[Congressional Record Volume 149, Number 69 (Friday, May 9, 2003)]
[House]
[Pages H3864-H3956]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             JOBS AND GROWTH RECONCILIATION TAX ACT OF 2003

  Mr. REYNOLDS. Mr. Speaker, by direction of the Committee on Rules, I 
call up House Resolution 227 and ask for its immediate consideration.
  The Clerk read the resolution, as follows:

                              H. Res. 227

       Resolved, That upon the adoption of this resolution it 
     shall be in order without intervention of any point of order 
     to consider in the House the bill (H.R. 2) to amend the 
     Internal Revenue Code of 1986 to provide additional tax 
     incentives to encourage economic growth. The bill shall be 
     considered as read for amendment. The amendment recommended 
     by the Committee on Ways and Means now printed in the bill 
     shall be considered as adopted. All points of order against 
     the bill, as amended, are waived. The previous question shall 
     be considered as ordered on the bill, as amended, to final 
     passage without intervening motion except: (1) one hour of 
     debate on the bill, as amended, equally divided and 
     controlled by the chairman and ranking minority member of the 
     Committee on Ways and Means; and (2) one motion to recommit 
     with or without instructions.

  The SPEAKER pro tempore. The gentleman from New York (Mr. Reynolds) 
is recognized for 1 hour.
  Mr. REYNOLDS. Mr. Speaker, for the purpose of debate only, I yield 
the customary 30 minutes to the gentleman from Texas (Mr. Frost), 
ranking member of the Committee on Rules, pending which I yield myself 
such time as I

[[Page H3865]]

may consume. During consideration of this resolution, all time yielded 
is for the purpose of debate only.
  (Mr. REYNOLDS asked and was given permission to revise and extend his 
remarks.)
  Mr. REYNOLDS. Mr. Speaker, House Resolution 227 is a closed rule 
providing 1 hour of debate for consideration of H.R. 2, the Jobs and 
Growth Reconciliation Act of 2003. The rule waives all points of order 
against the bill, as amended, and against its consideration; provides 
one motion to recommit with or without instructions.
  Mr. Speaker, our economy is a global one, dependent on free markets, 
free trade and free-flowing exchange of ideas and information. But our 
economy is also local. Its effects ripple through communities 
throughout America impacting each and every working family. In the 
final months of the previous administration, America's economy was 
beginning to slow. President Bush in one of his first major policy 
initiatives of his new presidency shepherded through the largest tax 
reduction package in a generation, needed tax relief for working 
families that this Congress approved in bipartisan fashion. We lowered 
rates for American workers, made the Tax Code fairer by easing the 
marriage penalty, and provided an immediate shot in the arm to 
overtaxed American families and our national economy by providing a 
well-deserved rebate to some 95 million taxpayers.

                              {time}  0945

  The result? The shortest and shallowest recession in America's 
history.
  Then the unthinkable happened. While positive growth registered in 
the fourth quarter of 2001, the horrific attacks on our Nation on 
September 11 left our Nation and our economy traumatized, and nowhere 
was that impact felt harder than in my home State of New York.
  Still, our country rallied and produced positive growth in all four 
quarters of 2002, according to the National Bureau of Economic 
Research. But this calculated growth has not always been readily 
recognizable across America. The American people demand and deserve an 
energized economy, complete with expanding job opportunities and 
investment incentives.
  As a logical compliment of the Economic Growth and Tax Relief 
Reconciliation Act, today's bill provides consistent tax relief and 
growth policies that will generate, on average, 575,000 jobs a year for 
the next 5 years.
  In New York, this will mean nearly 36,000 new jobs every year for 5 
years. For my part of the State, which never shared in the economic 
boom of the 1990s, job growth remains the number one priority, and this 
type of positive impact is what this and so many other parts of our 
country need. Plus, it puts more money back in the hands of hard-
working Americans. Former President Richard Nixon once said, ``We can 
never make taxation popular, but we can make taxation fair.''
  Two years ago, this Congress started to make the Tax Code more fair, 
and today we have the opportunity once again to achieve parity and 
fairness in the Tax Code. For years it has been well-documented that 
taxpayers in my home State of New York send far more of their hard-
earned money to Washington than they get back in Federal programs and 
services. Frankly, my constituents and their pocketbooks have noticed.
  My constituents have expressed their sincere concerns with the double 
taxation of dividends. Many are middle-class, retired seniors who rely 
on dividends as parts of their income. This legislation drastically 
reduces the dividend tax burden, making stocks more valuable and 
increasing expected rates of return. Stockholders in my district and 
all across America will have more control over their own money, while 
at the same time watching it grow at a faster rate.
  The effect is twofold: First, to bring fairness to the Tax Code by 
greatly reducing the double taxation of dividends; second, as dividend 
paying stocks become more attractive, more potential investors will be 
brought to the market.
  This bill also ensures equal treatment of dividends and capital gains 
by lowering the rate for each to 15 percent. By lowering the rates on 
dividends and capital gains, people will be more willing to invest 
because they will pay less tax on the returns to their investment, and 
corporate managers may find it more attractive to invest in projects 
since their cost of capital will decline. When businesses find their 
cost of capital lowered, it increases the likelihood that they will 
invest in new machinery, projects and employees. As more people invest, 
more companies grow and more jobs are created.
  Another important component of this job-creating tax relief is our 
continued effort towards greater corporate accountability. By 
strengthening dividends, investors will have solid evidence of a 
company's corporate health, proving the investor's adage that ``profits 
are an opinion, but cash is a fact.'' By reducing the advantage of 
paying interest ahead of paying dividends, the incentive for some 
corporate managers to cook the books will be greatly diminished.
  Equally important, this bill accelerates common-sense tax relief for 
families. By increasing the child tax credit to $1,000 for calendar 
years 2003 through 2005 and by expediting marriage penalty relief, 
families will retain valuable resources to help pay for their child's 
education, make a mortgage payment or help pay off the debt.
  As President Bush said, ``If tax relief is good for Americans years 
from now, it is even better when the American economy needs it today.''
  In New York, over 2 million married couples will benefit from 
marriage penalty relief and over 1.5 married families with children 
will benefit from the increased child tax credit.
  Our country is blessed with a strong entrepreneurial spirit. Under 
this bill, small businesses will have the option of immediately 
deducting $100,000 in expenses, a significant increase over the current 
$25,000 deduction. Because most small businesses pay taxes as 
individuals, accelerating the top rate reduction means lower taxes for 
small business owners. That means that millions of entrepreneurs will 
have more resources to spend on employees, supplies or expansion 
efforts.
  Mr. Speaker, the President has laid out clear goals for a strong, 
growing economy. Today this body can move one step closer to 
implementing this plan to create 1.2 million jobs by the end of 2004 
alone.
  Our country is already facing great challenges, and we must remain 
diligent in our efforts to tackle what lies ahead. The Jobs and Growth 
Tax Reconciliation Act confronts head on the serious issues before us, 
boosting employment levels, lowering the tax burden and growing the 
economy.
  I urge my colleagues to join me in supporting this rule, as well as 
the crucial underlying legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. FROST. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. FROST asked and was given permission to revise and extend his 
remarks, and include extraneous material.)
  Mr. FROST. Mr. Speaker, the rule poses a serious threat to the 
American economy because it prevents the House from considering 
anything other than the same old failed Bush economics that have left 
America with the weakest economy in a generation.
  Now, when I am back in my district in Texas, I am often asked a 
question that is highly relevant to today's debate. That question is, 
``Why does the Bush administration continue to insist on more tax 
breaks for the wealthiest few, while the country is running record 
deficits?'' So I want to take a few minutes to share with the House the 
explanation I give to my own constituents.
  It all began during the 2000 campaign for President. At the start of 
that campaign, the Republican candidate from my State of Texas, who now 
serves as President, made an almost unprecedented decision. He became 
one of the very few presidential candidates who have ever rejected 
Federal funding during the primaries. By rejecting Federal funds, of 
course, he freed himself from the State by State spending limits and, 
therefore, he was able to outspend his most serious Republican rival 
for the nomination at a critical point in the primary campaign.
  As a part of the decision to reject Federal funds, the Bush campaign 
established a special group called the ``Pioneers.'' Each Member of 
this small

[[Page H3866]]

elite group agreed to raise at least $100,000 for the Bush campaign.
  I submit for the Record a list of more than 5 Bush campaign 
``Pioneers'' as compiled by Texans for Public Justice. I also submit 
for the Record an article from the May 6, 2003, edition of the 
Washington Post. Its headline reads, `` `Pioneers paved Bush's way with 
big dollars.' ''

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[[Page H3878]]

          Lawsuit Reveals 312 New Bush ``Pioneer'' Fundraisers

       Austin & Boston: Newly released Bush presidential campaign 
     documents reveal 312 previously unknown members of Bush's 
     record-breaking ``Pioneer'' fundraising network. Participants 
     volunteered to help the campaign circumvent a $1,000 federal 
     campaign contribution limit by pledging to bundle checks from 
     family, friends and associates (most Pioneers pledged to 
     raise at least $100,000). Combined with previous disclosures, 
     the new data publicly identify 538 participants in the 
     Pioneer program. Yet the new documents still do not reveal 
     what each participant raised nor the total amount of Pioneer 
     money raised. Indeed, there is some evidence that the 
     campaign has yet to disclose everyone who answered the 
     ``Pioneer'' call.
       The new disclosures come in response to a legal challenge 
     to a provision of the McCain-Feingold 2002 Bipartisan 
     Campaign Reform Act that doubled the limit on individual 
     contributions to federal candidates to $2,000 and up to 
     $12,000 in races involving a self-funded candidate. 
     Represented by the National Voting Rights Institute (NVRI), 
     the plaintiffs, known as ``the Adams plaintiffs,'' argued 
     that the increased limits would open the floodgates to 
     donations from the wealthy and make it impossible for 
     candidates without large networks of maximum donors to run 
     for office. The Pioneer program is a leading example of the 
     way that wealthy interests are able to bundle together large 
     contributions to influence elections. A federal court panel 
     ruling on May 2 rejected the arguments made by the Adams 
     plaintiffs.
       In response to a September 2002 subpoena from the 
     plaintiffs requesting complete contribution data and other 
     information on the Pioneer program, representatives of the 
     campaign claimed to possess only limited information. For 
     example, Bush attorneys claimed that they could not locate an 
     accounting of the total amount of money raised by each 
     Pioneer fundraiser. Bush lawyers provided only limited 
     financial data on just 212 of the 538 disclosed Pioneer 
     fundraisers. The total amount attributed to these 212 
     fundraisers through some unknown data in the campaign is 
     $24.9 million, far short of the $60 million to $80 million 
     that observers suspect that the program raised.
       ``It's time to end the secrecy over who bankrolled the Bush 
     campaign,'' said Craig McDonald, an expert witness for the 
     plaintiffs and director of Texans for Public Justice, a 
     research organization that has tracked Bush's fundraising 
     since his gubernatorial days. ``It just isn't believable that 
     the President's campaign lost most of a $60 million 
     fundraising list. Has anyone checked Donald Evans' laptop?''
       ``These documents reveal the disproportionate power gained 
     by those who can bundle huge sums of hard money for political 
     campaigns,'' said NVRI Executive Director John C. Bonifaz. 
     ``With the hard money increases in the Bipartisan Campaign 
     Reform Act, elite donors such as the Bush Pioneers will 
     achieve a stranglehold over the electoral process and 
     ordinary voters will be locked out. This offends the basic 
     constitutional promise of political equality for all.''
       The newly released information and an accompanying Texans 
     for Public Justice (TPJ) analysis reveals the identities of 
     previously unknown Pioneer fundraisers. Key facts about the 
     newly released Pioneer volunteers include:
       The campaign credited each of 21 super Pioneers (or 
     partnerships in which two or three participants shared one 
     Pioneer tracking number) with raising more than $200,000 
     through some unknown data in the campaign. Topping the list 
     are business partners William DeWitt and Mercer Reynolds, 
     whom the new records reveal supported Bush to an extent 
     rivaled perhaps only by Enron. Sharing the same Pioneer 
     tracking number, these two Men--who bailed out Bush's 
     hemorrhaging Bush Oil Co., in 1984 and invested in the Texas 
     Rangers venture that made Bush a millionaire 15 times over--
     delivered a minimum of $605,082.
       The largest known single individual Pioneer was Michigan 
     real estate magnate Ronald Weiser, who was credited with 
     delivering at least $588,309.
       At least 49 of the newly identified fundraisers are Lawyers 
     & Lobbyists Randy DeLay, brother of House Majority Whip Tom 
     DeLay.
       At least 44 of the just-disclosed fundraisers come from the 
     Energy and Natural Resources industry, including former 
     Dynergy CEO Chuck Watson and former El Paso Energy CEO 
     William Wise, whose companies were battered by Enronesque 
     allegations of accounting fraud and ``round-trip trading.'' 
     The oil company of Pioneer Ray Hunt has teamed up with 
     Halliburton to build a gas pipeline through a fragile 
     Peruvian rain forest that is home to remote indigenous 
     tribes.
       Former Enron chief Ken Lay was credited with raising at 
     least $112,050.
       Two-thirds of the new fundraisers (201) come from Bush's 
     home state of Texas, followed by 18 from California and 16 
     from Washington, D.C.
       Critics have long contended that Bush's Pioneer disclosures 
     were incomplete--if not selective. Bush campaign officials 
     told the media that almost 400 individuals already had taken 
     the Pioneer pledge by July 1999. An April 2000 article 
     reported that the campaign had revealed just one-third of the 
     names that appeared on campaign Pioneer lists obtained by The 
     Nation. In fact, six of the eleven Pioneers that The Nation 
     reported by name did not appear in the newly released 
     documents (all of these happen to be current or former 
     corporate lobbyists). Prior to the latest disclosure, the 
     Bush campaign had revealed just 226 Pioneers whom it said had 
     raised at least $100,000 each.
       Materials related to the new Pioneer disclosures made 
     available at the TPJ web site include:
       1. Previously sealed depositions of Bush for President 
     Committee Finance Director Jack Oliver;
       2. A sample of the more than 300 Pioneer tracking forms 
     produced by the campaign;
       3. A campaign spreadsheet tracking 505 Pioneer program 
     participants (including limited contribution data on 212 of 
     them);
       4. A TPJ-compiled list of all 538 known Pioneer program 
     participants; and
       5. A preliminary TPJ analysis of the newly revealed Pioneer 
     participants.
                                  ____


             ``Pioneers'' Paved Bush's Way With Big Dollars

       Some of the lobbyists and corporate executives who funded 
     President Bush's campaign agreed to raise at least $250,000 
     apiece, much more than the previously reported goal of 
     $100,000, according to campaign documents.
       The documents, released as part of litigation over the 
     nation's new campaign-finance law, show that the Bush 
     campaign's financial appetite made the contribution limit of 
     $1,000 look like little more than a formality.
       Although no individual could legally give more than $1,000, 
     the campaign circulated pledge sheets inviting donors to 
     raise $250,000 from their friends and subordinates, then 
     tracked the results with a computer code so the donor would 
     get credit for all the checks.
       Those who raised $100,000 were recognized as Pioneers, but 
     the campaign documents show that there was a previously 
     undisclosed class of donor who raised as much as $600,000. 
     When the Pioneer program was created by Bush's presidential 
     exploratory campaign in 1999, the announced goal for members 
     was $100,000, although the campaign always made it clear that 
     they could raise more.
       In fact, they were encouraged to do so. The pledge form 
     from the finance committee of the George W. Bush Presidential 
     Exploratory Committee Inc. had an ``I pledge to raise'' 
     section ranging from $25,000 to $250,000.
       Republican officials said the campaign made no distinction 
     between the premium Pioneers and the regular ones.
       One enthusiastic telemarketing executive was not content 
     with the choices on the form and wrote ``$5.75 million'' in 
     bold letters, although there is no indication he raised that 
     much. At least 26 supporters promised to raise $250,000, one 
     wrote in $500,000 and two pledged $1 million. Many of them 
     fell short.
       The form asked donors to give a target date for completing 
     the goal. A corner of the form included a four-digit number 
     that the campaign used to track the contributions on 
     spreadsheets. ``Remember, your Solicitor Tracking Number is 
     your personal tracking number for money that you raise,'' the 
     form said. ``Please place this number on any check that you 
     solicit.''
       The campaign also tracked contributions by industry, and 
     Democrats have asserted that the system was set up to 
     expedite reward and punishment. Jack Oliver, the campaign's 
     national finance director, said in a deposition during the 
     campaign-finance litigation that the number was used to 
     prevent disputes over who had raised what.
       ``The Pioneer system itself, the tracking method was 
     effective because people didn't fight over things like they 
     usually did,'' said Oliver, now the deputy chairman of the 
     Republic National Committee.
       Targeted solicitations were made to airline, association 
     and utility executives and Bush's class at Harvard Business 
     School, according to the documents. Some of the letters used 
     campaign stationary, but Oliver said the solicitations were 
     from individual Bush supporters and not the campaign. ``We 
     wanted to reach out as broadly as humanly possible, to touch 
     as many different segments of America as we could,'' Oliver 
     said in the deposition.
       Pioneers were given briefings on confidential polling data 
     and were feted at a reception at the Republican National 
     Convention. Since Bush took office, at least 19 have been 
     named ambassadors.
       The documents, which were first reported by the Dallas 
     Morning News and the New York Times, showed that at least 27 
     couples had raised $200,000 or more for Bush by the time 
     he had defeated Sen. John McCain (R-Ariz.) in the 2000 
     primaries, and the money kept rolling in for several more 
     months.
       Many of the super-Pioneers were longtime friends of Bush, 
     but others were executives who stood to benefit substantially 
     from his administration. Frederick L. Webber, credited with 
     raising $206,000 through March 15, 2000, was president and 
     chief executive of the American Chemistry Council until seven 
     months ago. The council, which represents chemical 
     manufacturers, promotes the ``sound science'' approach to 
     environmental regulation that has been a mantra of Bush's 
     administration.
       Another of the premium Pioneers was Richard E. Hug of 
     Baltimore, founder and chairman emeritus of Environmental 
     Elements Corp., which makes smokestack scrubbers and other 
     pollution controls. Hug said that Bush's Clear Skies 
     Initiative, which would revise parts of the Clean Air Act and 
     is being considered by Congress, would be ``very beneficial'' 
     to his company

[[Page H3879]]

     by requiring utilities to upgrade their emission systems, but 
     that it had nothing to do with the $275,000 he raised.
       ``The Pioneers program really incentivized people to do a 
     great job for the next president,'' said Hug, who was Bush's 
     Maryland Finance chairman. ``There wasn't any financial 
     remuneration or anything like that, but it was just being on 
     the team. I can't imagine there's any Pioneer who won't help 
     George W. again.''
       Hug noted with a chuckle that the Pioneers had to pay extra 
     for the sterling silver cufflinks that served as emblems of 
     their service to the campaign.
       Bonnie Tenneriello, staff attorney for the National Voting 
     Rights Initiative, which released the documents, said they 
     show that the campaign-finance system gives ``a huge 
     advantage to wealthy individuals who are able to network and 
     effectively aggregate huge amounts.''
       Her group went to court to argue against the doubling of 
     the money that can be given to a campaign as a direct 
     contribution, known as hard money, to $2,000 under the new 
     campaign finance law Bush signed last year. On Friday, a 
     three-judge panel of the U.S. District Court for the District 
     of Columbia struck down major provisions of the law, but left 
     in place the higher ceiling for direct contributions to 
     campaigns.
       Republican sources said that because of the new limit, 
     Bush's reelection campaign is likely to ask Pioneers to raise 
     at least $200,000.

  Mr. Speaker, this is what I point out to my constituents. Had it not 
been for Candidate Bush's decision to reject Federal funding, he might 
have lost nomination, and thus never have become President. So, in 
reality, it was the Bush ``Pioneers'' who elected the 43rd President of 
the United States.
  Mr. Speaker, it should come as no great surprise that the top 
priority for many of the Bush ``Pioneers'' is to reduce the taxes they 
pay through the inheritance tax, through the top marginal income tax 
rate, and through capital gains taxes, and it should come as no great 
surprise that the Bush administration, from the day it entered office, 
has made it a priority to reduce taxes on the wealthiest few.
  Mr. Speaker, the Republican bill on the House floor today is merely 
the latest installment in this plan to give budget-busting tax breaks 
to the wealthiest few. If Republicans were shooting straight with the 
American people, they would call it the ``Pioneer's Tax Relief Act, 
Part 2.''
  Make no mistake: It is just another phase in the same old budget-
busting Republican priorities that have already failed the economy. 
Part 1 of the Pioneers Tax Relief Act was the package of tax breaks 
that the Republicans passed in 2001.
  To see how badly the Republican economic plan has failed, all we have 
to do is look around. All in all, some 2.7 million Americans have lost 
their jobs since George W. Bush became President. In fact, only Herbert 
Hoover lost more jobs than George W. Bush has.
  The stock market is down. Republicans have driven America's deficit 
so high that the Bush administration's own Treasury Department has 
twice asked the Congress to raise the debt limit so they can borrow 
more money. And Alan Greenspan is worried about the long-term economic 
damage that would be caused by even more budget-busting tax breaks.
  Mr. Speaker, in just over 2 years Republicans have compiled a record 
of unmitigated economic failure. I defy anyone to explain how Bush 
economics is working for America.
  The truth is Americans are still suffering from the second Bush 
recession in just over a decade. In fact, it is the third Republican 
recession in the past 20 years. If Republicans keep driving the economy 
into the ground, colleges will have to start teaching the new basic 
equation of Economics 101: Republican power plus Republican economic 
policies equals American recession.
  But none of that seems to matter to the Republicans who control the 
Federal Government right now, because with this bill they are pushing 
more of the same old Bush failed economics.
  It does not seem to matter that those failed policies have left 
America with the worst economy in a generation, or that America has 
actually lost jobs since Republicans passed Part 1 of the Pioneer's Tax 
Relief Act, their 2001 package of tax relief for the wealthiest, or 
that Part 2, the bill on the floor, will not create any more jobs than 
Part 1 does.
  It does not seem to matter that this bill shortchanges the majority 
of Americans on tax relief, or that it drives the Nation even deeper 
into debt, raising the debt tax on all Americans and hurting the 
economy over the long term.
  All that seems to matter to the President and to the Republicans in 
Congress is this fact: Part 2 of the Pioneers Tax Relief Act gives 
every millionaire a $93,000 tax break, even as it sticks the rest of 
America with the bill. To put it in context, the $93,000 tax break for 
millionaires is almost enough money to qualify as a Bush ``Pioneer.''
  It is hard to believe, Mr. Speaker, but that is the sad truth. A 
small elite group, the ``Pioneers,'' and a few people like them, are 
the focus of Republican economic policy. And no matter how bad the 
economy gets, the President and this Republican Congress will keep 
raiding ordinary taxpayers to pay for more tax breaks for the 
wealthiest of the wealthy, and that is why we are here today, stuck 
with yet another Republican tax plan that is bad for the economy. As I 
have said before, it is does not have to be this way. Most Americans 
believe, as House Democrats do, that it is ridiculous to stick with 
economic policies that have so clearly failed.
  That is why we have proposed the Democratic Jobs and Growth Plan. It 
is fast-acting, creating 1 million new jobs. It is fair, providing 
meaningful tax relief to working families. And it is fiscally 
responsible, completely paid for over 10 years. But Republican leaders 
are apparently afraid of sound economic policy, because just late last 
night in the Committee on Rules they blocked the Democratic Jobs and 
Growth Plan.
  Mr. Speaker, Americans have suffered long enough under the same old 
failed Bush-onomics. It is time for a change, before Republicans do 
permanent damage to our economy. But the only way to change America's 
economic policy today is on the important parliamentary vote on the 
previous question. If we defeat the previous question, I will amend the 
rule to allow the House to vote on the Democratic Jobs and Growth Plan. 
That is the only way we can provide immediate job-boosting help to the 
economy today.
  Mr. Speaker, I reserve the balance of my time.
  Mr. REYNOLDS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Georgia (Mr. Linder), a distinguished member of the Committee on Rules.
  Mr. LINDER. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, if we just take that last comment by the gentleman from 
Texas and play it over and over and over, we would have today's debate, 
because they are concerned that people who pay taxes will get tax 
relief.
  We have over the last 40 years removed 50 percent of the income 
earners from the tax rolls. This year the top 1 percent of the income 
earners will pay 38 percent of all the income taxes. The bottom 50 
percent collectively will pay less than 3 percent. And, guess what? I 
do not mean to sound remedial here, but if you are going to cut taxes, 
the taxpayers are going to get the relief.

                              {time}  1000

  We have done this before in this country. In 1961 President Kennedy 
said, ``A rising tide lifts all boats.'' They removed the top tax 
bracket from 90 percent to 70 percent, and guess who got the relief? 
The top tax bracket.
  We reduce taxes in this country for a reason, and it is an economic 
reason. The less burden the government places on the backs of small 
businesses and income earners, the more economic activity we will have, 
and more economic activity means more jobs, and more jobs means more 
taxpayers, and indeed, more revenues.
  In 1980, before the Reagan tax cut, the American people contributed 
$519 billion to the Federal Government. After those outrageous tax 
cuts, 10 years later, the American people contributed $1.54 trillion. A 
rising tide lifts all boats.
  If we want to stop this country from going into recession, if we want 
to build a growing economy, we simply have to remove the heavy burden 
of government from the backs of small business and income earners and 
let them create jobs, which will increase revenues.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York (Mr. Rangel), the ranking member of the Committee on Ways and 
Means.

[[Page H3880]]

  (Mr. RANGEL asked and was given permission to revise and extend his 
remarks.)
  Mr. RANGEL. Mr. Speaker, this is a day that I do not think our 
country will ever forget. It is a day of infamy. It is a day that the 
Republican majority has decided that it is their way or the highway. If 
they have a bill that they are so proud of, why is it that they believe 
that the Democrats should not be able to at least reveal what we want 
to do?
  Here we are on the brink in history where we are bringing democracy 
and freedom to Iraq; but at the same time, we are diminishing it here 
in the House of Representatives.
  This bill that is coming up, the secret Bush tax plan that even the 
President did not know about, came to the Committee on Ways and Means 
on Tuesday, we voted for it on Friday and never given an opportunity to 
bring our bill to the floor. I really believe that it should be 
shameful that in this House of Representatives that we ever forget what 
they are doing to the American people.
  Some people have just said that if you are not rich, you are not 
entitled to a tax cut. If you are the working poor, if you are 
unemployed, you are not entitled to any relief. We truly believe in 
this House, the people's House, what the majority is doing, they are 
not doing it to the Democrats who are the minority, they are not just 
doing this to the House of Representatives and the Congress; they are 
doing it to America, because they are afraid to allow a different point 
of view to be heard.
  I hope we never, never, never forget this day. I hope when the 
Democrats get the majority, that they never, never, never do what the 
Republicans are doing today. They should be ashamed of themselves for 
what they are doing to the legislative process, but more important than 
anything else, what they are doing to the good people of the United 
States of America.
  Mr. REYNOLDS. Mr. Speaker, I yield myself such time as I may consume.
  It is a tough day when I watch some of my colleagues use kind of a 
class warfare tactic. I would think I was in a political 101 class when 
I listened to ``pioneers,'' except I know that the President, when he 
ran as a candidate from being the Governor of Texas, he took all local 
money from those pioneers. Not all parties can claim that over the 
recent decade.
  But when we look here, I know something about Grand Prairie taxes 
where my colleague, the ranking member of the Committee on Rules, comes 
from. My wife lived there; grew up there until she moved to New York 
with me. I know a little about western New York where I reside, but I 
know a little about Harlem, where the ranking member of the Committee 
on Ways and Means resides. They are not rich in my area. They are not 
rich in Grand Prairie, Texas; and they are not rich in Harlem. But this 
bill, a typical family of four earning $40,000 will see their taxes go 
from $1,178 to $45 a year, and 23 million small businesses, whether it 
is Grand Prairie or Buffalo or Harlem, will be able to create new jobs 
with new incentives and tax relief under this bill.
  Mr. Speaker, I yield 2 minutes to the gentlewoman from Ohio (Ms. 
Pryce).
  Ms. PRYCE of Ohio. Mr. Speaker, I rise in utter astonishment at my 
colleagues on the other side of the aisle. Here we are today with a 
plan before us that has the potential to create 1.2 million jobs by the 
end of next year, a plan that would raise the total value of the stock 
market by at least $550 billion, a plan that has the ability to help 
small businesses invest in more equipment and expand operations, a plan 
that would guarantee working families more of what they earn through 
increases in the child tax credit and further reductions in their 
overall income tax rates.
  My colleagues on the other side of the aisle are trying to block it.
  I wonder if the small business owners in their home towns would 
disagree with them if they knew they did not want them to be able to 
buy that extra piece of equipment or keep a little more of their profit 
so that they could hire an extra person. I wonder if the single mother 
of two from their community who is working two jobs just to make ends 
meet would ask them to support this package so that they could provide 
her with a little extra spending money for food and clothes and rent. 
And I wonder if their neighbors, who are trying to save for their 
children's education and their retirement, would want them to support 
this pro-growth package that would increase the value of their 401(k)s.
  Their questions are the same as mine: Why do they oppose job 
creation? Why do they want to stop businesses from becoming productive 
and growing their operations? And why do they think they can spend 
working families' money better than the families themselves?
  Mr. Speaker, it is a clear choice before us today. We can complain, 
we can bury our heads in the sand and do nothing, pretending that we do 
not need to inject some lifeblood into this economy, or we can look to 
the future and understand that right now we have the opportunity and 
the obligation to create jobs and grow this economy.
  Let us get on with it, Mr. Speaker.
  Mr. FROST. Mr. Speaker, I yield 3 minutes to the gentleman from 
Maryland (Mr. Hoyer), the distinguished Democratic whip.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  We just heard a representation of what their bill is going to do. We 
ought to judge the credibility of those representations. The gentleman 
from Texas (Mr. DeLay), October 24, 2001: ``This tax plan is the right 
medicine for our economy. It is the best way to put people back to work 
and create jobs.''
  After we adopted his policy, we have lost 2.7 million jobs in 
America.
  The gentleman from Texas (Mr. DeLay) said, ``The Democrats bring to 
the floor today a tax package that will cost jobs.'' He said that May 
27, 1993. That program resulted in the creation of 22 million jobs over 
the next 8 years and the reduction of the deficit and the creation of 4 
years of surplus for the first time in 80 years.
  President Bush said of his last tax bill in 2001: ``Tax relief is 
central to my plan to encourage economic growth and we can proceed with 
tax relief without fear of budget deficits.'' We now have the largest 
budget deficit in the history of this country confronting us after the 
adoption of his plan; and we have just increased, through the House, it 
has not passed the Senate, $1 trillion in additional debt. That is a 
debt tax.
  The gentleman from New York (Mr. Reynolds) talks about the $45 that 
they are going to pay in taxes, but the gentleman from New York (Mr. 
Reynolds) does not talk about the additional thousands of dollars that 
they are going to have to pay on the debt that has been created and the 
interest that his kids will have to pay.
  Mr. Speaker, today this Republican leadership slams the door of 
democracy in this House in a style befitting a third-rate dictatorship. 
It utterly ignores the 140 million Americans who are represented by 
Democrats. While we preach the value and power of democracy in Iraq and 
elsewhere, the Republican majority is denying it right here in this 
House right now.
  The Republicans have not just refused to give the Democrats an 
opportunity to offer an alternative to this reckless, unaffordable, and 
unfair tax bill; they have breached their solemn obligation to let this 
House work its will, and the gentleman from California (Mr. Dreier) in 
1993 said that was wrong. I heard the quote so many times: ``Power 
corrupts, and absolute power corrupts absolutely.''
  The Republicans control the House, they control the Senate, and they 
control the presidency; and they have corrupted this House with this 
rule and other rules like it. A closed rule, a gag rule. It does not 
allow debates, it does not allow alternatives, and it promotes a 
program that will further decimate the economy of this country and be 
extraordinarily unfair to middle-income taxpayers while advantaging 
some wealthy people, not all; and it will be bad for America.
  Reject this rule; reject this bill. Let us do fairness for our 
taxpayers and for America.
  Mr. REYNOLDS. Mr. Speaker, I yield myself such time as I may consume.
  I did not get here until January of 1999, but I am told since the 
Republicans took control in January of 1995, every single bill that 
comes on the floor of this House will have a recommit, and I am here 
today to tell my

[[Page H3881]]

colleagues that this bill will have a recommit so the minority can 
write it any way they want and it will be up for consideration. We will 
have a recommit vote, and then we will have final passage, and the will 
of the House will be done.
  Mr. HOYER. Mr. Speaker, will the gentleman yield?
  Mr. REYNOLDS. I yield to the gentleman from Maryland, the minority 
whip.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for yielding. I respect 
the gentleman. He and I served on the Committee on House 
Administration. The gentleman knows, however, full well, and the 
American public ought to know, that a motion to recommit, as the 
gentleman so well knows, is very restricted. And the gentleman knows we 
cannot offer our substitute under the rules because the Committee on 
Rules would not give us a waiver.
  So saying we have a motion to recommit, which we do, he knows full 
well that it restricts us in dealing with unemployment insurance, it 
restricts us in dealing with the sunsets that the Republicans have put 
on middle-class income workers. The gentleman knows that; am I correct?
  Mr. REYNOLDS. Mr. Speaker, I would have to answer the minority whip 
when we are on my time, and that is I have been reading the minority's 
press clips since I have been here, and to them it seems to be the 
biggest deal for mankind what the recommit motion is and how that vote 
occurred here. So I am confused the gentleman's suggestion today of how 
restrictive it is, after I read the press releases of so many of the 
gentleman's colleagues on what they think it is when they moved it 
before this House.
  Mr. HOYER. Let us forget about the press releases.
  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentleman from 
Texas (Mr. Hensarling).
  Mr. HENSARLING. Mr. Speaker, I thank the gentleman for yielding me 
this time.
  Mr. Speaker, I rise today in strong support of this rule for H.R. 2, 
the Jobs and Growth Act of 2003. American families need more job 
opportunities, and they need them now. The Democrats' plan for the 
American family is the same it has been for 50 years: tax and spend, 
tax and spend. In other words, to take a larger slice of the family 
income pie. Our plan, the Republican plan, is to grow the size of that 
family income pie by growing the economy.
  Democrats have a plan to create more government. Republicans have a 
plan to create more jobs. The Republican plan will create 1.2 million 
new jobs by the end of 2004 alone. The Democrat budget plan grows the 
government and erases tax relief, actually increasing taxes by $128 
billion on American families and businesses, threatening, dramatically 
threatening our economic recovery.
  Mr. Speaker, we cannot have capitalism without capital. The Democrat 
plan does nothing for capital formation. It does nothing for jobs. 
Democrats claim to love jobs; they just seem to hate the people who 
create them.
  Under the Republican jobs and growth plan, 23 million small 
businesses in America would face a simpler, fairer Tax Code. They will 
benefit from a reduction in marginal income tax rates and face lower 
capital gains taxes.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from 
Massachusetts (Mr. McGovern).
  Mr. McGOVERN. Mr. Speaker, I oppose this closed rule and the 
underlying bill. As everyone here knows, our economy is in very bad 
shape. Unemployment is at 6 percent and millions of Americans are 
unable to find work. The deficit is exploding, leading to a crushing 
debt for our children and our grandchildren. Our States and local 
communities are facing their worst fiscal crisis in 50 years. Police, 
firefighters, and teachers are being laid off.
  But instead of addressing these issues with sensible, thoughtful, and 
fair fiscal policy, the Republican majority offers up their usual menu 
of tax breaks for the wealthy. Part of the problem may be that the 
Republican majority is so out of touch with the plight of American 
workers, they cannot even decide what committee has authority over the 
issue. The chairman of the Committee on Education and the Workforce 
says it is not his responsibility, and last night, the chairman of the 
Committee on Ways and Means said it is not his responsibility.
  Mr. Speaker, the Americans who are suffering in this economy deserve 
more than jurisdictional ``hot potato.'' Somehow, though, my Republican 
friends figured out who was in charge of tax giveaways to the wealthy, 
because that is the bill we have before us today.
  Now, last night in the Committee on Rules, Members from both parties 
attempted to offer amendments to improve the bill. The Republican 
majority rejected each of those amendments. In fact, they denied the 
minority the opportunity to offer a substitute.
  So here in the greatest deliberative body in the world, on a bill 
with enormous implications for the future of our country, this House is 
denied the ability to deliberate.

