109 HR 2950 IH: Individual Tax Simplification Act of 2005
U.S. House of Representatives
2005-06-16
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.
(a)This Act may be cited as the Individual Tax Simplification Act of 2005
.
(b)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)
Sec. 1. Short title
Title I—Simplification relating to nonrefundable personal credits
Sec. 101. Repeal of interaction with alternative minimum tax
Sec. 102. Uniform phaseout of credits for adoption, children, and education
Title II—Simplification of capital gains tax
Sec. 201. Simplification of capital gains tax
Title III—Repeal of certain hidden marginal rate increases; repeal of individual minimum tax
Subtitle A—Repeals
Sec. 301. Repeal of overall limitation on itemized deductions
Sec. 302. Repeal of phaseout of personal exemptions
Sec. 303. Repeal of alternative minimum tax on individuals
Subtitle B—Revenue Offsets
Sec. 311. Additional income tax
<enum>I</enum><header>Simplification relating to nonrefundable personal credits</header>
<section id="H87ABD540521042AD8CAACD53B04EA129"><enum>101.</enum><header>Repeal of interaction with alternative minimum tax</header>
<subsection id="H8687C11B2942492A94FFC4AAFB541A0"><enum>(a)</enum><header>General rule</header><text>Subsection (a) of section 26 (relating to limitation based on amount of tax) is amended to read as follows:</text>
<quoted-block id="H7B07F85BE664417586588D6F1BD4AE96">
<subsection id="HBD79EAC596C842DDB98878E5DEDAD061"><enum>(a)</enum><header>Limitation based on amount of tax</header><text>The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the tax imposed by this chapter for the taxable year.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection>
<subsection id="HF13F90424ECB4B2AB04124C0C1F2F7C"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HD8D781FAF00A489DBF99C24EDBD31EAB"><enum>(1)</enum><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/26">section 26(b)</external-xref> is amended by inserting <quote>subsection (a) and</quote> before <quote>paragraph (1)</quote>.</text></paragraph>
<paragraph id="H233DEAED31594426BA4C66F9BC19968"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/23">Section 23</external-xref> is amended—</text>
<subparagraph id="H23AF6E6BDDE449E3AABE9D3D7380E4A1"><enum>(A)</enum><text>in subsection (b) by striking paragraph (4), and</text></subparagraph>
<subparagraph id="HE86EA73859CC423EBAE6C0011717386"><enum>(B)</enum><text>in subsection (c) by striking <quote>subsection (b)(4) for such taxable year</quote> and inserting <quote>section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 24 and 1400C)</quote>.</text></subparagraph></paragraph>
<paragraph id="H265E81F83F9D47E5BFCC966F6726456C"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24</external-xref> is amended—</text>
<subparagraph id="H74FB8D1D38F64FDD8B5DCCB4BACE762"><enum>(A)</enum><text>in subsection (b) by striking paragraph (3), and</text></subparagraph>
<subparagraph id="H95224F89674F4595AE5BBF3C116100EA"><enum>(B)</enum><text>in subsection (d)(1) by striking <quote>subsection (b)(3)</quote> each place it appears and inserting <quote>section 26(a)</quote>.</text></subparagraph></paragraph>
<paragraph id="H2A4089F19D08451FA3516DE2795E074C"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/25B">Section 25B</external-xref> is amended by striking subsection (g) and redesignating subsection (h) as subsection (g).</text></paragraph>
<paragraph id="HDE940C9215404694BF4747B3EE8B084F"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(i)</external-xref> is amended by striking <quote>2004, or 2005</quote> and inserting <quote>or 2004</quote>.</text></paragraph></subsection>
<subsection id="H1B459E7813764332B41C2884A85145ED"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2005.</text></subsection></section>
<section id="H1D1C1015503547F7BBE823F59D7E1605"><enum>102.</enum><header>Uniform phaseout of credits for adoption, children, and education</header>
<subsection id="H854868356AC24341B9CDB7CB31032327"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/26">Section 26</external-xref> is amended by redesignating subsections (b) and (c) as subsections (c) and (d), respectively, and by inserting after subsection (a) the following new subsection:</text>
<quoted-block id="H659DE0ACFBBD40E8A294992DA19F1E2D">
<subsection id="H81A6BABACD3A4941BA1F7775A815E5F4"><enum>(b)</enum><header>Uniform phaseout of adoption expense credit, child credit, and hope and lifetime learning credits</header>
<paragraph id="H4C1D153BFC674DD297D15400C0A02300"><enum>(1)</enum><header>In general</header><text>The aggregate amount which would (but for subsection (a) and this subsection) be allowed as a credit under sections 23, 24, and 25A shall be reduced (but not below zero) by 10 percent of the amount by which the taxpayer’s modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term <term>modified adjusted gross income</term> means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.</text></paragraph>
<paragraph id="HE60C4DE5C22F4301AE2B9DB1EF079180"><enum>(2)</enum><header>Threshold amount</header><text>For purposes of paragraph (1), the term <term>threshold amount</term> means—</text>
<subparagraph id="H2DF8222E85774F5EAB6B6C4CA1D42F1"><enum>(A)</enum><text>$110,000 in the case of a joint return,</text></subparagraph>
<subparagraph id="H81E42FC8472D4014B4D3F4A9BE3414C6"><enum>(B)</enum><text>$75,000 in the case of an individual who is not married, and</text></subparagraph>
<subparagraph id="HFE2B6C08DF164DD4AC24F337DE4C3B1E"><enum>(C)</enum><text>$55,000 in the case of a married individual filing a separate return.</text></subparagraph><continuation-text continuation-text-level="paragraph">For purposes of this paragraph, marital status shall be determined under section 7703.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection>
<subsection id="H01972E2ED32B4D55813C5BFBD1F6826D"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HEE274F216CF043EAA5F0925FDF17BE2F"><enum>(1)</enum><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/23">section 23(b)</external-xref> is amended to read as follows:</text>
<quoted-block id="H5131664627E54E3E9D00DEF0D9F1F6">
<paragraph indent="up1" id="H20D433484BD541D5981C3FBFD8BE42FB"><enum>(2)</enum><header>Limitation based on adjusted gross income</header><text>For limitation based on adjusted gross income, see section 26(b).</text> </paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H4F62B38C42024887A484268B31E8D78B"><enum>(2)</enum><text>Subsection (c) of <external-xref legal-doc="usc" parsable-cite="usc/26/23">section 23</external-xref> is amended—</text>
<subparagraph id="H388EE2E387634582BFF9D2ED0000251B"><enum>(A)</enum><text>by inserting <quote>(as reduced under section 26(b))</quote> before <quote>exceeds</quote>, and</text></subparagraph>
<subparagraph id="H9C743C63808A4FB6A5D99E3CB72203BC"><enum>(B)</enum><text>by adding at the end the following new sentence: <quote>For purposes of this subsection, the reduction under section 26(b) shall first be applied to the credits under sections 24 and 25A and then to the credit under this section.</quote>.</text></subparagraph></paragraph>
