) Extraordinary dividends.--If an individual 
            receives, with respect to any share of stock, qualified 
            dividend income from 1 or more dividends which are 
            extraordinary dividends (within the meaning of section 
            1059(c)), any loss on the sale or exchange of such share 
            shall, to the extent of such dividends, be treated as long-
            term capital loss.
                ``(iii) Treatment of dividends from regulated 
            investment companies and real estate investment trusts.--A 
            dividend received from a regulated investment company or a 
            real estate investment trust shall be subject to the 
            limitations prescribed in sections 854 and 857.''.
    (b) Exclusion of Dividends From Investment Income.--Subparagraph 
(B) of section 163(d)(4) (defining net investment income) is amended by 
adding at the end the following flush sentence:
        ``Such term shall include qualified dividend income (as defined 
        in section 1(h)(11)(B)) only to the extent the taxpayer elects 
        to treat such income as investment income for purposes of this 
        subsection.''.
    (c) Treatment of Dividends From Regulated Investment Companies.--
        (1) Subsection (a) of section 854 (relating to dividends 
    received from regulated investment companies) is amended by 
    inserting ``section 1(h)(11) (relating to maximum rate of tax on 
    dividends) and'' after ``For purposes of''.
        (2) Paragraph (1) of section 854(b) (relating to other 
    dividends) is amended by redesignating subparagraph (B) as 
    subparagraph (C) and by inserting after subparagraph (A) the 
    following new subparagraph:
            ``(B) Maximum rate under section 1(h).--
                ``(i) In general.--If the aggregate dividends received 
            by a regulated investment company during any taxable year 
            are less than 95 percent of its gross income, then, in 
            computing the maximum rate under section 1(h)(11), rules 
            similar to the rules of subparagraph (A) shall apply.
                ``(ii) Gross income.--For purposes of clause (i), in 
            the case of 1 or more sales or other dispositions of stock 
            or securities, the term `gross income' includes only the 
            excess of--

                    ``(I) the net short-term capital gain from such 
                sales or dispositions, over
                    ``(II) the net long-term capital loss from such 
                sales or dispositions.

                ``(iii) Dividends from real estate investment trusts.--
            For purposes of clause (i)--

                    ``(I) paragraph (3)(B)(ii) shall not apply, and
                    ``(II) in the case of a distribution from a trust 
                described in such paragraph, the amount of such 
                distribution which is a dividend shall be subject to 
                the limitations under section 857(c).