                              {time}  1015

  We are told that there is not enough time to consider the amendments, 
that we need to finish our work early today so Members can catch their 
planes.
  Mr. Speaker, that excuse will not fly. We must make the time to 
debate and vote on thoughtful amendments to a multi-billion dollar tax 
bill. This past Tuesday, for example, would have been a great day to 
debate these important issues. On that day this House authorized the 
printing of bills on how a bill becomes a law, authorized the printing 
of a biographical directory of the U.S. Congress, and renamed four post 
offices.
  It seems to me we could have found a few minutes in there to debate 
the tax policies of the United States, not in a closed and undemocratic 
process, but in an open and fair process that allows Members of both 
sides to be able to work their will.
  Mr. Speaker, the American people deserve a House that has the right 
priorities, that helps people who need it most, and that does its work 
responsibly. Today, once again, the American people are getting less 
than they deserve.
  Mr. Speaker, I urge my colleagues to reject this rule and defeat this 
bill.
  Mr. REYNOLDS. Mr. Speaker, may I inquire of the amount of time 
remaining on both sides?
  The SPEAKER pro tempore (Mr. Simpson). The gentleman from New York 
(Mr. Reynolds) has 14 minutes remaining. The gentleman from Texas (Mr. 
Frost) has 15\1/2\ minutes remaining.
  Mr. REYNOLDS. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from Nevada (Mr. Gibbons).
  (Mr. GIBBONS asked and was given permission to revise and extend his 
remarks.)
  Mr. GIBBONS. Mr. Speaker, I thank my friend and colleague, the 
gentleman from New York (Mr. Reynolds) for yielding me time in which to 
speak in support of this rule and the underlying bill.
  This important legislation will create real job growth in America. In 
fact, according to some research institutions, it will create close to 
6,000 jobs in Nevada next year alone.
  Mr. Speaker, that is 6,000 more Nevadans who will be better off, 
better able to feed their children, better off to save for retirement, 
better off to pay their mortgage next year as a result of this 
important economic bill.
  With more pages than the Bible, our Tax Code contains many outdated, 
unnecessary and unfair taxes, many of which place an undue burden on 
our seniors. One example is the double taxation on dividends which 
punishes both savings and investment. It is simply unfair. Worse, 
seniors bear a disproportionate share of the burden under this tax 
because they typically have higher levels of savings being used as 
income during their retirement years. In fact, seniors receive an 
average of 47 percent of their income from dividends every year. With 
enactment of this bill, seniors will be able to depend on that steady 
source of income.
  In addition, over 230,000 Nevadans who filed returns in 2001 with 
dividend income will benefit from this bill and be able to reinvest 
their money, thus providing a real and positive impact on both the 
Nevada and U.S. economy.
  Mr. Speaker, I am disappointed to hear some Members on the other side 
of the aisle today express their views that this bill is too expensive 
and unnecessary. I say to them, tell that to

[[Page H3882]]

the over 230,000 Nevadans, mostly seniors, who pay taxes on the 
dividends and the more than 6,000 Nevadans who will find a job as a 
result of this bill.
  I urge all of my colleagues to support the rule and support the 
underlying bill.
  Mr. FROST. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida (Mr. Hastings).
  Mr. HASTINGS of Florida. Mr. Speaker, I thank my good friend and the 
distinguished ranking member, the gentleman from Texas (Mr. Frost) for 
yielding me time.
  Mr. Speaker, my colleague and good friend, the gentleman from New 
York (Mr. Reynolds) spoke about the fact that Democrats have received a 
motion to recommit for all the years that he is here. For all the years 
he is here, if we added up all of the motions to recommit that are 
allowed by the Republican majority, it would not add up to 9 hours of 
debate. We are given 10 minutes on a motion to recommit. That does not 
help very much in a free and open society in what is supposed to be the 
most deliberative body in the world. That has been curtailed and 
democracy loses when we close our rules, and democracy loses here 
today.
  Regarding the substance of the matter, envision that you are 
profoundly in debt and you have only a portion of the money you need to 
pay for major expenses coming up. What would you do? Would you, instead 
of working harder, saving more and paying off your debt as soon as 
possible, run up your credit card balance with expensive gifts for your 
wealthiest friends? No. The mere idea is preposterous.
  Mr. Speaker, if our economy was growing like it was before last 
year's obese, obtuse and downright obnoxious tax cut, I would be the 
first one to support cutting taxes, but our economy is not growing. In 
fact, it is hurting more that we are in a war, the war on terrorism, 
and we are not funding our homeland security responsibilities. The 
President and majority argue that further tax cuts will head off 
recession because to them tax cuts are a one-size-fits-all solution. 
The President and the majority have a tax cut obsession.
  Stretched over 10 years and designed with wrong priorities in mind, 
the cuts are not aimed where they can light a fire under the economy. 
Instead, the Thomas tax plan takes money out of needed social programs 
and gives it to people who are wealthy. Right now America needs an 
economic plan that focuses on providing relief to low and middle income 
families hardest hit by the Bush recession. Instead of making tax cuts 
for families a priority, Republicans make the increase in the child tax 
credit a temporary afterthought. The so-called increase in the child 
credit is like a magic trick, sort of like the marriage penalty, it is 
there and in 3 years it is gone.
  Indeed, America's greatness is based on its willingness to sacrifice 
today for the freedom and prosperity of tomorrow. This tax cut plan is 
completely out of touch with economic reality in America. It might as 
well come out of the Iraqi Information Ministry. We know how truthful 
they are.
  House Democrats are proposing a package that is front-loaded and fast 
acting, a real stimulus plan that will jump-start the economy. I urge 
my colleagues to vote no on the rule and on the underlying principle: 
The bigger the wallet, the bigger the benefit.
  Mr. Speaker, the following is the story of Thomas Zogg, one of my 
constituents that e-mailed me, which is emblematic of the problems we 
are talking about today.

       Dear Congressman Hastings, I wanted to bring to your 
     attention that while I most certainly appreciate the help I'm 
     getting from Unemployment, the bi-weekly payment of $550.00 
     is just not enough.
       I was laid off back in August of 2002 and have yet to 
     secure a job that actually pays enough to survive.
       So far, I have had to spend all of my savings, cash in my 
     retirement plan, sell my car just to make ends and pay the 
     rent. It's a terrible situation and now that I have nothing 
     of value left to sell, all of my unemployment money needs to 
     go toward paying rent.
       All of my bills are falling behind, and there is no money 
     left to buy food. I don't even have any money to relocate 
     even if I could find a job outside of Florida.
       I'm not sure what to do next.
       I can't get health insurance, and as a diabetic, and I 
     can't afford to pay for a doctor's visit to get a 
     prescription. I can't afford to pay for medication either. 
     Lets hope it gets better soon or I'll be homeless.

  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentleman from 
Minnesota (Mr. Kennedy).
  Mr. KENNEDY of Minnesota. Mr. Speaker, I rise today in strong support 
for the rule for H.R. 2.
  This is a fair rule for a critically important bill, important to get 
our economy moving again and create 1.2 million jobs. Before coming to 
Congress I spent 20 years in business and I know the importance of 
providing jobs for hardworking Americans. Retroactively lowering rates 
and expanding the 10 percent bracket will have an immediate stimulative 
impact on our economy to grow jobs. Accelerating the marriage penalty 
phaseout and raising the per child tax credit to $1,000 will give 
families the financial flexibility they need. Reducing the tax rate on 
dividends will put more money in seniors' pockets. And for small 
businesses, quadrupling the amounts that companies can immediately 
expense will help them grow and create jobs.
  Mr. Speaker, this is a good rule and a great bill, and I urge all of 
my colleagues to support it.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from Texas 
(Mr. Turner).
  Mr. TURNER of Texas. Mr. Speaker, in 2001 we approved a tax cut based 
on the Congressional Budget Office's estimate that we had a surplus 
over the next 10 years. Today our Republican colleagues come to the 
floor asking for a tax cut when the Congressional Budget Office 
projects a deficit over the next decades and as far as the eye can see. 
In that case, I think it is important for our Republican colleagues to 
be honest with the American people and go to them and let them know 
that in order to give this tax cut they have got to borrow the money, 
and here is the kind of credit application our Republican friends ought 
to submit to the people of this country.
  Typical application from the Members of Congress, always have to list 
your credit history. Our credit history is that we are in debt today 
$6.4 trillion. We pay $332 billion in interest. That is almost a 
billion dollars a day. Our estimated income for the next 10 years is 
$19.6 trillion. Our estimated expenditures exceed that, 23.6. It is 
estimated that in 2013 we will owe $12 trillion. And our estimated 
annual interest payments will be 6 to $700 billion, approaching what it 
costs to fund the Department of Defense.
  So what is our request from our Republicans? We need to borrow $550 
billion so we can give a tax cut. The interest cost on it is going to 
run another $273 billion, and so the whole deal will costs $820 
billion. What is the repayment schedule? It is unknown. I suggest that 
if you present this loan application to your local banker, they would 
say I am sorry, we are going to have to deny your loan.
  That is what we are being asked to do today by our Republican 
colleagues. Borrow money to finance a tax cut, charge it to the next 
generations with no prospect of repayment. I suggest this is the wrong 
direction for America.
  We must have a fiscally responsible tax cut like the Democrats 
propose that was paid for by not increasing our national debt. I urge 
you to vote no on the Republican proposal.
  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentleman from 
Indiana (Mr. Pence).
  Mr. PENCE. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, despite what the economists tell us America is in 
recession. My districts in eastern Indiana has seen job loss since the 
final days of the Clinton administration and that economic collapse has 
gone forwards unabated. The time for another pro-growth tax cut is now. 
The Jobs and Growth Act is such a measure.
  Now, we have heard already this morning, Mr. Speaker, that cutting 
taxes on capital gains and dividends is nothing more than a tax cut for 
the rich. But as a Pittsburg pipefitter said of the same cut in capital 
gains taxes advanced by President Reagan 20 years ago, ``It may be a 
tax cut for the rich but I ain't never been hired by a poor man.''
  President Kennedy was probably a bit more eloquent when he defended 
his cuts in the capital gains tax. He said, ``A rising tide lifts all 
ships.''
  Now that the war is behind us, America needs the tide of our economy 
to

[[Page H3883]]

rise again. Let us put politics aside, speed tax relief to working 
families, small businesses and family farms. Let us pass the Jobs and 
Growth Act today.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from South Carolina (Mr. Spratt), the ranking member on the 
Committee on the Budget.
  (Mr. SPRATT asked and was given permission to revise and extend his 
remarks.)
  Mr. SPRATT. Mr. Speaker, first of all, let us be clear, this is not a 
$550 billion tax cut. Take out the phony sunsets, the false expiration 
dates, and it is easily over a trillion dollars. By our calculation, 
the total impact of this tax package, of these tax cuts is $1 trillion 
123 billion.
  Now, what happens when you force feed another $1 trillion 123 billion 
to the budget we have got, which is already in deficit? The surplus is 
gone. It adds dollar for dollar to the bottom line, and here is what 
happens to the bottom line. This is what you are doing if you vote up 
this budget, this tax cut today.
  The deficit this year in 2003 will go to $426 billion. The deficit 
next year in 2004 will go to $494 billion. Here is the calculation of 
it. You cannot see it from there, but come look at it and contest it if 
you disagree.
  From 2004 to 2013 the total amount of deficit that we will incur, 
this budget will incur over the next 10 years goes to $3 trillion 953 
billion, and that is offsetting the deficits with the surpluses in 
Social Security. If you back out Social Security, if you put it in the 
lockbox, remember the lockbox, you know what happens. The total debt of 
the United States, the accumulated deficits over the next 10 years go 
to $6 trillion 521 billion. That is the legacy that you are leaving 
your children, our children, and this country if you vote for this tax 
cut today. That is the course you are putting us on.
  Now, here it is stated a different way. The bottom line on this curve 
shows you that the deficit drops to 3 to $400 billion and never comes 
out for the next 10 years. There is no recovery. It gets worse and 
worse if you put the country on this math.
  Now, you have to ask yourself is there a better way? Is there some 
way to do it better?

                              {time}  1030

  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentleman from 
Nebraska (Mr. Osborne).
  Mr. OSBORNE. Mr. Speaker, I represent a rural district that has been 
hit by 3 consecutive years of draught, contains the three poorest 
counties in the United States, definitely not a wealthy area. We are 
losing population, particularly our young people.
  The best way to keep our young people is to have them start their own 
business, to be involved in entrepreneurial activity. H.R. 2 is the 
most small business-friendly piece of legislation I have seen in years. 
It increases expensing allowance, expands the definition of small 
business, extends operating loss carryback. Also, the reduction in the 
capital gains tax to 5 percent for the low-income tax bracket also 
helps farmers and ranchers whose lands have appreciated in value, but 
they cannot sell out because of the debt they have accumulated and 
because of the capital gains tax they would have to pay.
  Most people in my district appreciate the child tax credit increase 
and the elimination of the marriage tax. These are not wealthy people.
  I support the rule, and I urge support of H.R. 2.
  Mr. FROST. Mr. Speaker, I yield such time as he may consume to the 
gentleman from New York (Mr. Engel).
  (Mr. ENGEL asked and was given permission to revise and extend his 
remarks.)
  Mr. ENGEL. Mr. Speaker, I rise in opposition to this outrageous rule 
and its outrageous tax cut. We are not even given time to debate this 
bill. We can have democracy in Iraq, but not here on the House floor.
  Mr. Speaker, I rise today with mixed emotions. I am angered by the 
blatant disregard by the Republican majority for the rights of the 
minority to offer an alternative. On top of that, we have just 1 hour 
of debate on this bill that will reduce Federal revenues by at least 
$550 billion. Not only are the views of the minority members being 
squashed, but the American people are being denied the opportunity to 
hear a frank and open debate about the future direction of their 
country. There is democracy in Iraq now, but not on the floor of the 
U.S. House of Representatives.
  I am also saddened. Saddened by the fact that my colleagues on the 
other side of the aisle, many of them good friends, have abandoned 
fiscal discipline. They have embraced tax cuts as a panacea for all our 
ills. They have made a conscious decision to enjoy their cake now and 
saddle our children, grandchildren and great-children with debt.
  Oh how times have changed. In 1995, the Republican Majority Leader, 
Mr. Delay. said ``By the year 2002, we can have a Federal Government 
with a balanced budget or we can continue down the present path towards 
total fiscal catastrophe.'' I don't often agree with the gentleman from 
Texas, but on this point I am with him 100 percent.
  Democrats have a fiscally sound bill that will provide immediate 
assistance to the 8 million unemployed Americans.
  Democrats have a fiscally sound bill that will provide immediate 
assistance to States that are being overwhelmed by budget crises of 
their own.
  Democrats have a fiscally sound bill that will provide immediate 
assistance to small businesses which are the job creators.
  Democrats have a fiscally sound bill that will give the majority of 
Americans tax relief right now.
  Republicans offer a plan that has been tried, tried, and tried again. 
Each and every time it has failed. Giving the wealthiest a tax cut does 
not spur economic activity. Wealthy people save the extra money. Middle 
class and low-income families spend the extra money. But, what we have 
before us today is a whopping permanent tax cut for the rich and a 
meager temporary tax cut for the rest of us.
  Mr. Speaker, I also have some fear in my gut right now. I fear that 
we will leave many, many children behind because of this foolish tax 
cut policy. I fear that one again seniors will be forced to choose 
between paying their rent and buying prescription drugs so that 
Republicans can provide a boondoggle of tax cut to 1 percent of 
Americans. I fear that the bipartisan effort that led to a balanced 
budget and actual payments toward eliminating our national debt has 
been squandered in a frenzy of demagoguery.
  I urge my colleagues on the other side of the aisle to stop. Take a 
breath. Think about what you are doing. Vote against the rule. Vote 
against this bill. Don't write out a bill, stuff it into an envelope 
and mark it to be paid by the next generation.
  Mr. FROST. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from California (Ms. Woolsey).
  (Ms. WOOLSEY asked and was given permission to revise and extend her 
remarks.)
  Ms. WOOLSEY. Mr. Speaker, I rise to speak about this rule and this 
bill of the Republican leadership that clearly engages in a game of 
make-believe, believing that big tax cuts for the wealthiest, which 
will not even be enacted for years to come, will ease the pain of 
today's unemployed workers now.
  Mr. Speaker, the Republican leadership is clearly engaging in a game 
of make-believe as they push their tax plan. In their imaginary world, 
big tax cuts for the wealthiest--the bulk of which won't be enacted for 
years to come--would ease the pain of unemployed workers now.
  We have already seen what happens when the Republicans legislate in a 
dream world. Since they passed their last irresponsible tax cut, more 
than 1\1/2\ million America's have lost their jobs. Only in fantasyland 
is that considered effective economic stimulus.
  But America's working families live in the real world. They 
understand the real damage this plan will cause. I oppose this rule and 
the Republican's budget and urge my colleagues to do the same.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from Texas 
(Mr. Edwards).
  (Mr. EDWARDS asked and was given permission to revise and extend his 
remarks.)
  Mr. EDWARDS. Mr. Speaker, we have heard it before, we can afford tax 
cuts, large increases in national defense and still balance the budget. 
This is not a new idea. We heard it 22 years ago from President Reagan 
and Congress. The result, America's national debt quadrupled in just 
over a decade.
  We heard this idea again 2 years ago when House Republicans speaking 
today proposed a $1 trillion tax cut and said the national debt will be 
paid off by 2013. The result, last month those same Republicans had to 
vote to increase the national debt ceiling in 2013 to $12 trillion, a 
$6 trillion increase. Result: we have gone from the largest

[[Page H3884]]

surplus in American history to the largest deficit in American history 
in just over 2 years and 2.5 million workers have lost their jobs.
  Now those same House Republicans want us to follow their lead once 
again, asking us to ignore their $12 trillion miscalculation just 24 
months ago. It is tempting to be swayed by their siren song of simple 
solutions, cut taxes by trillions, balance the budget, no sacrifice, no 
tough choices; and how I wish it were that simple. If it were, we could 
triple the size of this tax cut today and pay off the national debt 
tomorrow. The free-lunch philosophy might make for good sound bites, 
but it is fiscally irresponsible policy.
  The Congressional Budget Office, headed by President Bush's, one of 
his top White House economists, just a year or two ago recently 
concluded that any economic growth in the administration's tax cut 
proposals would be offset by the long-term drag effect of massive 
structural deficits as far as the eye can see.
  This is a growth bill all right. It will grow our national debt and 
the taxes our children will have to pay in interest on that debt for 
the rest of their lives. Once the economy gets on its feet, $300 
billion annual deficits, structural deficits will stifle business 
growth by soaking up capital and driving up interest costs for buying 
new homes, cars, running businesses or family farms.
  The free-lunch philosophy has not worked in the past, and it will not 
work today. Vote ``no'' on this fiscally irresponsible bill.
  Mr. Speaker, we have heard it before: ``We can afford massive tax 
cuts, large increases in national defense and still balance the 
budget.'' This is not a new idea. We heard it 22 years ago from 
Congress and President Reagan. The result? America's national debt 
quadrupled in just over a decade.
  We heard this idea 2 years ago when House Republicans proposed a 
trillion dollar tax cut and said the national debt will be paid off by 
2013. The result? Last month those same Republicans had to vote to 
increase the national debt in 2013 to $12 trillion, a $6 trillion 
increase. The result? We have gone from the largest surplus in American 
history to the largest deficit in American history in just over 2 years 
and 2\1/2\ million workers have lost their jobs.
  Now, those same House Republicans want us to follow their lead once 
again, asking us to ignore their $12 trillion miscalculation just two 
years ago. ``Let's have more massive tax cuts, increase defense 
spending, rebuild Afghanistan and Iraq, and oh, yes, we will balance 
the budget.''
  It is tempting to be swayed by the siren song of simple solutions--
cut taxes by hundreds of billions of dollars and balance the budget--no 
sacrifice and no tough choices. How I wish it were that simple. If it 
were, we could triple the size of this tax cut and pay off the national 
debt right a way.
  The free lunch philosophy might make for good sound bites, but it is 
fiscally irresponsible policy. That philosophy quadrupled our national 
debt in the 1980s and it contributed to our going from the largest 
surplus to the largest deficit in American history.
  The Congressional Budget Office, headed by one of President Bush's 
top White House economists recently concluded that any economic growth 
from the administration's tax cuts would be offset by the long-term 
drag effect of massive structural deficits for as far as the eye can 
see.
  I hear supporters of this tax bill say we could pay for the tax cuts 
with spending cuts. Well, show me the beef. The truth is that the 
administration is proposing increases in three of the five largest 
Federal programs: defense, medicare and interest on the national debt.
  It took House Republicans all of 2 weeks to completely retreat from 
their proposals to cut Medicare by $162 billion, Medicaid by $110 
billion and veterans benefits by $28 billion. And, frankly, I hope the 
House will reject the administration plan to cut highway spending and 
education funds for military children even while their parents are 
deployed to Iraq.
  The dirty little secret in this process is that the tax cut deal in 
this bill does not mention the fiscal impact of $795 billion in 
additional tax cuts proposed by the administration or Congressional 
Republicans.
  So, here we go again. Pass massive tax cuts. Talk tough on spending 
cuts, knowing full well Congress won't pass those spending cuts. The 
end result? Exactly what it was in 1981 and 2001--tax cuts paid for by 
massive borrowing from our children and grandchildren.
  This is a growth bill all right. It will grow our national debt and 
the taxes our children will have to pay on the interest on that debt. 
Once the economy gets on its feet, $300 billion annual deficits will 
stifle business growth by soaking up capital and driving up interest 
costs on houses, cars, businesses and farmers.
  The free lunch philosophy has not worked in the past and it will not 
work today.
  If we are to have a tax cut, it should focus its stimulus now, not 10 
years from now, it should be fair to average working Americans and it 
should not do damage to our long-term national debt.
  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Michigan (Mrs. Miller).
  (Mrs. MILLER of Michigan asked and was given permission to revise and 
extend her remarks.)
  Mrs. MILLER of Michigan. Mr. Speaker, I am proud to be here today to 
support this very comprehensive economic stimulus package. This plan 
actually has three fundamental caveats: number one, jobs; number two, 
jobs; number three, jobs. Jobs, jobs, jobs. If someone does not have a 
job and they want a job, this plan is for them. If they do have a job 
and they want a better-paying job, this plan is for them as well.
  Some are saying that this is a plan for the rich because it would 
reduce double taxation on dividends. Those that are saying that are 
stuck in an economic time warp because they are out of touch with 
reality. Today, a huge percentage of the American public is invested in 
the stock market. Double taxation is not only unfair, it is un-
American.
  That is why I am supporting this plan because I sincerely believe it 
is the right vehicle to get us on the right road to economic recovery. 
This plan is an economic engine that is pro-growth, pro-opportunity and 
pro-family; and I am talking about the American family, every single 
one of them.
  This is not the time to wring our hands. This is a time to be bold, 
like the President has been and like our proud troops have been, and I 
am proud to support this bold plan.
  I urge adoption of the rule.
  Mr. FROST. Mr. Speaker, how much time is remaining on each side?
  The SPEAKER pro tempore (Mr. Simpson). The gentleman from Texas (Mr. 
Frost) has 6\1/2\ minutes remaining. The gentleman from New York (Mr. 
Reynolds) has 8\1/2\ minutes remaining.
  Mr. FROST. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from Texas (Ms. Jackson-Lee).
  The SPEAKER pro tempore. The Chair will entertain unanimous consent 
requests and the request only. Time beyond the unanimous consent 
request will be timed and subtracted.
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I vigorously oppose this 
ridiculous and unsatisfactory----
  The SPEAKER pro tempore. Does the gentlewoman have a unanimous 
consent request to make? Does the gentlewoman have a unanimous consent 
request to make?
  Mr. REYNOLDS. Regular order, please, Mr. Speaker.
  Ms. JACKSON-LEE of Texas. Vote down this rule.
  Mr. Speaker, I rise in opposition to the rule, H. Res. 227. This rule 
is an outrageous departure from well-established House procedure.
  The minority party is invariably allowed to offer an amendment in the 
form of a substitute to the majority bill. This extraordinary and 
malicious rule denies the Democratic Party that opportunity. This 
closed rule shuts the door on debate of numerous valuable provisions 
that were included in the Democratic substitute to H.R. 2 as well as 
many valuable amendments that my Democratic colleagues and I proposed 
to the bill.
  The bill we will debate on this floor today impacts every American 
citizen regardless of their political affiliation. Both H.R. 2 and the 
Democratic substitute jobs and tax bill proposed solutions to the 
longstanding problems of unemployment and economic stagnancy.
  At the very least, the American people have the right to have the 
issue of the best way to create jobs and jumpstart our economy fully 
debated on the House of Representatives floor. This prohibitive rule 
strips Americans of that right.
  For example, I proposed an amendment to H.R. 2 that was not made in 
order and will therefore not have the benefit of floor debate. My 
amendment granted much needed tax relief to Americans who lost their 
jobs because of the faults of others. Under the provisions of my 
amendment, the severance packages of employees who lost their jobs 
because of the criminal activity or corporate malfeasance of their 
employers, are exempt from taxation.

[[Page H3885]]

  My amendment would help suffering former employees such as those laid 
off from Enron. In Houston alone, approximately 4,500 Enron employees 
lost their jobs. As they were shown the door, Enron employees received 
a severance package worth at most a mere $13,500. Given the struggles 
many Enron employees endured this sum was insufficient.
  For example, Nathan Childs of Houston was laid off from Enron. He and 
his wife, Adena, had to give up their apartment. The stress of the 
unemployment made their oldest son so ill he had to be hospitalized. 
Adena Childs had a stroke at the young age of 29 years old. Bill 
Peterson, also of Houston, is another Enron employee laid off in the 
massive cuts. Mr. Peterson lost his job while undergoing chemotherapy. 
He and his wife were forced to sell their car and home. For the first 
time in their married lives they were without life or medical 
insurance.
  My amendment would have kept every penny of the Enron severance in 
the pockets of struggling Americans like Nathan Childs and Bill 
Peterson. At the very least families like those who lost their jobs in 
the Enron debacle are due the opportunity to have their Congressperson 
engage in debate on their behalf. Likewise, those American who would 
have benefitted from the Democratic substitute job stimulus bill and 
those who benefitted from my colleagues various amendments are due 
vigorous debate on their behalf.
  Mr. Speaker, I vehemently oppose H. Res. 227. This rule violates 
established procedure. This rule take the malicious step of denying the 
minority party the opportunity to propose a substitute. I also oppose 
this rule because many provision, in the minority substitute and in 
proposed amendments, that benefit needy American families will not be 
heard on the House of Representatives floor.
  The SPEAKER pro tempore. Time has been subtracted beyond the 
unanimous consent request.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey (Mr. Menendez).
  Mr. MENENDEZ. Mr. Speaker, what are Republicans afraid of? Are they 
afraid of the anger of millions of unemployed when they found out 
Republicans are passing yet another massive tax cut while unemployment 
benefits for hard hit families are about to run out?
  Are Republicans afraid of middle-class workers who do not know 
whether we are going to have yet another wave of corporate downsizing 
in this country that will put their jobs, their health care and their 
kids education at risk?
  What is clear is that Republicans are afraid of something because 
they will not even allow Democrats to offer our alternative plan. We go 
halfway around the world to bring democracy to Iraq, and then they 
stifle democracy here. What a lesson to all those who we seek to spread 
the benefits of democracy to. They defile this bastion of democracy.
  Republicans do not want an open debate because they do not want the 
American middle class to see what they are doing. They borrow hundreds 
of billions from tomorrow to pay for tax cuts today, geared to those 
who already have plenty of income. Republicans create a mountain of 
debt on this and the next generation of Americans, and they conduct 
class warfare when they sunset the minimal tax provisions they provide 
to average Americans in 3 years, but wealthy Americans, they let those 
provisions continue to ride for quite some time.
  America simply cannot be red, white and broke and meet its challenges 
both at home and abroad in the years to come. It is time for 
Republicans to realize that their tax cut is not the answer to every 
problem. For 2\1/2\ years it has not worked; ask the 8.8 million 
Americans who are unemployed.
  Let us stop squandering the future of American families and start 
doing something about the economic mess they have created; and if my 
colleagues will not, at least allow us to offer an alternative that 
will put millions of Americans back to work. Give us the opportunity 
for a vote. What are my colleagues hiding from? Let us show the rest of 
the world what democracy is really about.
  Mr. REYNOLDS. Mr. Speaker, I yield myself such time as I may consume.
  Half of the tax relief package in 2003 is directed to the child tax 
credit, expanding the 10 percent bracket, eliminating the marriage 
penalty, accelerating the marginal rate cuts, and ensuring that middle-
class families do not face the AMT. 9.9 million taxpayers will not pay 
the AMT because of H.R. 2. Ten million Americans who are our seniors 
will directly receive assistance from the dividend return they are 
going to get in their senior income.
  If I were able to signal a message to the White House, I would say, 
Mr. President, we are on our way shortly to have a rule vote and we are 
no longer talking about your early ideas, should we or should we not 
have a tax cut. Mr. President, there is going to be a tax cut when the 
House concludes its business, I predict, and I predict it will pass by 
a bipartisan support, just as the one did that the President initiated 
in 2001.
  So as we look here today, we are talking some process, but when I sat 
in that Committee on Rules meeting last night, over half of the 
amendments introduced by my Democratic colleagues came forth on how 
they want to deal in tax planning, not to do away with it.
  So today we are moving forward. We are going to have a rule vote, and 
then we are going to take the bill on the floor, if it passes the rule, 
and we are going to have an opportunity to debate what the tax policy 
will be for this country. I believe, not only in my district and my 
State, but the country wants that money back in their pockets rather 
than the Federal Government spending it.
  Mr. Speaker, I yield 1 minute to the gentleman from New Hampshire 
(Mr. Bradley).
  Mr. BRADLEY of New Hampshire. Mr. Speaker, I rise in support of the 
jobs and growth package and the rule that accompanies it.
  Mr. Speaker, our economy is in the doldrums. 525,000 Americans have 
lost their jobs since February; 95,000 Americans have lost their 
manufacturing jobs. In my State of New Hampshire, 21 percent of our 
manufacturing jobs have disappeared; 17,000 of my fellow Granite 
Staters are out of work.
  Mr. Speaker, businesses and families need the 1.2 million jobs 
represented by H.R. 2; but, Mr. Speaker, it always comes down to 
individual Americans, and a couple of weeks ago, I spoke with a high-
tech worker in Bedford, New Hampshire, who had lost his job and been 
out of work for several months. That is just one American, but every 
American who cannot find a job is one American too many, and that is 
why today we need H.R. 2, to get Americans back to work.
  I urge support for the rule and H.R. 2.
  Mr. FROST. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Georgia (Mr. Scott).
  Mr. SCOTT of Georgia. Mr. Speaker, I think the fundamental question 
here this morning is what do the American people want. We know what we 
want; we know what my colleagues want. But what do the American people 
want?
  I will tell my colleagues what the American people want. The American 
people want a tax plan that will create jobs immediately, stimulate the 
economy immediately, and is paid for immediately, now, and will not add 
to the debt of our younger generations to pay for.
  The Republican plan does that. It adds to that debt. They cannot 
argue that. Is it fair to have that generation that went over in Iraq 
to fight so bravely, for those young men and women to come back here 
and to have to pay for the war, to pay for the debt?
  The Democratic plan that we support gives fair and balanced tax cuts. 
It gives immediate, targeted tax cuts for working families. It expands 
the 10 percent income tax bracket. It increases the child tax credit, 
ends the marriage penalty and, yes, extends unemployment benefits for 
those that need it.
  The American people are hurting. We have more people out of work than 
we have had in over 20-some years. Under the Republican administration, 
unemployment has skyrocketed. We need help for those that need it the 
most. We need help to give to our States.
  Under our Democratic plan, for our States' struggling economies, we 
give $44 billion; for the small businesses and the small manufacturers, 
$29 billion; and for those employers who will dare go and do the right 
thing and hire an unemployed person, we give a tax credit of $2,500. 
That is what is meaningful. That is what our people want, and I urge 
this House to reject and to vote for the Democratic plan.
  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. Cunningham), one of the great patriots of this House.
  Mr. CUNNINGHAM. Mr. Speaker, I am not on the Committee on Ways and

[[Page H3886]]

Means, but I do understand that before the committee the Democrats did 
not offer a plan. They wanted to do it in the dead of night with no 
rule, scrutiny and no amendments whatsoever and make press releases.
  They demagogue today all the things that they demagogued in 1993 when 
they had the House, the White House, and the Senate. They cut veterans' 
COLAs. We restored that. They cut military COLAs. We restored that. 
Social Security, another demagogue issue, well they increased the tax 
on Social Security; and they spent every dime out of the Social 
Security trust fund.
  I remember the gentleman from Missouri talking, oh, the lady in the 
red dress, we need middle-class tax breaks. They increased the tax on 
the middle class, and then they stand up here without any scrutiny, 
without bringing their substitute, their motion to recommit before the 
committee. It is a little disingenuous.