<paragraph id="H554D5ABBFCC94BB28D60D7C2DE476075"><enum>(3)</enum><text>Subsection (b) of <external-xref legal-doc="usc" parsable-cite="usc/26/24">section 24</external-xref> is amended to read as follows:</text>
<quoted-block id="HBA1E819BF72D4382A0EBB26369385E50">
<subsection id="HB0E74B374D6D4C67AD5411D234A92B1B"><enum>(b)</enum><header>Limitation based on adjusted gross</header><text>For limitation based on adjusted gross income, see section 26(b).</text> </subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H83E01FBF29864608A4D8D39C23FBCE56"><enum>(4)</enum><text>Subsection (d) of <external-xref legal-doc="usc" parsable-cite="usc/26/25A">section 25A</external-xref> is amended to read as follows:</text>
<quoted-block id="HDF3E8EA8502D483A8B442F9CE2A600C8">
<subsection id="H24A5FD07EDC74A51BE4C1DEF75D4D920"><enum>(d)</enum><header>Limitation based on adjusted gross</header><text>For limitation based on adjusted gross income, see section 26(b).</text> </subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H9FC2AF5361FC4594B7536DDE53CECA1B"><enum>(5)</enum><text>Subsection (h) of <external-xref legal-doc="usc" parsable-cite="usc/26/25A">section 25A</external-xref> is amended to read as follows:</text>
<quoted-block id="HD456CE19C224450EB84286FB50B11400">
<subsection id="H1542D2AABF354D4B9664E9A136030096"><enum>(h)</enum><header>Inflation adjustments</header>
<paragraph id="HBD5F23277C2B4F9C9FD7C058C0203358"><enum>(1)</enum><header>In general</header><text>In the case of a taxable year beginning after 2006, each of the $1,000 amounts under subsection (b)(1) shall be increased by an amount equal to—</text>
<subparagraph id="H08EEE45301F14959BDBB6D5D0435B2DE"><enum>(A)</enum><text>such dollar amount, multiplied by</text></subparagraph>
<subparagraph id="HBAF50BEE7D4D499BB8D4DC630AB22F3"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2005</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof.</text></subparagraph></paragraph>
<paragraph id="HF9DD6F2C20394799B157A600EAE8E787"><enum>(2)</enum><header>Rounding</header><text>If any amount as adjusted under paragraph (1) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H324656940E6D480F00AFB559459F6BC4"><enum>(6)</enum><text>The section heading for <external-xref legal-doc="usc" parsable-cite="usc/26/26">section 26</external-xref> is amended by inserting before the period <quote><header-in-text>; phaseout of certain credits based on income; definitions</header-in-text></quote>.</text></paragraph>
<paragraph id="HE2CBA3AD88D54699BE81FDC027D4FDA6"><enum>(7)</enum><text>The item relating to section 26 in the table of sections for subpart A of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting before the period <quote>; phaseout of certain credits based on income; definitions</quote>.</text></paragraph></subsection>
<subsection id="H797AC7A2BE9E4F268FB98298AED23200"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2005.</text></subsection></section>
<enum>II</enum><header>Simplification of capital gains tax</header>
<section id="H50A8EF36B878459B8FF9E2D781DEFECC"><enum>201.</enum><header>Simplification of capital gains tax</header>
<subsection id="H99A2C7236096446BAEF6E7E02324E8A"><enum>(a)</enum><header>In general</header><text>Part I of subchapter P of chapter 1 (relating to treatment of capital gains) is amended by adding at the end the following new section:</text>
<quoted-block id="HA0AD0E9D5D8C4CDFB10941028F5340A0">
<section id="H0758C29765924FE19DDCAD072B697FEA"><enum>1203.</enum><header>Capital gains deduction</header><text display-inline="no-display-inline">If for any taxable year a taxpayer other than a corporation has a net capital gain, 38 percent of such gain shall be a deduction from gross income.</text></section><after-quoted-block>.</after-quoted-block></quoted-block></subsection>
<subsection id="HCCF74F6AAEF94190ACBE87F74EE5366B"><enum>(b)</enum><header>Deduction allowable whether or not taxpayer itemizes other deductions</header>
<paragraph id="HD95D3EB473FA4E60A993A39B334DA2E2"><enum>(1)</enum><text>Subsection (b) of <external-xref legal-doc="usc" parsable-cite="usc/26/63">section 63</external-xref> is amended by striking <quote>and</quote> at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting <quote>, and</quote>, and by adding at the end the following new paragraph:</text>
<quoted-block id="H4FF927333F4F43BEBF45EBE1CB3CFA19">
<paragraph id="H33CA8EE7FAF245F0BB9560EAA2B4137"><enum>(3)</enum><text>the deduction allowed by section 1203.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HBBF1E95D022D4C5982B02E53CFD991D7"><enum>(2)</enum><text>Subsection (d) of <external-xref legal-doc="usc" parsable-cite="usc/26/63">section 63</external-xref> is amended by striking <quote>and</quote> at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting <quote>, and</quote>, and by adding at the end the following new paragraph:</text>
<quoted-block id="HF934E001E7AD473E93BA54DD1FAE83D">
<paragraph id="H64C40606479E4431B2AE89CCDA43C45F"><enum>(3)</enum><text>the deduction allowed by section 1203.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection>
<subsection id="H227650F02E6E4563805B7D85EA5221E0"><enum>(c)</enum><header>Treatment of collectibles</header>
<paragraph id="H9476626EDE0E47459E94272BBEC9B00"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1222">Section 1222</external-xref> is amended by inserting after paragraph (11) the following new paragraph:</text>
<quoted-block id="H1B6EA47D76904A25AA48CA8659008EAF">
<paragraph id="H5B9D2D6EC0CD434A947F1FDFB9B6D5F7"><enum>(12)</enum><header>Special rule for collectibles</header>
<subparagraph id="H7DAC6C2FD9754BC1A2131FE695454FDC"><enum>(A)</enum><header>In general</header><text>Any gain or loss from the sale or exchange of a collectible shall be treated as a short-term capital gain or loss (as the case may be), without regard to the period such asset was held. The preceding sentence shall apply only to the extent the gain or loss is taken into account in computing taxable income.</text></subparagraph>
<subparagraph id="HE85E328D17F747FA92F1396FB626F580"><enum>(B)</enum><header>Treatment of certain sales of interests in partnerships, etc</header><text>For purposes of subparagraph (A), any gain from the sale or exchange of an interest in a partnership, S corporation, or trust which is attributable to unrealized appreciation in the value of collectibles held by such entity shall be treated as gain from the sale or exchange of a collectible. Rules similar to the rules of section 751(f) shall apply for purposes of the preceding sentence.</text></subparagraph>
<subparagraph id="H2686F5C27F0048419CB036E4D4497337"><enum>(C)</enum><header>Collectible</header><text>For purposes of this paragraph, the term <term>collectible</term> means any capital asset which is a collectible (as defined in section 408(m) without regard to paragraph (3) thereof).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H4E08E972706C48E9B70333B1E7E32162"><enum>(2)</enum><header>Charitable deduction not affected</header>
