II 110th CONGRESS 1st Session S. 1111 IN THE SENATE OF THE UNITED STATES April 16, 2007 Mr. Wyden introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to make the Federal income tax system simpler, fairer, and more fiscally responsible, and for other purposes.

1.

Short title; amendment of 1986 Code; table of contents

(a)

Short Title

This Act may be cited as the Fair Flat Tax Act of 2007. (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 for this Act is as follows: Sec. 1. Short title; amendment of 1986 Code; table of contents. Sec. 2. Purpose. TITLE I—INDIVIDUAL INCOME TAX REFORMS Sec. 101. 3 progressive individual income tax rates for all forms of income. Sec. 102. Health care standard deduction. Sec. 103. Increase in basic standard deduction. Sec. 104. Refundable credit for State and local income, sales, and real and personal property taxes. Sec. 105. Earned income child credit and earned income credit for childless taxpayers. Sec. 106. Repeal of individual alternative minimum tax. Sec. 107. Termination of various exclusions, exemptions, deductions, and credits. TITLE II—CORPORATE AND BUSINESS INCOME TAX REFORMS Sec. 201. Corporate flat tax. Sec. 202. Treatment of travel on corporate aircraft. Sec. 203. Termination of various preferential treatments. Sec. 204. Elimination of tax expenditures that subsidize inefficiencies in the health care system. Sec. 205. Pass-through business entity transparency. Sec. 206. Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004. Sec. 207. Revaluation of LIFO inventories of large integrated oil companies. Sec. 208. Modifications of foreign tax credit rules applicable to large integrated oil companies which are dual capacity taxpayers. Sec. 209. Repeal of lower of cost or market value of inventory rule. Sec. 210. Reinstitution of per country foreign tax credit. Sec. 211. Application of rules treating inverted corporations as domestic corporations to certain transactions occurring after March 20, 2002. TITLE III—Other provisions Subtitle A—Improvements in tax compliance Sec. 301. Information reporting on payments to corporations. Sec. 302. Broker reporting of customer's basis in securities transactions. Sec. 303. Additional reporting requirements by regulation. Sec. 304. Increase in information return penalties. Sec. 305. E-filing requirement for certain large organizations. Sec. 306. Implementation of standards clarifying when employee leasing companies can be held liable for their clients' Federal employment taxes. Sec. 307. Modification of collection due process procedures for employment tax liabilities. Sec. 308. Expansion of IRS access to information in National Directory of New Hires for tax administration purposes. Sec. 309. Disclosure of prisoner return information to Federal Bureau of Prisons. Sec. 310. Modification of criminal penalties for willful failures involving tax payments and filing requirements. Sec. 311. Understatement of taxpayer liability by return preparers. Sec. 312. Penalties for failure to file certain returns electronically. Sec. 313. Penalty for filing erroneous refund claims. Subtitle B—Requiring economic substance Sec. 321. Clarification of economic substance doctrine. Sec. 322. Penalty for understatements attributable to transactions lacking economic substance, etc. Sec. 323. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions. Subtitle C—Miscellaneous Sec. 331. Denial of deduction for punitive damages. TITLE IV—TECHNICAL AND CONFORMING AMENDMENTS; SUNSET Sec. 401. Technical and conforming amendments. Sec. 402. Sunset.

2.

Purpose

The purpose of this Act is to amend the Internal Revenue Code of 1986— (1)to make the Federal individual income tax system simpler, fairer, and more transparent by— (A)recognizing the overall Federal, State, and local tax burden on individual Americans, especially the regressive nature of State and local taxes, and providing a Federal income tax credit for State and local income, sales, and property taxes, (B)providing for an earned income tax credit for childless taxpayers and a new earned income child credit, (C)repealing the individual alternative minimum tax, (D)increasing the basic standard deduction and maintaining itemized deductions for principal residence mortgage interest and charitable contributions, (E)reducing the number of exclusions, exemptions, deductions, and credits, and (F)treating all income equally, (2)to make the Federal corporate income tax rate a flat 35 percent and eliminate special tax preferences that favor particular types of businesses or activities, and (3)to partially offset the Federal budget deficit through the increased fiscal responsibility resulting from these reforms.