                              {time}  1045

  Mr. FROST. Mr. Speaker, I yield 1 minute to the gentleman from 
Massachusetts (Mr. Capuano).
  Mr. CAPUANO. Mr. Speaker, this is all about the Wizard of Oz. What is 
behind the curtain? They do not want anybody to look. Why? Because what 
is behind the curtain since President Bush took office is every single 
hour, and we have been debating this rule for 1 hour, and in that 1 
hour, 563 Americans have lost their jobs, and there is nothing in this 
bill for them. That is obscene. The rule is bad. That is worst.
  At the same time, we have been borrowing from our children. Every 
single minute that President Bush has been in office, we have borrowed 
$585,000. Since this debate has taken place, about 90 minutes, we have 
borrowed $52 million, and that does not include what we will have to 
borrow to pay for this tax cut.
  This tax cut is wrong. It will not help the economy. It is targeted 
to the wrong group of taxpayers, and it will increase the debt we leave 
to our children. It is irresponsible, and it is a gimmick to keep the 
American people from looking behind the curtain. We need to vote ``no'' 
on this rule, and we need to vote ``no'' on this tax bill.
  Mr. REYNOLDS. Mr. Speaker, I yield 1 minute to the gentleman from 
Iowa (Mr. Nussle), the chairman of the Committee on the Budget.
  (Mr. NUSSLE asked and was given permission to revise and extend his 
remarks.)
  Mr. NUSSLE. Mr. Speaker, just like last year when the Democrats did 
not have a budget, this year they do not have an economic plan. They 
have a press release that they rushed to the floor today, had it put 
into legislative language, but it is basically a press release. What 
does it do? It spends and it taxes. In fact, in the Committee on Ways 
and Means, half of the amendments that were introduced raised taxes on 
the American people.
  I do not know what economics book they are reading; but not only do 
we not raise taxes during a recession, but as the gentleman earlier 
said, it does not cost the government when we talk about tax cuts. 
Taxes cost Americans. When we leave money in the pockets of the people 
that earned the money in the first place, that is what is called 
America. When we tax and spend, that is what is called liberalism.
  Unfortunately, that is what we are offered with more today. The 
Democratic plan increases the debt actually more than the Republican 
plan. Just like the gentleman from South Carolina (Mr. Spratt) said, 
the plan for the Republicans increases the debt; we have had the 
Democratic plan scored over 10 years, and it increases the debt $1.7 
trillion.
  Mr. NUSSLE. Mr. Speaker, I rise in support of H.R. 2--``The Jobs and 
Growth Act of 2003.''
  This bill is appropriately named--it provides tax relief to boost 
economic growth and create jobs. And that is what workers and their 
families in Iowa and across the nation need today--a stronger economy 
and more jobs.
  We cannot afford to sit back and do nothing. We are rising to the 
challenge and taking action to get our economy growing again. We will 
help ensure that every worker who wants a job can be fully employed.
  The economy is struggling to overcome a number of shocks that no one 
anticipated: the terrorist attacks of September 11, 2001; a recession; 
the ongoing war on terror; military conflicts in Afghanistan and in 
Iraq; and a bursting of the stock market bubble. We should be thankful 
that our Nation's economy has been relatively resilient in the face of 
such shocks. Things could be much worse.
  In 2001, we passed tax relief legislation--including $40 billion in 
tax rebates--that was perfectly timed to help keep the recession from 
being worse than it was. Last year, we passed stimulus legislation--
``The Job Creation and Worker Assistance Act''--that included 
business investment incentives and extended unemployment benefits. 
Without these policies, the economy would be in much worse shape and an 
additional 1\1/2\ million jobs would have been lost.

  But things aren't as good as we want them to be. Our economy has lost 
2 million jobs over the past 2 years and the unemployment rate is up to 
6 percent. We've had a half million jobs lost in just the last 3 
months. Real GDP is growing at only 1\1/2\ percent over the past 6 
months. The evidence is clear: We need to adopt policies to help boost 
our economy and create jobs.
  This bill will do that. It will help families in Iowa. It will help 
businesses. It will promote investment and jobs. It will help to get 
our economy growing again. It provides for immediate help for all 
taxpayers, including lower income tax rates, increased child tax 
credits, and marriage penalty relief.
  When it comes to job creation, small businesses are the engine that 
keeps our economy pumping. Small business investment in Iowa and across 
the nation will particularly benefit from the higher depreciation 
allowances that will reduce the cost of new equipment that businesses 
need to maintain operations and grow. There will be an improved flow of 
investment funds for new capital investments from the reduction in 
capital gains and dividend income tax rates.
  We've heard various estimates about how many jobs the President's 
plan would create; or how many jobs a bill at $550 billion, or at $350 
billion would create. Or how many the Democrats want to claim from 
their proposal. What we know is that this bill, H.R. 2, has more tax 
relief in FY 2003 and FY 2004 than was even included in the President's 
plan. It certainly has more tax relief than in the Democrats' plan--and 
more total stimulus, too. The tax relief of this bill will clearly help 
to create as many or more jobs than either the President's plan or the 
Democrats's plan--and the numbers we've heard for those plans are in 
the range of 1 million to 1.4 million jobs. This bill will boost jobs 
by well over a million jobs by the end of 2004. This legislation will 
add an estimated more than 9,000 jobs in Iowa just in 2004 alone.

  Our plan will promote sustained growth in the economy and jobs. The 
Democratic plan is like a rug pulled out from underneath the economy. 
They want to raise taxes by nearly $200 billion. Their plan would kill 
economic growth and jobs right when growth was getting started.
  As Chairman of the Budget Committee, I can say that the $550 billion 
of tax relief in H.R. 2 is within the revenue and spending levels 
provided in the budget resolution. In fact, the budget resolution 
provides for as much as $1.2 trillion of tax relief. And, I can remind 
everyone that the budget resolution shows a return to a balanced 
budget. We are in favor of the tax relief that the bill under 
consideration provides--but we also provide that tax relief with an eye 
toward boosting the economy and returning the budget to balance.
  I urge my colleagues in the House to support this bill--to support 
growth in our economy and growth in jobs, and all within a framework of 
returning the budget to balance.
  Mr. FROST. Mr. Speaker, I would inquire of the other side how many 
speakers they have left.
  Mr. REYNOLDS. Mr. Speaker, I have one additional speaker, and I 
reserve the right to close.
  Mr. FROST. Mr. Speaker, we are prepared to close, but customarily we 
close by preceding the last speaker on the other side.
  Mr. REYNOLDS. Mr. Speaker, I yield 3 minutes to the gentleman from 
California (Mr. Dreier).
  Mr. DREIER. Mr. Speaker, I rise in strong support of this rule. When 
we won the majority back in 1994, we decided that we were going to 
guarantee that the minority had something that we on numerous occasions 
were denied. That was an opportunity to offer a motion to recommit.
  I will admit that we very much wanted to try to put together a 
structure whereby we could allow a substitute for the minority. But as 
we looked at what this bill is called, Mr. Speaker, it is called the 
Jobs and Growth Tax Act of 2003. What that means is we are putting into 
place policies that will reduce the tax burden so we can stimulate 
economic growth.

[[Page H3887]]

  Unfortunately, the package that was submitted to us yesterday by the 
minority to be offered as a substitute consisted, as was just said by 
the chairman of the Committee on the Budget, of tax increases; and it 
also goes into a wide range of other areas which have nothing to do 
with the Jobs and Growth Tax Act of 2003. In fact, we would have to 
provide waivers of almost every single rule imaginable to have made in 
order their substitute.
  That is why, Mr. Speaker, I would argue that we have done the 
minority a tremendous favor, a tremendous favor by saving them from 
casting a vote in support of a tax increase as we deal with what 
Secretary Snow yesterday described as a wobbly recovery. We all 
acknowledge that we are dealing with economic challenges. As we listen 
to our friends talk about the unemployment rate, we know jobs have been 
lost, and we know also that this downturn began the last 2 quarters of 
2000 before this administration came into office.
  We also know as we looked at the statements that were made by the 
President in his campaign, he said if we faced war, recession or a 
national emergency, we would be forced to go into deficit spending. And 
guess what, we have encountered all three. We are working diligently to 
ensure that we can climb out, and the best way to climb out is to 
unleash the potential of the American people which we know is limitless 
if we can provide that kind of opportunity for them.
  So, Mr. Speaker, we have a fair rule which does guarantee them their 
motion to recommit, and we also will have a chance to put into place a 
package which will do what President Bush has been arguing 
consistently, to give the American people a chance to keep some of 
their own hard-earned monies, generate economic growth, and then have 
the level of revenues that we need to balance the budget, to meet our 
priorities when it comes to education and health care and homeland 
security and national defense.
  Mr. Speaker, I think we have a wonderful package here. We have saved 
the Democrats from themselves. Let us support this rule, move ahead 
with a rigorous debate, and then pass our growth package.
  Mr. FROST. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, because this rule is so patently unfair, I urge every 
Member of this House, even those who do not care about the integrity of 
the institution itself, to vote against the previous question. If the 
previous question is defeated, I will offer an amendment to the rule. 
My amendment will allow the House to consider the Rangel substitute, 
the Rebuilding America Through Jobs Democratic substitute which was 
voted down in the Committee on Rules last night by a straight party-
line vote.
  The Democratic plan provides immediate job-boosting help to the 
economy. It provides fair tax relief by giving working families a 
break. It does not pander to the wealthiest of the wealthy. It provides 
a desperately needed extension of unemployment assistance to the 
millions of people without jobs under George W. Bush. It stimulates the 
economy by giving tax incentives to all businesses, especially small 
businesses and U.S. manufacturing.
  Let me make it very clear that a ``no'' vote on the previous question 
will not stop consideration of Republican Pioneers Tax Relief Act. A 
``no'' vote will simply allow the House to consider the Democratic Jobs 
and Growth Plan; but a ``yes'' vote on the previous question will 
prevent the House from taking up this responsible alternative. Make no 
mistake, this vote is the only opportunity the House will have to 
consider the Rangel substitute. I urge a ``no'' vote on the previous 
question.
  Mr. Speaker, I ask unanimous consent the text of the amendment be 
printed in the Record immediately before the vote on the previous 
question.
  The SPEAKER pro tempore (Mr. Simpson). Is there objection to the 
request of the gentleman from Texas?
  There was no objection.
  Mr. FROST. Mr. Speaker, I yield back the balance of my time.
  Mr. REYNOLDS. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, our economy is in need of a doctor, but the diagnosis 
suggests a remedy that is more comprehensive than the Band-Aid approach 
some of my colleagues suggest. Rather, the economy requires a shock to 
the system to stimulate a more rapid rate of growth, create incentives 
to work, save and invest, and encourage more disciplined Federal 
spending. The prognosis is very promising, but it stipulates immediate 
attention. That is why I urge a ``yes'' vote on this rule and the 
underlying legislation. A ``yes'' vote delivers money back into the 
hands of our constituents, the American taxpayers, and sends jobs to 
our districts.
  The material previously referred to by Mr. Frost is as follows:

       In the resolution strike ``and (2)'' and insert the 
     following:
       ``(2) the amendment printed in Sec. 2 of this resolution if 
     offered by Representative Rangel or a designee, which shall 
     be in order without intervention of any point of order, shall 
     be considered as read, and shall be separately debatable for 
     60 minutes equally divided and controlled by the proponent 
     and an opponent; and (3)''
       Strike all after the enacting clause and insert in lieu 
     thereof the following:
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Jobs and 
     Growth Reconciliation Tax Act of 2003''.
       (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 of this Act 
     is as follows:

Sec. 1. Short title; references; table of contents.

              TITLE I--IMMEDIATE STIMULUS AND JOB CREATION

                     Subtitle A--Family Tax Relief

Sec. 101. Acceleration of increase in child tax credit.
Sec. 102. Increase in standard deduction for married taxpayers filing 
              joint returns accelerated.
Sec. 103. Acceleration of 10-percent individual income tax rate bracket 
              expansion.
Sec. 104. Acceleration of elimination of marriage penalty in earned 
              income credit.

        Subtitle B--Incentives to Hire the Long-Term Unemployed

Sec. 111. Incentives to hire the long-term unemployed.

             Subtitle C--Extension of Unemployment Benefits

Sec. 121. Short title.

          Part I--Temporary Extended Unemployment Compensation

Sec. 131. References.
Sec. 132. Extension of the Temporary Extended Unemployment Compensation 
              Act of 2002.
Sec. 133. Entitlement to additional weeks of temporary extended 
              unemployment compensation.
Sec. 134. Extended benefit periods.

  Part II--Unemployment Benefits for Individuals Qualifying Based on 
              Part-time Work or an Alternative Base Period

Sec. 141. Federal-State agreements.
Sec. 142. Payments to States having agreements under this part.
Sec. 143. Financing provisions.
Sec. 144. Definitions.
Sec. 145. Applicability.

                Part III--Enhanced Unemployment Benefits

Sec. 151. Federal-State agreements.
Sec. 152. Payments to States having agreements under this part.
Sec. 153. Definitions.
Sec. 154. Applicability.

         Subtitle D--Trust Fund to Meet Nation's Pressing Needs

Sec. 161. Trust fund to meet nation's pressing needs.

              TITLE II--LONG-TERM JOB CREATION AND GROWTH

Sec. 201. Increase and extension of bonus depreciation.
Sec. 202. Increased expensing for small business.
Sec. 203. Deduction relating to income attributable to United States 
              production activities.

 TITLE III--FISCAL RESPONSIBILITY AND PROVISIONS ADDRESSING CORPORATE 
                                 ABUSE

                    Subtitle A-- General Provisions

Sec. 301. Freeze of top individual income tax rates.
Sec. 302. Restoration of phaseouts of deductions for personal 
              exemptions and of itemized deductions.
Sec. 303. Repeal of exclusion for extraterritorial income.

  Subtitle B--Abusive Tax Shelter Shutdown and Taxpayer Accountability

          Part I--Provisions Designed to Curtail Tax Shelters

Sec. 311. Clarification of economic substance doctrine.

[[Page H3888]]

Sec. 312. Penalty for failing to disclose reportable transaction.
Sec. 313. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 314. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 315. Modifications of substantial understatement penalty for 
              nonreportable transactions.
Sec. 316. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 317. Disclosure of reportable transactions.
Sec. 318. Modifications to penalty for failure to register tax 
              shelters.
Sec. 319. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 320. Modification of actions to enjoin certain conduct related to 
              tax shelters and reportable transactions.
Sec. 321. Understatement of taxpayer's liability by income tax return 
              preparer.
Sec. 322. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 323. Frivolous tax submissions.
Sec. 324. Regulation of individuals practicing before the department of 
              treasury.
Sec. 325. Penalty on promoters of tax shelters.
Sec. 326. Statute of limitations for taxable years for which listed 
              transactions not reported.
Sec. 327. Denial of deduction for interest on underpayments 
              attributable to nondisclosed reportable and noneconomic 
              substance transactions.

                       Part II--Other Provisions

Sec. 331. Limitation on transfer or importation of built-in losses.
Sec. 332. Disallowance of certain partnership loss transfers.
Sec. 333. No reduction of basis under section 734 in stock held by 
              partnership in corporate partner.
Sec. 334. Repeal of special rules for fasits.
Sec. 335. Expanded disallowance of deduction for interest on 
              convertible debt.
Sec. 336. Expanded authority to disallow tax benefits under section 
              269.
Sec. 337. Modifications of certain rules relating to controlled foreign 
              corporations.
Sec. 338. Basis for determining loss always reduced by nontaxed portion 
              of dividends.
Sec. 339. Affirmation of consolidated return regulation authority.

Subtitle C--Prevention of Corporate Expatriation To Avoid United States 
                               Income Tax

Sec. 341. Prevention of corporate expatriation to avoid United States 
              income tax.

 Subtitle D--Inclusion in Gross Income of Funded Deferred Compensation 
                         of Corporate Insiders

Sec. 351. Inclusion in gross income of funded deferred compensation of 
              corporate insiders.

              TITLE I--IMMEDIATE STIMULUS AND JOB CREATION

                     Subtitle A--Family Tax Relief

     SEC. 101. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.

       (a) In General.--The items relating to calendar years 2001 
     through 2008 in the table contained in paragraph (2) of 
     section 24(a) (relating to per child amount) are amended to 
     read as follows:

  ``2003 thru 2009...........................................$ 800 ....

   2010 or thereafter......................................1,000''.....

       (b) Acceleration of Increase in Refundable Portion of 
     Credit.--
       (1) In general.--Clause (i) of section 24(d)(1)(B) is 
     amended to read as follows:
       ``(i) 15 percent of so much of the taxpayer's earned income 
     (within the meaning of section 32) which is taken into 
     account in computing taxable income for the taxable year as 
     exceeds $7,500, or''.
       (2) Conforming amendment.--Paragraph (3) of section 24(d) 
     is amended--
       (A) by striking ``$10,000'' and inserting ``$7,500'', and
       (B) by striking ``2000'' and inserting ``2002''.
       (c) Effective Dates.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 102. INCREASE IN STANDARD DEDUCTION FOR MARRIED 
                   TAXPAYERS FILING JOINT RETURNS ACCELERATED.

       (a) In General.--Subparagraph (A) of section 63(c)(2), as 
     amended by the Economic Growth and Tax Relief Reconciliation 
     Act of 2001, is amended by striking ``the applicable 
     percentage of'' and inserting ``twice''.
       (b) Conforming Amendments.--
       (1) Section 301(d) of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended by striking ``2004'' 
     and inserting ``2002''.
       (2) Section 63(c) is amended by striking paragraph (7).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 103. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION.

       (a) In General.--Clause (i) of section 1(i)(1)(B) (relating 
     to the initial bracket amount) is amended by striking 
     ``($12,000 in the case of taxable years beginning before 
     January 1, 2008)''.
       (b) Inflation Adjustment.--Subparagraph (C) of section 
     1(i)(1) is amended to read as follows:
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f)--
       ``(i) no adjustment shall be made in the $14,000 amount for 
     any taxable year beginning before 2004, and
       ``(ii) the adjustment in such amount with respect to 
     taxable years beginning after 2003 shall be determined under 
     subsection (f)(3) by substituting `2003' for `1992' in 
     subparagraph (B) thereof.''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2002.
       (2) Tables for 2003.--The Secretary of the Treasury shall 
     modify each table which has been prescribed under section 
     1(f) of the Internal Revenue Code of 1986 for taxable years 
     beginning in 2003 and which relates to the amendment made by 
     this section to reflect such amendment.

     SEC. 104. ACCELERATION OF ELIMINATION OF MARRIAGE PENALTY IN 
                   EARNED INCOME CREDIT.

       (a) In General.--Subparagraph (B) of section 32(b)(2) is 
     amended to read as follows:
       ``(B) Joint returns.--In the case of a joint return filed 
     by an eligible individual and such individual's spouse, the 
     phaseout amount determined under subparagraph (A) shall be 
     increased by $3,000.''
       (b) Conforming Amendment.--Clause (ii) of section 
     32(j)(1)(B) is amended by striking ``2007'' and inserting 
     ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

        Subtitle B--Incentives to Hire the Long-Term Unemployed

     SEC. 111. INCENTIVES TO HIRE THE LONG-TERM UNEMPLOYED.

       (a) In General.--Paragraph (1) of section 51(d) (relating 
     to members of targeted groups) is amended by striking ``or'' 
     at the end of subparagraph (G), by striking the period at the 
     end of subparagraph (H) and inserting ``, or'', and by adding 
     at the end the following new subparagraph:
       ``(I) a qualified long-term unemployed individual.''
       (b) Qualified Long-Term Unemployed Individual.--Subsection 
     (d) of section 51 is amended by redesignating paragraphs 
     (10), (11), and (12) as paragraphs (11), (12), and (13), 
     respectively, and by inserting after paragraph (9) the 
     following new paragraph:
       ``(10) Qualified long-term unemployed individual.--
       ``(A) In general.--The term `qualified long-term unemployed 
     individual' means any individual who is certified by the 
     designated local agency--
       ``(i) as having exhausted, during the 1-year period ending 
     on the hiring date, all rights to regular unemployment 
     compensation under State or Federal law, and
       ``(ii) as having a hiring date which is during the 1-year 
     period beginning on the date of the enactment of this 
     paragraph.
     Subsection (c)(4) shall not apply to any qualified long-term 
     unemployed individual.
       ``(B) Exhaustion of benefits.--For purposes of subparagraph 
     (A), an individual shall be deemed to have exhausted such 
     individual's rights to regular compensation when--
       ``(i) no payments of regular compensation can be made under 
     such law because such individual has received all regular 
     compensation available to such individual based on employment 
     or wages during such individual's base period, or
       ``(ii) such individual's rights to such compensation have 
     been terminated by reason of the expiration of the benefit 
     year with respect to which such rights existed.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after the date of the enactment of this Act.

             Subtitle C--Extension of Unemployment Benefits

     SEC. 121. SHORT TITLE.

       This subtitle may be cited as the ``Unemployment Benefits 
     Extension Act''.

          PART I--TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION

     SEC. 131. REFERENCES.

       Except as otherwise expressly provided, whenever in this 
     part an amendment is expressed in terms of an amendment to a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Temporary 
     Extended Unemployment Compensation Act of 2002 (Public Law 
     107-147; 26 U.S.C. 3304 note).

     SEC. 132. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT 
                   COMPENSATION ACT OF 2002.

       (a) Extension of Program.--Section 208 is amended to read 
     as follows:

     ``SEC. 208. APPLICABILITY.

       ``(a) In General.--Subject to subsection (b), an agreement 
     entered into under this title shall apply to weeks of 
     unemployment--
       ``(1) beginning after the date on which such agreement is 
     entered into; and
       ``(2) ending before March 1, 2004.
       ``(b) Transition.--In the case of an individual who is 
     receiving temporary extended unemployment compensation for 
     the week which immediately precedes the first day of

[[Page H3889]]

     the week that includes March 1, 2004, temporary extended 
     unemployment compensation shall continue to be payable to 
     such individual for any week thereafter from the account from 
     which such individual received compensation for the week 
     immediately preceding that termination date. No compensation 
     shall be payable by reason of the preceding sentence for any 
     week beginning after October 31, 2004.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the enactment of the 
     Temporary Extended Unemployment Compensation Act of 2002 
     (Public Law 107-147; 116 Stat. 21).

     SEC. 133. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY 
                   EXTENDED UNEMPLOYMENT COMPENSATION.

       (a) Weeks of TEUC Amounts.--Paragraph (1) of section 203(b) 
     is amended to read as follows:
       ``(1) In general.--The amount established in an account 
     under subsection (a) shall be equal to 26 times the 
     individual's weekly benefit amount for the benefit year.''.
       (b) Weeks of TEUC-X Amounts.--Section 203(c)(1) is amended 
     by striking ``an amount equal to the amount originally 
     established in such account (as determined under subsection 
     (b)(1))'' and inserting ``7 times the individual's weekly 
     benefit amount for the benefit year''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section--
       (A) shall take effect as if included in the enactment of 
     the Temporary Extended Unemployment Compensation Act of 2002 
     (Public Law 107-147; 116 Stat. 21); but
       (B) shall apply only with respect to weeks of unemployment 
     beginning on or after the date of enactment this Act, subject 
     to paragraph (2).
       (2) Special rules.--In the case of an individual for whom a 
     temporary extended unemployment account was established 
     before the date of enactment of this Act, the Temporary 
     Extended Unemployment Compensation Act of 2002 (as amended by 
     this part) shall be applied subject to the following:
       (A) Any amounts deposited in the individual's temporary 
     extended unemployment compensation account by reason of 
     section 203(c) of such Act (commonly known as ``TEUC-X 
     amounts'') before the date of enactment of this Act shall be 
     treated as amounts deposited by reason of section 203(b) of 
     such Act (commonly known as ``TEUC amounts''), as amended by 
     subsection (a).
       (B) For purposes of determining whether the individual is 
     eligible for any TEUC-X amounts under such Act, as amended by 
     this part--
       (i) any determination made under section 203(c) of such Act 
     before the application of the amendments made by this part 
     shall be disregarded; and
       (ii) any such determination shall instead be made by 
     applying section 203(c) of such Act, as amended by this 
     part--

       (I) as of the time that all amounts established in such 
     account in accordance with section 203(b) of such Act (as 
     amended by this part, and including any amounts described in 
     subparagraph (A)) are in fact exhausted, except that
       (II) if such individual's account was both augmented by and 
     exhausted of all TEUC-X amounts before the date of enactment 
     of this Act, such determination shall be made as if 
     exhaustion (as described in section 203(c)(1) of such Act) 
     had not occurred until such date of enactment.

     SEC. 134. EXTENDED BENEFIT PERIODS.

       (a) Application of Revised Rate of Insured Unemployment.--
     Section 207 is amended--
       (1) by striking ``In'' and inserting ``(a) In General.--
     In''; and
       (2) by adding at the end the following:
       ``(b) Insured Unemployment Rate.--For purposes of carrying 
     out section 203(c) with respect to weeks of unemployment 
     beginning on or after the date of enactment of this 
     subsection, the term `rate of insured unemployment', as used 
     in section 203(d) of the Federal-State Extended Unemployment 
     Compensation Act of 1970 (26 U.S.C. 3304 note), has the 
     meaning given such term under section 203(e)(1) of such Act, 
     except that individuals exhausting their right to regular 
     compensation during the most recent 3 calendar months for 
     which data are available before the close of the period for 
     which such rate is being determined shall be taken into 
     account as if they were individuals filing claims for regular 
     compensation for each week during the period for which such 
     rate is being determined, and section 203(d)(1)(A) of such 
     Act shall be applied by substituting `either (or both)' for 
     `each'.''.
       (b) Additional Extended Benefit Period Trigger.--
       (1) In general.--Section 203(c) is amended by adding at the 
     end the following:
       ``(3) Additional extended benefit period trigger.--
       ``(A) In general.--Effective with respect to compensation 
     for weeks of unemployment beginning on or after the date of 
     enactment of this paragraph, an agreement under this title 
     shall provide that, in addition to any other extended benefit 
     period trigger, for purposes of beginning or ending any 
     extended benefit period under this section--
       ``(i) there is a State `on' indicator for a week if--

       ``(I) the average rate of total unemployment in such State 
     (seasonally adjusted) for the period consisting of the most 
     recent 3 months for which data for all States are published 
     before the close of such week equals or exceeds 6 percent; 
     and
       ``(II) the average rate of total unemployment in such State 
     (seasonally adjusted) for the 3-month period referred to in 
     subclause (I) equals or exceeds 110 percent of such average 
     rate for either (or both) of the corresponding 3-month 
     periods ending in the 2 preceding calendar years; and

       ``(ii) there is a State `off' indicator for a week if 
     either the requirements of subclause (I) or (II) of clause 
     (i) are not satisfied.
       ``(B) No effect on other determinations.--Notwithstanding 
     the provisions of any agreement described in subparagraph 
     (A), any week for which there would otherwise be a State `on' 
     indicator shall continue to be such a week and shall not be 
     determined to be a week for which there is a State `off' 
     indicator.
       ``(C) Determinations made by the secretary.--For purposes 
     of this subsection, determinations of the rate of total 
     unemployment in any State for any period (and of any seasonal 
     adjustment) shall be made by the Secretary.''.
       (2) Conforming amendment.--Section 203(c)(1) is amended by 
     inserting ``or (3)'' after ``paragraph (2)''.

  PART II--UNEMPLOYMENT BENEFITS FOR INDIVIDUALS QUALIFYING BASED ON 
              PART-TIME WORK OR AN ALTERNATIVE BASE PERIOD

     SEC. 141. FEDERAL-STATE AGREEMENTS.

       (a) In General.--Any State which desires to do so may enter 
     into and participate in an agreement under this part with the 
     Secretary of Labor (hereinafter in this part referred to as 
     the ``Secretary''). Any State which is a party to an 
     agreement under this part may, upon providing 30 days' 
     written notice to the Secretary, terminate such agreement.
       (b) Provisions of Agreement.--
       (1) In general.--Any agreement under subsection (a) shall 
     provide that the State agency of the State will make payments 
     of regular compensation to individuals in amounts and to the 
     extent that they would be determined if the State law were 
     applied with the modifications described in paragraph (2).
       (2) Modifications described.--The modifications described 
     in this paragraph are as follows:
       (A) In the case of an individual who is not eligible for 
     regular compensation under the State law because of the use 
     of a definition of base period that does not count wages 
     earned in the most recently completed calendar quarter, 
     eligibility for compensation under this part shall be 
     determined by applying a base period ending at the close of 
     the most recently completed calendar quarter.
       (B) In the case of an individual who is not eligible for 
     regular compensation under the State law because such 
     individual does not meet requirements relating to 
     availability for work, active search for work, or refusal to 
     accept work, because such individual is seeking, or is 
     available for, less than full-time work, compensation under 
     this part shall not be denied by such State to an otherwise 
     eligible individual who seeks less than full-time work or 
     fails to accept full-time work.
       (c) Coordination Rule.--The modifications described in 
     subsection (b)(2) shall also apply in determining the amount 
     of benefits payable under any Federal law to the extent that 
     those benefits are determined by reference to regular 
     compensation payable under the State law of the State 
     involved.

     SEC. 142. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS 
                   PART.

       (a) General Rule.--There shall be paid to each State which 
     has entered into an agreement under this part an amount equal 
     to--
       (1) 100 percent of any regular compensation made payable to 
     individuals by such State by virtue of the modifications 
     which are described in section 141(b)(2) and deemed to be in 
     effect with respect to such State pursuant to section 
     141(b)(1), and
       (2) 100 percent of any regular compensation--
       (A) which is paid to individuals by such State by reason of 
     the fact that its State law contains provisions comparable to 
     the modifications described in section 141(b)(2), but only
       (B) to the extent that those amounts would, if such amounts 
     were instead payable by virtue of the State law's being 
     deemed to be so modified pursuant to section 141(b)(1), have 
     been reimbursable under paragraph (1).
       (b) Determination of Amount.--Sums under subsection (a) 
     payable to any State by reason of such State having an 
     agreement under this part shall be payable, either in advance 
     or by way of reimbursement (as may be determined by the 
     Secretary), in such amounts as the Secretary estimates the 
     State will be entitled to receive under this part for each 
     calendar month, reduced or increased, as the case may be, by 
     any amount by which the Secretary finds that the Secretary's 
     estimates for any prior calendar month were greater or less 
     than the amounts which should have been paid to the State. 
     Such estimates may be made on the basis of such statistical, 
     sampling, or other method as may be agreed upon by the 
     Secretary and the State agency of the State involved.
       (c) Administrative and Other Expenses.--There is hereby 
     appropriated out of the employment security administration 
     account of the Unemployment Trust Fund (as established by 
     section 901(a) of the Social Security Act) $500,000,000 to 
     reimburse States for the costs of the administration of 
     agreements under this part (including any improvements in 
     technology in connection

[[Page H3890]]

     therewith) and to provide reemployment services to 
     unemployment compensation claimants in States having 
     agreements under this part. Each State's share of the amount 
     appropriated by the preceding sentence shall be determined by 
     the Secretary according to the factors described in section 
     302(a) of the Social Security Act and certified by the 
     Secretary to the Secretary of the Treasury.