<subparagraph id="H493EF27543FB4731B2489DDC33437F69"><enum>(A)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/170">section 170(e)</external-xref> is amended by adding at the end thereof the following new sentence: <quote>For purposes of this paragraph, section 1222 shall be applied without regard to paragraph (12) thereof (relating to special rule for collectibles).</quote>.</text></subparagraph>
<subparagraph id="HE6EDF77C92C1434C8CEEEC059D00195C"><enum>(B)</enum><text>Clause (iv) of <external-xref legal-doc="usc" parsable-cite="usc/26/170">section 170(b)(1)(C)</external-xref> is amended by inserting before the period at the end thereof the following: <quote>and section 1222 shall be applied without regard to paragraph (12) thereof (relating to special rule for collectibles)</quote>.</text></subparagraph></paragraph></subsection>
<subsection id="H535A60715DAA474894B9DB814534F77"><enum>(d)</enum><header>Technical and conforming changes</header>
<paragraph id="H6579D4507F4542298CC397AC2C729900"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1">Section 1</external-xref> is amended by striking subsection (h).</text></paragraph>
<paragraph id="H757B5AC6B958440FA76B914F4090094E"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(d)(4)</external-xref> is amended—</text>
<subparagraph id="H240EDA35A82744218BC16C7BCD2B1435"><enum>(A)</enum><text>by striking the last sentence of subparagraph (B), and</text></subparagraph>
<subparagraph id="H48BB873F6FCF47C297661864E8CF2F2D"><enum>(B)</enum><text>by amending subparagraph (E) to read as follows:</text>
<quoted-block id="H17F9F4FDED8548A085A987EE4E8D2D2B">
<subparagraph id="HE7FF87DA5B42443494BCC2967DF55034"><enum>(E)</enum><header>Coordination with capital gains deduction</header><text>The net capital gain taken into account under section 1203 for any taxable year shall be reduced (but not below zero) by the amount which the taxpayer takes into account as investment income under subparagraph (B)(iii) for such year.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph></paragraph>
<paragraph id="H3CF0F0447A3647429E1179E4BF62BB5C"><enum>(3)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/170">section 170(e)</external-xref> is amended by striking <quote>the amount of gain</quote> in the material following subparagraph (B)(ii) and inserting <quote>62 percent (100 percent in the case of a corporation) of the amount of gain</quote>.</text></paragraph>
<paragraph id="H2A8D20346B984D8E9461BE28E13EC18F"><enum>(4)</enum><text>Subparagraph (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/172">section 172(d)(2)</external-xref> is amended to read as follows:</text>
<quoted-block id="H4150080EABB2448F8548A63FC7BF1900">
<subparagraph id="H48789BF9291A4D83A9F65249AC008DA4"><enum>(B)</enum><text>the exclusion under section 1202 and the deduction under section 1203 shall not be allowed.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HED1F74D1C85541249F5CD99D549B88C8"><enum>(5)</enum><text>The last sentence of <external-xref legal-doc="usc" parsable-cite="usc/26/453A">section 453A(c)(3)</external-xref> is amended by striking all that follows <quote>long-term capital gain,</quote> and inserting <quote>the maximum rate on net capital gain under section 1201 or the deduction under section 1203 (whichever is appropriate) shall be taken into account.</quote>.</text></paragraph>
<paragraph id="H2BAC2566339A4E919C4CB7FC42E3BB1B"><enum>(6)</enum>
<subparagraph display-inline="yes-display-inline" id="H48D2031750AB4A2D85CA3FB5D3D0615"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/641">Section 641(c)(2)(A)</external-xref> is amended by striking <quote>Except as provided in section 1(h), the</quote> and inserting <quote>The</quote>.</text></subparagraph>
<subparagraph indent="up1" id="H758B470390A74DADBB2CA95ED2325C39"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/641">Section 641(c)(2)(C)</external-xref> is amended by inserting after clause (iii) the following new clause:</text>
<quoted-block id="H1A1A16ED8A264DF6B38E4B74FE4EC5BB">
<clause id="H3829396B8F4641C7AE4088713E580809"><enum>(iv)</enum><text>The deduction under section 1203.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph></paragraph>
<paragraph id="H2646D2C587E84429AFDE0389D33B30BA"><enum>(7)</enum><text>Paragraph (4) of <external-xref legal-doc="usc" parsable-cite="usc/26/642">section 642(c)</external-xref> is amended to read as follows:</text>
<quoted-block id="HE609CB4A1AF342BBA723E4FEB41163C7">
<paragraph id="H012DEC9422054F81989706F349199329"><enum>(4)</enum><header>Adjustments</header><text>To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain from the sale or exchange of capital assets held for more than 1 year, proper adjustment shall be made for any exclusion allowable under section 1202 and any deduction allowable under section 1203 to the estate or trust. In the case of a trust, the deduction allowed by this subsection shall be subject to section 681 (relating to unrelated business income).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H3C14AAA41F064ABDB1BBF57EE45E0066"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/642">Section 642</external-xref> is amended by adding at the end the following new subsection:</text>
<quoted-block id="H628E6633AE894F85BFBA5CB0452C2E8B">
<subsection id="H7CF7AAC5DA0B40A6A7107777455D0069"><enum>(j)</enum><header>Capital gains deduction</header><text>The deduction under section 1203 to an estate or trust shall be computed by excluding the portion (if any) of the gains for the taxable year which is includible by the income beneficiaries under sections 652 and 662 (relating to inclusions of amounts in gross income of beneficiaries of trusts) as gain derived from the sale or exchange of capital assets.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HFF1C280E8F8940028F13C824EE6B8039"><enum>(9)</enum><text>The last sentence of <external-xref legal-doc="usc" parsable-cite="usc/26/643">section 643(a)(3)</external-xref> is amended to read as follows: <quote>The exclusion under section 1202 and the deduction under section 1203 shall not be taken into account.</quote>.</text></paragraph>
<paragraph id="H9366408FA81440A1AA3FC7BC359F4629"><enum>(10)</enum><text>Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/643">section 643(a)(6)</external-xref> is amended by inserting <quote>(i)</quote> before <quote>there shall</quote> and by inserting before the period <quote>, and (ii) the deduction under section 1203 (relating to capital gains deduction) shall not be taken into account</quote>.</text></paragraph>
<paragraph id="HC905D53C7E1047E7A6E450D852E05051"><enum>(11)</enum><text>Paragraph (4) of <external-xref legal-doc="usc" parsable-cite="usc/26/691">section 691(c)</external-xref> is amended by striking <quote>1(h),</quote> and by inserting <quote>1203,</quote> after <quote>1202,</quote>.</text></paragraph>