                ``(iv) Dividends from qualified foreign corporations.--
            For purposes of clause (i), dividends received from 
            qualified foreign corporations (as defined in section 
            1(h)(11)) shall also be taken into account in computing 
            aggregate dividends received.''.
        (3) Subparagraph (C) of section 854(b)(1), as redesignated by 
    paragraph (2), is amended by striking ``subparagraph (A)'' and 
    inserting ``subparagraph (A) or (B)''.
        (4) Paragraph (2) of section 854(b) is amended by inserting 
    ``the maximum rate under section 1(h)(11) and'' after ``for 
    purposes of''.
        (5) Subsection (b) of section 854 is amended by adding at the 
    end the following new paragraph:
        ``(5) Coordination with section 1(h)(11).--For purposes of 
    paragraph (1)(B), an amount shall be treated as a dividend only if 
    the amount is qualified dividend income (within the meaning of 
    section 1(h)(11)(B)).''.
    (d) Treatment of Dividends Received From Real Estate Investment 
Trusts.--Section 857(c) (relating to restrictions applicable to 
dividends received from real estate investment trusts) is amended to 
read as follows:
    ``(c) Restrictions Applicable to Dividends Received From Real 
Estate Investment Trusts.--
        ``(1) Section 243.--For purposes of 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 a dividend.
        ``(2) Section 1(h)(11).--For purposes of section 1(h)(11) 
    (relating to maximum rate of tax on dividends)--
            ``(A) rules similar to the rules of subparagraphs (B) and 
        (C) of section 854(b)(1) shall apply to dividends received from 
        a real estate investment trust which meets the requirements of 
        this part, and
            ``(B) for purposes of such rules, such a trust shall be 
        treated as receiving qualified dividend income during any 
        taxable year in an amount equal to the sum of--
                ``(i) the excess of real estate investment trust 
            taxable income computed under section 857(b)(2) for the 
            preceding taxable year over the tax payable by the trust 
            under section 857(b)(1) for such preceding taxable year, 
            and
                ``(ii) the excess of the income subject to tax by 
            reason of the application of the regulations under section 
            337(d) for the preceding taxable year over the tax payable 
            by the trust on such income for such preceding taxable 
            year.''.
    (e) Conforming Amendments.--
        (1) Paragraph (3) of section 1(h), as redesignated by section 
    301, is amended to read as follows:
        ``(3) Adjusted net capital gain.--For purposes of this 
    subsection, the term `adjusted net capital gain' means the sum of--
            ``(A) net capital gain (determined without regard to 
        paragraph (11)) reduced (but not below zero) by the sum of--
                ``(i) unrecaptured section 1250 gain, and
                ``(ii) 28-percent rate gain, plus
            ``(B) qualified dividend income (as defined in paragraph 
        (11)).''.
        (2) Subsection (f) of section 301 is amended adding at the end 
    the following new paragraph:
        ``(4) For taxation of dividends received by individuals at 
    capital gain rates, see section 1(h)(11).''.
        (3) Paragraph (1) of section 306(a) is amended by adding at the 
    end the following new subparagraph:
            ``(D) Treatment as dividend.--For purposes of section 
        1(h)(11) and such other provisions as the Secretary may 
        specify, any amount treated as ordinary income under this 
        paragraph shall be treated as a dividend received from the 
        corporation.''.
        (4)(A) Subpart C of part II of subchapter C of chapter 1 
    (relating to collapsible corporations) is repealed.
        (B)(i) Section 338(h) is amended by striking paragraph (14).
        (ii) Sections 467(c)(5)(C), 1255(b)(2), and 1257(d) are each 
    amended by striking ``, 341(e)(12),''.
        (iii) The table of subparts for part II of subchapter C of 
    chapter 1 is amended by striking the item related to subpart C.
        (5) Section 531 is amended by striking ``equal to'' and all 
    that follows and inserting ``equal to 15 percent of the accumulated 
    taxable income.''.
        (6) Section 541 is amended by striking ``equal to'' and all 
    that follows and inserting ``equal to 15 percent of the 
    undistributed personal holding company income.''.
        (7) Section 584(c) is amended by adding at the end the 
    following new flush sentence:
``The proportionate share of each participant in the amount of 
dividends received by the common trust fund and to which section 
1(h)(11) applies shall be considered for purposes of such paragraph as 
having been received by such participant.''.
        (8) Paragraph (5) of section 702(a) is amended to read as 
    follows:
        ``(5) dividends with respect to which section 1(h)(11) or part 
    VIII of subchapter B applies,''.
    (f) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to taxable years 
    beginning after December 31, 2002.
        (2) Regulated investment companies and real estate investment 
    trusts.--In the case of a regulated investment company or a real 
    estate investment trust, the amendments made by this section shall 
    apply to taxable years ending after December 31, 2002; except that 
    dividends received by such a company or trust on or before such 
    date shall not be treated as qualified dividend income (as defined 
    in section 1(h)(11)(B) of the Internal Revenue Code of 1986, as 
    added by this Act).

SEC. 303. SUNSET OF TITLE.

    All provisions of, and amendments made by, this title shall not 
apply to taxable years beginning after December 31, 2008, and the 
Internal Revenue Code of 1986 shall be applied and administered to such 
years as if such provisions and amendments had never been enacted.

                TITLE IV--TEMPORARY STATE FISCAL RELIEF

SEC. 401. TEMPORARY STATE FISCAL RELIEF.