     SEC. 143. FINANCING PROVISIONS.

       (a) In General.--Funds in the extended unemployment 
     compensation account (as established by section 905(a) of the 
     Social Security Act), and the Federal unemployment account 
     (as established by section 904(g) of the Social Security 
     Act), of the Unemployment Trust Fund shall be used, in 
     accordance with subsection (b), for the making of payments 
     (described in section 142(a)) to States having agreements 
     entered into under this part.
       (b) Certification.--The Secretary shall from time to time 
     certify to the Secretary of the Treasury for payment to each 
     State the sums described in section 142(a) which are payable 
     to such State under this part. The Secretary of the Treasury, 
     prior to audit or settlement by the General Accounting 
     Office, shall make payments to the State in accordance with 
     such certification by transfers from the extended 
     unemployment compensation account (or, to the extent that 
     there are insufficient funds in that account, from the 
     Federal unemployment account) to the account of such State in 
     the Unemployment Trust Fund.

     SEC. 144. DEFINITIONS.

       For purposes of this part:
       (1) In general.--The terms ``compensation'', ``regular 
     compensation'', ``base period'', ``State'', ``State agency'', 
     ``State law'', and ``week'' have the respective meanings 
     given such terms under section 205 of the Federal-State 
     Extended Unemployment Compensation Act of 1970, subject to 
     paragraph (2).
       (2) State law and regular compensation.--In the case of a 
     State entering into an agreement under this part--
       (A) ``State law'' shall be considered to refer to the State 
     law of such State, applied in conformance with the 
     modifications described in section 201(b)(2), and
       (B) ``regular compensation'' shall be considered to refer 
     to such compensation, determined under its State law (applied 
     in the manner described in subparagraph (A)),
     except as otherwise provided or where the context clearly 
     indicates otherwise.

     SEC. 145. APPLICABILITY.

       An agreement entered into under this part shall apply to 
     weeks of unemployment--
       (1) beginning after the date on which such agreement is 
     entered into, and
       (2) ending before July 1, 2004.

                PART III--ENHANCED UNEMPLOYMENT BENEFITS

     SEC. 151. FEDERAL-STATE AGREEMENTS.

       (a) In General.--Any State which desires to do so may enter 
     into and participate in an agreement under this part with the 
     Secretary of Labor (hereinafter in this part referred to as 
     the ``Secretary''). Any State which is a party to an 
     agreement under this part may, upon providing 30 days' 
     written notice to the Secretary, terminate such agreement.
       (b) Provisions of Agreement.--
       (1) In general.--Any agreement under subsection (a) shall 
     provide that the State agency of the State will make payments 
     of regular compensation to individuals in amounts and to the 
     extent that they would be determined if the State law were 
     applied with the modification described in paragraph (2).
       (2) Modification described.--The modification described in 
     this paragraph is that the amount of regular compensation 
     (including dependents' allowances) payable for any week shall 
     be equal to the amount determined under the State law (before 
     the application of this paragraph), plus an additional--
       (A) 15 percent, or
       (B) $25,
     whichever is greater.
       (c) Nonreduction Rule.--Each agreement shall provide that 
     such agreement shall not apply (or shall cease to apply) upon 
     a determination by the Secretary that the method governing 
     the computation of regular compensation under the State law 
     of that State has been modified in a way such that--
       (1) the average weekly amount of regular compensation which 
     will be payable during the period of the agreement 
     (determined disregarding the modification described in 
     subsection (b)(2)) will be less than
       (2) the average weekly amount of regular compensation which 
     would otherwise have been payable during such period under 
     the State law, as in effect on September 11, 2001.
       (d) Coordination Rule.--The modification described in 
     subsection (b)(2) shall also apply in determining the amount 
     of benefits payable under any Federal law to the extent that 
     those benefits are determined by reference to regular 
     compensation payable under the State law of the State 
     involved.

     SEC. 152. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS 
                   PART.

       (a) General Rule.--There shall be paid to each State which 
     has entered into an agreement under this part an amount equal 
     to 100 percent of any regular compensation made payable to 
     individuals by such State by virtue of the modification 
     described in section 151(b)(2) and deemed to be in effect 
     with respect to such State pursuant to section 151(b)(1).
       (b) Determination of Amount.--Sums under subsection (a) 
     payable to any State by reason of such State having an 
     agreement under this part shall be payable, either in advance 
     or by way of reimbursement (as may be determined by the 
     Secretary), in such amounts as the Secretary estimates the 
     State will be entitled to receive under this part for each 
     calendar month, reduced or increased, as the case may be, by 
     any amount by which the Secretary finds that the Secretary's 
     estimates for any prior calendar month were greater or less 
     than the amounts which should have been paid to the State. 
     Such estimates may be made on the basis of such statistical, 
     sampling, or other method as may be agreed upon by the 
     Secretary and the State agency of the State involved.

     SEC. 153. DEFINITIONS.

       For purposes of this part:
       (1) In general.--The terms ``compensation'', ``regular 
     compensation'', ``extended compensation'', ``additional 
     compensation'', ``benefit year'', ``base period'', ``State'', 
     ``State agency'', ``State law'', and ``week'' have the 
     respective meanings given such terms under section 205 of the 
     Federal-State Extended Unemployment Compensation Act of 1970, 
     subject to paragraph (2).
       (2) State law and regular compensation.--In the case of a 
     State entering into an agreement under this part--
       (A) ``State law'' shall be considered to refer to the State 
     law of such State, applied in conformance with the 
     modification described in section 151(b)(2), subject to 
     section 151(c), and
       (B) ``regular compensation'' shall be considered to refer 
     to such compensation, determined under its State law (applied 
     in the manner described in subparagraph (A)),
     except as otherwise provided or where the context clearly 
     indicates otherwise.

     SEC. 154. APPLICABILITY.

       (a) In General.--An agreement entered into under this part 
     shall apply to weeks of unemployment--
       (1) beginning after the date on which such agreement is 
     entered into, and
       (2) ending before January 1, 2004.

         Subtitle D--Trust Fund to Meet Nation's Pressing Needs

     SEC. 161. TRUST FUND TO MEET NATION'S PRESSING NEEDS.

       (a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Pressing Domestic Needs Trust Fund', consisting of such 
     amounts as may be transferred to the Trust Fund as provided 
     in this section.
       (b) Transfers to Fund.--There are hereby transferred from 
     the general Fund of the Treasury to the Pressing Domestic 
     Needs Trust Fund so much of the additional amounts received 
     in the Treasury by reason of the amendments made by title III 
     of this Act as does not exceed--
       (1) $18,000,000,000 to be used for increasing Federal 
     matching funds under medicaid, and
       (2) $26,000,000,000 to be used for infrastructure 
     improvements, homeland security, community development, and 
     education.
       (c) Expenditures.--Amounts in the Pressing Domestic Needs 
     Trust Fund shall be available, as provided by appropriation 
     Acts, for purposes and in the amount specified in subsection 
     (b).

         Subtitle D--Trust Fund to Meet Nation's Pressing Needs

     SEC. 161. TRUST FUND TO MEET NATION'S PRESSING NEEDS.

       (a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Pressing Domestic Needs Trust Fund', consisting of such 
     amounts as may be transferred to the Trust Fund as provided 
     in this section.
       (b) Transfers to Fund.--There are hereby transferred from 
     the general Fund of the Treasury to the Pressing Domestic 
     Needs Trust Fund so much of the additional amounts received 
     in the Treasury by reason of the amendments made by title III 
     of this Act as does not exceed--
       (1) $18,000,000,000 to be used for increasing Federal 
     matching funds under medicaid, and
       (2) $26,000,000,000 to be used for infrastructure 
     improvements, homeland security, community development, and 
     education.
       (c) Expenditures.--Amounts in the Pressing Domestic Needs 
     Trust Fund shall be available, as provided by appropriation 
     Acts, for purposes and in the amount specified in subsection 
     (b).

              TITLE II--LONG-TERM JOB CREATION AND GROWTH

     SEC. 201. INCREASE AND EXTENSION OF BONUS DEPRECIATION.

       (a) In General.--Section 168(k) (relating to special 
     allowance for certain property acquired after September 10, 
     2001, and before September 11, 2004) is amended by adding at 
     the end the following new paragraph:
       ``(4) 50-percent bonus depreciation for certain property.--
       ``(A) In general.--In the case of 50-percent bonus 
     depreciation property--
       ``(i) paragraph (1)(A) shall be applied by substituting `50 
     percent' for `30 percent', and
       ``(ii) except as provided in paragraph (2)(C), such 
     property shall be treated as qualified property for purposes 
     of this subsection.
       ``(B) 50-percent bonus depreciation property.--For purposes 
     of this subsection, the term `50-percent bonus depreciation 
     property' means property described in paragraph (2)(A)(i)--

[[Page H3891]]

       ``(i) the original use of which commences with the taxpayer 
     after April 30, 2003,
       ``(ii) which is acquired by the taxpayer after April 30, 
     2003, and before May 1, 2004, but only if no written binding 
     contract for the acquisition was in effect before May 1, 
     2003, and
       ``(iii) which is placed in service by the taxpayer before 
     January 1, 2005, or, in the case of property described in 
     paragraph (2)(B) (as modified by subparagraph (C) of this 
     paragraph), before January 1, 2006.
       ``(C) Special rules.--Rules similar to the rules of 
     subparagraphs (B) and (D) of paragraph (2) shall apply for 
     purposes of this paragraph; except that reference to 
     September 10, 2001, shall be treated as references to April 
     30, 2003.
       ``(D) Automobiles.--Paragraph (2)(E) shall be applied by 
     substituting `$9,200' for `$4,600' in the case of 50-percent 
     bonus depreciation property.
       ``(E) Election of 30 percent bonus.--If a taxpayer makes an 
     election under this subparagraph with respect to any class of 
     property for any taxable year, subparagraph (A)(i) shall not 
     apply to all property in such class placed in service during 
     such taxable year.''
        (b) Modification to 30-Percent Bonus Depreciation 
     Property.--
       (1) Portion of basis taken into account.--Subparagraphs 
     (B)(ii) and (D)(i) of section 168(k)(2) are each amended by 
     striking ``September 11, 2004'' each place it appears and 
     inserting ``January 1, 2005''.
       (2) Election.--Clause (iii) of section 168(k)(2)(C) is 
     amended by adding at the end the following: ``The preceding 
     sentence shall be applied separately with respect to property 
     treated as qualified property by paragraph (4) and other 
     qualified property.''
       (3) Acquisition date.--Clause (iii) of section 168(k)(2)(A) 
     is amended by striking ``September 11, 2004'' each place it 
     appears and inserting ``January 1, 2005''.
       (c) Conforming Amendments.--
       (1) The subsection heading for section 168(k) is amended by 
     striking ``September 11, 2004'' and inserting ``January 1, 
     2005''.
       (2) The heading for clause (i) of section 1400L(b)(2)(C) is 
     amended by striking ``30-percent additional allowable 
     property'' and inserting ``Bonus depreciation property under 
     section 168(k)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 202. INCREASED EXPENSING FOR SMALL BUSINESS.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000 ($75,000 in the case of taxable 
     years beginning in 2003 or 2004).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 203. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED 
                   STATES PRODUCTION ACTIVITIES.

       (a) In General.--Part VIII of subchapter B of chapter 1 
     (relating to special deductions for corporations) is amended 
     by adding at the end the following new section:

     ``SEC. 250. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION 
                   ACTIVITIES.

       ``(a) In General.--In the case of a corporation, there 
     shall be allowed as a deduction an amount equal to 10 percent 
     of the qualified production activities income of the 
     corporation for the taxable year.
       ``(b) Phasein.--In the case of taxable years beginning in 
     2006, 2007, 2008 or 2009, subsection (a) shall be applied by 
     substituting for the percentage contained therein the 
     transition percentage determined under the following table:

      The transitions
      percentage is:
        16.............................................................
        27.............................................................
        48.............................................................
        99.............................................................

       ``(c) Qualified Production Activities Income.--For purposes 
     of this section, the term `qualified production activities 
     income' means the product of--
       ``(1) the portion of the modified taxable income of the 
     taxpayer which is attributable to domestic production 
     activities, and
       ``(2) the domestic/foreign fraction.
       ``(d) Determination of Income Attributable to Domestic 
     Production Activities.--For purposes of this section--
       ``(1) In general.--The portion of the modified taxable 
     income which is attributable to domestic production 
     activities is so much of the modified taxable income for the 
     taxable year as does not exceed--
       ``(A) the taxpayer's domestic production gross receipts for 
     such taxable year, reduced by
       ``(B) the sum of--
       ``(i) the costs of goods sold that are allocable to such 
     receipts,
       ``(ii) other deductions, expenses, or losses directly 
     allocable to such receipts, and
       ``(iii) a ratable portion of other deductions, expenses, 
     and losses that are not directly allocable to such receipts 
     or another class of income.
       ``(2) Allocation method.--Except as provided in 
     regulations, allocations under clauses (ii) and (iii) of 
     paragraph (1)(B) shall be made under the principles used in 
     determining the portion of taxable income from sources within 
     and without the United States.
       ``(3) Special rule.--
       ``(A) For purposes of determining costs under clause (i) of 
     paragraph (1)(B), any item or service brought into the United 
     States without a transfer price meeting the requirements of 
     section 482 shall be treated as acquired by purchase, and its 
     cost shall be treated as not less than its value when it 
     entered the United States. A similar rule shall apply in 
     determining the adjusted basis of leased or rented property 
     where the lease or rental gives rise to domestic production 
     gross receipts.
       ``(B) In the case of any property described in subparagraph 
     (A) that had been exported by the taxpayer for further 
     manufacture, the increase in cost (or adjusted basis) under 
     subparagraph (A) shall not exceed the difference between the 
     value of the property when exported and the value of the 
     property when brought back into the United States after the 
     further manufacture.
       ``(4) Modified taxable income.--The term `modified taxable 
     income' means taxable income computed without regard to the 
     deduction allowable under this section.
       ``(e) Domestic Production Gross Receipts.--For purposes of 
     this section--
       ``(1) In general.--The term `domestic production gross 
     receipts' means the gross receipts of the taxpayer which are 
     derived from--
       ``(A) any sale, exchange, or other disposition of, or
       ``(B) any lease, rental or license of,
     qualifying production property which was manufactured, 
     produced, grown, or extracted in whole or in significant part 
     by the taxpayer within the United States.
       ``(2) Special rule.--The term `domestic production gross 
     receipts' includes gross receipts of the taxpayer from the 
     sale, exchange, or other disposition of replacement parts 
     if--
       ``(A) such parts are sold by the taxpayer as replacement 
     parts for qualified production property produced or 
     manufactured in whole or significant part by the taxpayer in 
     the United States, and
       ``(B) the taxpayer (or a related party) owns the designs 
     for such parts.
       ``(3) Related party.--The term `related party' means any 
     corporation which is a member of the taxpayer's expanded 
     affiliated group.
       ``(f) Qualifying Production Property.--For purposes of this 
     section--
       ``(1) In general.--Except as otherwise provided in this 
     paragraph, the term `qualifying production property' means--
       ``(A) any tangible personal property,
       ``(B) any computer software, and
       ``(C) any films, tapes, records, or similar reproductions.
       ``(2) Exclusions from qualifying production property.--The 
     term `qualifying production property' shall not include--
       ``(A) consumable property that is sold, leased, or licensed 
     by the taxpayer as an integral part of the provision of 
     services,
       ``(B) oil or gas (or any primary product thereof),
       ``(C) electricity,
       ``(D) water supplied by pipeline to the consumer,
       ``(E) any unprocessed timber which is softwood,
       ``(F) utility services, or
       ``(G) any property (not described in paragraph (1)(B)) 
     which is a film, tape, recording, book, magazine, newspaper, 
     or similar property the market for which is primarily topical 
     or otherwise essentially transitory in nature.
     For purposes of subparagraph (E), the term `unprocessed 
     timber' means any log, cant, or similar form of timber.
       ``(g) Domestic/Foreign Fraction.--For purposes of this 
     section--
       ``(1) In general.--The term `domestic/foreign fraction' 
     means a fraction--
       ``(A) the numerator of which is the value of the domestic 
     production of the taxpayer, and
       ``(B) the denominator of which is the value of the 
     worldwide production of the taxpayer.
       ``(2) Value of domestic production.--The value of domestic 
     production is the excess of--
       ``(A) the domestic production gross receipts, over
       ``(B) the cost of purchased inputs allocable to such 
     receipts that are deductible under this chapter for the 
     taxable year.
       ``(3) Purchased inputs.--
       ``(A) In general.--Purchased inputs are any of the 
     following items acquired by purchase:
       ``(i) Services (other than services of employees) used in 
     manufacture, production, growth, or extraction activities.
       ``(ii) Items consumed in connection with such activities.
       ``(iii) Items incorporated as part of the property being 
     manufactured, produced, grown, or extracted.
       ``(B) Special rule.--Rules similar to the rules of 
     subsection (d)(3) shall apply for purposes of this 
     subsection.
       ``(4) Value of worldwide production.--
       ``(A) In general.--The value of worldwide production shall 
     be determined under the principles of paragraph (2), except 
     that--
       ``(i) worldwide production gross receipts shall be taken 
     into account, and
       ``(ii) paragraph (3)(B) shall not apply.
       ``(B) Worldwide production gross receipts.--The worldwide 
     production gross receipts is the amount that would be 
     determined under subsection (e) if such subsection

[[Page H3892]]

     were applied without any reference to the United States.
       ``(5) Special rule for affiliated groups.--
       ``(A) In general.--In the case of a taxpayer that is a 
     member of an expanded affiliated group, the domestic/foreign 
     fraction shall be the amount determined under the preceding 
     provisions of this subsection by treating all members of such 
     group as a single corporation.
       ``(B) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a), determined--
       ``(i) by substituting `50 percent' for `80 percent' each 
     place it appears, and
       ``(ii) without regard to paragraphs (2), (3), and (4) of 
     section 1504(b).
       ``(h) Definitions and Special Rules.--
       ``(1) United states.--For purposes of this section, the 
     term `United States' includes the Commonwealth of Puerto Rico 
     and any other possession of the United States.
       ``(2) Special rule for partnerships.--For purposes of this 
     section, a corporation's distributive share of any 
     partnership item shall be taken into account as if directly 
     realized by the corporation.
       ``(3) Coordination with minimum tax.--The deduction under 
     this section shall be allowed for purposes of the tax imposed 
     by section 55; except that for purposes of section 55, 
     alternative minimum taxable income shall be taken into 
     account in determining the deduction under this section.
       ``(4) Ordering rule.--The amount of any other deduction 
     allowable under this chapter shall be determined as if this 
     section had not been enacted.
       ``(5) Coordination with transition rules.--For purposes of 
     this section--
       ``(A) domestic production gross receipts shall not include 
     gross receipts from any transaction if the binding contract 
     transition relief of section 303(c)(2) of the Jobs and Growth 
     Reconciliation Tax Act of 2003 applies to such transaction, 
     and
       ``(B) any deduction allowed under section 2(e) of such Act 
     shall be disregarded in determining the portion of the 
     taxable income which is attributable to domestic production 
     gross receipts.''.
       (b) Clerical Amendment.--The table of sections for part 
     VIII of subchapter B of chapter 1 is amended by adding at the 
     end the following new item:

``Sec. 250. Income attributable to domestic production activities.''.

       (c) Effective Date.--
       ``(1) In general.--The amendments made by this section 
     shall apply to taxable years beginning after 2005.
       ``(2) Application of section 15.--Section 15 of the 
     Internal Revenue Code of 1986 shall apply to the amendments 
     made by this section as if they were changes in a rate of 
     tax.

 TITLE III--FISCAL RESPONSIBILITY AND PROVISIONS ADDRESSING CORPORATE 
                                 ABUSE

                     Subtitle A--General Provisions

     SEC. 301. FREEZE OF TOP INDIVIDUAL INCOME TAX RATES.

       (a) Freeze of Top Individual Income Tax Rates.--Paragraph 
     (2) of section 1(i) (relating to reductions in rates after 
     June 30, 2001) is amended--
       (1) in the column for the highest rate--
       (A) by striking ``37.6'' and inserting ``38.6'', and
       (B) by striking ``35.0'' and inserting ``38.6'', and
       (2) in the column for the next highest rate--
       (A) by striking ``34.0'' and inserting ``35.0'', and
       (B) by striking ``33.0'' and inserting ``35.0''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
       (c) Restoration of Rate Reductions If Funds Not Committed 
     to Meet Nation's Pressing Needs.--
       (1) In general.--On December 31, 2003, the Director of the 
     Office of Management and Budget shall determine whether there 
     is a noncommitted balance in the Pressing Domestic Needs 
     Trust Fund (established by section 161 of this Act). If such 
     a noncommitted balance is determined, the Secretary of the 
     Treasury shall reduce the rates otherwise applicable under 
     the amendment made by subsection (a) so that the total 
     revenue raised by such amendment is reduced by the amount of 
     such noncommitted balance.
       (2) Noncommitted balance.--For purposes of paragraph (1), 
     the noncommitted balance of the trust fund is the portion of 
     the amounts in the trust fund which are not committed to 
     meeting the pressing needs specified in section 161.
       (d) Restoration of Rate Reductions If Balanced Budget.--The 
     amendments made by this section shall cease to apply to any 
     taxable year beginning after a calendar year if there is no 
     deficit in the Federal budget for the fiscal year ending in 
     such calendar year.

     SEC. 302. RESTORATION OF PHASEOUTS OF DEDUCTIONS FOR PERSONAL 
                   EXEMPTIONS AND OF ITEMIZED DEDUCTIONS.

       (a) Phaseout of Personal Exemptions.--Paragraph (3) of 
     section 151(d) is amended by striking subparagraphs (E) and 
     (F).
       (b) Phaseout of Itemized Deductions.--Section 68 (relating 
     to overall limitation on itemized deductions) is amended by 
     striking subsections (f) and (g).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 303. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

       (a) In General.--Section 114 is hereby repealed.
       (b) Conforming Amendments.--
       (1) Subpart E of part III of subchapter N of chapter 1 
     (relating to qualifying foreign trade income) is hereby 
     repealed.
       (2) The table of subparts for such part III is amended by 
     striking the item relating to subpart E.
       (3) The table of sections for part III of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     114.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to transactions occurring after the date of the 
     enactment of this Act.
       (2) Binding contracts.--The amendments made by this section 
     shall not apply to any transaction in the ordinary course of 
     a trade or business which occurs pursuant to a binding 
     contract--
       (A) which is between the taxpayer and a person who is not a 
     related person (as defined in section 943(b)(3) of such Code, 
     as in effect on the day before the date of the enactment of 
     this Act), and
       (B) which is in effect on April 11, 2003, and at all times 
     thereafter.
     For purposes of this paragraph, a binding contract shall 
     include a purchase option, renewal option, or replacement 
     option which is included in such contract.
       (d) Revocation of Section 943(e) Elections.--
       (1) In general.--In the case of a corporation that elected 
     to be treated as a domestic corporation under section 943(e) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of this Act)--
       (A) the corporation may revoke such election, effective as 
     of the date of the enactment of this Act, and
       (B) if the corporation does revoke such election--
       (i) such corporation shall be treated as a domestic 
     corporation transferring (as of the date of the enactment of 
     this Act) all of its property to a foreign corporation in 
     connection with an exchange described in section 354 of the 
     Internal Revenue Code of 1986, and
       (ii) no gain or loss shall be recognized on such transfer.
       (2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall 
     not apply to gain on any asset held by the revoking 
     corporation if--
       (A) the basis of such asset is determined in whole or in 
     part by reference to the basis of such asset in the hands of 
     the person from whom the revoking corporation acquired such 
     asset,
       (B) the asset was acquired by transfer (not as a result of 
     the election under section 943(e) of such Code) occurring on 
     or after the 1st day on which its election under section 
     943(e) of such Code was effective, and
       (C) a principal purpose of the acquisition was the 
     reduction or avoidance of tax.
       (e) General Transition.--
       (1) In general.--In the case of a taxable year ending after 
     the date of the enactment of this Act and beginning before 
     January 1, 2009, for purposes of chapter 1 of such Code, each 
     current FSC/ETI beneficiary shall be allowed a deduction 
     equal to the transition amount determined under this 
     subsection with respect to such beneficiary for such year.
       (2) Current fsc/eti beneficiary.--The term ``current FSC/
     ETI beneficiary'' means any corporation which entered into 
     one or more transactions during its taxable year beginning in 
     calendar year 2001 with respect to which FSC/ETI benefits 
     were allowable.
       (3) Transition amount.--For purposes of this subsection--
       (A) In general.--The transition amount applicable to any 
     current FSC/ETI beneficiary for any taxable year is the 
     phaseout percentage of the adjusted base period amount.
       (B) Phaseout percentage.--
       (i) In general.--In the case of a taxpayer using the 
     calendar year as its taxable year, the phaseout percentage 
     shall be determined under the following table:

      The phaseout
      percentage is:
        100and 2005....................................................
         75............................................................
         75............................................................
         50............................................................
          0and thereafter..............................................

       (ii) Special rule for 2003.--The phaseout percentage for 
     2003 shall be the amount that bears the same ratio to 100 
     percent as the number of days after the date of the enactment 
     of this Act bears to 365.
       (iii) Special rule for fiscal year taxpayers.--In the case 
     of a taxpayer not using the calendar year as its taxable 
     year, the phaseout percentage is the weighted average of the 
     phaseout percentages determined under the preceding 
     provisions of this paragraph with respect to calendar years 
     any portion of which is included in the taxpayer's taxable 
     year. The weighted average shall be determined on the basis 
     of the respective portions of the taxable year in each 
     calendar year.
       (4) Adjusted base period amount.--For purposes of this 
     subsection--
       (A) In general.--In the case of a taxpayer using the 
     calendar year as its taxable year, the adjusted base period 
     amount for any taxable year is the base period amount 
     multiplied by the applicable percentage, as determined in the 
     following table:


[[Page H3893]]


      The applicable
      percentage is:
        100............................................................
        100............................................................
        105............................................................
        110............................................................
        115............................................................
        120............................................................
          0and thereafter..............................................

       (B) Base period amount.--The base period amount is the 
     aggregate FSC/ETI benefits for the taxpayer's taxable year 
     beginning in calendar year 2001.
       (C) Special rules for fiscal year taxpayers, etc.--Rules 
     similar to rules of clauses (ii) and (iii) of paragraph 
     (3)(B) shall apply for purposes of this paragraph.
       (5) FSC/ETI benefit.--For purposes of this subsection, the 
     term `FSC/ETI benefit' means--
       (A) amounts excludable from gross income under section 114 
     of such Code, and
       (B) the exempt foreign trade income of related foreign 
     sales corporations from property acquired from the taxpayer 
     (determined without regard to section 923(a)(5) of such Code 
     (relating to special rule for military property), as in 
     effect on the day before the date of the enactment of the FSC 
     Repeal and Extraterritorial Income Exclusion Act of 2000).
     In determining the FSC/ETI benefit there shall be excluded 
     any amount attributable to a transaction with respect to 
     which the taxpayer is the lessor unless the leased property 
     was manufactured or produced in whole or in part by the 
     taxpayer.
       (6) Special rule for farm cooperatives.--Under regulations 
     prescribed by the Secretary, determinations under this 
     subsection with respect to an organization described in 
     section 943(g)(1) of such Code, as in effect on the day 
     before the date of the enactment of this Act, shall be made 
     at the cooperative level and the purposes of this subsection 
     shall be carried out by excluding amounts from the gross 
     income of its patrons.
       (7) Certain rules to apply.--Rules similar to the rules of 
     section 41(f) of such Code shall apply for purposes of this 
     subsection.
       (8) Coordination with binding contract rule.--The deduction 
     determined under paragraph (1) for any taxable year shall be 
     reduced by the phaseout percentage of any FSC/ETI benefit 
     realized for the taxable year by reason of subsection (c)(2). 
     The preceding sentence shall not apply to any FSC/ETI benefit 
     attributable to a transaction described in the last sentence 
     of paragraph (5).
       (9) Special rule for taxable year which includes date of 
     enactment.--In the case of a taxable year which includes the 
     date of the enactment of this Act, the deduction allowed 
     under this subsection to any current FSC/ETI beneficiary 
     shall in no event exceed--
       (A) 100 percent of such beneficiary's adjusted base period 
     amount for calendar year 2003, reduced by
       (B) the aggregate FSC/ETI benefits of such beneficiary with 
     respect to transactions occurring during the portion of the 
     taxable year ending on the date of the enactment of this Act.

  Subtitle B--Abusive Tax Shelter Shutdown and Taxpayer Accountability

          PART I--PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS

     SEC. 311. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Clarification of Economic Substance Doctrine; Etc.--
       ``(1) General rules.--
       ``(A) In general.--In applying the economic substance 
     doctrine, the determination of whether a transaction has 
     economic substance shall be made as provided in this 
     paragraph.
       ``(B) Definition of economic substance.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--A transaction has economic substance 
     only if--

       ``(I) the transaction changes in a meaningful way (apart 
     from Federal tax effects and, if there is any Federal tax 
     effects, also apart from any foreign, State, or local tax 
     effects) the taxpayer's economic position, and
       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

       ``(ii) Special rule where taxpayer relies on profit 
     potential.--A transaction shall not be treated as having 
     economic substance by reason of having a potential for profit 
     unless--

       ``(I) the present value of the reasonably expected pre-tax 
     profit from the transaction is substantial in relation to the 
     present value of the expected net tax benefits that would be 
     allowed if the transaction were respected, and
       ``(II) the reasonably expected pre-tax profit from the 
     transaction exceeds a risk-free rate of return.

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Substantial nontax purpose.--In applying subclause 
     (II) of paragraph (1)(B)(i), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax.
       ``(D) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(E) Treatment of lessors.--In applying subclause (I) of 
     paragraph (1)(B)(ii) to the lessor of tangible property 
     subject to a lease, the expected net tax benefits shall not 
     include the benefits of depreciation, or any tax credit, with 
     respect to the leased property and subclause (II) of 
     paragraph (1)(B)(ii) shall be disregarded in determining 
     whether any of such benefits are allowable.
       ``(4) Other common law doctrines not affected.--Except as 
     specifically provided in this subsection, the provisions of 
     this subsection shall not be construed as altering or 
     supplanting any other rule of law, and the requirements of 
     this subsection shall be construed as being in addition to 
     any such other rule of law.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection. Such regulations may include 
     exemptions from the application of this subsection.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 13, 
     2003.

     SEC. 312. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

       (a) In General.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by inserting 
     after section 6707 the following new section:

     ``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE 
                   TRANSACTION INFORMATION WITH RETURN OR 
                   STATEMENT.

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,
     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--

[[Page H3894]]

       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,
     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Coordination With Other Penalties.--The penalty 
     imposed by this section is in addition to any penalty imposed 
     under this title.''
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

     SEC. 313. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662 the following new section:

     ``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERSTATEMENTS WITH RESPECT TO REPORTABLE 
                   TRANSACTIONS.

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--
       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.
     For purposes of subparagraph (A), any reduction of the excess 
     of deductions allowed for the taxable year over gross income 
     for such year, and any reduction in the amount of capital 
     losses which would (without regard to section 1211) be 
     allowed for such year, shall be treated as an increase in 
     taxable income.
       ``(2) Items to which section applies.--This section shall 
     apply to any item which is attributable to--
       ``(A) any listed transaction, and
       ``(B) any reportable transaction (other than a listed 
     transaction) if a significant purpose of such transaction is 
     the avoidance or evasion of Federal income tax.
       ``(c) Higher Penalty for Nondisclosed Listed and Other 
     Avoidance Transactions.--
       ``(1) In general.--Subsection (a) shall be applied by 
     substituting `30 percent' for `20 percent' with respect to 
     the portion of any reportable transaction understatement with 
     respect to which the requirement of section 6664(d)(2)(A) is 
     not met.
       ``(2) Rules applicable to compromise of penalty.--
       ``(A) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which paragraph (1) 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(B) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements and 
     noneconomic substance transaction understatements for 
     purposes of determining whether such understatement is a 
     substantial understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements and noneconomic substance transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement and a 
     noneconomic substance transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6662B or 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement or noneconomic substance 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).
       ``(5) Cross reference.--

  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''
       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:
     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies and 
     without regard to items with respect to which a penalty is 
     imposed by section 6662B.''
     (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--

[[Page H3895]]

       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a reportable 
     transaction understatement if it is shown that there was a 
     reasonable cause for such portion and that the taxpayer acted 
     in good faith with respect to such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.
     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account the possibility that a return will not be audited, 
     such treatment will not be raised on audit, or such treatment 
     will be resolved through settlement if it is raised.
       ``(B) Certain opinions may not be relied upon.--
       ``(i) In general.--An opinion of a tax advisor may not be 
     relied upon to establish the reasonable belief of a taxpayer 
     if--

       ``(I) the tax advisor is described in clause (ii), or
       ``(II) the opinion is described in clause (iii).