<paragraph id="H78D2BDCA961A4066A41E88D4F8CB8222"><enum>(12)</enum><text>The second sentence of paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/871">section 871(a)</external-xref> is amended by striking <quote>section 1202</quote> and inserting <quote>sections 1202 and 1203</quote>.</text></paragraph>
<paragraph id="H31644808719F4FB3BAFF090996617120"><enum>(13)</enum>
<subparagraph display-inline="yes-display-inline" id="HF59025740DE1473E81D0D5E3EB69C7B1"><enum>(A)</enum><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/904">section 904(b)</external-xref> is amended by striking subparagraphs (A) and (C), by redesignating subparagraph (B) as subparagraph (A), and by inserting after subparagraph (A) (as so redesignated) the following new subparagraph:</text>
<quoted-block id="H19665B9230D44B31008BCEEF87624B07">
<subparagraph id="H5BCCB5CE4A894091A100F9AD876F9C73"><enum>(B)</enum><header>Other taxpayers</header><text>In the case of a taxpayer other than a corporation, taxable income from sources outside the United States shall include gain from the sale or exchange of capital assets only to the extent of foreign source capital gain net income.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph>
<subparagraph indent="up1" id="H2DD0F015124E46EAA69CEF32769CA1C"><enum>(B)</enum><text>Subparagraph (A) of section 904(b)(2), as so redesignated, is amended—</text>
<clause id="H774BFF969A8641D3AC9515CE22726DB8"><enum>(i)</enum><text>by striking all that precedes clause (i) and inserting the following:</text>
<quoted-block id="H561EDF87A04F4161896E973D489B3C6E">
<subparagraph id="HD68674614F8747E5869D186B9E73FC0"><enum>(A)</enum><header>Corporations</header><text>In the case of a corporation—</text></subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block></clause>
<clause id="HC01ABF1E9222461DA3CCA0C5A980B27B" indent="up1"><enum>(ii)</enum><text>by striking in clause (i) <quote>in lieu of applying subparagraph (A),</quote>.</text></clause></subparagraph>
<subparagraph indent="up1" id="HE8855F30205946AB939640269FB45BC9"><enum>(C)</enum><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/904">section 904(b)</external-xref> is amended by striking subparagraphs (D) and (E) and inserting the following new subparagraph:</text>
<quoted-block id="H0FBF940DE1644A40973683C8D009376">
<subparagraph id="H51CD46444FA3447EADFD848130C5D7A4"><enum>(D)</enum><header>Rate differential portion</header><text>The rate differential portion of foreign source net capital gain, net capital gain, or the excess of net capital gain from sources within the United States over net capital gain, as the case may be, is the same proportion of such amount as the excess of the highest rate of tax specified in section 11(b) over the alternative rate of tax under section 1201(a) bears to the highest rate of tax specified in section 11(b).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph></paragraph>
<paragraph id="H7326E9A634574E21A605FD91DD004CB7"><enum>(14)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/1402">section 1402(i)</external-xref> is amended by inserting <quote>, and the deduction provided by section 1203 shall not apply</quote> before the period at the end thereof.</text></paragraph>
<paragraph id="H30148DF490AA468789C8F08DFB2C5753"><enum>(15)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/1445">section 1445(e)</external-xref> is amended by striking <quote>15 percent</quote> and inserting <quote>24.5 percent</quote>.</text></paragraph>
<paragraph id="H7050FD707D4F4435BBE648C00745600"><enum>(16)</enum>
<subparagraph display-inline="yes-display-inline" id="H811AFF0336134B75A4F2E300B900A22F"><enum>(A)</enum><text>The second sentence of <external-xref legal-doc="usc" parsable-cite="usc/26/7518">section 7518(g)(6)(A)</external-xref> is amended—</text>
<clause indent="up1" id="HF054FB35B7894FCDA2726E77099DBB5E"><enum>(i)</enum><text>by striking <quote>during a taxable year to which section 1(h) or 1201(a) applies</quote>, and</text></clause>
<clause indent="up1" id="HE37F931F797D45A284B3495760F68D74"><enum>(ii)</enum><text>by striking <quote>15 percent</quote> and inserting <quote>24.5 percent</quote>.</text></clause></subparagraph>
<subparagraph indent="up1" id="HA2DE52FDF6644FBCB51393F900878474"><enum>(B)</enum><text>The second sentence of section 607(h)(6)(A) of the <act-name parsable-cite="MMA">Merchant Marine Act</act-name>, 1936, is amended—</text>
<clause id="H4E3251264CB24B22964B00E240D57320"><enum>(i)</enum><text>by striking <quote>during a taxable year to which section 1(h) or 1201(a) of such Code applies</quote>, and</text></clause>
<clause id="H68F6D2C8FC28490AB537A8B1ADDA628B"><enum>(ii)</enum><text>by striking <quote>15 percent</quote> and inserting <quote>24.5 percent</quote>.</text></clause></subparagraph></paragraph></subsection>
<subsection id="HC46525B2B90845B4947301F799780100"><enum>(e)</enum><header>Clerical amendment</header><text>The table of sections for part I of subchapter P of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by adding at the end the following new item:</text>
<quoted-block style="OLC" id="H2D233DD0183B4547AA22D0053BFE7073">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1203. Capital gains deduction</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block></subsection>
<subsection id="H5E3963EDFDE6438A98A7BBB047650219"><enum>(f)</enum><header>Effective dates</header>
<paragraph id="HB7D8CEBB49E14796B64E12506DE52245"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2005.</text></paragraph>
<paragraph id="H5233970CD8394943A3ADDCF6CEB4E0AC"><enum>(2)</enum><header>Withholding</header><text>The amendments made by subsection (d)(15) shall apply only to amounts paid after December 31, 2005.</text></paragraph>
<paragraph id="H42A7614E66024054B9808350F28FD84B"><enum>(3)</enum><header>Coordination with prior transition rule</header><text>Any amount treated as long-term capital gain by reason of paragraph (3) of section 1122(h) of the Tax Reform Act of 1986 shall not be taken into account for purposes of applying <external-xref legal-doc="usc" parsable-cite="usc/26/1203">section 1203</external-xref> of the Internal Revenue Code of 1986 (as added by this section).</text></paragraph></subsection></section>
<enum>III</enum><header>Repeal of certain hidden marginal rate increases; repeal of individual minimum tax</header>
<subtitle id="H21B446B606A3404A9400FE008CCA052E"><enum>A</enum><header>Repeals</header>
<section id="H28946C0E4E184031A486668EF0A15943"><enum>301.</enum><header>Repeal of overall limitation on itemized deductions</header>
<subsection id="HD65F1B17A1854AB68FAF98157D23107C"><enum>(a)</enum><header>In general</header><text>Section 68 (relating to overall limitation on itemized deductions) is hereby repealed.</text></subsection>
<subsection id="H9E23FB7EB18C466F85E5FD49D9C32946"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HEF74968F865647CEB5EA6E6FB61CA5C6"><enum>(1)</enum><text>Subparagraph (A) of <external-xref legal-doc="usc" parsable-cite="usc/26/1">section 1(f)(6)</external-xref> is amended by striking <quote>section 68(b)(2)</quote>.</text></paragraph>
