Zero percent capital gains rate for individuals and corporations

(a)

Zero percent capital gains rate for individuals

(1)

In general

Paragraph (1) of section 1(h) of the Internal Revenue Code of 1986 is amended by striking subparagraph (C), by redesignating subparagraphs (D) and (E) and subparagraphs (C) and (D), respectively, and by amending subparagraph (B) to read as follows:

(B)0 percent of the adjusted net capital gain (or, if less, taxable income);

(2)

Alternative minimum tax

Paragraph (3) of section 55(b) is amended by striking subparagraph (C), by redesignating subparagraph (D) as subparagraph (C), and by amending subparagraph (B) to read as follows:

(B)0 percent of the adjusted net capital gain (or, if less, taxable excess), plus

(3)

Repeal of sunset of reduction in capital gains rates for individuals

Section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 shall not apply to section 301 of such Act. (b)

Zero percent capital gains rate for corporations

(1)

In general

Section 1201 of the Internal Revenue Code of 1986 is amended by redesignating subsection (b) as subsection (c), and by striking subsection (a) and inserting the following new subsections:

(a)

General rule

If for any taxable year a corporation has a net capital gain, then, in lieu of the tax imposed by sections 11, 511, 821(a) or (c), and 831(a), there is hereby imposed a tax (if such tax is less than the tax imposed by such sections) which shall consist of the sum of— (1)a tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this subsection had not been enacted, (2)0 percent of the adjusted net capital gain (or, if less, taxable income), (3)25 percent of the excess (if any) of— (A)the unrecaptured section 1250 gain (or, if less, the net capital gain (determined without regard to subsection (b)(2))), over (B)the excess (if any) of— (i)the sum of the amount on which tax is determined under paragraph (1) plus the net capital gain, over (ii)taxable income, plus (4)28 percent of the amount of taxable income in excess of the sum of the amounts on which tax is determined under the preceding paragraphs of this subsection. (b)

Definitions and special rules

For purposes of this section— (1)

In general

The terms adjusted net capital gain and unrecaptured section 1250 gain shall have the respective meanings given such terms in section 1(h). (2)

Dividends taxed at net capital gain

Except as otherwise provided in this section, the term net capital gain has the meaning given such term in section 1(h)(11).

(2)

Alternative minimum tax

Section 55(b) of such Code is amended by adding at the end the following new paragraph:

(4)

Maximum rate of tax on net capital gain of corporations

The amount determined under paragraph (1)(B)(i) shall not exceed the sum of— (A)the amount determined under such paragraph computed at the rates and in the same manner as if this paragraph had not been enacted on the taxable excess reduced by the net capital gain, plus (B)the amount determined under section 1201.

(3)

Technical amendments

(A)Section 1445(e)(1) of such Code is amended by striking 35 percent (or, to the extent provided in regulations, 15 percent) and inserting 0 percent. (B)Section 1445(e)(2) of such Code is amended by striking 35 percent and inserting 0 percent. (C)Section 7518(g)(6)(A) of such Code is amended by striking 15 percent (34 percent in the case of a corporation) and inserting 0 percent . (D)Section 607(h)(6)(A) of the Merchant Marine Act, 1936 is amended by striking 15 percent (34 percent in the case of a corporation) and inserting 0 percent. (c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. (2)

Withholding

The amendments made by subparagraphs (A) and (B) of subsection (b)(3) shall take apply to dispositions and distributions after the date of the enactment of this Act.