       ``(ii) Disqualified tax advisors.--A tax advisor is 
     described in this clause if the tax advisor--

       ``(I) is a material advisor (within the meaning of section 
     6111(b)(1)) who participates in the organization, management, 
     promotion, or sale of the transaction or who is related 
     (within the meaning of section 267(b) or 707(b)(1)) to any 
     person who so participates,
       ``(II) is compensated directly or indirectly by a material 
     advisor with respect to the transaction,
       ``(III) has a fee arrangement with respect to the 
     transaction which is contingent on all or part of the 
     intended tax benefits from the transaction being sustained, 
     or
       ``(IV) as determined under regulations prescribed by the 
     Secretary, has a continuing financial interest with respect 
     to the transaction.

       ``(iii) Disqualified opinions.--For purposes of clause (i), 
     an opinion is disqualified if the opinion--

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),
       ``(II) unreasonably relies on representations, statements, 
     findings, or agreements of the taxpayer or any other person,
       ``(III) does not identify and consider all relevant facts, 
     or
       ``(IV) fails to meet any other requirement as the Secretary 
     may prescribe.''

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--
       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,
     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''
       (3) Section 6662(d)(2) is amended by striking subparagraphs 
     (C) and (D).
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

     ``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERPAYMENTS.''

       (B) The table of sections for part II of subchapter A of 
     chapter 68 is amended by striking the item relating to 
     section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 314. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662A the following new section:

     ``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       ``(a) Imposition of Penalty.--If a taxpayer has an 
     noneconomic substance transaction understatement for any 
     taxable year, there shall be added to the tax an amount equal 
     to 40 percent of the amount of such understatement.
       ``(b) Reduction of Penalty for Disclosed Transactions.--
     Subsection (a) shall be applied by substituting `20 percent' 
     for `40 percent' with respect to the portion of any 
     noneconomic substance transaction understatement with respect 
     to which the relevant facts affecting the tax treatment of 
     the item are adequately disclosed in the return or a 
     statement attached to the return.
       ``(c) Noneconomic Substance Transaction Understatement.--
     For purposes of this section--
       ``(1) In general.--The term `noneconomic substance 
     transaction understatement' means any amount which would be 
     an understatement under section 6662A(b)(1) if section 6662A 
     were applied by taking into account items attributable to 
     noneconomic substance transactions rather than items to which 
     section 6662A would apply without regard to this paragraph.
       ``(2) Noneconomic substance transaction.--The term 
     `noneconomic substance transaction' means any transaction 
     if--
       ``(A) there is a lack of economic substance (within the 
     meaning of section 7701(m)(1)) for the transaction giving 
     rise to the claimed tax benefit or the transaction was not 
     respected under section 7701(m)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable To Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which this section 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 6707A(d) shall apply for purposes of 
     paragraph (1).
       ``(e) Coordination With Other Penalties.--Except as 
     otherwise provided in this part, the penalty imposed by this 
     section shall be in addition to any other penalty imposed by 
     this title.
       ``(f) Cross References.--

  ``(1) For coordination of penalty with understatements under section 
6662 and other special rules, see section 6662A(e).
  ``(2) For reporting of penalty imposed under this section to the 
Securities and Exchange Commission, see section 6707A(e).''
       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68 is amended by inserting after 
     the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 13, 
     2003.

     SEC. 315. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY 
                   FOR NONREPORTABLE TRANSACTIONS.

       (a) Substantial Understatement of Corporations.--Section 
     6662(d)(1)(B) (relating to special rule for corporations) is 
     amended to read as follows:
       ``(B) Special rule for corporations.--In the case of a 
     corporation other than an S corporation or a personal holding 
     company (as defined in section 542), there is a substantial 
     understatement of income tax for any taxable year if the 
     amount of the understatement for the taxable year exceeds the 
     lesser of--
       ``(i) 10 percent of the tax required to be shown on the 
     return for the taxable year (or, if greater, $10,000), or
       ``(ii) $10,000,000.''
       (b) Reduction for Understatement of Taxpayer Due to 
     Position of Taxpayer or Disclosed Item.--
       (1) In general.--Section 6662(d)(2)(B)(i) (relating to 
     substantial authority) is amended to read as follows:
       ``(i) the tax treatment of any item by the taxpayer if the 
     taxpayer had reasonable belief that the tax treatment was 
     more likely than not the proper treatment, or''.
       (2) Conforming amendment.--Section 6662(d) is amended by 
     adding at the end the following new paragraph:
       ``(3) Secretarial list.--For purposes of this subsection, 
     section 6664(d)(2), and section 6694(a)(1), the Secretary may 
     prescribe a list of positions for which the Secretary 
     believes there is not substantial authority or there is no 
     reasonable belief that the tax treatment is more likely than 
     not the proper tax treatment. Such list (and any revisions 
     thereof) shall be published in the Federal Register or the 
     Internal Revenue Bulletin.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

[[Page H3896]]

     SEC. 316. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

       (a) In General.--Section 7525(b) (relating to section not 
     to apply to communications regarding corporate tax shelters) 
     is amended to read as follows:
       ``(b) Section Not To Apply to Communications Regarding Tax 
     Shelters.--The privilege under subsection (a) shall not apply 
     to any written communication which is--
       ``(1) between a federally authorized tax practitioner and--
       ``(A) any person,
       ``(B) any director, officer, employee, agent, or 
     representative of the person, or
       ``(C) any other person holding a capital or profits 
     interest in the person, and
       ``(2) in connection with the promotion of the direct or 
     indirect participation of the person in any tax shelter (as 
     defined in section 1274(b)(3)(C)).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to communications made on or after the date of 
     the enactment of this Act.

     SEC. 317. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended to read as follows:

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.
     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, promoting, selling, implementing, 
     or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of reportable transactions.''

       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS 
                   MUST KEEP LISTS OF ADVISEES.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.
     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''

       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH 
                   RESPECT TO REPORTABLE TRANSACTIONS.''

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions with respect to which material 
     aid, assistance, or advice referred to in section 
     6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as 
     added by this section) is provided after the date of the 
     enactment of this Act.

     SEC. 318. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING 
                   REPORTABLE TRANSACTIONS.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,
     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the reportable transaction before the date 
     the return including the transaction is filed under section 
     6111.
     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Rescission Authority.--The provisions of section 
     6707A(d) (relating to authority of Commissioner to rescind 
     penalty) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

     SEC. 319. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

       (a) In General.--Subsection (a) of section 6708 is amended 
     to read as follows:
       ``(a) Imposition of Penalty.--
       ``(1) In general.--If any person who is required to 
     maintain a list under section 6112(a) fails to make such list 
     available upon written request to the Secretary in accordance 
     with section 6112(b)(1)(A) within 20 business days after the 
     date of the Secretary's request, such person shall pay a 
     penalty of $10,000 for each day of such failure after such 
     20th day.
       ``(2) Reasonable cause exception.--No penalty shall be 
     imposed by paragraph (1) with respect to the failure on any 
     day if such failure is due to reasonable cause.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 320. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT 
                   RELATED TO TAX SHELTERS AND REPORTABLE 
                   TRANSACTIONS.

       (a) In General.--Section 7408 (relating to action to enjoin 
     promoters of abusive tax shelters, etc.) is amended by 
     redesignating subsection (c) as subsection (d) and by 
     striking subsections (a) and (b) and inserting the following 
     new subsections:
       ``(a) Authority To Seek Injunction.--A civil action in the 
     name of the United States to enjoin any person from further 
     engaging in specified conduct may be commenced at the request 
     of the Secretary. Any action under this section shall be 
     brought in the district court of the United States for the 
     district in which such person resides, has his principal 
     place of business, or has engaged in specified conduct. The 
     court may exercise its jurisdiction over such action (as 
     provided in section 7402(a)) separate and apart from any 
     other action brought by the United States against such 
     person.
       ``(b) Adjudication and Decree.--In any action under 
     subsection (a), if the court finds--
       ``(1) that the person has engaged in any specified conduct, 
     and
       ``(2) that injunctive relief is appropriate to prevent 
     recurrence of such conduct,
     the court may enjoin such person from engaging in such 
     conduct or in any other activity subject to penalty under 
     this title.
       ``(c) Specified Conduct.--For purposes of this section, the 
     term `specified conduct' means any action, or failure to take 
     action, subject to penalty under section 6700, 6701, 6707, or 
     6708.''
       (b) Conforming Amendments.--
       (1) The heading for section 7408 is amended to read as 
     follows:

[[Page H3897]]

     ``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO 
                   TAX SHELTERS AND REPORTABLE TRANSACTIONS.''

       (2) The table of sections for subchapter A of chapter 67 is 
     amended by striking the item relating to section 7408 and 
     inserting the following new item:

``Sec. 7408. Actions to enjoin specified conduct related to tax 
              shelters and reportable transactions.''

       (c) Effective Date.--The amendment made by this section 
     shall take effect on the day after the date of the enactment 
     of this Act.

     SEC. 321. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME 
                   TAX RETURN PREPARER.

       (a) Standards Conformed to Taxpayer Standards.--Section 
     6694(a) (relating to understatements due to unrealistic 
     positions) is amended--
       (1) by striking ``realistic possibility of being sustained 
     on its merits'' in paragraph (1) and inserting ``reasonable 
     belief that the tax treatment in such position was more 
     likely than not the proper treatment'',
       (2) by striking ``or was frivolous'' in paragraph (3) and 
     inserting ``or there was no reasonable basis for the tax 
     treatment of such position'', and
       (3) by striking ``Unrealistic'' in the heading and 
     inserting ``Improper''.
       (b) Amount of Penalty.--Section 6694 is amended--
       (1) by striking ``$250'' in subsection (a) and inserting 
     ``$1,000'', and
       (2) by striking ``$1,000'' in subsection (b) and inserting 
     ``$5,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to documents prepared after the date of the 
     enactment of this Act.

     SEC. 322. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

       (a) In General.--Section 5321(a)(5) of title 31, United 
     States Code, is amended to read as follows:
       ``(5) Foreign financial agency transaction violation.--
       ``(A) Penalty authorized.--The Secretary of the Treasury 
     may impose a civil money penalty on any person who violates, 
     or causes any violation of, any provision of section 5314.
       ``(B) Amount of penalty.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the amount of any civil penalty imposed under subparagraph 
     (A) shall not exceed $5,000.
       ``(ii) Reasonable cause exceptionNo penalty shall be 
     imposed under subparagraph (A) with respect to any violation 
     if--

       ``(I) such violation was due to reasonable cause, and
       ``(II) the amount of the transaction or the balance in the 
     account at the time of the transaction was properly reported.

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--
       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

       ``(I) $25,000, or
       ``(II) the amount (not exceeding $100,000) determined under 
     subparagraph (D), and

       ``(ii) subparagraph (B)(ii) shall not apply.
       ``(D) Amount.--The amount determined under this 
     subparagraph is--
       ``(i) in the case of a violation involving a transaction, 
     the amount of the transaction, or
       ``(ii) in the case of a violation involving a failure to 
     report the existence of an account or any identifying 
     information required to be provided with respect to an 
     account, the balance in the account at the time of the 
     violation.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to violations occurring after the date of the 
     enactment of this Act.

     SEC. 323. FRIVOLOUS TAX SUBMISSIONS.

       (a) Civil Penalties.--Section 6702 is amended to read as 
     follows:

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

       ``(a) Civil Penalty for Frivolous Tax Returns.--A person 
     shall pay a penalty of $5,000 if--
       ``(1) such person files what purports to be a return of a 
     tax imposed by this title but which--
       ``(A) does not contain information on which the substantial 
     correctness of the self-assessment may be judged, or
       ``(B) contains information that on its face indicates that 
     the self-assessment is substantially incorrect; and
       ``(2) the conduct referred to in paragraph (1)--
       ``(A) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(B) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(b) Civil Penalty for Specified Frivolous Submissions.--
       ``(1) Imposition of penalty.--Except as provided in 
     paragraph (3), any person who submits a specified frivolous 
     submission shall pay a penalty of $5,000.
       ``(2) Specified frivolous submission.--For purposes of this 
     section--
       ``(A) Specified frivolous submission.--The term `specified 
     frivolous submission' means a specified submission if any 
     portion of such submission--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified submission.--The term `specified 
     submission' means--
       ``(i) a request for a hearing under--

       ``(I) section 6320 (relating to notice and opportunity for 
     hearing upon filing of notice of lien), or
       ``(II) section 6330 (relating to notice and opportunity for 
     hearing before levy), and

       ``(ii) an application under--

       ``(I) section 6159 (relating to agreements for payment of 
     tax liability in installments),
       ``(II) section 7122 (relating to compromises), or
       ``(III) section 7811 (relating to taxpayer assistance 
     orders).

       ``(3) Opportunity to withdraw submission.--If the Secretary 
     provides a person with notice that a submission is a 
     specified frivolous submission and such person withdraws such 
     submission within 30 days after such notice, the penalty 
     imposed under paragraph (1) shall not apply with respect to 
     such submission.
       ``(c) Listing of Frivolous Positions.--The Secretary shall 
     prescribe (and periodically revise) a list of positions which 
     the Secretary has identified as being frivolous for purposes 
     of this subsection. The Secretary shall not include in such 
     list any position that the Secretary determines meets the 
     requirement of section 6662(d)(2)(B)(ii)(II).
       ``(d) Reduction of Penalty.--The Secretary may reduce the 
     amount of any penalty imposed under this section if the 
     Secretary determines that such reduction would promote 
     compliance with and administration of the Federal tax laws.
       ``(e) Penalties in Addition to Other Penalties.--The 
     penalties imposed by this section shall be in addition to any 
     other penalty provided by law.''
       (b) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, Etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''
       (e) Clerical Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by striking the item 
     relating to section 6702 and inserting the following new 
     item:

``Sec. 6702. Frivolous tax submissions.''

       (f) Effective Date.--The amendments made by this section 
     shall apply to submissions made and issues raised after the 
     date on which the Secretary first prescribes a list under 
     section 6702(c) of the Internal Revenue Code of 1986, as 
     amended by subsection (a).

     SEC. 324. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE 
                   DEPARTMENT OF TREASURY.

       (a) Censure; Imposition of Penalty.--
       (1) In general.--Section 330(b) of title 31, United States 
     Code, is amended--
       (A) by inserting ``, or censure,'' after ``Department'', 
     and
       (B) by adding at the end the following new flush sentence:
     ``The Secretary may impose a monetary penalty on any 
     representative described in the preceding sentence. If the 
     representative was acting on behalf of an employer or any 
     firm or other entity in connection with the conduct giving 
     rise to such penalty, the Secretary may impose a monetary 
     penalty on

[[Page H3898]]

     such employer, firm, or entity if it knew, or reasonably 
     should have known, of such conduct. Such penalty shall not 
     exceed the gross income derived (or to be derived) from the 
     conduct giving rise to the penalty and may be in addition to, 
     or in lieu of, any suspension, disbarment, or censure.''
       (2) Effective date.--The amendments made by this subsection 
     shall apply to actions taken after the date of the enactment 
     of this Act.
       (b) Tax Shelter Opinions, Etc.--Section 330 of such title 
     31 is amended by adding at the end the following new 
     subsection:
       ``(d) Nothing in this section or in any other provision of 
     law shall be construed to limit the authority of the 
     Secretary of the Treasury to impose standards applicable to 
     the rendering of written advice with respect to any entity, 
     transaction plan or arrangement, or other plan or 
     arrangement, which is of a type which the Secretary 
     determines as having a potential for tax avoidance or 
     evasion.''

     SEC. 325. PENALTY ON PROMOTERS OF TAX SHELTERS.

       (a) Penalty on Promoting Abusive Tax Shelters.--Section 
     6700(a) is amended by adding at the end the following new 
     sentence: ``Notwithstanding the first sentence, if an 
     activity with respect to which a penalty imposed under this 
     subsection involves a statement described in paragraph 
     (2)(A), the amount of the penalty shall be equal to 50 
     percent of the gross income derived (or to be derived) from 
     such activity by the person on which the penalty is 
     imposed.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. 326. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH 
                   LISTED TRANSACTIONS NOT REPORTED.

       (a) In General.--Section 6501(e)(1) (relating to 
     substantial omission of items for income taxes) is amended by 
     adding at the end the following new subparagraph:
       ``(C) Listed transactions.--If a taxpayer fails to include 
     on any return or statement for any taxable year any 
     information with respect to a listed transaction (as defined 
     in section 6707A(c)(2)) which is required under section 6011 
     to be included with such return or statement, the tax for 
     such taxable year may be assessed, or a proceeding in court 
     for collection of such tax may be begun without assessment, 
     at any time within 6 years after the time the return is 
     filed. This subparagraph shall not apply to any taxable year 
     if the time for assessment or beginning the proceeding in 
     court has expired before the time a transaction is treated as 
     a listed transaction under section 6011.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act in taxable years ending after such date.

     SEC. 327. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND 
                   NONECONOMIC SUBSTANCE TRANSACTIONS.

       (a) In General.--Section 163 (relating to deduction for 
     interest) is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following new subsection:
       ``(m) Interest on Unpaid Taxes Attributable To Nondisclosed 
     Reportable Transactions and Noneconomic Substance 
     Transactions.--No deduction shall be allowed under this 
     chapter for any interest paid or accrued under section 6601 
     on any underpayment of tax which is attributable to--
       ``(1) the portion of any reportable transaction 
     understatement (as defined in section 6662A(b)) with respect 
     to which the requirement of section 6664(d)(2)(A) is not met, 
     or
       ``(2) any noneconomic substance transaction understatement 
     (as defined in section 6662B(c)).''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act in taxable years ending after such date.

                       PART II--OTHER PROVISIONS

     SEC. 331. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN 
                   LOSSES.

       (a) In General.--Section 362 (relating to basis to 
     corporations) is amended by adding at the end the following 
     new subsection:
       ``(e) Limitations on Built-in Losses.--
       ``(1) Limitation on importation of built-in losses.--
       ``(A) In general.--If in any transaction described in 
     subsection (a) or (b) there would (but for this subsection) 
     be an importation of a net built-in loss, the basis of each 
     property described in subparagraph (B) which is acquired in 
     such transaction shall (notwithstanding subsections (a) and 
     (b)) be its fair market value immediately after such 
     transaction.
       ``(B) Property described.--For purposes of subparagraph 
     (A), property is described in this paragraph if--
       ``(i) gain or loss with respect to such property is not 
     subject to tax under this subtitle in the hands of the 
     transferor immediately before the transfer, and
       ``(ii) gain or loss with respect to such property is 
     subject to such tax in the hands of the transferee 
     immediately after such transfer.
     In any case in which the transferor is a partnership, the 
     preceding sentence shall be applied by treating each partner 
     in such partnership as holding such partner's proportionate 
     share of the property of such partnership.
       ``(C) Importation of net built-in loss.--For purposes of 
     subparagraph (A), there is an importation of a net built-in 
     loss in a transaction if the transferee's aggregate adjusted 
     bases of property described in subparagraph (B) which is 
     transferred in such transaction would (but for this 
     paragraph) exceed the fair market value of such property 
     immediately after such transaction.''
       ``(2) Limitation on transfer of built-in losses in section 
     351 transactions.--
       ``(A) In general.--If--
       ``(i) property is transferred in any transaction which is 
     described in subsection (a) and which is not described in 
     paragraph (1) of this subsection, and
       ``(ii) the transferee's aggregate adjusted bases of the 
     property so transferred would (but for this paragraph) exceed 
     the fair market value of such property immediately after such 
     transaction,
     then, notwithstanding subsection (a), the transferee's 
     aggregate adjusted bases of the property so transferred shall 
     not exceed the fair market value of such property immediately 
     after such transaction.
       ``(B) Allocation of basis reduction.--The aggregate 
     reduction in basis by reason of subparagraph (A) shall be 
     allocated among the property so transferred in proportion to 
     their respective built-in losses immediately before the 
     transaction.
       ``(C) Exception for transfers within affiliated group.--
     Subparagraph (A) shall not apply to any transaction if the 
     transferor owns stock in the transferee meeting the 
     requirements of section 1504(a)(2). In the case of property 
     to which subparagraph (A) does not apply by reason of the 
     preceding sentence, the transferor's basis in the stock 
     received for such property shall not exceed its fair market 
     value immediately after the transfer.''
       (b) Comparable Treatment Where Liquidation.--Paragraph (1) 
     of section 334(b) (relating to liquidation of subsidiary) is 
     amended to read as follows:
       ``(1) In general.--If property is received by a corporate 
     distributee in a distribution in a complete liquidation to 
     which section 332 applies (or in a transfer described in 
     section 337(b)(1)), the basis of such property in the hands 
     of such distributee shall be the same as it would be in the 
     hands of the transferor; except that the basis of such 
     property in the hands of such distributee shall be the fair 
     market value of the property at the time of the 
     distribution--
       ``(A) in any case in which gain or loss is recognized by 
     the liquidating corporation with respect to such property, or
       ``(B) in any case in which the liquidating corporation is a 
     foreign corporation, the corporate distributee is a domestic 
     corporation, and the corporate distributee's aggregate 
     adjusted bases of property described in section 362(e)(1)(B) 
     which is distributed in such liquidation would (but for this 
     subparagraph) exceed the fair market value of such property 
     immediately after such liquidation.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act.

     SEC. 332. DISALLOWANCE OF CERTAIN PARTNERSHIP LOSS TRANSFERS.

       (a) Treatment of Contributed Property With Built-In Loss.--
     Paragraph (1) of section 704(c) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following:
       ``(C) if any property so contributed has a built-in loss--
       ``(i) such built-in loss shall be taken into account only 
     in determining the amount of items allocated to the 
     contributing partner, and
       ``(ii) except as provided in regulations, in determining 
     the amount of items allocated to other partners, the basis of 
     the contributed property in the hands of the partnership 
     shall be treated as being equal to its fair market value 
     immediately after the contribution.
     For purposes of subparagraph (C), the term `built-in loss' 
     means the excess of the adjusted basis of the property 
     (determined without regard to subparagraph (C)(ii)) over its 
     fair market value immediately after the contribution.''
       (b) Adjustment to Basis of Partnership Property on Transfer 
     of Partnership Interest If There Is Substantial Built-In 
     Loss.--
       (1) Adjustment required.--Subsection (a) of section 743 
     (relating to optional adjustment to basis of partnership 
     property) is amended by inserting before the period ``or 
     unless the partnership has a substantial built-in loss 
     immediately after such transfer''.
       (2) Adjustment.--Subsection (b) of section 743 is amended 
     by inserting ``or with respect to which there is a 
     substantial built-in loss immediately after such transfer'' 
     after ``section 754 is in effect''.
       (3) Substantial built-in loss.--Section 743 is amended by 
     adding at the end the following new subsection:
       ``(d) Substantial Built-In Loss.--
       ``(1) In general.--For purposes of this section, a 
     partnership has a substantial built-in loss with respect to a 
     transfer of an interest in a partnership if the transferee 
     partner's proportionate share of the adjusted basis of the 
     partnership property exceeds by more than $250,000 the basis 
     of such partner's interest in the partnership.
       ``(2) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of paragraph

[[Page H3899]]

     (1) and section 734(d), including regulations aggregating 
     related partnerships and disregarding property acquired by 
     the partnership in an attempt to avoid such purposes.''
       (4) Clerical amendments.--
       (A) The section heading for section 743 is amended to read 
     as follows:

     ``SEC. 743. ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY WHERE 
                   SECTION 754 ELECTION OR SUBSTANTIAL BUILT-IN 
                   LOSS.''

       (B) The table of sections for subpart C of part II of 
     subchapter K of chapter 1 is amended by striking the item 
     relating to section 743 and inserting the following new item:

``Sec. 743. Adjustment to basis of partnership property where section 
              754 election or substantial built-in loss.''

       (c) Adjustment to Basis of Undistributed Partnership 
     Property if There Is Substantial Basis Reduction.--
       (1) Adjustment required.--Subsection (a) of section 734 
     (relating to optional adjustment to basis of undistributed 
     partnership property) is amended by inserting before the 
     period ``or unless there is a substantial basis reduction''.
       (2) Adjustment.--Subsection (b) of section 734 is amended 
     by inserting ``or unless there is a substantial basis 
     reduction'' after ``section 754 is in effect''.
       (3) Substantial basis reduction.--Section 734 is amended by 
     adding at the end the following new subsection:
       ``(d) Substantial Basis Reduction.--
       ``(1) In general.--For purposes of this section, there is a 
     substantial basis reduction with respect to a distribution if 
     the sum of the amounts described in subparagraphs (A) and (B) 
     of subsection (b)(2) exceeds $250,000.
       ``(2) Regulations.--

  ``For regulations to carry out this subsection, see section 
743(d)(2).''
       (4) Clerical amendments.--
       (A) The section heading for section 734 is amended to read 
     as follows:

     ``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP 
                   PROPERTY WHERE SECTION 754 ELECTION OR 
                   SUBSTANTIAL BASIS REDUCTION.''

       (B) The table of sections for subpart B of part II of 
     subchapter K of chapter 1 is amended by striking the item 
     relating to section 734 and inserting the following new item:

``Sec. 734. Adjustment to basis of undistributed partnership property 
              where section 754 election or substantial basis 
              reduction.''

       (d) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to contributions made after the date of the 
     enactment of this Act.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to transfers after the date of the enactment of 
     this Act.
       (3) Subsection (c).--The amendments made by subsection (c) 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 333. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK 
                   HELD BY PARTNERSHIP IN CORPORATE PARTNER.

       (a) In General.--Section 755 is amended by adding at the 
     end the following new subsection:
       ``(c) No Allocation of Basis Decrease to Stock of Corporate 
     Partner.--In making an allocation under subsection (a) of any 
     decrease in the adjusted basis of partnership property under 
     section 734(b)--
       ``(1) no allocation may be made to stock in a corporation 
     which is a partner in the partnership, and
       ``(2) any amount not allocable to stock by reason of 
     paragraph (1) shall be allocated under subsection (a) to 
     other partnership property.
     Gain shall be recognized to the partnership to the extent 
     that the amount required to be allocated under paragraph (2) 
     to other partnership property exceeds the aggregate adjusted 
     basis of such other property immediately before the 
     allocation required by paragraph (2).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 334. REPEAL OF SPECIAL RULES FOR FASITS.

       (a) In General.--Part V of subchapter M of chapter 1 
     (relating to financial asset securitization investment 
     trusts) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Paragraph (6) of section 56(g) is amended by striking 
     ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (2) Clause (ii) of section 382(l)(4)(B) is amended by 
     striking ``a REMIC to which part IV of subchapter M applies, 
     or a FASIT to which part V of subchapter M applies,'' and 
     inserting ``or a REMIC to which part IV of subchapter M 
     applies,''.
       (3) Paragraph (1) of section 582(c) is amended by striking 
     ``, and any regular interest in a FASIT,''.
       (4) Subparagraph (E) of section 856(c)(5) is amended by 
     striking the last sentence.
       (5) Paragraph (5) of section 860G(a) is amended by adding 
     ``and'' at the end of subparagraph (B), by striking ``, and'' 
     at the end of subparagraph (C) and inserting a period, and by 
     striking subparagraph (D).
       (6) Subparagraph (C) of section 1202(e)(4) is amended by 
     striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (7) Subparagraph (C) of section 7701(a)(19) is amended by 
     adding ``and'' at the end of clause (ix), by striking ``, 
     and'' at the end of clause (x) and inserting a period, and by 
     striking clause (xi).
       (8) The table of parts for subchapter M of chapter 1 is 
     amended by striking the item relating to part V.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2003.
       (2) Exception for existing fasits.--
       (A) In general.--Paragraph (1) shall not apply to any FASIT 
     in existence on the date of the enactment of this Act.
       (B) Transfer of additional assets not permitted.--Except as 
     provided in regulations prescribed by the Secretary of the 
     Treasury or the Secretary's delegate, subparagraph (A) shall 
     cease to apply as of the earliest date after the date of the 
     enactment of this Act that any property is transferred to the 
     FASIT.

     SEC. 335. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON 
                   CONVERTIBLE DEBT.

       (a) In General.--Paragraph (2) of section 163(l) is amended 
     by striking ``or a related party'' and inserting ``or equity 
     held by the issuer (or any related party) in any other 
     person''.
       (b) Conforming Amendment.--Paragraph (3) of section 163(l) 
     is amended by striking ``or a related party'' in the material 
     preceding subparagraph (A) and inserting ``or any other 
     person''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to debt instruments issued after the date of the 
     enactment of this Act.

     SEC. 336. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER 
                   SECTION 269.

       (a) In General.--Subsection (a) of section 269 (relating to 
     acquisitions made to evade or avoid income tax) is amended to 
     read as follows:
       ``(a) In General.--If--
       ``(1)(A) any person acquires stock in a corporation, or
       ``(B) any corporation acquires, directly or indirectly, 
     property of another corporation and the basis of such 
     property, in the hands of the acquiring corporation, is 
     determined by reference to the basis in the hands of the 
     transferor corporation, and
       ``(2) the principal purpose for which such acquisition was 
     made is evasion or avoidance of Federal income tax by 
     securing the benefit of a deduction, credit, or other 
     allowance,
     then the Secretary may disallow such deduction, credit, or 
     other allowance.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to stock and property acquired after February 13, 
     2003.

     SEC. 337. MODIFICATIONS OF CERTAIN RULES RELATING TO 
                   CONTROLLED FOREIGN CORPORATIONS.

       (a) Limitation on Exception From PFIC Rules for United 
     States Shareholders of Controlled Foreign Corporations.--
     Paragraph (2) of section 1297(e) (relating to passive 
     investment company) is amended by adding at the end the 
     following flush sentence:
     ``Such term shall not include any period if there is only a 
     remote likelihood of an inclusion in gross income under 
     section 951(a)(1)(A)(i) of subpart F income of such 
     corporation for such period.''
       (b) Determination of Pro Rata Share of Subpart F Income.--
     Subsection (a) of section 951 (relating to amounts included 
     in gross income of United States shareholders) is amended by 
     adding at the end the following new paragraph:
       ``(4) Special rules for determining pro rata share of 
     subpart f income.--The pro rata share under paragraph (2) 
     shall be determined by disregarding--
       ``(A) any rights lacking substantial economic effect, and
       ``(B) stock owned by a shareholder who is a tax-indifferent 
     party (as defined in section 7701(m)(3)) if the amount which 
     would (but for this paragraph) be allocated to such 
     shareholder does not reflect such shareholder's economic 
     share of the earnings and profits of the corporation.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years on controlled foreign 
     corporation beginning after February 13, 2003, and to taxable 
     years of United States shareholder in which or with which 
     such taxable years of controlled foreign corporations end.

     SEC. 338. BASIS FOR DETERMINING LOSS ALWAYS REDUCED BY 
                   NONTAXED PORTION OF DIVIDENDS.

       (a) In General.--Section 1059 (relating to corporate 
     shareholder's basis in stock reduced by nontaxed portion of 
     extraordinary dividends) is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Basis for Determining Loss Always Reduced by Nontaxed 
     Portion of Dividends.--The basis of stock in a corporation 
     (for purposes of determining loss) shall be reduced by the 
     nontaxed portion of any dividend received with respect to 
     such stock if this section does not otherwise apply to such 
     dividend.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to dividends received after the date of the 
     enactment of this Act.

[[Page H3900]]

     SEC. 339. AFFIRMATION OF CONSOLIDATED RETURN REGULATION 
                   AUTHORITY.

       (a) In General.--Section 1502 (relating to consolidated 
     return regulations) is amended by adding at the end the 
     following new sentence: ``In prescribing such regulations, 
     the Secretary may prescribe rules applicable to corporations 
     filing consolidated returns under section 1501 that are 
     different from other provisions of this title that would 
     apply if such corporations filed separate returns.''
       (b) Result Not Overturned.--Notwithstanding subsection (a), 
     the Internal Revenue Code of 1986 shall be construed by 
     treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as in 
     effect on January 1, 2001) as being inapplicable to the type 
     of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
       (c) Effective Date.--The provisions of this section shall 
     apply to taxable years beginning before, on, or after the 
     date of the enactment of this Act.

Subtitle C--Prevention of Corporate Expatriation To Avoid United States 
                               Income Tax

     SEC. 341. PREVENTION OF CORPORATE EXPATRIATION TO AVOID 
                   UNITED STATES INCOME TAX.

       (a) In General.--Paragraph (4) of section 7701(a) (defining 
     domestic) is amended to read as follows:
       ``(4) Domestic.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `domestic' when applied to a corporation or 
     partnership means created or organized in the United States 
     or under the law of the United States or of any State unless, 
     in the case of a partnership, the Secretary provides 
     otherwise by regulations.
       ``(B) Certain corporations treated as domestic.--
       ``(i) In general.--The acquiring corporation in a corporate 
     expatriation transaction shall be treated as a domestic 
     corporation.
       ``(ii) Corporate expatriation transaction.--For purposes of 
     this subparagraph, the term `corporate expatriation 
     transaction' means any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly 
     substantially all of the properties held directly or 
     indirectly by a domestic corporation, and
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation.

       ``(iii) Lower stock ownership requirement in certain 
     cases.--Subclause (II) of clause (ii) shall be applied by 
     substituting `50 percent' for `80 percent' with respect to 
     any nominally foreign corporation if--

       ``(I) such corporation does not have substantial business 
     activities (when compared to the total business activities of 
     the expanded affiliated group) in the foreign country in 
     which or under the law of which the corporation is created or 
     organized, and
       ``(II) the stock of the corporation is publicly traded and 
     the principal market for the public trading of such stock is 
     in the United States.

       ``(iv) Partnership transactions.--The term `corporate 
     expatriation transaction' includes any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly properties 
     constituting a trade or business of a domestic partnership,
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former partners of the domestic 
     partnership or related foreign partnerships (determined 
     without regard to stock of the acquiring corporation which is 
     sold in a public offering related to the transaction), and
       ``(III) the acquiring corporation meets the requirements of 
     subclauses (I) and (II) of clause (iii).