    (a) $10,000,000,000 for a Temporary Increase of the Medicaid 
FMAP.--
        (1) Permitting maintenance of fiscal year 2002 fmap for last 2 
    calendar quarters of fiscal year 2003.--Subject to paragraph (5), 
    if the FMAP determined without regard to this subsection for a 
    State for fiscal year 2003 is less than the FMAP as so determined 
    for fiscal year 2002, the FMAP for the State for fiscal year 2002 
    shall be substituted for the State's FMAP for the third and fourth 
    calendar quarters of fiscal year 2003, before the application of 
    this subsection.
        (2) Permitting maintenance of fiscal year 2003 fmap for first 3 
    quarters of fiscal year 2004.--Subject to paragraph (5), if the 
    FMAP determined without regard to this subsection for a State for 
    fiscal year 2004 is less than the FMAP as so determined for fiscal 
    year 2003, the FMAP for the State for fiscal year 2003 shall be 
    substituted for the State's FMAP for the first, second, and third 
    calendar quarters of fiscal year 2004, before the application of 
    this subsection.
        (3) General 2.95 percentage points increase for last 2 calendar 
    quarters of fiscal year 2003 and first 3 calendar quarters of 
    fiscal year 2004.--Subject to paragraphs (5), (6), and (7), for 
    each State for the third and fourth calendar quarters of fiscal 
    year 2003 and for the first, second, and third calendar quarters of 
    fiscal year 2004, the FMAP (taking into account the application of 
    paragraphs (1) and (2)) shall be increased by 2.95 percentage 
    points.
        (4) Increase in cap on medicaid payments to territories.--
    Subject to paragraphs (6) and (7), with respect to the third and 
    fourth calendar quarters of fiscal year 2003 and the first, second, 
    and third calendar quarters of fiscal year 2004, the amounts 
    otherwise determined for Puerto Rico, the Virgin Islands, Guam, the 
    Northern Mariana Islands, and American Samoa under subsections (f) 
    and (g) of section 1108 of the Social Security Act (42 U.S.C. 1308) 
    shall each be increased by an amount equal to 5.90 percent of such 
    amounts.
        (5) Scope of application.--The increases in the FMAP for a 
    State under this subsection shall apply only for purposes of title 
    XIX of the Social Security Act and shall not apply with respect 
    to--
            (A) disproportionate share hospital payments described in 
        section 1923 of such Act (42 U.S.C. 1396r-4);
            (B) payments under title IV or XXI of such Act (42 U.S.C. 
        601 et seq. and 1397aa et seq.); or
            (C) any payments under XIX of such Act that are based on 
        the enhanced FMAP described in section 2105(b) of such Act (42 
        U.S.C. 1397ee(b)).
        (6) State eligibility.--
            (A) In general.--Subject to subparagraph (B), a State is 
        eligible for an increase in its FMAP under paragraph (3) or an 
        increase in a cap amount under paragraph (4) only if the 
        eligibility under its State plan under title XIX of the Social 
        Security Act (including any waiver under such title or under 
        section 1115 of such Act (42 U.S.C. 1315)) is no more 
        restrictive than the eligibility under such plan (or waiver) as 
        in effect on September 2, 2003.
            (B) State reinstatement of eligibility permitted.--A State 
        that has restricted eligibility under its State plan under 
        title XIX of the Social Security Act (including any waiver 
        under such title or under section 1115 of such Act (42 U.S.C. 
        1315)) after September 2, 2003, is eligible for an increase in 
        its FMAP under paragraph (3) or an increase in a cap amount 
        under paragraph (4) in the first calendar quarter (and 
        subsequent calendar quarters) in which the State has reinstated 
        eligibility that is no more restrictive than the eligibility 
        under such plan (or waiver) as in effect on September 2, 2003.
            (C) Rule of construction.--Nothing in subparagraph (A) or 
        (B) shall be construed as affecting a State's flexibility with 
        respect to benefits offered under the State medicaid program 
        under title XIX of the Social Security Act (42 U.S.C. 1396 et 
        seq.) (including any waiver under such title or under section 
        1115 of such Act (42 U.S.C. 1315)).
        (7) Requirement for certain states.--In the case of a State 
    that requires political subdivisions within the State to contribute 
    toward the non-Federal share of expenditures under the State 
    medicaid plan required under section 1902(a)(2) of the Social 
    Security Act (42 U.S.C. 1396a(a)(2)), the State shall not require 
    that such political subdivisions pay a greater percentage of the 
    non-Federal share of such expenditures for the third and fourth 
    calendar quarters of fiscal year 2003 and the first, second and 
    third calendar quarters of fiscal year 2004, than the percentage 
    that was required by the State under such plan on April 1, 2003, 
    prior to application of this subsection.
        (8) Definitions.--In this subsection:
            (A) FMAP.--The term ``FMAP'' means the Federal medical 
        assistance percentage, as defined in section 1905(b) of the 
        Social Security Act (42 U.S.C. 1396d(b)).
            (B) State.--The term ``State'' has the meaning given such 
        term for purposes of title XIX of the Social Security Act (42 
        U.S.C. 1396 et seq.).
        (9) Repeal.--Effective as of October 1, 2004, this subsection 
    is repealed.
    (b) $10,000,000,000 to Assist States in Providing Government 
Services.--The Social Security Act (42 U.S.C. 301 et seq.) is amended 
by inserting after title V the following:

               ``TITLE VI--TEMPORARY STATE FISCAL RELIEF

``SEC. 601. TEMPORARY STATE FISCAL RELIEF.

