Individual income tax

(a)

In general

Section 1 of the Internal Revenue Code of 1986 is amended to read as follows:

Tax imposed

There is hereby imposed on the taxable income of every individual a tax equal to 15 percent of the taxable income of such individual for such taxable year.

(b)

Taxable income

Section 63 of such Code is amended to read as follows:

63.

Taxable income

(a)

In general

For purposes of this subtitle, the term taxable income means the excess of—(1)the sum of—(A)wages (as defined in section 3121(a) without regard to paragraph (1) thereof) which are paid in cash and which are received during the taxable year for services performed in the United States,(B)retirement distributions which are includible in gross income for such taxable year, plus(C)amounts received under any law of the United States or of any State which is in the nature of unemployment compensation, over(2)the standard deduction.(b)

Standard deduction

(1)

In general

For purposes of this subtitle, the term standard deduction means the sum of—(A)the basic standard deduction, plus(B)the additional standard deduction.(2)

Basic standard deduction

For purposes of paragraph (1), the basic standard deduction is—(A)$25,000 in the case of—(i)a joint return, or(ii)a surviving spouse (as defined in section 2(a)),(B)$18,000 in the case of a head of household (as defined in section 2(b)), and(C)$12,500 in the case of an individual—(i)who is not married and who is not a surviving spouse or head of household, or(ii)who is a married individual filing a separate return.(3)

Additional standard deduction

For purposes of paragraph (1), the additional standard deduction is $5,000 for each dependent (as defined in section 152) who is described in section 151(c) for the taxable year and who is not required to file a return for such taxable year.(c)

Retirement distributions

For purposes of subsection (a), the term retirement distribution means any distribution from—(1)a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),(2)an annuity plan described in section 403(a),(3)an annuity contract described in section 403(b),(4)an individual retirement account described in section 408(a),(5)an individual retirement annuity described in section 408(b),(6)an eligible deferred compensation plan (as defined in section 457),(7)a governmental plan (as defined in section 414(d)), or(8)a trust described in section 501(c)(18).

Such term includes any plan, contract, account, annuity, or trust which, at any time, has been determined by the Secretary to be such a plan, contract, account, annuity, or trust.

(d)

Income of certain children

For purposes of this subtitle—(1)an individual’s taxable income shall include the taxable income of each dependent child of such individual who has not attained age 14 as of the close of such taxable year, and(2)such dependent child shall have no liability for tax imposed by section 1 with respect to such income and shall not be required to file a return for such taxable year.(e)

Inflation adjustment

(1)

In general

In the case of any taxable year beginning in a calendar year after 2023, each dollar amount contained in subsection (b) shall be increased by an amount determined by the Secretary to be equal to—(A)such dollar amount, multiplied by(B)the cost-of-living adjustment for such calendar year.(2)

Cost-of-living adjustment

For purposes of paragraph (1), the cost-of-living adjustment for any calendar year is the percentage (if any) by which—(A)the CPI for the preceding calendar year, exceeds(B)the CPI for the calendar year 2022.(3)

CPI for any calendar year

For purposes of paragraph (2), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.(4)

Consumer Price Index

For purposes of paragraph (3), the term Consumer Price Index means the last Consumer Price Index for all-urban consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.(5)

Rounding

If any increase determined under paragraph (1) is not a multiple of $10, such increase shall be rounded to the next highest multiple of $10.(f)

Marital status

For purposes of this section, marital status shall be determined under section 7703.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

Tax on business activities

(a)

In general

Section 11 of the Internal Revenue Code of 1986 (relating to tax imposed on corporations) is amended to read as follows:

11.

Tax imposed on business activities

(a)

Tax imposed

There is hereby imposed on every person engaged in a business activity a tax equal to 15 percent of the business taxable income of such person.(b)

Liability for tax

The tax imposed by this section shall be paid by the person engaged in the business activity, whether such person is an individual, partnership, corporation, or otherwise.(c)

Business taxable income

For purposes of this section—(1)

In general

The term business taxable income means gross active income reduced by the deductions specified in subsection (d).(2)

Gross active income

(A)

In general

For purposes of paragraph (1), the term gross active income means gross receipts from—(i)the sale or exchange of property or services in the United States by any person in connection with a business activity, and(ii)the export of property or services from the United States in connection with a business activity.(B)

Exchanges

For purposes of this section, the amount treated as gross receipts from the exchange of property or services is the fair market value of the property or services received, plus any money received.(C)

Coordination with special rules for financial services, etc

Except as provided in subsection (e)—(i)the term property does not include money or any financial instrument, and(ii)the term services does not include financial services.(3)

Exemption from tax for activities of governmental entities and tax-exempt organizations

For purposes of this section, the term business activity does not include any activity of a governmental entity or of any other organization which is exempt from tax under this chapter.(d)

Deductions

(1)

In general

The deductions specified in this subsection are—(A)the cost of business inputs for the business activity,(B)wages (as defined in section 3121(a) without regard to paragraph (1) thereof) which are paid in cash for services performed in the United States as an employee, and(C)retirement contributions to or under any plan or arrangement which makes retirement distributions (as defined in section 63(c)) for the benefit of such employees to the extent such contributions are allowed as a deduction under section 404.(2)

Business inputs

(A)

In general

For purposes of paragraph (1), the term cost of business inputs means—(i)the amount paid for property sold or used in connection with a business activity,(ii)the amount paid for services (other than for the services of employees, including fringe benefits paid by reason of such services) in connection with a business activity, and(iii)any excise tax, sales tax, customs duty, or other separately stated levy imposed by a Federal, State, or local government on the purchase of property or services which are for use in connection with a business activity.