       ``(v) Special rules.--For purposes of this subparagraph--

       ``(I) a series of related transactions shall be treated as 
     1 transaction, and
       ``(II) stock held by members of the expanded affiliated 
     group which includes the acquiring corporation shall not be 
     taken into account in determining ownership.

       ``(vi) Other definitions.--For purposes of this 
     subparagraph--

       ``(I) Nominally foreign corporation.--The term `nominally 
     foreign corporation' means any corporation which would (but 
     for this subparagraph) be treated as a foreign corporation.
       ``(II) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)).
       ``(III) Related foreign partnership.--A foreign partnership 
     is related to a domestic partnership if they are under common 
     control (within the meaning of section 482), or they shared 
     the same trademark or tradename.''

       (b) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     apply to corporate expatriation transactions completed after 
     September 11, 2001.
       (2) Special rule.--The amendment made by this section shall 
     also apply to corporate expatriation transactions completed 
     on or before September 11, 2001, but only with respect to 
     taxable years of the acquiring corporation beginning after 
     December 31, 2003.

 Subtitle D--Inclusion in Gross Income of Funded Deferred Compensation 
                         of Corporate Insiders

     SEC. 351. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED 
                   COMPENSATION OF CORPORATE INSIDERS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 is amended by adding at the end the following new 
     section:

     ``SEC. 409A. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED 
                   COMPENSATION OF CORPORATE INSIDERS.

       ``(a) In General.--If an employer maintains a funded 
     deferred compensation plan--
       ``(1) compensation of any disqualified individual which is 
     deferred under such funded deferred compensation plan shall 
     be included in the gross income of the disqualified 
     individual or beneficiary for the 1st taxable year in which 
     there is no substantial risk of forfeiture of the rights to 
     such compensation, and
       ``(2) the tax treatment of any amount made available under 
     the plan to a disqualified individual or beneficiary shall be 
     determined under section 72 (relating to annuities, etc.).
       ``(b) Funded Deferred Compensation Plan.--For purposes of 
     this section--
       ``(1) In general.--The term `funded deferred compensation 
     plan' means any plan providing for the deferral of 
     compensation unless--
       ``(A) the employee's rights to the compensation deferred 
     under the plan are no greater than the rights of a general 
     creditor of the employer, and
       ``(B) all amounts set aside (directly or indirectly) for 
     purposes of paying the deferred compensation, and all income 
     attributable to such amounts, remain (until made available to 
     the participant or other beneficiary) solely the property of 
     the employer (without being restricted to the provision of 
     benefits under the plan), and
       ``(C) the amounts referred to in subparagraph (B) are 
     available to satisfy the claims of the employer's general 
     creditors at all times (not merely after bankruptcy or 
     insolvency).
     Such term shall not include a qualified employer plan.
       ``(2) Special rules.--
       ``(A) Employee's rights.--A plan shall be treated as 
     failing to meet the requirements of paragraph (1)(A) unless--
       ``(i) the compensation deferred under the plan is payable 
     only upon separation from service, death, or at a specified 
     time (or pursuant to a fixed schedule), and
       ``(ii) the plan does not permit the acceleration of the 
     time such deferred compensation is payable by reason of any 
     event.
     If the employer and employee agree to a modification of the 
     plan that accelerates the time for payment of any deferred 
     compensation, then all compensation previously deferred under 
     the plan shall be includible in gross income for the taxable 
     year during which such modification takes effect and the 
     taxpayer shall pay interest at the underpayment rate on the 
     underpayments that would have occurred had the deferred 
     compensation been includible in gross income on the earliest 
     date that there is no substantial risk of forfeiture of the 
     rights to such compensation.
       ``(B) Creditor's rights.--A plan shall be treated as 
     failing to meet the requirements of paragraph (1)(B) with 
     respect to amounts set aside in a trust unless--
       ``(i) the employee has no beneficial interest in the trust,
       ``(ii) assets in the trust are available to satisfy claims 
     of general creditors at all times (not merely after 
     bankruptcy or insolvency), and
       ``(iii) there is no factor that would make it more 
     difficult for general creditors to reach the assets in the 
     trust than it would be if the trust assets were held directly 
     by the employer in the United States.
     Except as provided in regulations prescribed by the 
     Secretary, such a factor shall include the location of the 
     trust outside the United States.
       ``(c) Disqualified Individual.--For purposes of this 
     section, the term `disqualified individual' means, with 
     respect to a corporation, any individual--
       ``(1) who is subject to the requirements of section 16(a) 
     of the Securities Exchange Act of 1934 with respect to such 
     corporation, or
       ``(2) who would be subject to such requirements if such 
     corporation were an issuer of equity securities referred to 
     in such section.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Qualified employer plan.--The term `qualified 
     employer plan' means--
       ``(A) any plan, contract, pension, account, or trust 
     described in subparagraph (A) or (B) of section 219(g)(5), 
     and
       ``(B) any other plan of an organization exempt from tax 
     under subtitle A.
       ``(2) Plan includes arrangements, etc.--The term `plan' 
     includes any agreement or arrangement.
       ``(3) Substantial risk of forfeiture.--The rights of a 
     person to compensation are subject to a substantial risk of 
     forfeiture if such person's rights to such compensation are 
     conditioned upon the future performance of substantial 
     services by any individual.
       ``(4) Treatment of earnings.--Except for purposes of 
     subsection (a)(1) and the last sentence of (b)(2)(A), 
     references to deferred compensation shall be treated as 
     including references to income attributable to such 
     compensation or such income.''

[[Page H3901]]

       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by adding at the end the following new 
     item:

``Sec. 409A. Inclusion in gross income of funded deferred compensation 
              of corporate insiders.''

       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts deferred after July 10, 2002.
  Mr. REYNOLDS. Mr. Speaker, I yield back the balance of my time, and I 
move the previous question on the resolution.
  The SPEAKER pro tempore. The question is on ordering the previous 
question.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. FROST. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Evidently a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  Pursuant to clause 9 of rule XX, the Chair will reduce to 5 minutes 
the minimum time for any electronic vote, if ordered, on the question 
of adoption of the resolution.
  The vote was taken by electronic device, and there were--yeas 219, 
nays 203, not voting 12, as follows:

                             [Roll No. 178]

                               YEAS--219

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Ney
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NAYS--203

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Clay
     Clyburn
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Hall
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--12

     Boyd
     Brady (TX)
     Cole
     Combest
     Conyers
     Feeney
     Gephardt
     Herger
     King (IA)
     Miller, Gary
     Northup
     Schrock


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Simpson) (during the vote). Members are 
advised that a minimum of 2 minutes remain in this vote.

                              {time}  1113

  Mr. WYNN and Mr. BALLANCE changed their vote from ``yea'' to ``nay.''
  Mr. LEWIS of California and Mr. PAUL changed their vote from ``nay'' 
to ``yea.''
  So the previous question was ordered.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore. The question is on the resolution.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded Vote

  Mr. McGOVERN. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. This will be a 5-minute vote.
  The vote was taken by electronic device, and there were--ayes 220, 
noes 203, not voting 11, as follows:

                             [Roll No. 179]

                               AYES--220

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Ney
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich

[[Page H3902]]


     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NOES--203

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Hall
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--11

     Boyd
     Cole
     Combest
     Cramer
     Feeney
     Gephardt
     Hunter
     King (IA)
     Miller, Gary
     Northup
     Schrock


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Simpson) (during the vote). Members are 
advised there are 2 minutes remaining in this vote.

                              {time}  1121

  So the resolution was agreed to.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.
  Mr. THOMAS. Mr. Speaker, pursuant to House Resolutions 227, I call up 
the bill (H.R. 2) to amend the Internal Revenue Code of 1986 to provide 
additional tax incentives to encourage economic growth, and ask for its 
immediate consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore. Pursuant to House Resolution 227, the bill 
is considered read for amendment.
  The text of H.R. 2 is as follows:

                                 H.R. 2

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

     SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Jobs and 
     Growth Tax Act of 2003''.
       (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 of this Act 
     is as follows:

Sec. 1. Short title; references; table of contents.

  TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS; 
                INCREASED EXPENSING FOR SMALL BUSINESSES

Sec. 101. Acceleration of 10-percent individual income tax rate bracket 
              expansion.
Sec. 102. Acceleration of reduction in individual income tax rates.
Sec. 103. Acceleration of 15-percent individual income tax rate bracket 
              expansion for married taxpayers filing joint returns.
Sec. 104. Acceleration of increase in standard deduction for married 
              taxpayers filing joint returns.
Sec. 105. Acceleration of increase in child tax credit.
Sec. 106. Increased expensing for small business.
Sec. 107. Minimum tax relief to individuals.
Sec. 108. Application of EGTRRA sunset to this title.

TITLE II--DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF CORPORATE 
                                EARNINGS

Sec. 201. Dividend exclusion to eliminate double taxation of corporate 
              earnings.
Sec. 202. Rules for application of dividend exclusion and retained 
              earnings basis adjustments.
Sec. 203. Treatment of regulated investment companies and real estate 
              investment trusts.
Sec. 204. Treatment of insurance companies.
Sec. 205. Treatment of S corporations.
Sec. 206. Repeal of accumulated earnings tax and personal holding 
              company tax.
Sec. 207. Effective dates.

  TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS; 
                INCREASED EXPENSING FOR SMALL BUSINESSES

     SEC. 101. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION.

       (a) In General.--Clause (i) of section 1(i)(1)(B) (relating 
     to the initial bracket amount) is amended by striking 
     ``($12,000 in the case of taxable years beginning before 
     January 1, 2008)''.
       (b) Inflation Adjustment Beginning in 2003.--Section 
     1(i)(1)(C) (relating to inflation adjustment) is amended to 
     read as follows:
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f) which apply with respect to taxable 
     years beginning in calendar years after 2002--
       ``(i) the cost-of-living adjustment used in making 
     adjustments to the initial bracket amount shall be determined 
     under subsection (f)(3) by substituting `2001' for `1992' in 
     subparagraph (B) thereof, and
       ``(ii) such adjustment shall not apply to the amount 
     referred to in subparagraph (B)(iii).

     If any amount after adjustment under the preceding sentence 
     is not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2002.
       (2) Tables for 2003.--The Secretary of the Treasury shall 
     modify each table which has been prescribed for taxable years 
     beginning in 2003 and which relates to any amendment made by 
     this section, section 102, or section 103 to reflect each 
     such amendment.

     SEC. 102. ACCELERATION OF REDUCTION IN INDIVIDUAL INCOME TAX 
                   RATES.

       (a) In General.--The table in paragraph (2) of section 1(i) 
     (relating to reductions in rates after June 30, 2001) is 
     amended to read as follows:

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  ``In the case of taxable                                                                                                                   The corresponding percentages shall be substituted for  the following percentages:
                  years  beginning during  ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                       calendar year:         28%      31%      36%                                                                                                                                              39.6%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                 2001.....................   27.5%    30.5%    35.5%                                                                                                                                             39.1%
                 2002.....................   27.0%    30.0%    35.0%                                                                                                                                             38.6%
                 2003 and thereafter......   25.0%    28.0%    33.0%                                                                                                                                            35.0%''.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page H3903]]

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 103. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS 
                   FILING JOINT RETURNS.

       (a) In General.--Paragraph (8) of section 1(f ) (relating 
     to phaseout of marriage penalty in 15-percent bracket) is 
     amended to read as follows:
       ``(8) Elimination of marriage penalty in 15-percent 
     bracket.--With respect to taxable years beginning after 
     December 31, 2002, in prescribing the tables under paragraph 
     (1)--
       ``(A) the maximum taxable income in the 15 percent rate 
     bracket in the table contained in subsection (a) (and the 
     minimum taxable income in the next higher taxable income 
     bracket in such table) shall be 200 percent of the maximum 
     taxable income in the 15-percent rate bracket in the table 
     contained in subsection (c) (after any other adjustment under 
     this subsection), and
       ``(B) the comparable taxable income amounts in the table 
     contained in subsection (d) shall be \1/2\ of the amounts 
     determined under subparagraph (A).''.
       (b) Conforming Amendments.--
       (1) The heading for subsection (f ) of section 1 is amended 
     by striking ``Phaseout'' and inserting ``Elimination''.
       (2) Section 302(c) of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended by striking ``2004'' 
     and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 104. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR 
                   MARRIED TAXPAYERS FILING JOINT RETURNS.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to basic standard deduction) is amended to read as follows:
       ``(2) Basic standard deduction.--For purposes of paragraph 
     (1), the basic standard deduction is--
       ``(A) 200 percent of the dollar amount in effect under 
     subparagraph (C) for the taxable year in the case of--
       ``(i) a joint return, or
       ``(ii) a surviving spouse (as defined in section 2(a)),
       ``(B) $4,400 in the case of a head of household (as defined 
     in section 2(b)), or
       ``(C) $3,000 in any other case.''.
       (b) Conforming Amendments.--
       (1) Section 63(c)(4) is amended by striking ``(2)(D)'' each 
     place it occurs and inserting ``(2)(C)''.
       (2) Section 63(c) is amended by striking paragraph (7).
       (3) Section 301(d) of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended by striking ``2004'' 
     and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 105. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.

       (a) In General.--Subsection (a) of section 24 (relating to 
     child tax credit) is amended to read as follows:
       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year with respect to each qualifying child of the 
     taxpayer an amount equal to $1,000.''.
       (b) Advance Payment of Portion of Increased Credit in 
     2003.--
       (1) In general.--Subchapter B of chapter 65 (relating to 
     abatements, credits, and refunds) is amended by adding at the 
     end the following new section:

     ``SEC. 6429. ADVANCE PAYMENT OF PORTION OF INCREASED CHILD 
                   CREDIT.

       ``(a) In General.--Each eligible taxpayer shall be treated 
     as having made a payment against the tax imposed by chapter 1 
     for such taxpayer's first taxable year beginning in 2002 in 
     an amount equal to the child tax credit refund amount.
       ``(b) Eligible Taxpayer.--For purposes of this section, the 
     term `eligible taxpayer' means any taxpayer if--
       ``(1) such taxpayer was allowed a credit under section 24 
     for such taxpayer's first taxable year beginning in 2002, and
       ``(2) at least one qualifying child (as defined in section 
     24(c)) of the taxpayer for such year meets the age 
     requirement for 2003.
       ``(c) Child Tax Credit Refund Amount.--
       ``(1) In general.--For purposes of this section, the child 
     tax credit refund amount is equal to the excess (if any) of--
       ``(A) the amount which would have been allowed as a credit 
     under section 24 for the taxpayer's first taxable year 
     beginning in 2002 if--
       ``(i) the per child amount for such year were $1,000, and
       ``(ii) only qualifying children (as defined in section 
     24(c)) of the taxpayer for such year who meet the age 
     requirement for 2003 were taken into account, over
       ``(B) the amount which would have been allowed as a credit 
     under section 24 for the taxpayer's first taxable year 
     beginning in 2002 if only qualifying children (as defined in 
     section 24(c)) of the taxpayer for such year who meet the age 
     requirement for 2003 were taken into account.
       ``(2) Adjustments.--The amounts described in subparagraphs 
     (A) and (B) of paragraph (1) shall be determined--
       ``(A) without regard to section 24(d)(1)(B)(ii), and
       ``(B) as if the credit allowed under section 24(d) were 
     allowed under section 24.
       ``(d) Age Requirement.--A child of a taxpayer meets the age 
     requirement for 2003 if such child meets the requirement of 
     section 24(c)(1)(B) for the taxpayer's first taxable year 
     beginning in 2003.
       ``(e) Timing of Payments.--In the case of any overpayment 
     attributable to this section, the Secretary shall, subject to 
     the provisions of this title, refund or credit such 
     overpayment as rapidly as possible and, to the extent 
     practicable, before December 31, 2003.
       ``(f) Coordination With Child Tax Credit.--
       ``(1) In general.--The amount of credit which would (but 
     for this paragraph) be allowable under section 24 for the 
     taxpayer's first taxable year beginning in 2003 shall be 
     reduced (but not below zero) by the aggregate refunds and 
     credits made or allowed to the taxpayer under this section. 
     Any failure to so reduce the credit shall be treated as 
     arising out of a mathematical or clerical error and assessed 
     according to section 6213(b)(1).
       ``(2) Joint returns.--In the case of a refund or credit 
     made or allowed under this section with respect to a joint 
     return, half of such refund or credit shall be treated as 
     having been made or allowed to each individual filing such 
     return.
       ``(g) No Interest.--No interest shall be allowed on any 
     overpayment attributable to this section.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter B of chapter 65 is amended by adding at the end 
     the following new item:

``Sec. 6429. Advance payment of portion of increased child credit.''.

       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall take effect on the date of the enactment of this Act.

     SEC. 106. INCREASED EXPENSING FOR SMALL BUSINESS.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $75,000.''.
       (b) Increase in Qualifying Investment at Which Phaseout 
     Begins.--Paragraph (2) of section 179(b) (relating to 
     reduction in limitation) is amended by striking ``$200,000'' 
     and inserting ``$325,000''.
       (c) Off-the-Shelf Computer Software.--Paragraph (1) of 
     section 179(d) (defining section 179 property) is amended to 
     read as follows:
       ``(1) Section 179 property.--For purposes of this section, 
     the term `section 179 property' means property--
       ``(A) which is--
       ``(i) tangible property (to which section 168 applies), or
       ``(ii) computer software (as defined in section 
     197(e)(3)(B)) which is described in section 197(e)(3)(A)(i) 
     and to which section 167 applies,
       ``(B) which is section 1245 property (as defined in section 
     1245(a)(3)), and
       ``(C) which is acquired by purchase for use in the active 
     conduct of a trade or business.
     Such term shall not include any property described in section 
     50(b) and shall not include air conditioning or heating 
     units.''.
       (d) Adjustment of Dollar Limit and Phaseout Threshold for 
     Inflation.--Subsection (b) of section 179 (relating to 
     limitations) is amended by adding at the end the following 
     new paragraph:
       ``(5) Inflation adjustments.--
       ``(A) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, the dollar amounts 
     in paragraphs (1) and (2) shall each be increased by an 
     amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 2002' for 
     `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding.--
       ``(i) Dollar limitation.--If the amount in paragraph (1) as 
     increased under subparagraph (A) is not a multiple of $1,000, 
     such amount shall be rounded to the nearest multiple of 
     $1,000.
       ``(ii) Phaseout amount.--If the amount in paragraph (2) as 
     increased under subparagraph (A) is not a multiple of 
     $10,000, such amount shall be rounded to the nearest multiple 
     of $10,000.''.
       (e) Revocation of Election.--Paragraph (2) of section 
     179(c) (relating to election irrevocable) is amended to read 
     as follows:
       ``(2) Revocation of election.--The taxpayer may revoke an 
     election under paragraph (1), and any specification contained 
     in any such election, with respect to any property. Such 
     revocation, once made, shall be irrevocable.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 107. MINIMUM TAX RELIEF TO INDIVIDUALS.

       (a) In General.--So much of paragraph (1) of section 55(d) 
     (relating to exemption amount for taxpayers other than 
     corporations) as precedes subparagraph (C) thereof is amended 
     to read as follows:

[[Page H3904]]

       ``(1) Exemption amount for taxpayers other than 
     corporations.--In the case of a taxpayer other than a 
     corporation, the term `exemption amount' means as follows:
       ``(A) Joint return and surviving spouse.--In the case of a 
     joint return or a surviving spouse, the amount under the 
     following table:

``In the case of taxable years beginning:      The exemption amount is:
  Before 2001..................................................$45,000 
  In 2001 and 2002.............................................$49,000 
  In 2003, 2004, and 2005......................................$57,000 
  After 2005...................................................$45,000.
       ``(B) Individual not married and not a surviving spouse.--
     In the case of an individual who is not a married individual 
     and is not a surviving spouse, the amount under the following 
     table:

``In the case of taxable years beginning:      The exemption amount is:
  Before 2001..................................................$33,750 
  In 2001 and 2002.............................................$35,750 
  In 2003, 2004, and 2005......................................$39,750 
  After 2005................................................$33,750.''.
       (b) Conforming Amendments.--
       (1) Section 55(d)(1)(C) is amended--
       (A) by striking ``, and'' and inserting a period, and
       (B) by striking ``50 percent'' and inserting ``Married 
     individual filing a separate return.--50 percent''.
       (2) Section 55(d)(1)(D) is amended by striking ``$22,500'' 
     and inserting ``Estate and trust.--$22,500''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 108. APPLICATION OF EGTRRA SUNSET TO THIS TITLE.

       Each amendment made by this title (other than section 106) 
     shall be subject to title IX of the Economic Growth and Tax 
     Relief Reconciliation Act of 2001 to the same extent and in 
     the same manner as the provision of such Act to which such 
     amendment relates.

TITLE II--DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF CORPORATE 
                                EARNINGS

     SEC. 201. DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF 
                   CORPORATE EARNINGS.

       (a) In General.--Part III of subchapter B of chapter 1 is 
     amended by inserting after section 115 the following new 
     section:

     ``SEC. 116. DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION 
                   OF CORPORATE EARNINGS.

       ``(a) Exclusion.--Gross income does not include the 
     excludable portion (as defined in section 281) of any amount 
     received as a dividend.
       ``(b) Comparable Treatment for Retained Earnings.--If the 
     excludable dividend amount (as defined in section 281) of any 
     corporation for any calendar year exceeds the dividends paid 
     by the corporation in such calendar year, the basis of stock 
     in the corporation shall  be increased in the manner and to 
     the extent provided in section 282.
       ``(c) Reporting to Shareholders.--For reporting to 
     shareholders, see section 6042.''
       (b) Clerical Amendment.--The table of sections for such 
     part III is amended by inserting after the item relating to 
     section 115 the following new item:

``Sec. 116. Dividend exclusion to eliminate double taxation of 
              corporate earnings.''

     SEC. 202. RULES FOR APPLICATION OF DIVIDEND EXCLUSION AND 
                   RETAINED EARNINGS BASIS ADJUSTMENTS.

       (a) In General.--Subchapter B of chapter 1 (as amended by 
     subsection (d)) is amended by inserting after part IX the 
     following new part:

  ``PART X--RULES FOR APPLICATION OF DIVIDEND EXCLUSION AND RETAINED 
                      EARNINGS BASIS ADJUSTMENTS.

``Sec. 281. Excludable portion of dividends.
``Sec. 282. Retained earnings basis adjustments.
``Sec. 283. Treatment of distributions after previous retained earnings 
              basis adjustments.
``Sec. 284. Special rules for credits and refunds.
``Sec. 285. Special rules for foreign corporations and shareholders.
``Sec. 286. Other special rules.
``Sec. 287. Regulations.

     ``SEC. 281. EXCLUDABLE PORTION OF DIVIDENDS.

       ``(a) Excludable Portion.--For purposes of section 116, the 
     term `excludable portion' means, with respect to any dividend 
     paid by a corporation in a calendar year, an amount which 
     bears the same ratio to such dividend as the excludable 
     dividend amount of such corporation for the calendar year 
     bears to the total amount of dividends paid by such 
     corporation in such calendar year.
       ``(b) Excludable Dividend Amount.--For purposes of this 
     part and section 116--
       ``(1) In general.--The term `excludable dividend amount' 
     means, with respect to any corporation for any calendar year, 
     the excess of--
       ``(A) the sum of--
       ``(i) the fully taxed earnings amount for the preceding 
     calendar year,
       ``(ii) the aggregate amount of dividends received by the 
     corporation during such preceding year which are excluded 
     from gross income under section 116(a), and
       ``(iii) the aggregate amount of increases during such 
     preceding year under section 116(b) in the basis of stock 
     held by the corporation, over
       ``(B) the amount of applicable income tax taken into 
     account under subparagraph (A)(i).
       ``(2) Carryover of excess of excludable dividend amount 
     over earnings and profits.--The excludable dividend amount of 
     a corporation for any calendar year shall be increased by the 
     excess of--
       ``(A) the excludable dividend amount of such corporation 
     for the preceding calendar year, over
       ``(B) the maximum amount which could have been paid by the 
     corporation as dividends during such preceding calendar year.
       ``(c) Fully Taxed Earnings Amount.--
       ``(1) In general.--The fully taxed earnings amount for any 
     calendar year is the amount of the applicable income tax 
     shown on applicable returns for such year divided by the 
     highest rate of tax specified in section 11.
       ``(2) Increase for prior year assessments.--The fully taxed 
     earnings amount for any calendar year shall be increased by 
     the amount of any applicable income tax (not previously taken 
     into account under paragraph (1)) which is assessed during 
     such year divided by the highest rate of tax specified in 
     section 11.
       ``(3) Limitation to amount paid.--If an amount described in 
     paragraph (1) or (2) is paid after the close of the calendar 
     year in which such amount would (but for this paragraph) be 
     taken into account, such amount shall be taken into account 
     for the calendar year in which paid.
       ``(4) Highest rate of tax.--For purposes of this 
     subsection, the highest rate of tax specified in section 11 
     with respect to any applicable income tax shall be such 
     highest rate for the taxable year for which (or by reference 
     to which) such tax is determined.
       ``(d) Definitions.--For purposes of this part--
       ``(1) Applicable income tax.--
       ``(A) In general.--The term `applicable income tax' means 
     the excess (if any) of--
       ``(i) the sum of the taxes imposed by sections 11, 55, 511, 
     801, 831, 882, 1201, 1291 (without regard to section 
     1291(c)(1)(B)), and 1374, over
       ``(ii) the sum of the credits under part IV of subchapter A 
     (other than subpart C and section 27(a)).
       ``(B) Transitional rules.--
       ``(i) In general.--Such term shall not include any tax 
     imposed for any taxable year ending before April 1, 2001.
       ``(ii) Treatment of minimum tax credit.--The applicable 
     income tax shall not be reduced by the credit under section 
     53 attributable (determined as if such credit were used on a 
     first-in first-out basis) to taxable years ending before 
     April 1, 2001.
       ``(iii) Section 1374.--The reference to section 1374 in 
     subparagraph (A)(i) shall not apply to taxable years 
     beginning before January 1, 2003.
       ``(iv) Other taxes included.--The taxes imposed by sections 
     531 and 541 (as in effect before their repeal) shall be taken 
     into account under subparagraph (A)(i) for taxable years 
     ending after March 30, 2001, and beginning before January 1, 
     2003.
       ``(2) Applicable return.--
       ``(A) In general.--The term `applicable return' means, with 
     respect to a calendar year, any return of applicable income 
     tax for a taxable year if the 15th day of the 8th month 
     following the close of such taxable year occurs during such 
     calendar year.
       ``(B) Filing requirement.--If a return is filed after the 
     close of the calendar year with respect to which such return 
     would (but for this subparagraph) be treated as an applicable 
     return under subparagraph (A), such return shall be treated 
     as an applicable return for the calendar year in which filed.

     ``SEC. 282. RETAINED EARNINGS BASIS ADJUSTMENTS.

       ``(a) In General.--If any portion of the excess described 
     in section 116(b) is allocated to a share of stock in a 
     corporation under subsection (b), the basis of such share 
     shall be increased by the amount so allocated.
       ``(b) Allocation of Excess.--
       ``(1) In general.--A corporation may allocate the excess 
     described in section 116(b) for any calendar year to shares 
     of stock in the corporation at 1 or more times during the 
     calendar year to the extent that cash in the amount of such 
     excess, if distributed at the time of such allocation, would 
     be a dividend.
       ``(2) Manner.--Except as provided in regulations prescribed 
     by the Secretary, any amount allocated under paragraph (1) 
     shall be allocated in the same manner as if cash in such 
     amount were actually distributed as dividends. No allocation 
     shall be effective before the date on which it is made by the 
     corporation.
       ``(3) Exception for certain preferred stock.--No amount may 
     be allocated under this subsection to stock described in 
     section 1504(a)(4) (determined without regard to subparagraph 
     (A) thereof).
       ``(c) Effect on Earnings and Profits.--Earnings and profits 
     of a corporation making an allocation under subsection (b), 
     and of a corporation receiving such an allocation, shall be 
     adjusted in the same manner as if the allocation were treated 
     as a dividend.
       ``(d) Authority to Allow Carryover of Unallocated Excess 
     Excludable Dividend Amount.--Notwithstanding section 281, the 
     Secretary may by regulation allow a corporation to increase 
     the excludable dividend amount for any calendar year by the 
     amount of the excess described in section 116(b) for

[[Page H3905]]

     the preceding calendar year which is not allocated under 
     subsection (b).

     ``SEC. 283. TREATMENT OF DISTRIBUTIONS AFTER PREVIOUS 
                   RETAINED EARNINGS BASIS ADJUSTMENTS.

       ``(a) Treatment of Distributions.--
       ``(1) In general.--If a corporation makes distributions 
     described in section 301(a) with respect to any class of 
     stock in any calendar year which are not excludable under 
     section 116(a), such distributions shall not be treated as 
     dividends (and paragraphs (2) and (3) of section 301(c) shall 
     apply to such distributions) to the extent such distributions 
     do not exceed the corporation's cumulative retained earnings 
     basis adjustment amount for such class as of the beginning of 
     such year. If such distributions exceed such amount, this 
     paragraph shall be applied to a proportionate share of each 
     such distribution.
       ``(2) Special rules for recharacterized dividends.--If any 
     dividend (determined without regard to this subsection) 
     during any calendar year with respect to any class of stock 
     in a corporation is treated as a distribution other than a 
     dividend under paragraph (1), such treatment shall be 
     disregarded for purposes of--
       ``(A) determining the excludable portion under section 281 
     of dividends paid by the corporation during the calendar 
     year, and
       ``(B) determining whether any distribution during the 
     calendar year with respect to stock in the corporation is 
     treated as a dividend.
       ``(b) Cumulative Retained Earnings Basis Adjustment 
     Amount.--For purposes of this section, the term `cumulative 
     retained earnings basis adjustment amount' means, with 
     respect to any class of stock for any calendar year, the 
     excess (if any) of--
       ``(1) the aggregate of the excess described in section 
     116(b) allocated to shares of such class of stock under 
     section 282 for all preceding calendar years, over
       ``(2) the aggregate amount of distributions to which 
     subsection (a)(1) applies with respect to such class of stock 
     for all preceding calendar years.

     ``SEC. 284. SPECIAL RULES FOR CREDITS AND REFUNDS.

       ``(a) In General.--No overpayment of an applicable income 
     tax may be allowed as a credit or refund to the extent that 
     the overpayment exceeds the sum of--
       ``(1) the aggregate applicable income taxes for the 
     calendar year in which the credit or refund would otherwise 
     be allowed or made, and
       ``(2) an amount equal to the lesser of--
       ``(A) the product of the corporation's excludable dividend 
     amount for such calendar year and the fraction the numerator 
     of which is the highest rate of tax specified in section 11 
     (within the meaning of section 281(c)(4)) and the denominator 
     of which is 1 minus such highest rate, or
       ``(B) the amount specified by the corporation for purposes 
     of this paragraph.
       ``(b) Adjustments to Excludable Dividend Amounts Resulting 
     From Credits and Refunds.--If subsection (a) applies to any 
     credit or refund which is allowed or made in a calendar 
     year--
       ``(1) the applicable income taxes described in subsection 
     (a)(1) otherwise taken into account under section 281 for 
     determining the excludable dividend amount for the succeeding 
     calendar year shall be reduced (but not below zero) by the 
     amount of the credit or refund, and
       ``(2) the excludable dividend amount for the calendar year 
     shall be reduced by the excess of--
       ``(A) the amount determined under subsection (a)(2) divided 
     by the highest rate of tax specified in section 11, over
       ``(B) the amount determined under subsection (a)(2).
       ``(c) Disallowed Overpayment Not Lost.--Nothing in 
     subsection (a) shall be construed to reduce the amount of any 
     overpayment for which credit or refund is not allowed by 
     reason of subsection (a), and such overpayment shall continue 
     to be taken into account in applying subsection (a) for 
     succeeding calendar years until a credit or refund is allowed 
     or made.
       ``(d) Exception for Foreign Tax Credit.--This section shall 
     not apply to any overpayment to the extent that such 
     overpayment is attributable to the credit allowed under 
     section 27(a).
       ``(e) Denial of Interest.--No interest shall be allowed on 
     any overpayment during the period that credit or refund of 
     such overpayment is not allowed by reason of this section.

     ``SEC. 285. SPECIAL RULES FOR FOREIGN CORPORATIONS AND 
                   SHAREHOLDERS.

