[Congressional Record Volume 147, Number 54 (Thursday, April 26, 2001)]
[Senate]
[Pages S4003-S4004]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MURKOWSKI:
  S. 784. A bill to amend the Internal Revenue Code of 1986 to increase 
the limitation on capital losses any individual may deduct against 
ordinary income, and to allow individuals a 3-year capital loss 
carryback and unlimited

[[Page S4004]]

carryovers; to the Committee on Finance.
  Mr. MURKOWSKI. Mr. President, I am today introducing legislation that 
would soften the blow that many investors have felt as the stock market 
has declined. My bill would raise the capital loss limit that can be 
applied against ordinary income. Currently, the limit is $3,000. Under 
my proposal, the limit would rise to $20,000. Moreover, my legislation 
allows individual taxpayers to carryback capital losses three years to 
offset prior capital gains.
  This bill reflects the reality of what has happened to many millions 
of investors. In the past year, more than $4.5 trillion of wealth has 
been wiped out as our economy has slowed and the markets have declined. 
For many investors, when they file their taxes next year, they are 
going to find that if they have no offsetting gains they are only going 
to be allowed to write off $3,000 of their loss. Of course, they can 
carry forward that loss. But for an investor who has net capital losses 
of $20,000 this year he or she will not be able to completely write off 
that investment loss until 2007, assuming no future capital gains. With 
$40,000 of losses, it would take until 2014 to write off those losses.
  The capital loss/ordinary income limit has been in place since 1976. 
It seems to me that with 25 years of inflation, that $3,000 limit is 
far too low. Moreover, I have always believed that if we want to 
encourage investors to take financial risks investing in new frontier 
technologies, we should cushion the financial blow when the venture 
does not succeed. The best way to do that is to allow them to write off 
a greater portion of their loss immediately.
  The bill also allows individuals the opportunity to carry back losses 
in the same fashion that is allowed to corporations. If their capital 
losses exceed their capital gains they would be able to carry those 
losses back three years to offset capital gains incurred in prior 
years. While I recognize that this may create some complexity for 
taxpayers since it would require the filing of amended returns, I 
believe it is an appropriate and fair way to deal with capital losses. 
If a corporation can take advantage of this benefit, it seems only fair 
to give that same benefit to individuals.
  I would certainly like to see the capital gains rate lowered. But as 
one Wall Street executive recently was quoted: ``The last time I 
looked, you had to have gains for this to make any difference.'' I 
certainly think the proposal I have offered would certainly make a 
difference to many millions of taxpayers who have suffered grievous 
losses in the market this year.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
   There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 784

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

     SECTION 1. TREATMENT OF CAPITAL LOSSES OF TAXPAYERS OTHER 
                   THAN CORPORATIONS.

       (a) Increase in Limitation on Losses Allowable Against 
     Ordinary Income.--Section 1211(b)(1) of the Internal Revenue 
     Code of 1986 (relating to limitation on capital losses of 
     taxpayers other than corporations) is amended--
       (1) by striking ``$3,000'' and inserting ``$20,000'', and
       (2) by striking ``$1,500'' and inserting ``$10,000''.
       (b) Carryback and Carryovers of Capital Losses.--Section 
     1212(b)(1) of the Internal Revenue Code of 1986 (relating to 
     capital loss carrybacks and carryovers of taxpayers other 
     than corporations) is amended to read as follows:
       ``(1) Carrybacks and carryovers.--
       ``(A) In general.--If a taxpayer other than a corporation 
     has a net capital loss for any taxable year (the `loss 
     year')--
       ``(i) the excess of the net short-term capital loss over 
     the net long-term capital gain for the loss year shall be a 
     capital loss carryback to each of the 3 taxable years 
     preceding the loss year and a capital loss carryover to each 
     taxable year succeeding the loss year, and shall be treated 
     as a short-term capital loss in each such taxable year, and
       ``(ii) the excess of the net long-term capital loss over 
     the net short-term capital gain for the loss year shall be a 
     capital loss carryback to each of the 3 taxable years 
     preceding the loss year and a capital loss carryover to each 
     taxable year succeeding the loss year, and shall be treated 
     as a long-term capital loss in each of such taxable years.
       ``(B) Amount carried to each taxable year.--The entire 
     amount of the loss which may be carried to another taxable 
     year under subparagraph (A) shall be carried to the earliest 
     of the taxable years to which the loss may be carried. The 
     portion of such loss which may be carried to any other 
     taxable year shall be the excess (if any) of such loss over 
     the portion of such loss which, after application of 
     subparagraph (C), was allowed as a carryback or carryover to 
     any prior taxable year.
       ``(C) Amount which may be used.--An amount shall be allowed 
     as a carryback or carryover from a loss year to another 
     taxable year only to the extent--
       ``(i) such amount does not exceed the excess (if any) of--

       ``(I) the sum of the losses from the sale or exchange of 
     capital assets in such other taxable year plus losses carried 
     under this paragraph to such other taxable year from taxable 
     years prior to such loss year, over
       ``(II) gains from such sales or exchanges in such other 
     taxable year, and

       ``(ii) the allowance of such carryback or carryover does 
     not increase or produce a net operating loss (as defined in 
     section 172(c)) for such other taxable year.''
       (c) Conforming Amendments.--
       (1) Section 1212(b)(2)(A) of the Internal Revenue Code of 
     1986 is amended by striking ``subparagraph (A) or (B) of 
     paragraph (1)'' and inserting ``clause (i) or (ii) of 
     paragraph (1)(A)''.
       (2) Section 1212 of such Code is amended by striking 
     subsection (c).
       (d) Effective Date.--The amendments made by this section 
     shall apply to capital losses arising in taxable years 
     beginning after December 31, 2000.
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