<paragraph id="HF48C9CDF6278481E9F8F7C9D36FA6CC2"><enum>(2)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56(b)</external-xref> is amended by striking subparagraph (F).</text></paragraph>
<paragraph id="H0878DF187A684B2AA1E384F263FBDB19"><enum>(3)</enum><text>Subclause (III) of <external-xref legal-doc="usc" parsable-cite="usc/26/164">section 164(b)(5)(H)(ii)</external-xref> is amended by striking <quote>section 68(b))</quote> and inserting <quote>, as in effect on the date of the enactment of the <short-title>Individual Tax Simplification Act of 2005</short-title>)</quote>. </text></paragraph>
<paragraph id="HC172F6ABCF214C2FA22E3B5FF400916B"><enum>(4)</enum><text>Subparagraph (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/773">section 773(a)(3)</external-xref> is amended by striking clause (i) and by redesignating clauses (ii), (iii), and (iv), as clauses (i), (ii), and (iii), respectively.</text></paragraph>
<paragraph id="HB266E12C886540A1A5990057D8FB0000"><enum>(5)</enum><text>The table of sections for subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 68.</text></paragraph></subsection>
<subsection id="H7A6476C03AA242DA85DA597E00BDDB62"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2005.</text></subsection></section>
<section id="H16EF369F3F2D4C77969D5D2400D06615"><enum>302.</enum><header>Repeal of phaseout of personal exemptions</header>
<subsection id="HC6ADD983E77942A98B4B41F841D2474B"><enum>(a)</enum><header>In general</header><text>Subsection (d) of section 151 (relating to allowance of deductions for personal exemptions) is amended by striking paragraph (3) and by redesignating paragraph (4) as paragraph (3).</text></subsection>
<subsection id="H41CB7D6CC1214707B4C6F8AF72CF06BA"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H1138FB614F334B8BAB50B1FB314796A8"><enum>(1)</enum><text>Paragraph (6) of <external-xref legal-doc="usc" parsable-cite="usc/26/1">section 1(f)</external-xref> is amended—</text>
<subparagraph id="H31E38D90EF704E358B5D656560E4EDE2"><enum>(A)</enum><text>by striking <quote>section 151(d)(4)</quote> in subparagraph (A) and inserting <quote>section 151(d)(3)</quote>, and</text></subparagraph>
<subparagraph id="H4A6A8FF396B34E0FB398E9E281437D22"><enum>(B)</enum><text>by striking <quote>section 151(d)(4)(A)</quote> in subparagraph (B) and inserting <quote>section 151(d)(3)</quote>.</text></subparagraph></paragraph>
<paragraph id="H5678EA638E2E4620B013A0BDC0847494"><enum>(2)</enum><text>Paragraph (3) of section 151(d), as redesignated by subsection (a), is amended to read as follows:</text>
<quoted-block id="H2F139A22389D432180B9C1981CA57E5F">
<paragraph id="H8B2A7C98A0D14C31BF12FC4200CC3C90"><enum>(3)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning in a calendar year after 1989, the dollar amount contained in paragraph (1) shall be increased by an amount equal to—</text>
<subparagraph id="H4BF274338D5C41350096362BFB5C76CD"><enum>(A)</enum><text>such dollar amount, multiplied by</text></subparagraph>
<subparagraph id="H0D1B114AAF1D4D4AAEF3B30E5349737"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 1988</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection>
<subsection id="HC354F287A7CA438DA9281100B32E59D3"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2005.</text></subsection></section>
<section id="H47AD47CA758846B48EF05D516D5EBCB4"><enum>303.</enum><header>Repeal of alternative minimum tax on individuals</header>
<subsection id="H04572581C1C54315B057F031E2B8D2C4"><enum>(a)</enum><header>In general</header><text>Subsection (a) of section 55 (relating to alternative minimum tax imposed) is amended by adding at the end the following new flush sentence:</text>
<quoted-block id="HDC169B3EA9834485A6EFB083B15D13"><text display-inline="no-display-inline">Except in the case of a corporation, no tax shall be imposed by this section for any taxable year beginning after December 31, 2005, and the tentative minimum tax of any taxpayer other than a corporation shall be zero for purposes of this title.</text><after-quoted-block>.</after-quoted-block></quoted-block></subsection>
<subsection id="H819660C18E7E4364A7C31D7F7E58C744"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HBB0E8C33328841F7B6476C3C2593528D"><enum>(1)</enum><text>Subparagraph (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/1">section 1(g)(7)</external-xref> is amended by adding <quote>and</quote> at the end of clause (i), by striking <quote>, and</quote> at the end of clause (ii) and inserting a period, and by striking clause (iii).</text></paragraph>
<paragraph id="HD7A5B866DB124D75803ED3D8A18E3E73"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/2">Section 2(d)</external-xref> is amended by striking <quote>sections 1 and 55</quote> and inserting <quote>section 1</quote>.</text></paragraph>
<paragraph id="H2BE3CD531F53412DB6E2F998387D0015"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/5">Section 5(a)</external-xref> is amended by striking paragraph (4).</text></paragraph>
<paragraph id="HFE6ED7E64AAA403389FDE52EED63DAC7"><enum>(4)</enum><text>Subsection (d) of section 26 (as redesignated by <external-xref legal-doc="usc" parsable-cite="usc/26/102">section 102)</external-xref> is amended by inserting before the period <quote>; except that such amount shall be treated as being zero in the case of a taxpayer other than a corporation</quote>.</text></paragraph>
<paragraph id="HE61783AB370049949F835EB959A36FBD"><enum>(5)</enum><text>Paragraph (6) of <external-xref legal-doc="usc" parsable-cite="usc/26/29">section 29(b)</external-xref> is amended to read as follows:</text>
<quoted-block id="H37C2163764204C6DA4D392BDD7CD3DD6">
<paragraph id="H103312049040405C95F3844FDE88FA9D"><enum>(6)</enum><header>Application with other credits</header><text>The credit allowed by subsection (a) for any taxable year shall not exceed the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and section 27. In the case of a corporation, the limitation under the preceding sentence shall be reduced (but not below zero) by the tentative minimum tax for the taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HB1A9218348C9431FB9D34C1842BD0014"><enum>(6)</enum><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/30">section 30(b)</external-xref> is amended to read as follows:</text>
<quoted-block id="HDE7116DA6CDE468CB6BC568B91F83FED">
<paragraph id="H2A670D8EB7CC4C47B81895D600DA9352"><enum>(3)</enum><header>Application with other credits</header><text>The credit allowed by subsection (a) for any taxable year shall not exceed the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27 and 29. In the case of a corporation, the limitation under the preceding sentence shall be reduced (but not below zero) by the tentative minimum tax for the taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HC6236EC0302A4DEFB2EE1DC450D4EAE6"><enum>(7)</enum><text>Subsection (d) of <external-xref legal-doc="usc" parsable-cite="usc/26/53">section 53</external-xref> is amended to read as follows:</text>