       ``(a) Computation of Excludable Dividend Amounts of Foreign 
     Corporations.--
       ``(1) Reduction in excludable dividend amount for certain 
     taxes.--The reduction under section 281(b)(1)(B) (without 
     regard to this subparagraph) shall be increased by the sum 
     of--
       ``(A) the taxes imposed by section 884 (relating to branch 
     profits tax), and
       ``(B) so much of the taxes imposed by section 881 as are 
     attributable to dividends which would (but for subsection 
     (b)) be excludable under section 116 or are attributable to 
     distributions which are described in section 283(a).
       ``(2) Treatment of disallowed exclusions and adjustments.--
     Notwithstanding subsection (b)--
       ``(A) the excludable dividend amount of a foreign 
     corporation for a calendar year shall be increased by--
       ``(i) the dividends received by the corporation which (but 
     for subsection (b)) would be excludable under section 116(a), 
     and
       ``(ii) the distributions received by such corporation 
     during such year which are described in section 283(a), and
       ``(B) the earnings and profits of a foreign corporation--
       ``(i) shall be increased by the amount described in 
     subparagraph (A)(ii), and
       ``(ii) shall not be increased by any excess described in 
     section 116(b) allocated to such corporation for which an 
     increase in basis is not allowed by reason of subsection 
     (b)(2).
       ``(b) Taxation of Foreign Shareholders.--In the case of a 
     shareholder who is a nonresident alien individual or a 
     foreign corporation--
       ``(1) no dividends shall be excludable under section 
     116(a),
       ``(2) there shall be no increase in basis for any excess 
     described in section 116(b) allocated to such individual or 
     corporation under section 282, and
       ``(3) any distribution described in section 283 shall be 
     treated as a dividend for purposes of sections 871 and 881 
     and chapter 3.
       ``(c) Rules Relating to Foreign Tax Credit.--
       ``(1) In general.--No credit shall be allowed under section 
     901 for any taxes paid or accrued (or deemed paid under 
     section 902 or 960) with respect to any dividend excludable 
     under section 116 and any distribution described in section 
     283(a).
       ``(2) Excludable dividend amount.--The excludable dividend 
     amount of a corporation for any calendar year shall be 
     determined without regard to a reduction in the credit 
     allowed by section 27(a) on an applicable return for a prior 
     calendar year.

     ``SEC. 286. OTHER SPECIAL RULES.

       ``(a) Redemptions.--If a corporation makes a distribution 
     to a shareholder during any calendar year with respect to its 
     stock and section 301 does not apply to such distribution, 
     the excludable dividend amount for the calendar year, and the 
     cumulative retained earnings basis adjustment amount as of 
     the beginning of the calendar year in which the distribution 
     is made, shall be reduced by the ratable share of such 
     amounts attributable to the stock so redeemed.
       ``(b) Coordination With Section 246(c).--
       ``(1) Holding period requirements.--If a shareholder 
     disposes of any share of stock before the holding period 
     requirements of section 246(c) are met--
       ``(A) the basis of such share shall be reduced by the 
     amount of dividends received with respect to such share which 
     are excludable under section 116(a), and
       ``(B) there shall be no increase in basis for any excess 
     described in section 116(b) allocated to the shareholder of 
     such stock under section 282.
       ``(2) Related payments.--No deduction shall be allowed 
     under this chapter for any related payments described in 
     section 246(c)(1)(B) with respect to any dividend excludable 
     under section 116(a) or basis increase under section 116(b) 
     with respect to any share of stock to the extent that such 
     payments do not exceed the amount of such dividend or basis 
     increase.
       ``(3) Treatment of disallowed exclusions and adjustments.--
     The excludable dividend amount of any corporation for a 
     calendar year, and its earnings and profits, shall not be 
     increased by--
       ``(A) the dividends received by the corporation which are 
     excludable under section 116(a) and which resulted in a basis 
     reduction under paragraph (1)(A), and
       ``(B) the aggregate increases in basis which (but for 
     paragraph (1)(B)) would be made in stock held by the 
     corporation.
       ``(c) Treatment of Regulated Investment Companies and Real 
     Estate Investment Trusts.--
       ``(1) In general.--Except as provided in regulations, the 
     excludable dividend amount of a regulated investment company 
     or real estate investment trust shall be zero.
       ``(2) Cross reference.--

  ``For special rules relating to application of this part to regulated 
investment companies and real estate investment trusts, see section 
852(g).
       ``(d) Exclusion and Basis Allocation Reduced Where 
     Portfolio Stock Held by Corporation is Debt-Financed.--
       ``(1) Treatment of excludable dividend.--In the case of any 
     debt-financed portfolio stock (within the meaning of section 
     246A), the amount excluded under section 116(a) with respect 
     to any dividend received with respect to such stock shall be 
     an amount equal to the product of--
       ``(A) the amount which would be excluded under section 
     116(a) without regard to this paragraph, and
       ``(B) 100 percent minus the average indebtedness percentage 
     (within the meaning of section 246A(d)).
       ``(2) Treatment of basis increase.--In the case of any 
     debt-financed portfolio stock (within the meaning of section 
     246A) with respect to which there is an increase in basis 
     under section 116(b) during any taxable year, the gross 
     income of the taxpayer shall be increased by an amount equal 
     to the product of--
       ``(A) the amount of the increase under section 116(b), and
       ``(B) the average indebtedness percentage (within the 
     meaning of section 246A(d)).
       ``(3) Limitation.--The aggregate amount of reductions under 
     paragraph (1) and increases in  gross income under paragraph 
     (2) with respect to any debt-financed portfolio stock

[[Page H3906]]

     shall not exceed the amount of interest deduction 
     (including any deductible short sale expense) allocable to 
     such stock.
       ``(4) Treatment of increase in gross income.--The 
     excludable dividend amount of a corporation for a calendar 
     year shall not be increased by reason of any increase in 
     gross income under paragraph (2).
       ``(5) Exception.--This subsection shall not apply to any 
     dividend described in paragraph (1) or (2) of section 
     246A(b).
       ``(e) Cooperatives.--In the case of a cooperative to which 
     subchapter T applies--
       ``(1) the excludable dividend amount of such cooperative 
     shall be allocated for purposes of section 116 and this part 
     between shares of such cooperative held by patrons and shares 
     held by other persons in such manner as the Secretary shall 
     prescribe by regulations, and
       ``(2) no deduction shall be allowed to the cooperative 
     under this chapter for any dividend paid to a patron which is 
     excludable under section 116(a) or for any distribution 
     described in section 283(a) which reduced the basis of stock 
     held by the cooperative under section 301(c)(2).
       ``(f) ESOP Stock.--Any dividend allowed as a deduction 
     under section 404(k) shall not be treated as a dividend for 
     purposes of section 116 and this part, and any stock with 
     respect to which such a dividend may be paid shall not be 
     taken into account in making any allocation under 282 or any 
     distribution described in section 283(a).

     ``SEC. 287. REGULATIONS.

       ``The Secretary shall prescribe such regulations as may be 
     appropriate to carry out section 116 and this part, including 
     regulations--
       ``(1) providing for the treatment of options and 
     convertible debt as stock, including modification of the 
     attribution rules under section 318(a)(4),
       ``(2) providing for the allocation of the excludable 
     dividend amount and the cumulative retained earnings basis 
     adjustment amount in the case of transactions described in 
     section 312(h),
       ``(3) waiving the application of section 246(c)(4) for 
     purposes of sections 286(b) and 1059(g),
       ``(4) modifying the consolidated return regulations to the 
     extent necessary or appropriate to apply the provisions of 
     this part, including regulations that accelerate the 
     inclusion in the excludable dividend amount of a higher-tier 
     member with respect to--
       ``(A) activities of lower-tier members of the group,
       ``(B) dividends excludable under section 116(a) received 
     from such lower-tier members, and
       ``(C) increases in basis allocated under section 282 to 
     stock in such lower-tier members,
       ``(5) providing for the application of section 116 and this 
     part in the case of pass-thru entities, including appropriate 
     adjustments to basis, and
       ``(6) as are necessary to further the purposes of section 
     116 and this part and to prevent the circumvention of such 
     purposes.

     Any regulations under paragraph (4) may be effective as of 
     the effective date of this part.''
       (b) Reporting of Excludable Dividends and Retained Earnings 
     Basis Adjustments.--
       (1) In general.--Section 6042(a) (relating to returns 
     regarding payments of dividends and corporate earnings and 
     profits) is amended to read as follows:
       ``(a) Requirement of Reporting.--
       ``(1) In general.--Every person--
       ``(A) who makes payments of dividends aggregating $10 or 
     more to any other person during any calendar year,
       ``(B) who allocates under section 282 increases in basis of 
     stock in a corporation aggregating $10 or more to any other 
     person during any calendar year,
       ``(C) who makes distributions described in section 283(a) 
     aggregating $10 or more to any other person during any 
     calendar year, or
       ``(D) who receives such payments of dividends, allocations 
     of increases in basis, or distributions as a nominee and who 
     makes payments or allocates increases aggregating $10 or more 
     during any calendar year to any other person with respect to 
     the dividends, allocations, or distributions received,

     shall make a return at the time and in the manner prescribed 
     by the Secretary, setting forth the information described in 
     paragraph (3).
       ``(2) Returns required by secretary.--Every person who 
     makes payments of dividends, allocations under section 282, 
     or distributions described in section 283(a) to which 
     paragraph (1) does not apply shall, when required by the 
     Secretary, make a return setting forth the information 
     described in paragraph (3).
       ``(3) Information reported.--Information described in this 
     paragraph includes--
       ``(A) the aggregate amount of dividends, including the 
     portion of such amount excludable from gross income under 
     section 116(a),
       ``(B) the amount of each allocation of basis under section 
     282 with respect to each share of stock and the date of such 
     increase,
       ``(C) the amount of each distribution described in section 
     283(a), including the portion of such amount to which 
     paragraph (2) or (3) of section 301(c) applies and the date 
     of such distribution, and
       ``(D) such other information as the Secretary may require.

     In the case of a nominee described in paragraph (1)(D), this 
     paragraph shall apply with respect to the payments and 
     allocations made by the nominee.''
       (2) Application to foreign persons.--Section 6042 is 
     amended by adding at the end the following new subsection:
       ``(e) Application to Foreign Persons.--The Secretary may 
     provide for the application of this section to payments, 
     allocations, and distributions made by or to a foreign person 
     to the extent necessary to carry out the provisions of 
     section 116 and part X of subchapter B of chapter 1.''
       (3) Conforming amendments.--
       (A) Section 6042(b)(3) is amended by striking ``or (B)'' 
     and inserting ``or (D)''.
       (B) Section 6042(c)(2) is amended to read as follows:
       ``(2) the information described in subsection (a)(3) 
     required to be shown on the return.''
       (c) Amendments to Other Sections.--
       (1) Minimum tax.--Clause (i) of section 56(g)(4)(B) is 
     amended by striking ``or under section 114'' and inserting 
     ``, section 114, or section 116''.
       (2) Coordination with dividend received deductions.--
       (A) Section 246 is amended by adding at the end the 
     following new subsection:
       ``(f) Coordination With Dividend Exclusion.--No deduction 
     shall be allowed under section 243, 244, or 245 with respect 
     to the amount of any dividend excluded from gross income 
     under section 116 or would be so excluded but for sections 
     285(b)(1) and 286(d).''
       (B) Section 243 is amended by adding at the end the 
     following new subsection:
       ``(f) Termination.--Paragraph (1) of subsection (a) shall 
     not apply to any dividend--
       ``(1) paid from earnings and profits accumulated in taxable 
     years ending after April 1, 2001,
       ``(2) made with respect to stock issued after February 2, 
     2003, or
       ``(3) received by a corporation after December 31, 2005.''
       (3) Carryovers in certain corporation acquisitions.--
     Section 381(c) is amended by adding at the end the following 
     new paragraph:
       ``(27) EDA and crebaa.--The acquiring corporation shall 
     take into account (to the extent proper to carry out the 
     purposes of this section, section 116, and part X of 
     subchapter B, and under such regulation as may be prescribed 
     by the Secretary) the excludable dividend amount and the 
     cumulative retained earnings basis adjustment amount in 
     respect of the distributor or transferor.''
       (4) Trusts and estates.--Subsection (a) of section 643 is 
     amended--
       (A) by redesignating paragraph (7) as paragraph (8) and by 
     inserting after paragraph (6) the following new paragraph:
       ``(7) Dividends, etc.--There shall be included the amount 
     of any dividends excluded from gross income under section 116 
     and the amount of any distribution described in section 
     283.'', and
       (B) by striking ``and (6)'' in the last sentence and 
     inserting ``, (6), and (7)''.
       (5) Partnerships.--
       (A) Paragraph (5) of section 702(a) is amended to read as 
     follows:
       ``(5) dividends with respect to which there is an exclusion 
     under section 116 or a deduction under part VIII of 
     subchapter B,''.
       (B) Section 705(a)(1) is amended by striking ``and'' at the 
     end of subparagraph (B), by striking the semicolon at the end 
     of subparagraph (C) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(D) increases in basis under section 116(b) allocated to 
     the partnership;''.
       (6) Extraordinary dividends.--
       (A) In general.--Section 1059 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Treatment of Excludable Dividends and Retained 
     Earnings Basis Adjustments as Extraordinary Dividends.--
       ``(1) In general.--For purposes of this section, any 
     dividend excludable under section 116(a) or increase in basis 
     under section 116(b) shall be treated as an extraordinary 
     dividend, except that this section shall be applied by 
     substituting `1 year (or such other period as the Secretary 
     may prescribe)' for `2 years' each place it appears.
       ``(2) Treatment of deemed extraordinary dividends.--The 
     excludable dividend amount of any corporation for a calendar 
     year, and its earnings and profits, shall not be increased 
     by--
       ``(A) the dividends received by the corporation which are 
     treated as extraordinary dividends by reason of paragraph 
     (1), and
       ``(B) the aggregate increases in basis under section 116(b) 
     which are so treated.
       ``(3) Regulations.--The Secretary may by regulation provide 
     for exceptions to the application of paragraph (1).''
       (B) Paragraph (3) of section 1059(d) is amended by 
     inserting ``section 1223(11) shall not apply and'' after 
     ``subsection (a),''.
       (C)(i) Section 1059 is amended by striking ``corporation'' 
     each place it appears in subsection (a) and inserting 
     ``taxpayer''.
       (ii) The section heading for section 1059 is amended by 
     striking ``corporate'' and by inserting ``and excludable'' 
     before ``dividends''.
       (iii) The item relating to section 1059 in the table of 
     sections for part IV of subchapter O of chapter 1 is amended 
     by striking ``corporate'' and by inserting ``and excludable'' 
     before ``dividends''.
       (7) Private foundations.--Section 4940(c) is amended by 
     adding at the end the following new paragraph:

[[Page H3907]]

       ``(6) Coordination with dividend exclusion.--For purposes 
     of this section, gross investment income shall not include--
       ``(A) a dividend to the extent excluded from gross income 
     under section 116(a), and
       ``(B) a distribution described in section 283.''
       (d) Conforming Amendments.--
       (1)(A) Part X of subchapter B of chapter 1, as in effect on 
     the day before the date of the enactment of this Act, is 
     hereby moved after part XI of such subchapter B and 
     redesignated as part XII.
       (B) Section 281, as so in effect, is redesignated as 
     section 296.
       (C) The table of sections for such part XII, as so 
     designated, is amended by striking ``Sec. 281'' and inserting 
     ``Sec. 296.''
       (D) The table of parts for subchapter B of chapter 1 is 
     amended by striking the items relating to parts X and XI and 
     inserting the following new items:

``Part X. Rules for application of dividend exclusion and retained 
              earnings basis adjustments.
``Part XI. Special rules relating to corporate preference items.
``Part XII. Terminal railroad corporations and their shareholders.''
       (2) Subsection (f) of section 301 is amended by adding at 
     the end the following new paragraph:
       ``(4) For exclusion from gross income of certain dividends, 
     see section 116.''

     SEC. 203. TREATMENT OF REGULATED INVESTMENT COMPANIES AND 
                   REAL ESTATE INVESTMENT TRUSTS.

       (a) In General.--Section 852 is amended by adding at the 
     end the following new subsection:
       ``(g) Special Rules Relating to Section 116 and Part X of 
     Subchapter B.--
       ``(1) Excludable portion.--
       ``(A) In general.--For purposes of section 116(a), the 
     excludable portion of any dividend paid by any qualified 
     investment entity shall be the amount so designated by such 
     entity in a written notice mailed to its shareholders not 
     later than 60 days after the close of its taxable year in 
     which such dividend is paid.
       ``(B) Limitation.--If the aggregate amount so designated 
     with respect to a taxable year (including dividends paid 
     after the close of the taxable year as described in section 
     855) exceeds the aggregate amount of dividends received by 
     such entity during such year which are excludable from gross 
     income under section 116(a), then the amount of a dividend 
     otherwise excludable by reason of a designation under 
     subparagraph (A) shall be reduced by an amount which bears 
     the same ratio to the amount otherwise excludable as such 
     excess bears to the total amount designated under 
     subparagraph (A).
       ``(C) Treatment of capital gain and exempt-interest 
     dividends.--Any amount designated under subparagraph (A) as 
     excludable under section 116 may not be treated as a capital 
     gain dividend or an exempt-interest dividend.
       ``(D) Coordination with section 853.--The election under 
     section 853 shall not apply to dividends excludable under 
     section 116 and distributions described in section 283(a) 
     received by a qualified investment entity.
       ``(2) Retained earnings basis adjustments.--
       ``(A) In general.--A qualified investment entity may 
     allocate any increase in basis allocated to the entity under 
     section 282 to shares of stock in the entity at 1 or more 
     times during the taxable year in the manner and the time 
     prescribed in paragraphs (2) and (3) of section 282(b).
       ``(B) Designation.--For purposes of section 116(b), the 
     increase in basis allocated to any share of stock in the 
     entity shall be the amount so designated by such entity in a 
     written notice mailed to its shareholders not later than 60 
     days after the close of its taxable year in which such 
     allocation is made.
       ``(C) Limitation.--Rules similar to the rules of paragraph 
     (1)(B) shall apply to amounts allocated under this paragraph.
       ``(D) Shareholder treatment of amounts designated.--
     Shareholders of such entity who receive an allocation under 
     this paragraph from such entity shall take into account such 
     allocation as if it were an allocation under section 282.
       ``(E) Earnings and profits.--Earnings and profits of the 
     entity making such an allocation shall be adjusted in the 
     same manner as provided in section 282(c).
       ``(3) Certain distributions after previous retained 
     earnings basis adjustments.--
       ``(A) In general.--If any qualified investment entity 
     receives during any taxable year distributions described in 
     section 283(a) which reduced the basis of stock held by such 
     entity under section 301(c)(2), the entity may designate any 
     distributions described in section 301(a) made by such entity 
     in such taxable year which are not excludable under section 
     116(a) (after the application of paragraph (1)) as 
     distributions described in section 283(a). Such designations 
     shall be made in a written notice mailed to its shareholders 
     not later than 60 days after the close of its taxable year in 
     which such distribution is made.
       ``(B) Limitation.--If the aggregate amount so designated 
     with respect to a taxable year (including distributions paid 
     after the close of the taxable year as provided in section 
     855(e)) exceeds the aggregate distributions described in 
     section 283(a) which reduced the basis of stock held by such 
     entity under section 301(c)(2) for such taxable year, then 
     the amount of a distribution otherwise treated as a 
     distribution described in section 283(a) by reason of a 
     designation under subparagraph (A) shall be reduced by an 
     amount which bears the same ratio to the amount otherwise so 
     treated as such excess bears to the total amount designated 
     under subparagraph (A).
       ``(C) Shareholder treatment of amounts designated.--
     Shareholders of such entity who receive a distribution from 
     such entity which is designated under this paragraph shall 
     treat such distribution as a distribution described in 
     section 283(a).
       ``(D) Treatment of capital gain and exempt-interest 
     dividends.--Any distribution designated under subparagraph 
     (A) may not be treated as a capital gain dividend or an 
     exempt-interest dividend.
       ``(E) Adjustments.--No adjustment shall be made in the 
     earnings and profits of a qualified investment entity with 
     respect to a distribution by such entity which is designated 
     under subparagraph (A).
       ``(4) Coordination with dividends paid deduction.--No 
     allocation or distribution designated under paragraph (2) or 
     (3) shall be treated as a dividend for purposes of section 
     561.
       ``(5) Definitions.--For purposes of this subsection--
       ``(A) Qualified investment entity.--The term `qualified 
     investment entity' means--
       ``(i) a regulated investment company, and
       ``(ii) a real estate investment trust.
       ``(B) Exempt-interest dividend.--The term `exempt-interest 
     dividend' has the meaning given to such term by subsection 
     (b)(5).''
       (b) Other Rules Relating to Regulated Investment 
     Companies.--
       (1) Distribution requirements.--
       (A) Clause (i) of section 852(a)(1)(B) is amended by 
     inserting ``and its dividend income excludable under section 
     116(a),'' before ``over''.
       (B) Section 852(a) is amended by striking ``and'' at the 
     end of paragraph (1), by redesignating paragraph (2) as 
     paragraph (3), and by inserting after paragraph (1) the 
     following new paragraph:
       ``(2) 90 percent of the distributions described in section 
     283(a)--
       ``(A) which are received by such company during the taxable 
     year, and
       ``(B) which reduce under section 301(c)(2) the basis of 
     stock held by such company,
     are distributed during such year under subsection (g)(3)(A), 
     and''.
       (C) Section 855 is amended by adding at the end the 
     following new subsection:
       ``(e) Distribution of Previously Retained Earnings Basis 
     Adjustments.--Rules similar to the rules of the preceding 
     provisions of this section shall apply to distributions 
     described in section 852(g)(3)(A).''
       (2) Taxation of entity and shareholders.--
       (A) The material following paragraph (3) of section 851(b) 
     is amended--
       (i) by inserting ``, dividends excludable from gross income 
     under section 116(a), and distributions described in section 
     283(a) which reduce the basis of stock under section 
     301(c)(2)'' after ``103(a)'' in the third sentence, and
       (ii) by adding at the end the following new sentence: ``For 
     purposes of paragraph (2), distributions described in section 
     283(a) which reduce the basis of stock under section 
     301(c)(2) shall be treated as dividends.''
       (B) Section 852(b)(2)(D) is amended by striking ``and 
     exempt-interest dividends'' and inserting ``, exempt-interest 
     dividends, and any dividends excludable under section 
     116(a)''.
       (C) Subparagraph (B) of section 852(b)(4) is amended to 
     read as follows:
       ``(B) Loss attributable to exempt dividends.--If--
       ``(i) a shareholder of a regulated investment company 
     receives an exempt-interest dividend, a dividend excludable 
     under section 116(a), or an allocation under subsection 
     (g)(2), with respect to any share, and
       ``(ii) such share is held by the taxpayer for 6 months or 
     less,
     then any loss on the sale or exchange of such share shall, to 
     the extent of the sum of the amounts of such dividends and 
     allocations, be disallowed.''
       (D) Paragraph (3) of section 4982(c) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) any dividend excludable from gross income under 
     section 116(a).''
       (c) Other Rules Relating to Real Estate Investment 
     Trusts.--
       (1) Distribution requirements.--
       (A) Subparagraph (A) of section 857(a)(1) is amended by 
     striking ``and'' at the end of clause (i), by striking 
     ``minus'' at the end of clause (ii), and by inserting at the 
     end the following new clause:
       ``(iii) 90 percent of its dividend income excludable under 
     section 116(a); minus''
       (B) Subsection (a) of section 857 is amended by 
     redesignating paragraph (2) as paragraph (3) and by inserting 
     after paragraph (1) the following new paragraph:
       ``(2) 90 percent of the distributions described in section 
     283(a)--
       ``(A) which are received by such trust during the taxable 
     year, and
       ``(B) which reduce under section 301(c)(2) the basis of 
     stock held by such trust,
     are distributed during such year under subsection (g)(3)(A); 
     and''.

[[Page H3908]]

       (C) Section 858 is amended by adding at the end the 
     following new subsection:
       ``(d) Distribution of Previously Retained Earnings Basis 
     Adjustments.--Rules similar to the rules of the preceding 
     provisions of this section shall apply to distributions 
     described in section 852(g)(3).''
       (2) Taxation of entity and shareholders.--
       (A)(i) Section 856(c)(2) is amended--
       (I) by inserting ``(including dividends excludable from 
     gross income under section 116(a)) and distributions 
     described in section 283(a) which reduce the basis of stock 
     under section 301(c)(2)'' after ``dividends'' in subparagraph 
     (A), and
       (II) by inserting ``(including tax-exempt interest)'' after 
     ``interest'' in subparagraph (B).
       (ii) Section 856(c) is amended by adding at the end the 
     following new paragraph:
       ``(8) Gross income tests.--For purposes of paragraphs (2) 
     and (3), gross income shall be treated as including tax-
     exempt interest, dividends excludable from gross income under 
     section 116(a), and distributions described in section 283(a) 
     which reduce the basis of stock under section 301(c)(2).''
       (B) Section 857(b)(2)(B) is amended by inserting `` or any 
     dividends paid which are excludable under section 116(a)'' 
     after ``subparagraph (D)''.
       (C) Section 857(b) is amended by adding at the end the 
     following new paragraph:
       ``(10) Loss attributable to exempt dividends.--If--
       ``(A) a shareholder of a real estate investment trust 
     receives a dividend excludable under section 116(a) or an 
     allocation under section 852(g)(2) with respect to any share, 
     and
       ``(B) such share is held by the taxpayer for 6 months or 
     less,
     then any loss on the sale or exchange of such share shall, to 
     the extent of the sum of the amounts of such dividends and 
     allocations, be disallowed.''
       (D) Subsection (g) of section 857 is amended to read as 
     follows:
       ``(g) Cross References.--
       ``(1) For provisions relating to excise tax based on 
     certain real estate investment trust taxable income not 
     distributed during the taxable year, see section 4981.
       ``(2) For special rules relating to application of dividend 
     exclusion and retained earnings basis adjustments, see 
     section 852(g).''
       (E) Paragraph (1) of section 4981(c) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) any dividend excludable from gross income under 
     section 116(a).''

     SEC. 204. TREATMENT OF INSURANCE COMPANIES.

       (a) Life Insurance Companies.--
       (1) Section 803 is amended by adding at the end the 
     following new subsection:
       ``(c) Special Rules for Excludable Dividends and Retained 
     Earnings Basis Adjustments.--
       ``(1) In general.--The exclusion under section 116(a) with 
     respect to any dividend received by a life insurance company 
     shall only apply to such company's share (as determined under 
     section 812) of such dividend.
       ``(2) Retained earnings basis adjustments.--In the case of 
     any increase in basis under section 116(b) allocated under 
     section 282 to stock held by a life insurance company--
       ``(A) the life insurance company's and policyholders' 
     shares of such allocation shall be determined in accordance 
     with section 812 in the same manner as if it were a dividend, 
     and
       ``(B) life insurance company gross income of such company 
     shall be increased by the policyholders' share of such 
     allocation.
       ``(3) Rules for segregated asset accounts.--In the case of 
     stock held in a segregated asset account (within the meaning 
     of section 817), this subsection shall be applied as if the 
     policyholders' share of the excludable portion of any 
     dividend, or any increase in basis under section 116(b), with 
     respect to such stock were 100 percent.
       ``(4) Computation of excludable dividend amount.--In the 
     case of a life insurance company, the increase under clause 
     (ii) or (iii) of section 281(b)(1)(A) in the company's 
     excludable dividend amount shall be limited to the company's 
     share (as determined under section 812) of the dividends or 
     increases in basis described in either such clause.''
       (2) Section 812(d)(1)(A) is amended by inserting 
     ``(including dividends excludable under section 116(a))'' 
     after ``dividends''.
       (3) Section 815(c)(2)(A)(iii) is amended by adding ``,the 
     amount of dividends excludable under section 116(a) (as 
     modified by section 803(c)(1)), and the amount of basis 
     increase under section 116(b) (as modified by section 
     803(c)(2))'' after ``section 103''.
       (b) Other Insurance Companies.--
       (1) Section 832(b)(5)(B) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding after 
     clause (iii) the following new clause:
       ``(iv) any dividend excludable under section 116(a) which 
     is received during such taxable year and any increase in 
     basis under section 116(b) which is allocated under section 
     282 to such company during such taxable year.''
       (2) Section 832(c) is amended by striking ``and'' at the 
     end of paragraph (12), by striking the period at the end of 
     paragraph (13) and inserting ``; and'', and by adding at the 
     end the following new paragraph:
       ``(14) the amount of dividends received during the taxable 
     year which are excluded from gross income under section 
     116(a).''
       (3) Section 833(b)(3)(E) is amended--
       (A) by striking ``and'' at the end of clause (i), by 
     striking the period at the end of clause (ii) and inserting 
     ``, and'', and by inserting after clause (ii) the following 
     new clause:
       ``(iii) the aggregate amount excluded for the taxable year 
     under section 116(a).'', and
       (B) by adding at the end the following: ``The amount 
     determined under clause (iii) shall be reduced by the amount 
     of any decrease in such deductions for the taxable year by 
     reason of section 832(b)(5)(B) to the extent such decrease is 
     attributable to the exclusion under section 116(a).''
       (4) Section 834(c) is amended by adding at the end the 
     following new paragraph:
       ``(10) Excludable dividends.--The amount of dividends 
     received during the taxable year which are excluded from 
     gross income under section 116(a).''

     SEC. 205. TREATMENT OF S CORPORATIONS.

       (a) Basis Adjustments Relating to Dividends.--Section 
     1367(a)(1) is amended by striking ``and'' at the end of 
     subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(D) increases in basis under section 116(b) allocated to 
     the S corporation.''.
       (b) Application of Section 116 and Part X of Subchapter B 
     to S Corporations.--Section 1368 is amended by adding at the 
     end the following new subsection:
       ``(f) Coordination with Dividend Exclusion and Retained 
     Earnings Basis Adjustments.--
       ``(1) Determination of excluded dividends amount.--
       ``(A) In general.--Clauses (ii) and (iii) of section 
     281(b)(1)(A) shall not apply to amounts received or allocated 
     in a taxable year for which the corporation is an S 
     corporation.
       ``(B) Cross reference.--

  ``For treatment of taxes imposed by section 1374, see section 
281(d)(1).
       ``(2) Distributions.--Subject to regulations prescribed by 
     the Secretary, the preceding provisions of this section shall 
     not apply to any dividend excludable from gross income under 
     section 116(a) and any distribution described in section 
     283(a).''
       (c) Modification to Treatment of Section 1374 Tax.--
       (1) Paragraph (2) of section 1366(f) is amended to read as 
     follows:
       ``(2) Treatment of tax imposed on built-in gains.--The 
     amount of the items of the net recognized built-in-gain taken 
     into account under section 1374(b)(1) (reduced by any 
     deduction allowed under section 1374(b)(2)) shall not be 
     taken into account under this section.''
       (2)(A) Subsection (c) of section 1371 is amended by adding 
     at the end the following new paragraph:
       ``(B) Earnings and profits.--The accumulated earnings and 
     profits of the corporation shall be increased at the 
     beginning of the taxable year by the amount not taken into 
     account under section 1366 by reason of section 1366(f)(2) 
     (determined without regard any reduction of such amount 
     under section 1374(b)(2)) reduced by the tax imposed by 
     section 1374 (net of credits allowed).''
       (B) Paragraph (1) of section 1371(c) is amended by striking 
     ``and (3)'' and inserting ``, (3), and (4)''.
       (d) Repeal of Tax and Termination Where Excess Passive 
     Investment Income.--
       (1) Repeal of tax.--
       (A) In general.--Section 1375 is repealed.
       (B) Conforming amendments.--Sections 26(b)(2)(J) and 
     1366(f)(3) are repealed.
       (2) Repeal of termination.--Section 1362(d) is amended by 
     striking paragraph (3).

     SEC. 206. REPEAL OF ACCUMULATED EARNINGS TAX AND PERSONAL 
                   HOLDING COMPANY TAX.

       (a) In General.--Parts I and II of subchapter G of chapter 
     1 (relating to corporations improperly accumulating surplus 
     and to personal holding companies) are hereby repealed.
       (b) Conforming Amendments.--
       (1) Section 12 is amended by striking paragraph (2) and by 
     redesignating paragraphs (3), (4), (5), (6), and (7) as 
     paragraphs (2), (3), (4), (5), and (6), respectively.
       (2) Section 26(b)(2) is amended by striking subparagraphs 
     (F) and (G).
       (3) Section 30A(c) is amended by inserting ``or'' at the 
     end of paragraph (1), by striking paragraphs (2) and (3), and 
     by redesignating paragraph (4) as paragraph (2).
       (4) Section 41(e)(7)(E) is amended by adding ``and'' at the 
     end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (5) Section 56(b)(2) is amended by striking subparagraph 
     (C) and by redesignating subparagraph (D) as subparagraph 
     (C).
       (6) Section 111 is amended by striking subsection (d).
       (7) Section 170(e)(4)(D) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (8) Sections 170(f)(10)(A), 508(d), 4947, and 4948(c)(4) 
     are each amended by striking ``545(b)(2),'' each place it 
     appears.
       (9)(A) Section 316(b) is amended by striking paragraph (2) 
     and by redesignating paragraph (3) as paragraph (2).