Such term shall not include any tax imposed by chapter 2 or 21.

(B)

Exceptions

Such term shall not include—(i)items described in subparagraphs (B) and (C) of paragraph (1), and(ii)items for personal use not in connection with any business activity.(C)

Exchanges

For purposes of this section, the amount treated as paid in connection with the exchange of property or services is the fair market value of the property or services exchanged, plus any money paid.(e)

Special rules for financial intermediation service activities

In the case of the business activity of providing financial intermediation services, the taxable income from such activity shall be equal to the value of the intermediation services provided in such activity.(f)

Exception for services performed as employee

For purposes of this section, the term business activity does not include the performance of services by an employee for the employee’s employer.(g)

Carryover of credit-Equivalent of excess deductions

(1)

In general

If the aggregate deductions for any taxable year exceed the gross active income for such taxable year, the credit-equivalent of such excess shall be allowed as a credit against the tax imposed by this section for the following taxable year.(2)

Credit-equivalent of excess deductions

For purposes of paragraph (1), the credit-equivalent of the excess described in paragraph (1) for any taxable year is an amount equal to—(A)the sum of—(i)such excess, plus(ii)the product of such excess and the 3-month Treasury rate for the last month of such taxable year, multiplied by(B)the rate of the tax imposed by subsection (a) for such taxable year.(3)

Carryover of unused credit

If the credit allowable for any taxable year by reason of this subsection exceeds the tax imposed by this section for such year, then (in lieu of treating such excess as an overpayment) the sum of—(A)such excess, plus(B)the product of such excess and the 3-month Treasury rate for the last month of such taxable year, shall be allowed as a credit against the tax imposed by this section for the following taxable year.(4)

3-month Treasury rate

For purposes of this subsection, the 3-month Treasury rate is the rate determined by the Secretary based on the average market yield (during any 1-month period selected by the Secretary and ending in the calendar month in which the determination is made) on outstanding marketable obligations of the United States with remaining periods to maturity of 3 months or less.

(b)

Tax on tax-Exempt entities providing noncash compensation to employees

Section 4977 of such Code is amended to read as follows:

4977.

Tax on noncash compensation provided to employees not engaged in business activity

(a)

Imposition of tax

There is hereby imposed a tax equal to 15 percent of the value of excludable compensation provided during the calendar year by an employer for the benefit of employees to whom this section applies.(b)

Liability for tax

The tax imposed by this section shall be paid by the employer.(c)

Excludable compensation

For purposes of subsection (a), the term excludable compensation means any remuneration for services performed as an employee other than—(1)wages (as defined in section 3121(a) without regard to paragraph (1) thereof) which are paid in cash,(2)remuneration for services performed outside the United States, and(3)retirement contributions to or under any plan or arrangement which makes retirement distributions (as defined in section 63(c)).(d)

Employees to whom section applies

This section shall apply to an employee who is employed in any activity by—(1)any organization which is exempt from taxation under this chapter, or(2)any agency or instrumentality of the United States, any State or political subdivision of a State, or the District of Columbia.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

Repeal of alternative minimum tax

(a)

In general

Part VI of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

Repeal of credits

(a)

In general

Part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

Repeal of estate and gift taxes and obsolete income tax provisions

(a)

Repeal of estate and gift taxes

(1)

In general

Subtitle B of the Internal Revenue Code of 1986 is hereby repealed.(2)

Effective date

The repeal made by paragraph (1) shall apply to the estates of decedents dying, and gifts and generation-skipping transfers made, after December 31, 2022.(b)

Repeal of obsolete income tax provisions

(1)

In general

Except as provided in paragraph (2), chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.(2)

Exceptions

Paragraph (1) shall not apply to—(A)sections 1, 11, and 63 of such Code, as amended by this Act,(B)those provisions of chapter 1 of such Code which are necessary for determining whether or not—(i)retirement distributions are includible in the gross income of employees, or(ii)an organization is exempt from tax under such chapter, (C)subchapter D of such chapter 1 (relating to deferred compensation), (D)section 170 of such Code, and(E)section 965 of such Code.(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

Treatment of deferred foreign income upon transition to participation exemption system of taxation

(a)

In general

Section 965(o) of the Internal Revenue Code of 1986 is amended by striking and at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting , and, and by adding at the end the following:

(3)regulations or other guidance to establish that this section shall apply not less often than annually.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2022.