<quoted-block id="HB9DC166345BD4E6CAEF06D274F000160">
<subsection id="HCC7A57A2E17C49FAB3C76B82047916F8"><enum>(d)</enum><header>Definitions</header><text>For purposes of this section—</text>
<paragraph id="H41ADDC36C813496C81FA8C507EEFB082"><enum>(1)</enum><header>Net minimum tax</header><text>The term <term>net minimum tax</term> means the tax imposed by section 55 increased by the amount of the credit not allowed under section 29 (relating to credit for producing fuel from a nonconventional source) solely by reason of the application of the last sentence of section 29(b)(6), or not allowed under section 30 solely by reason of the application of the last sentence of section 30(b)(3).</text></paragraph>
<paragraph id="H2FB66F15694744A882B47BD73F11F872"><enum>(2)</enum><header>Tentative minimum tax</header><text>The term <term>tentative minimum tax</term> has the meaning given to such term by section 55(b); except that such tax shall be treated as being zero in the case of a taxpayer other than a corporation.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HB9C9E1734D5A40929FD3AAB9F362BFA1"><enum>(8)</enum>
<subparagraph display-inline="yes-display-inline" id="H7D2FC9CF6FA3468CA9658C01F31785CB"><enum>(A)</enum><text>Subsection (b) of section 55 (relating to alternative minimum tax imposed) is amended to read as follows:</text>
<quoted-block id="H3E12FDD9AA074A2CBE03AFC25E004E90">
<subsection id="HCCAD47C8B49A47578EF3366132F55DE5"><enum>(b)</enum><header>Tentative minimum tax</header><text>For purposes of this part—</text>
<paragraph id="HA9D3E338BD134982BB69B7990919EDA3"><enum>(1)</enum><header>Amount of tentative tax</header><text>The tentative minimum tax for the taxable year is—</text>
<subparagraph id="H46B0E6A698004AA4AB76E935C401CB67"><enum>(A)</enum><text>20 percent of so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount, reduced by</text></subparagraph>
<subparagraph id="H9602F79047D0485EBADB5FCA869E3C11"><enum>(B)</enum><text>the alternative minimum tax foreign tax credit for the taxable year.</text></subparagraph></paragraph>
<paragraph id="HADE3D223BE2F43B482438629C560FDF2"><enum>(2)</enum><header>Alternative minimum taxable income</header><text>The term <term>alternative minimum taxable income</term> means the taxable income of the taxpayer for the taxable year—</text>
<subparagraph id="HD4584038FDAC433DBADD1366C9D28ED0"><enum>(A)</enum><text>determined with the adjustments provided in section 56, and</text></subparagraph>
<subparagraph id="HFCBF689EA1B244A5B76EBD2287D500AE"><enum>(B)</enum><text>increased by the amount of the items of tax preference described in section 57.</text></subparagraph><continuation-text continuation-text-level="paragraph">If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the taxable income of such taxpayer for purposes of the preceding sentence).</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph>
<subparagraph indent="up1" id="HAC85A06198534F48B8AF7E4248385224"><enum>(B)</enum><text>Subsection (d) of <external-xref legal-doc="usc" parsable-cite="usc/26/55">section 55</external-xref> is amended to read as follows:</text>
<quoted-block id="H3943314016A24AF8BC887B4813486595">
<subsection id="H8E803152D48B44F29426CC22176ED6C6"><enum>(d)</enum><header>Exemption amount</header><text>For purposes of this section—</text>
<paragraph id="HF76D01DD8BF44CEBA4533664C2A308D1"><enum>(1)</enum><header>In general</header><text>The term <term>exemption amount</term> means $40,000.</text></paragraph>
<paragraph id="HDFE98888C8194232AB783DE28F02FA6E"><enum>(2)</enum><header>Phase-out of exemption amount</header><text>The exemption amount of any taxpayer shall be reduced (but not below zero) by an amount equal to 25 percent of the amount by which the alternative minimum taxable income of the taxpayer exceeds $150,000.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph></paragraph>
<paragraph id="HBE0D0B407FD343A4A0C6DBCABF295F05"><enum>(9)</enum>
<subparagraph display-inline="yes-display-inline" id="H757F671354A94905B8D8889254B46FD5"><enum>(A)</enum><text>Paragraph (6) of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56(a)</external-xref> is amended to read as follows:</text>
<quoted-block id="H2B2F5846C6D44F12929D89A8E565008C">
<paragraph id="H4761C9D77ECD4FD8B1F38B3E80086F6"><enum>(6)</enum><header>Adjusted basis</header><text>The adjusted basis of any property to which paragraph (1) or (5) applies (or with respect to which there are any expenditures to which paragraph (2) applies) shall be determined on the basis of the treatment prescribed in paragraph (1), (2), or (5), whichever applies.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph>
<subparagraph indent="up1" id="HF0EA90C9490E4CBAB305AC268195ADE1"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/56">Section 56</external-xref> is amended by striking subsection (b).</text></subparagraph>
<subparagraph indent="up1" id="HFBBC93DB23C84C0D8107D3B400BCB9C6"><enum>(C)</enum><text>Subsection (c) of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56</external-xref> is amended by striking so much of the subsection as precedes paragraph (1), by redesignating paragraphs (1), (2), and (3) as paragraphs (8), (9), and (10), respectively, and moving them to the end of subsection (a).</text></subparagraph>
<subparagraph indent="up1" id="H0CE8A11B893F4695B1DA20F8FCC6CB37"><enum>(D)</enum><text>Paragraph (8) of section 56(a), as redesignated by subparagraph (C), is amended by striking <quote>subsection (g)</quote> and inserting <quote>subsection (c)</quote>.</text></subparagraph>
<subparagraph indent="up1" id="H9CBC596F057647E59065D70710634182"><enum>(E)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/56">Section 56</external-xref> is amended by striking subsection (e) and by redesignating subsections (d) and (g) as subsections (b) and (c), respectively.</text></subparagraph></paragraph>
<paragraph id="H009B4B06D8144BE8BFBB3E9DF1BF652"><enum>(10)</enum>
<subparagraph display-inline="yes-display-inline" id="HE47435C6F1D5495D98DA0800C736B21B"><enum>(A)</enum><text>Section 58 is hereby repealed.</text></subparagraph>
<subparagraph indent="up1" id="H9F894C8DDA444FB9B900355EB605007C"><enum>(B)</enum><text>Clause (i) of section 56(b)(2)(A) (as redesignated by subparagraph (E), is amended by inserting <quote>, in the case of taxable years beginning before January 1, 2006,</quote> before <quote>section 58</quote>.</text></subparagraph>
<subparagraph indent="up1" id="H9D5CD692023C4B29AB4959A42F052612"><enum>(C)</enum><text>Subsection (h) of <external-xref legal-doc="usc" parsable-cite="usc/26/59">section 59</external-xref> is amended—</text>
<clause id="H71076D9021164301BEB2F5C80BE43C5"><enum>(i)</enum><text>by striking <quote>, 465, and 1366(d)</quote> and inserting <quote>and 465</quote>, and</text></clause>
<clause id="H2AC72555C85C474FA552BBBAAAA55ECD"><enum>(ii)</enum><text>by striking <quote>56, 57, and 58</quote> and inserting <quote>56 and 57</quote>.</text></clause></subparagraph></paragraph>