    ``(a) Appropriation.--There is authorized to be appropriated and is 
appropriated for making payments to States under this section, 
$5,000,000,000 for each of fiscal years 2003 and 2004.
    ``(b) Payments.--
        ``(1) Fiscal year 2003.--From the amount appropriated under 
    subsection (a) for fiscal year 2003, the Secretary of the Treasury 
    shall, not later than the later of the date that is 45 days after 
    the date of enactment of this Act or the date that a State provides 
    the certification required by subsection (e) for fiscal year 2003, 
    pay each State the amount determined for the State for fiscal year 
    2003 under subsection (c).
        ``(2) Fiscal year 2004.--From the amount appropriated under 
    subsection (a) for fiscal year 2004, the Secretary of the Treasury 
    shall, not later than the later of October 1, 2003, or the date 
    that a State provides the certification required by subsection (e) 
    for fiscal year 2004, pay each State the amount determined for the 
    State for fiscal year 2004 under subsection (c).
    ``(c) Payments Based on Population.--
        ``(1) In general.--Subject to paragraph (2), the amount 
    appropriated under subsection (a) for each of fiscal years 2003 and 
    2004 shall be used to pay each State an amount equal to the 
    relative population proportion amount described in paragraph (3) 
    for such fiscal year.
        ``(2) Minimum payment.--
            ``(A) In general.--No State shall receive a payment under 
        this section for a fiscal year that is less than--
                ``(i) in the case of 1 of the 50 States or the District 
            of Columbia, \1/2\ of 1 percent of the amount appropriated 
            for such fiscal year under subsection (a); and
                ``(ii) in the case of the Commonwealth of Puerto Rico, 
            the United States Virgin Islands, Guam, the Commonwealth of 
            the Northern Mariana Islands, or American Samoa, \1/10\ of 
            1 percent of the amount appropriated for such fiscal year 
            under subsection (a).
            ``(B) Pro rata adjustments.--The Secretary of the Treasury 
        shall adjust on a pro rata basis the amount of the payments to 
        States determined under this section without regard to this 
        subparagraph to the extent necessary to comply with the 
        requirements of subparagraph (A).
        ``(3) Relative population proportion amount.--The relative 
    population proportion amount described in this paragraph is the 
    product of--
            ``(A) the amount described in subsection (a) for a fiscal 
        year; and
            ``(B) the relative State population proportion (as defined 
        in paragraph (4)).
        ``(4) Relative state population proportion defined.--For 
    purposes of paragraph (3)(B), the term `relative State population 
    proportion' means, with respect to a State, the amount equal to the 
    quotient of--
            ``(A) the population of the State (as reported in the most 
        recent decennial census); and
            ``(B) the total population of all States (as reported in 
        the most recent decennial census).
    ``(d) Use of Payment.--
        ``(1) In general.--Subject to paragraph (2), a State shall use 
    the funds provided under a payment made under this section for a 
    fiscal year to--
            ``(A) provide essential government services; or
            ``(B) cover the costs to the State of complying with any 
        Federal intergovernmental mandate (as defined in section 421(5) 
        of the Congressional Budget Act of 1974) to the extent that the 
        mandate applies to the State, and the Federal Government has 
        not provided funds to cover the costs.
        ``(2) Limitation.--A State may only use funds provided under a 
    payment made under this section for types of expenditures permitted 
    under the most recently approved budget for the State.
    ``(e) Certification.--In order to receive a payment under this 
section for a fiscal year, the State shall provide the Secretary of the 
Treasury with a certification that the State's proposed uses of the 
funds are consistent with subsection (d).
    ``(f) Definition of State.--In this section, the term `State' means 
the 50 States, the District of Columbia, the Commonwealth of Puerto 
Rico, the United States Virgin Islands, Guam, the Commonwealth of the 
Northern Mariana Islands, and American Samoa.
    ``(g) Repeal.--Effective as of October 1, 2004, this title is 
repealed.''.

           TITLE V--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003

SEC. 501. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

    Notwithstanding section 6655 of the Internal Revenue Code of 1986, 
25 percent of the amount of any required installment of corporate 
estimated tax which is otherwise due in September 2003 shall not be due 
until October 1, 2003.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.