<paragraph id="H136AD200398D4F4BB067230055ECFE21"><enum>(11)</enum>
<subparagraph display-inline="yes-display-inline" id="H6A05E8C5A066429A8FC4476687F7008F"><enum>(A)</enum><text>Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/59">section 59(a)(1)</external-xref> is amended by striking <quote>subparagraph (A)(i) or (B)(i) of section 55(b)(1) (whichever applies)</quote> and inserting <quote>section 55(b)(1)(A)</quote>.</text></subparagraph>
<subparagraph indent="up1" id="H09FDA97F1A6F4873924F5ECBDD2EF9C0"><enum>(B)</enum><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/59">section 59(a)</external-xref> is amended to read as follows:</text>
<quoted-block id="HDB25B3AA360B4D49B9920000B694724E">
<paragraph id="HA6F10867A59449DA9F610045D59498A4"><enum>(3)</enum><header>Pre-credit tentative minimum tax</header><text>For purposes of this subsection, the term <term>pre-credit tentative minimum tax</term> means the amount determined under section 55(b)(1)(A).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph>
<subparagraph indent="up1" id="H9B7C22E816274F9196D28136BF009B32"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/59">Section 59</external-xref> is amended by striking subsection (c).</text></subparagraph>
<subparagraph indent="up1" id="H1F447200CB08474B9572E9E58CF6D15F"><enum>(D)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/59">Section 59</external-xref> is amended by striking subsection (j).</text></subparagraph></paragraph>
<paragraph id="H28BE0C90B33E417400468E35D5414D23"><enum>(12)</enum><text>Paragraph (7) of <external-xref legal-doc="usc" parsable-cite="usc/26/382">section 382(l)</external-xref> is amended by striking <quote>section 56(d)</quote> and inserting <quote>section 56(b)</quote>.</text></paragraph>
<paragraph id="H67DE9E2C8B134134AC9BA9C69974E5B9"><enum>(13)</enum><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/641">section 641(c)</external-xref> is amended by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.</text></paragraph>
<paragraph id="H18A1EF130CF14D2096BE8FDB54ECC400"><enum>(14)</enum><text>Subsections (b) and (c) of section 666 are each amended by striking <quote>(other than the tax imposed by section 55)</quote>.</text></paragraph>
<paragraph id="H6CAC8A7EEA25479F98B0B786E0B679F5"><enum>(15)</enum><text>Subsections (c)(5) and (d)(3)(B) of section 772 are each amended by striking <quote>56, 57, and 58</quote> and inserting <quote>56 and 57</quote>.</text></paragraph>
<paragraph id="H3AD6A5901BD54D6F8DC3AAB6D3D82385"><enum>(16)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/847">Sections 847(9)</external-xref> and <external-xref legal-doc="usc" parsable-cite="usc/26/848"> 848(i)</external-xref> are each amended by striking <quote>section 56(g)</quote> and inserting <quote>section 56(c)</quote>.</text></paragraph>
<paragraph id="HC63A1459C0C749279C6EC6CD8DFEF32"><enum>(17)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/871">Sections 871(b)(1)</external-xref> and <external-xref legal-doc="usc" parsable-cite="usc/26/877"> 877(b)</external-xref> are each amended by striking <quote>or 55</quote>.</text></paragraph>
<paragraph id="H8AAFB262714D4A3EBFBFDDE030D4E2B9"><enum>(18)</enum><text>Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/897">section 897</external-xref> is amended to read as follows:</text>
<quoted-block id="HEBC94DA7EAC2456181F0DFD638365551">
<subsection id="H9010DDD7A12A42A189D0006CF6F582E2"><enum>(a)</enum><header>General rule</header><text>For purposes of this title, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest shall be taken into account—</text>
<paragraph id="H626087B8167C46F081F4D37F4977FAC9"><enum>(1)</enum><text>in the case of a nonresident alien individual, under section 871(b)(1), or</text></paragraph>
<paragraph id="HEDC7D524DF614759A0FFD15AE3E003F"><enum>(2)</enum><text>in the case of a foreign corporation, under section 882(a)(1),</text></paragraph><continuation-text continuation-text-level="subsection">as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="HC8A8F963AF4A475A006E398340A6FE12"><enum>(19)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/962">section 962(a)</external-xref> is amended by striking <quote>sections 1 and 55</quote> and inserting <quote>section 1</quote>.</text></paragraph>
<paragraph id="H5FF695D69EAA47DB87C9B57CD3E83BB"><enum>(20)</enum><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/1397E">section 1397E(c)</external-xref> is amended to read as follows:</text>
<quoted-block id="HB264F0C5628141ECB083AEAA92C162AA">
<paragraph id="H8B9774B4B92D4CD1934E004F716500E0"><enum>(1)</enum><text>the regular tax liability (as defined in section 26(b), over</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph>
<paragraph id="H1684A1A58BC24C55B73E59B74F23D02"><enum>(21)</enum><text>The last sentence of <external-xref legal-doc="usc" parsable-cite="usc/26/1561">section 1561(a)</external-xref> is amended by striking <quote>section 55(d)(3)</quote> and inserting <quote>section 55(d)(2)</quote>.</text></paragraph>
<paragraph id="HB70980BF8C70460DA69983CA4ED4BA74"><enum>(22)</enum><text>Subparagraph (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/6015">section 6015(d)(2)</external-xref> is amended by striking <quote>or 55</quote>.</text></paragraph></subsection>
<subsection id="H363659D252524AE08765B75667D1ABCC"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2005.</text></subsection>
<subsection id="HC581EB7D16DB43858D08AA0516828DFB"><enum>(d)</enum><header>Transitional rule relating to minimum tax credit</header>
<paragraph id="H6E8B24C65EC94BB29216F9682DB1FB5E"><enum>(1)</enum><header>In general</header><text>The pre-effective date minimum tax credit of a taxpayer other than a corporation shall not be allowed under <external-xref legal-doc="usc" parsable-cite="usc/26/53">section 53</external-xref> of the Internal Revenue Code of 1986 but shall be allowed under this subsection.</text></paragraph>
<paragraph id="H075812F6A8CF435DADF598230E727B3"><enum>(2)</enum><header>Pre-effective date minimum tax credit</header><text>For purposes of this subsection, the term <term>pre-effective date minimum tax credit</term> means the amount determined under section 53(b) of such Code for the first taxable year beginning after December 31, 2005.</text></paragraph>
<paragraph id="H97DC7121D12C429AA7539B6452032359"><enum>(3)</enum><header>Amount of credit</header>
<subparagraph id="H01F1D1C34A35496B9B917651CCF036B"><enum>(A)</enum><header>In general</header><text>The pre-effective date minimum tax credit of a taxpayer other than a corporation shall be allowed ratably over the period of 10 taxable years beginning with the first taxable year beginning after December 31, 2005.</text></subparagraph>
<subparagraph id="HEA14F30F8AAB479385522497C92F3D00"><enum>(B)</enum><header>Limitation</header><text>The credit allowable by this subsection for any taxable year shall not exceed the regular tax liability of the taxpayer for such taxable year reduced by the sum of the credits allowable under subparts A, B, D, E, and F of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> of the Internal Revenue Code of 1986.</text></subparagraph>
<subparagraph id="H17FA8B09FBA24B35ABFAF2109E0030BD"><enum>(C)</enum><header>Carryforward</header><text>If the credit allowable by this subsection exceeds the limitation imposed by subparagraph (B), such excess shall be carried to the succeeding taxable year and added to the credit allowable under this subsection for such succeeding taxable year.</text></subparagraph></paragraph>
<paragraph id="H1438D9421574491FA800171188316CD"><enum>(4)</enum><header>Acceleration of credit where previously taxed income</header>
<subparagraph id="H1A41B5E9B1F14E23B9554C0877D5DE36"><enum>(A)</enum><header>In general</header><text>The credit allowed under this subsection for any taxable year shall not be less than so much of the limitation described in paragraph (3)(B) for the taxable year as is attributable to previously taxed incentive stock option gain. Proper adjustments shall be made in the amount allowed under this subsection for subsequent taxable years to take into account any increased credit allowed by reason of this paragraph.</text></subparagraph>
<subparagraph id="H4EC2ED3696FB434BAA87FC267CC9B75F"><enum>(B)</enum><header>Incentive stock option gain</header><text>For purposes of subparagraph (A), the term <term>previously taxed incentive stock option gain</term> means the amount of gain recognized during the taxable year on account of the disposition of stock acquired by exercising an incentive stock option (as defined in section 422 of such Code) to the extent such gain does not exceed the amount of gain previously taken into account by reason of section 56(b)(3) of such Code (as in effect on the day before the date of the enactment of this Act) with respect to such option.</text></subparagraph></paragraph>
<paragraph id="H3E2A6C46331A4C85AEB7A0F59E1558A0"><enum>(5)</enum><header>Definitions</header><text>Terms used in this subsection which are also used in section 53 of such Code shall have the respective meanings given to such terms by such section 53.</text></paragraph></subsection></section></subtitle>
<subtitle id="HF826AE2C71674139B3AE6DECBF00BB90"><enum>B</enum><header>Revenue offsets</header>
<section id="H98216D28760F49B89F86F6108250BAA"><enum>311.</enum><header>Additional income tax</header>
<subsection id="HE03A6C9703F64621B6945675EC72E574"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1">Section 1</external-xref> is amended by adding at the end the following new subsection:</text>
<quoted-block id="HAA3052989E9849C4AF36BDA78912F00">
<subsection id="HE13C2607ED6143E091499F00FE35DDD9"><enum>(j)</enum><header>Additional income tax</header>
<paragraph id="HE187AE5C75F54104BA711DA098247635"><enum>(1)</enum><header>In general</header><text>If the adjusted gross income of an individual exceeds the initial threshold amount, the tax imposed by this section (determined without regard to this subsection) shall be increased by an amount equal to the sum of—</text>
<subparagraph id="H62506F9F5B054F1B9FC4846938455400"><enum>(A)</enum><text>the applicable rate of so much of the adjusted gross income as exceeds the initial threshold amount but does not exceed the second threshold amount, and</text></subparagraph>
<subparagraph id="HD291FAE3C12F4B48A3C6E14F1FEA4E50"><enum>(B)</enum><text>twice the applicable rate of so much of the adjusted gross income as exceeds the second threshold amount.</text></subparagraph></paragraph>
<paragraph id="H43E2125F052748B0A5BCD6CF74BDE071"><enum>(2)</enum><header>Applicable rate</header><text>For purposes of this section, the applicable rate is the rate estimated by the Secretary which will result in the <short-title>Individual Tax Simplification Act of 2005</short-title> being revenue neutral over the first 10 years after its enactment.</text></paragraph>
<paragraph id="HBC6EC643D653459EA7A8C8927746C3E1"><enum>(3)</enum><header>Threshold amounts</header><text>For purposes of this subsection—</text>
<subparagraph id="H7C3801F5A04B4736A941E4EDDA002C4C"><enum>(A)</enum><header>Initial threshold amount</header><text>The initial threshold amount is—</text>
<clause id="H188E96AD7A3A4BFE8DC3D883AFBF2B89"><enum>(i)</enum><text>$120,000 in the case of a joint return,</text></clause>
<clause id="HF82352014A7F44EDA06862347E8C7CF7"><enum>(ii)</enum><text>$90,000 in the case of an individual who is not married, and</text></clause>
<clause id="HFE96DB0EB13C4A7AA787BC111CDAEBB0"><enum>(iii)</enum><text><fraction>1/2</fraction> the dollar amount applicable under clause (i) in the case of a married individual filing a separate return.</text></clause></subparagraph>
<subparagraph id="H793AD3C508EF4AAA830083E3316E4495"><enum>(B)</enum><header>Second threshold amount</header><text>The second threshold amount is—</text>
<clause id="H5084696D33944150BB37992F2BF04537"><enum>(i)</enum><text>$150,000 in the case of a joint return,</text></clause>
<clause id="H30F1AC8EDB6D49759B1403D4760076C8"><enum>(ii)</enum><text>$112,000 in the case of an individual who is not married, and</text></clause>
<clause id="H7DA2A05961854F75821DE6AF54E7B845"><enum>(iii)</enum><text><fraction>1/2</fraction> the dollar amount applicable under clause (i) in the case of a married individual filing a separate return.</text></clause></subparagraph>
<subparagraph id="H4A94BB4BE811441AB313CFEFFF12312B"><enum>(C)</enum><header>Marital status</header><text>For purposes of this paragraph, marital status shall be determined under section 7703.</text></subparagraph></paragraph>
<paragraph id="HA1BB126AD49B4242ACCBF7ABB9BBEF74"><enum>(4)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning in a calendar year after 2006, each dollar amount contained in paragraph (2) shall be increased by an amount equal to—</text>
<subparagraph id="H8378CFCB085A431AAE0035DD87BEEF8"><enum>(A)</enum><text>such dollar amount, multiplied by</text></subparagraph>
<subparagraph id="H771F6A7E3BBE4D0A8EDF0667EE18D63C"><enum>(B)</enum><text>the cost-of-living adjustment determined under subsection (f)(3) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 2005</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof.</text></subparagraph><continuation-text continuation-text-level="paragraph">If any increase under the preceding sentence is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.</continuation-text></paragraph>
<paragraph id="H770F3A1893934F3A8CA0AF4C4BD2CEDA"><enum>(5)</enum><header>Tax not to apply to estates and trusts</header><text>This subsection shall not apply to an estate or trust.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection>
<subsection id="H76D918D1C0784F049E1B87D8626074AE"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2005.</text></subsection>
<subsection id="HE998DC14A09343ACBB52CB19CE52A08C"><enum>(c)</enum><header>Section 15 not to apply</header><text>The amendment made by this section shall not be treated as a change in a rate of tax for purposes of section 15 of such Code.</text></subsection></section></subtitle>