[[Page H3909]]

       (B) Section 331(b) is amended by striking ``(other than a 
     distribution referred to in paragraph (2)(B) of section 
     316(b))''.
       (10) Section 341(d) is amended--
       (A) by striking ``section 544(a) (relating to personal 
     holding companies)'' and inserting ``section 465(f) (relating 
     to constructive ownership rules)'', and
       (B) by inserting before the period at the end of the next 
     to the last sentence ``and such paragraph (2) shall be 
     applied by inserting `or by or for his partner' after `his 
     family' ''.
       (11) Section 381(c) is amended by striking paragraphs (14) 
     and (17).
       (12) Section 443(e) is amended by striking paragraphs (1) 
     and (2) and by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (1), (2), and (3), respectively.
       (13) Section 447(g)(4)(A) is amended by striking ``other 
     than--'' and all that follows and inserting ``other than an S 
     corporation.''
       (14)(A) Section 465(a)(1)(B) is amended to read as follows:
       ``(B) a C corporation which is closely held,''.
       (B) Section 465(a)(3) is amended to read as follows:
       ``(3) Closely held determination.--For purposes of 
     paragraph (1), a corporation is closely held if, at any time 
     during the last half of the taxable year, more than 50 
     percent in value of its outstanding stock is owned, directly 
     or indirectly, by or for not more than 5 individuals. For 
     purposes of this paragraph, an organization described in 
     section 401(a), 501(c)(17), or 509(a) or a portion of a trust 
     permanently set aside or to be used exclusively for the 
     purposes described in section 642(c) shall be considered an 
     individual.''
       (C) Section 465(c)(7)(B) is amended by striking clause (i) 
     and by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively.
       (D) Section 465(c)(7)(G) is amended to read as follows:
       ``(G) Loss of 1 member of affiliated group may not offset 
     income of personal service corporation.--Nothing in this 
     paragraph shall permit any loss of a member of an affiliated 
     group to be used as an offset against the income of any other 
     member of such group which is a personal service corporation 
     (as defined in section 269A(b) but determined by substituting 
     `5 percent' for `10 percent' in section 269A(b)(2)).''
       (E) Section 465 is amended by adding at the end the 
     following new subsection:
       ``(f) Constructive Ownership Rules.--For purposes of 
     subsection (a)(3)--
       ``(1) Stock not owned by individual.--Stock owned, directly 
     or indirectly, by or for a corporation, partnership, estate, 
     or trust shall be considered as being owned proportionately 
     by its shareholders, partners, or beneficiaries.
       ``(2) Family ownership.--An individual shall be considered 
     as owning the stock owned, directly or indirectly, by or for 
     his family. For purposes of this paragraph, the family of an 
     individual includes only his brothers and sisters (whether by 
     the whole or half blood), spouse, ancestors, and lineal 
     descendants.
       ``(3) Options.--If any person has an option to acquire 
     stock, such stock shall be considered as owned by such 
     person. For purposes of this paragraph, an option to acquire 
     such an option, and each one of a series of such options, 
     shall be considered as an option to acquire such stock.
       ``(4) Application of family and option rules.--Paragraphs 
     (2) and (3) shall be applied if, but only if, the effect is 
     to make the corporation closely held under subsection (a)(3).
       ``(5) Constructive ownership as actual ownership.--Stock 
     constructively owned by a person by reason of the application 
     of paragraph (1) or (3), shall, for purposes of applying 
     paragraph (1) or (2), be treated as actually owned by such 
     person; but stock constructively owned by an individual by 
     reason of the application of paragraph (2) shall not be 
     treated as owned by him for purposes of again applying such 
     paragraph in order to make another the constructive owner of 
     such stock.
       ``(6) Option rule in lieu of family rule.--If stock may be 
     considered as owned by an individual under either paragraph 
     (2) or (3) it shall be considered as owned by him under 
     paragraph (3).
       ``(7) Convertible securities.--Outstanding securities 
     convertible into stock (whether or not convertible during the 
     taxable year) shall be considered as outstanding stock if the 
     effect of the inclusion of all such securities is to make the 
     corporation closely held under subsection (a)(3). The 
     requirement under the preceding sentence that all convertible 
     securities must be included if any are to be included shall 
     be subject to the exception that, where some of the 
     outstanding securities are convertible only after a later 
     date than in the case of others, the class having the 
     earlier conversion date may be included although the 
     others are not included, but no convertible securities 
     shall be included unless all outstanding securities having 
     a prior conversion date are also included.''
       (15)(A) Section 553(a)(1) is amended by striking ``section 
     543(d)'' and inserting ``subsection (c)''.
       (B) Section 553 is amended by adding at the end the 
     following new subsection:
       ``(c) Active Business Computer Software Royalties.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `active business computer software royalties' means any 
     royalties--
       ``(A) received by any corporation during the taxable year 
     in connection with the licensing of computer software, and
       ``(B) with respect to which the requirements of paragraphs 
     (2), (3), and (4) are met.
       ``(2) Royalties must be received by corporation actively 
     engaged in computer software business.--The requirements of 
     this paragraph are met if the royalties described in 
     paragraph (1)--
       ``(A) are received by a corporation engaged in the active 
     conduct of the trade or business of developing, 
     manufacturing, or producing computer software, and
       ``(B) are attributable to computer software which--
       ``(i) is developed, manufactured, or produced by such 
     corporation (or its predecessor) in connection with the trade 
     or business described in subparagraph (A), or
       ``(ii) is directly related to such trade or business.
       ``(3) Royalties must constitute at least 50 percent of 
     income.--The requirements of this paragraph are met if the 
     royalties described in paragraph (1) constitute at least 50 
     percent of the ordinary gross income of the corporation for 
     the taxable year.
       ``(4) Deductions under sections 162 and 174 relating to 
     royalties must equal or exceed 25 percent of ordinary gross 
     income.--
       ``(A) In general.--The requirements of this paragraph are 
     met if--
       ``(i) the sum of the deductions allowable to the 
     corporation under sections 162, 174, and 195 for the taxable 
     year which are properly allocable to the trade or business 
     described in paragraph (2) equals or exceeds 25 percent of 
     the ordinary gross income of such corporation for such 
     taxable year, or
       ``(ii) the average of such deductions for the 5-taxable 
     year period ending with such taxable year equals or exceeds 
     25 percent of the average ordinary gross income of such 
     corporation for such period.
     If a corporation has not been in existence during the 5-
     taxable year period described in clause (ii), then the period 
     of existence of such corporation shall be substituted for 
     such 5-taxable year period.
       ``(B) Deductions allowable under section 162.--For purposes 
     of subparagraph (A), a deduction shall not be treated as 
     allowable under section 162 if it is specifically allowable 
     under another section.
       ``(C) Limitation on allowable deductions.--For purposes of 
     subparagraph (A), no deduction shall be taken into account 
     with respect to compensation for personal services rendered 
     by the 5 individual shareholders holding the largest 
     percentage (by value) of the outstanding stock of the 
     corporation. For purposes of the preceding sentence 
     individuals holding less than 5 percent (by value) of the 
     stock of such corporation shall not be taken into account.''
       (16) Section 556(b)(1) is amended by striking ``, but not 
     including'' and all that follows and inserting a period.
       (17) Section 561(a) is amended by striking paragraph (3), 
     by inserting ``and'' at the end of paragraph (1), and by 
     striking ``, and'' at the end of paragraph (2) and inserting 
     a period.
       (18) Section 562(b) is amended to read as follows:
       ``(b) Distributions in Liquidation.--Except in the case of 
     a foreign personal holding company described in section 552--
       ``(1) in the case of amounts distributed in liquidation, 
     the part of such distribution which is properly chargeable to 
     earnings and profits accumulated after February 28, 1913, 
     shall be treated as a dividend for purposes of computing the 
     dividends paid deduction, and
       ``(2) in the case of a complete liquidation occurring 
     within 24 months after the adoption of a plan of liquidation, 
     any distribution within such period pursuant to such plan 
     shall, to the extent of the earnings and profits (computed 
     without regard to capital losses) of the corporation for the 
     taxable year in which such distribution is made, be treated 
     as a dividend for purposes of computing the dividends paid 
     deduction.
     For purposes of paragraph (1), a liquidation includes a 
     redemption of stock to which section 302 applies. Except to 
     the extent provided in regulations, the preceding sentence 
     shall not apply in the case of any mere holding or investment 
     company which is not a regulated investment company.''
       (19) Section 563 is amended by striking subsections (a) and 
     (b), by redesignating subsections (c) and (d) as subsections 
     (a) and (b), and by striking ``, (b), or (c)'' in subsection 
     (b) (as so redesignated).
       (20) Section 564 is hereby repealed.
       (21) Section 631(c) is amended by striking the next to the 
     last sentence and inserting the following: ``This subsection 
     shall have no application for purposes of applying subchapter 
     G (relating to corporations used to avoid income tax on 
     shareholders).''.
       (22) Section 852(b)(1) is amended by striking ``which is a 
     personal holding company (as defined in section 542) or''.
       (23)(A) Section 856(h)(1) is amended to read as follows:
       ``(1) In general.--For purposes of subsection (a)(6), a 
     corporation, trust, or association is closely held if the 
     stock ownership requirement of section 465(a)(3) is met.''.
       (B) Section 856(h)(3)(A)(i) is amended by striking 
     ``section 542(a)(2)'' and inserting ``section 465(a)(3)''.
       (C) Paragraph (3) of section 856(h) is amended by striking 
     subparagraph (B) and by redesignating subparagraphs (C) and 
     (D) as subparagraphs (B) and (C), respectively.

[[Page H3910]]

       (D) Subparagraph (C) of section 856(h)(3), as redesignated 
     by the preceding subparagraph, is amended by striking 
     ``subparagraph (C)'' and inserting ``subparagraph (B)''.
       (24) The last sentence of section 882(c)(2) is amended to 
     read as follows:
     ``The preceding sentence shall not be construed to deny the 
     credit provided by section 33 for tax withheld at source or 
     the credit provided by section 34 for certain uses of 
     gasoline.''.
       (25) Section 936(a)(3) is amended by striking subparagraphs 
     (B) and (C), by inserting ``or'' at the end of subparagraph 
     (A), and by redesignating subparagraph (D) as subparagraph 
     (B).
       (26) Section 936 is amended by striking subsection (g).
       (27) Section 992(d) is amended by striking paragraph (2) 
     and by redesignating paragraphs (3), (4), (5), (6), and (7) 
     as paragraphs (2), (3), (4), (5), and (6), respectively.
       (28) Section 992 is amended by striking subsection (e).
       (29) Section 1202(e)(8) is amended by striking ``section 
     543(d)(1)'' and inserting ``section 553(c)(1)''.
       (30) Section 1298(b) is amended by striking paragraph (8) 
     and redesignating paragraph (9) as paragraph (8).
       (31) Section 1504(c)(2)(B) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (32)(A) Section 1551(a) is amended by striking ``or the 
     accumulated earnings credit'' and all that follows and 
     inserting ``unless such transferee corporation shall 
     establish by the clear preponderance of the evidence that the 
     securing of such benefits was not a major purpose of such 
     transfer.''.
       (B) The section heading for section 1551 is amended by 
     striking ``and accumulated earnings credit''.
       (C) The item relating to section 1551 in the table of 
     sections for part I of subchapter B of chapter 6 is amended 
     by striking ``and accumulated earnings credit''.
       (33)(A) Section 1561(a) is amended--
       (i) by striking paragraph (2),
       (ii) by redesignating paragraphs (3) and (4) as paragraphs 
     (2) and (3),
       (iii) by striking ``paragraph (3)'' each place it appears 
     and inserting ``paragraph (2)'',
       (iv) by striking ``paragraph (4)'' and inserting 
     ``paragraph (3)'', and
       (v) by striking the third sentence.
       (B) Section 1561(b) is amended to read as follows:
       ``(b) Certain Short Taxable Years.--If a corporation has a 
     short taxable year which does not include a December 31 and 
     is a component member of a controlled group of corporations 
     with respect to such taxable year, then for purposes of this 
     subtitle, the amount in each taxable income bracket in the 
     tax table in section 11(b) for such corporation for such 
     taxable year shall be the amount specified in subsection 
     (a)(1), divided by the number of corporations which are 
     component members of such group on the last day of such 
     taxable year. For purposes of the preceding sentence, section 
     1563(b) shall be applied as if such last day were substituted 
     for December 31.''.
       (34) Section 2057(e)(2)(C) is amended by adding at the end 
     the following new sentence: ``References to sections 542 and 
     543 in the preceding sentence shall be treated as references 
     to such sections as in effect on the day before their 
     repeal.''
       (35) Sections 6422 is amended by striking paragraph (3) and 
     by redesignating paragraphs (4) through (12) and paragraphs 
     (3) through (11), respectively.
       (36) Section 6501 is amended by striking subsection (f).
       (37) Section 6503(k) of such Code is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) through (5) 
     as paragraphs (1) through (4), respectively.
       (38) Section 6515 is amended by striking paragraph (1) and 
     by redesignating paragraphs (2) through (6) as paragraphs (1) 
     through (5), respectively.
       (39) Section 6601(b) is amended by striking paragraph (4) 
     and redesignating paragraph (5) as paragraph (4).
       (40) Subsections (d)(1)(B) and (e)(2) of section 6662 of 
     such Code are each amended by striking ``or a personal 
     holding company (as defined in section 542)''.
       (41) Section 6683 is hereby repealed.
       (42) Section 7518(c)(1) is amended by inserting ``and'' at 
     the end of subparagraph (C), by striking ``, and'' at the end 
     of subparagraph (D) and inserting a period, and by striking 
     subparagraph (E).
       (c) Clerical Amendments.--
       (1) The table of parts for subchapter G of chapter 1 of 
     such Code is amended by striking the items relating to parts 
     I and II.
       (2) The table of sections for part IV of such subchapter G 
     is amended by striking the item relating to section 564.
       (3) The table of sections for part I of subchapter B of 
     chapter 68 of such Code is amended by striking the item 
     relating to section 6683.

     SEC. 207. EFFECTIVE DATES.

       (a) In General.--Except as otherwise provided in this 
     section, the amendments made by this title shall apply to 
     distributions received, and basis allocations made under 
     section 282 of the Internal Revenue Code of 1986 (as added by 
     this title), after December 31, 2002.
       (b) Special Rules.--
       (1) Section 1374 tax.--In applying the amendments made by 
     this title, any tax imposed by section 1374 of the Internal 
     Revenue Code of 1986 for any taxable year beginning before 
     January 1, 2003, shall not be taken into account.
       (2) Section 205(d) and 206.--The amendments made by 
     sections 205(d) and 206 shall apply to taxable years 
     beginning after December 31, 2002; except that--
       (A) section 547 of such Code (as in effect before its 
     repeal) shall continue to apply to deficiency dividends (as 
     defined in section 547(d) of such Code) relating to taxable 
     years beginning before January 1, 2003, and
       (B) subsections (a) and (b) of section 563 of such Code (as 
     so in effect) shall continue to apply to dividends relating 
     to taxable years beginning before January 1, 2003.
     Notwithstanding subparagraphs (A) and (B), such dividends 
     shall not be taken into account in applying section 116 of 
     such Code or part X of subchapter B of chapter 1 of such 
     Code.

  The SPEAKER pro tempore. The amendment printed in the bill is 
adopted.
  The text of H.R. 2, as amended, is as follows:

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

     SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Jobs and 
     Growth Reconciliation Tax Act of 2003''.
       (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 of this Act 
     is as follows:

Sec. 1. Short title; references; table of contents.

   TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS

Sec. 101. Acceleration of increase in child tax credit.
Sec. 102. Acceleration of 15-percent individual income tax rate bracket 
              expansion for married taxpayers filing joint returns.
Sec. 103. Acceleration of increase in standard deduction for married 
              taxpayers filing joint returns.
Sec. 104. Acceleration of 10-percent individual income tax rate bracket 
              expansion.
Sec. 105. Acceleration of reduction in individual income tax rates.
Sec. 106. Minimum tax relief to individuals.

                TITLE II--GROWTH INCENTIVES FOR BUSINESS

Sec. 201. Increase and extension of bonus depreciation.
Sec. 202. Increased expensing for small business.
Sec. 203. 5-year carryback of certain net operating losses.

     TITLE III--REDUCTIONS IN TAXES ON DIVIDENDS AND CAPITAL GAINS

Sec. 301. Reduction in capital gains rates for individuals; repeal of 
              5-year holding period requirement.
Sec. 302. Dividends of individuals taxed at capital gain rates.
Sec. 303. Sunset of title.

          TITLE IV--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003

Sec. 401. Time for payment of corporate estimated taxes.

   TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS

     SEC. 101. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.

       (a) In General.--The items relating to calendar years 2001 
     through 2008 in the table contained in paragraph (2) of 
     section 24(a) (relating to per child amount) are amended to 
     read as follows:

  ``2003, 2004, 2005........................................$1,000 ....

   2006, 2007, or 2008.....................................  700''.....

       (b) Advance Payment of Portion of Increased Credit in 
     2003.--
       (1) In general.--Subchapter B of chapter 65 (relating to 
     abatements, credits, and refunds) is amended by inserting 
     after section 6428 the following new section:

     ``SEC. 6429. ADVANCE PAYMENT OF PORTION OF INCREASED CHILD 
                   CREDIT FOR 2003.

       ``(a) In General.--Each taxpayer who claimed a credit under 
     section 24 on the return for the taxpayer's first taxable 
     year beginning in 2002 shall be treated as having made a 
     payment against the tax imposed by chapter 1 for such taxable 
     year in an amount equal to the child tax credit refund amount 
     (if any) for such taxable year.
       ``(b) Child Tax Credit Refund Amount.--For purposes of this 
     section, the child tax credit refund amount is the amount by 
     which the aggregate credits allowed under part IV of 
     subchapter A of chapter 1 for such first taxable year would 
     have been increased if--
       ``(1) the per child amount under section 24(a)(2) for such 
     year were $1,000,
       ``(2) only qualifying children (as defined in section 
     24(c)) of the taxpayer for such year who had not attained age 
     17 as of December 31, 2003, were taken into account, and
       ``(3) section 24(d)(1)(B)(ii) did not apply.
       ``(c) Timing of Payments.--In the case of any overpayment 
     attributable to this section, the Secretary shall, subject to 
     the provisions of this title, refund or credit such 
     overpayment as

[[Page H3911]]

     rapidly as possible and, to the extent practicable, before 
     October 1, 2003. No refund or credit shall be made or allowed 
     under this section after December 31, 2003.
       ``(d) Coordination With Child Tax Credit.--
       ``(1) In general.--The amount of credit which would (but 
     for this subsection and section 26) be allowed under section 
     24 for the taxpayer's first taxable year beginning in 2003 
     shall be reduced (but not below zero) by the payments made 
     to the taxpayer under this section. Any failure to so 
     reduce the credit shall be treated as arising out of a 
     mathematical or clerical error and assessed according to 
     section 6213(b)(1).
       ``(2) Joint returns.--In the case of a payment under this 
     section with respect to a joint return, half of such payment 
     shall be treated as having been made to each individual 
     filing such return.
       ``(e) No Interest.--No interest shall be allowed on any 
     overpayment attributable to this section.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter B of chapter 65 is amended by adding at the end 
     the following new item:

``Sec. 6429. Advance payment of portion of increased child credit for 
              2003.''.

       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall take effect on the date of the enactment of this Act.

     SEC. 102. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS 
                   FILING JOINT RETURNS.

       (a) In General.--The item relating to 2005 in the table 
     contained in subparagraph (B) of section 1(f )(8) (relating 
     to applicable percentage) is amended to read as follows:

      ``2003, 2004, and 2005.....................................200''.

       (b) Conforming Amendments.--
       (1) Section 1(f)(8)(A) is amended by striking ``2004'' and 
     inserting ``2002''.
       (2) Section 302(c) of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended by striking ``2004'' 
     and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 103. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR 
                   MARRIED TAXPAYERS FILING JOINT RETURNS.

       (a) In General.--The item relating to 2005 in the table 
     contained in paragraph (7) of section 63(c) (relating to 
     applicable percentage) is amended to read as follows:

      ``2003, 2004, and 2005.....................................200''.

       (b) Conforming Amendment.--Section 301(d) of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 is amended 
     by striking ``2004'' and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 104. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION.

       (a) In General.--Clause (i) of section 1(i)(1)(B) (relating 
     to the initial bracket amount) is amended by striking 
     ``($12,000 in the case of taxable years beginning before 
     January 1, 2008)'' and inserting ``($12,000 in the case of 
     taxable years beginning after December 31, 2005, and before 
     January 1, 2008)''.
       (b) Inflation Adjustment.--Subparagraph (C) of section 
     1(i)(1) is amended to read as follows:
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f) which apply with respect to taxable 
     years beginning in calendar years after 2000--
       ``(i) the Secretary shall make no adjustment to the $12,000 
     initial bracket amount for any taxable year,
       ``(ii)(I) the Secretary shall make no adjustment to the 
     $14,000 initial bracket amount for any taxable year beginning 
     before January 1, 2004,
       ``(II) the cost-of-living adjustment used in making 
     adjustments to the $14,000 initial bracket amount for any 
     taxable year beginning during 2004 or 2005 shall be 
     determined under subsection (f)(3) by substituting `2002' for 
     `1992' in subparagraph (B) thereof, and
       ``(III) the cost-of-living adjustment used in making 
     adjustments to the $14,000 initial bracket amount for any 
     taxable year beginning after December 31, 2008, shall be 
     determined under subsection (f)(3) by substituting `2007' for 
     `1992' in subparagraph (B) thereof, and
       ``(iii) the adjustments under clause (ii) shall not apply 
     to the amount referred to in subparagraph (B)(iii).

     If any amount after adjustment under the preceding sentence 
     is not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2002.
       (2) Tables for 2003.--The Secretary of the Treasury shall 
     modify each table which has been prescribed under section 
     1(f) of the Internal Revenue Code of 1986 for taxable years 
     beginning in 2003 and which relates to the amendment made by 
     this section to reflect such amendment.

     SEC. 105. ACCELERATION OF REDUCTION IN INDIVIDUAL INCOME TAX 
                   RATES.

       (a) In General.--The table in paragraph (2) of section 1(i) 
     (relating to reductions in rates after June 30, 2001) is 
     amended to read as follows:


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                   ``In the case of taxable                                                                                                                   The corresponding percentages shall be substituted for  the following percentages:
                   years  beginning during  --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        calendar year:         28%      31%      36%                                                                                                                                              39.6%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  2001.....................   27.5%    30.5%    35.5%                                                                                                                                             39.1%
                  2002.....................   27.0%    30.0%    35.0%                                                                                                                                             38.6%
                  2003 and thereafter......   25.0%    28.0%    33.0%                                                                                                                                           35.0%''.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 106. MINIMUM TAX RELIEF TO INDIVIDUALS.

       (a) In General.--
       (1) Subparagraph (A) of section 55(d)(1) is amended by 
     striking ``$49,000 in the case of taxable years beginning in 
     2001, 2002, 2003, and 2004'' and inserting ``$64,000 in the 
     case of taxable years beginning in 2003, 2004, and 2005''.
       (2) Subparagraph (B) of section 55(d)(1) is amended by 
     striking ``$35,750 in the case of taxable years beginning in 
     2001, 2002, 2003, and 2004'' and inserting ``$43,250 in the 
     case of taxable years beginning in 2003, 2004, and 2005''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.

                TITLE II--GROWTH INCENTIVES FOR BUSINESS

     SEC. 201. INCREASE AND EXTENSION OF BONUS DEPRECIATION.

       (a) In General.--Section 168(k) (relating to special 
     allowance for certain property acquired after September 10, 
     2001, and before September 11, 2004) is amended by adding at 
     the end the following new paragraph:
       ``(4) 50-percent bonus depreciation for certain property.--
       ``(A) In general.--In the case of 50-percent bonus 
     depreciation property--
       ``(i) paragraph (1)(A) shall be applied by substituting `50 
     percent' for `30 percent', and
       ``(ii) except as provided in paragraph (2)(C), such 
     property shall be treated as qualified property for purposes 
     of this subsection.
       ``(B) 50-percent bonus depreciation property.--For purposes 
     of this subsection, the term `50-percent bonus depreciation 
     property' means property described in paragraph (2)(A)(i)--
       ``(i) the original use of which commences with the taxpayer 
     after May 5, 2003,
       ``(ii) which is acquired by the taxpayer after May 5, 2003, 
     and before January 1, 2006, but only if no written binding 
     contract for the acquisition was in effect before May 6, 
     2003, and
       ``(iii) which is placed in service by the taxpayer before 
     January 1, 2006, or, in the case of property described in 
     paragraph (2)(B) (as modified by subparagraph (C) of this 
     paragraph), before January 1, 2007.
       ``(C) Special rules.--Rules similar to the rules of 
     subparagraphs (B) and (D) of paragraph (2) shall apply for 
     purposes of this paragraph; except that references to 
     September 10, 2001, shall be treated as references to May 5, 
     2003.
       ``(D) Automobiles.--Paragraph (2)(E) shall be applied by 
     substituting `$9,200' for `$4,600' in the case of 50-percent 
     bonus depreciation property.
       ``(E) Election of 30 percent bonus.--If a taxpayer makes an 
     election under this subparagraph with respect to any class of 
     property for any taxable year, subparagraph (A)(i) shall not 
     apply to all property in such class placed in service during 
     such taxable year.''
        (b) Extension of Placed in Service Dates, Etc. for 30-
     Percent Bonus Depreciation Property.--
       (1) In general.--Clause (iv) of section 168(k)(2)(A) is 
     amended--
       (A) by striking ``January 1, 2005'' and inserting ``January 
     1, 2006'', and
       (B) by striking ``January 1, 2006'' (as in effect before 
     the amendment made by subparagraph (A)) and inserting 
     ``January 1, 2007''.
       (2) Portion of basis taken into account.--
       (A) Subparagraphs (B)(ii) and (D)(i) of section 168(k)(2) 
     are each amended by striking ``September 11, 2004'' each 
     place it appears in the text and inserting ``January 1, 
     2006''.
       (B) Clause (ii) of section 168(k)(2)(B) is amended by 
     striking ``pre-september 11, 2004'' in the heading and 
     inserting ``pre-january 1, 2006''.
       (3) Acquisition date.--Clause (iii) of section 168(k)(2)(A) 
     is amended by striking ``September 11, 2004'' each place it 
     appears and inserting ``January 1, 2006''.
       (4) Election.--Clause (iii) of section 168(k)(2)(C) is 
     amended by adding at the end the following: ``The preceding 
     sentence shall be applied separately with respect to property 
     treated as qualified property by paragraph (4) and other 
     qualified property.''
       (c) Conforming Amendments.--
       (1) The subsection heading for section 168(k) is amended by 
     striking ``September 11, 2004'' and inserting ``January 1, 
     2006''.
       (2) The heading for clause (i) of section 1400L(b)(2)(C) is 
     amended by striking ``30-percent additional allowable 
     property'' and inserting ``Bonus depreciation property under 
     section 168(k)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 202. INCREASED EXPENSING FOR SMALL BUSINESS.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000 ($100,000 in the case of taxable 
     years beginning after 2002 and before 2008).''.
       (b) Increase in Qualifying Investment at Which Phaseout 
     Begins.--Paragraph (2) of

[[Page H3912]]

     section 179(b) (relating to reduction in limitation) is 
     amended by inserting ``($400,000 in the case of taxable years 
     beginning after 2002 and before 2008)'' after ``$200,000''.
       (c) Off-the-Shelf Computer Software.--Paragraph (1) of 
     section 179(d) (defining section 179 property) is amended to 
     read as follows:
       ``(1) Section 179 property.--For purposes of this section, 
     the term `section 179 property' means property--
       ``(A) which is--
       ``(i) tangible property (to which section 168 applies), or
       ``(ii) computer software (as defined in section 
     197(e)(3)(B)) which is described in section 197(e)(3)(A)(i), 
     to which section 167 applies, and which is placed in service 
     in a taxable year beginning after 2002 and before 2008,
       ``(B) which is section 1245 property (as defined in section 
     1245(a)(3)), and
       ``(C) which is acquired by purchase for use in the active 
     conduct of a trade or business.

     Such term shall not include any property described in section 
     50(b) and shall not include air conditioning or heating 
     units.''.
       (d) Adjustment of Dollar Limit and Phaseout Threshold for 
     Inflation.--Subsection (b) of section 179 (relating to 
     limitations) is amended by adding at the end the following 
     new paragraph:
       ``(5) Inflation adjustments.--
       ``(A) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003 and before 2008, the 
     $100,000 and $400,000 amounts in paragraphs (1) and (2) shall 
     each be increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 2002' for 
     `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding.--
       ``(i) Dollar limitation.--If the amount in paragraph (1) as 
     increased under subparagraph (A) is not a multiple of $1,000, 
     such amount shall be rounded to the nearest multiple of 
     $1,000.
       ``(ii) Phaseout amount.--If the amount in paragraph (2) as 
     increased under subparagraph (A) is not a multiple of 
     $10,000, such amount shall be rounded to the nearest multiple 
     of $10,000.''.
       (e) Revocation of Election.--Paragraph (2) of section 
     179(c) (relating to election irrevocable) is amended to read 
     as follows:
       ``(2) Revocation of election.--An election under paragraph 
     (1) with respect to any taxable year beginning after 2002 and 
     before 2008, and any specification contained in any such 
     election, may be revoked by the taxpayer with respect to any 
     property. Such revocation, once made, shall be 
     irrevocable.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 203. 5-YEAR CARRYBACK OF CERTAIN NET OPERATING LOSSES.

       (a) In General.--Subparagraph (H) of section 172(b)(1) is 
     amended--
       (1) by inserting ``5-year carryback of certain losses.--'' 
     after ``(H)'', and
       (2) by striking ``or 2002'' and inserting ``, 2002, 2003, 
     2004 or 2005''.
       (b) Temporary Suspension of 90 Percent Limit on Certain NOL 
     Carrybacks.--Subclause (I) of section 56(d)(1)(A)(ii) is 
     amended--
       (1) by striking ``or 2002'' and inserting ``, 2002, 2003, 
     2004, or 2005'', and
       (2) by striking ``and 2002'' and inserting ``, 2002, 2003, 
     2004, or 2005''.
       (c) Technical Corrections.--
       (1) Subparagraph (H) of section 172(b)(1) is amended by 
     striking ``a taxpayer which has''.
       (2) Section 102(c)(2) of the Job Creation and Worker 
     Assistance Act of 2002 (Public Law 107-147) is amended by 
     striking ``before January 1, 2003'' and inserting ``after 
     December 31, 1990''.
       (3)(A) Subclause (I) of section 56(d)(1)(A)(i) is amended 
     by striking ``attributable to carryovers''.
       (B) Subclause (I) of section 56(d)(1)(A)(ii) is amended--
       (i) by striking ``for taxable years'' and inserting ``from 
     taxable years'', and
       (ii) by striking ``carryforwards'' and inserting 
     ``carryovers''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to net operating 
     losses for taxable years ending after December 31, 2002.
       (2) Technical corrections.--The amendments made by 
     subsection (c) shall take effect as if included in the 
     amendments made by section 102 of the Job Creation and Worker 
     Assistance Act of 2002.
       (3) Election.--In the case of a net operating loss for a 
     taxable year ending during 2003--
       (A) any election made under section 172(b)(3) of such Code 
     may (notwithstanding such section) be revoked before November 
     1, 2003, and
       (B) any election made under section 172(j) of such Code 
     shall (notwithstanding such section) be treated as timely 
     made if made before November 1, 2003.

      TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS

     SEC. 301. REDUCTION IN CAPITAL GAINS RATES FOR INDIVIDUALS; 
                   REPEAL OF 5-YEAR HOLDING PERIOD REQUIREMENT.

       (a) In General.--
       (1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by 
     striking ``10 percent'' and inserting ``5 percent''.
       (2) The following sections are each amended by striking 
     ``20 percent'' and inserting ``15 percent'':
       (A) Section 1(h)(1)(C).
       (B) Section 55(b)(3)(C).
       (C) Section 1445(e)(1).
       (D) The second sentence of section 7518(g)(6)(A).
       (E) The second sentence of section 607(h)(6)(A) of the 
     Merchant Marine Act, 1936.
       (b) Conforming Amendments.--
       (1) Section 1(h) is amended--
       (A) by striking paragraphs (2) and (9),
       (B) by redesignating paragraphs (3) through (8) as 
     paragraphs (2) through (7), respectively, and
       (C) by redesignating paragraphs (10), (11), and (12) as 
     paragraphs (8), (9), and (10), respectively.
       (2) Paragraph (3) of section 55(b) is amended by striking 
     ``In the case of taxable years beginning after December 31, 
     2000, rules similar to the rules of section 1(h)(2) shall 
     apply for purposes of subparagraphs (B) and (C).''.
       (3) Paragraph (7) of section 57(a) is amended--
       (A) by striking ``42 percent'' the first place it appears 
     and inserting ``7 percent'', and
       (B) by striking the last sentence.
       (c) Transitional Rules for Taxable Years Which Include May 
     6, 2003.--For purposes of applying section 1(h) of the 
     Internal Revenue Code of 1986 in the case of a taxable year 
     which includes May 6, 2003--
       (1) The amount of tax determined under subparagraph (B) of 
     section 1(h)(1) of such Code shall be the sum of--
       (A) 5 percent of the lesser of--
       (i) the net capital gain determined by taking into account 
     only gain or loss properly taken into account for the portion 
     of the taxable year on or after May 6, 2003 (determined 
     without regard to collectibles gain or loss, gain described 
     in section 1(h)(6)(A)(i) of such Code, and section 1202 
     gain), or
       (ii) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection),
       (B) 8 percent of the lesser of--
       (i) the qualified 5-year gain (as defined in section 
     1(h)(9) of the Internal Revenue Code of 1986, as in effect on 
     the day before the date of the enactment of this Act) 
     properly taken into account for the portion of the taxable 
     year before May 6, 2003, over
       (ii) the excess (if any) of--

       (I) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection), over
       (II) the amount on which a tax is determined under 
     subparagraph (A), plus

       (C) 10 percent of the excess (if any) of--
       (i) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection), over
       (ii) the sum of the amounts on which a tax is determined 
     under subparagraphs (A) and (B).
       (2) The amount of tax determined under subparagraph (C) of 
     section (1)(h)(1) of such Code shall be the sum of--
       (A) 15 percent of the lesser of--
       (i) the excess (if any) of the amount of net capital gain 
     determined under subparagraph (A)(i) of paragraph (1) of this 
     subsection over the amount on which a tax is determined under 
     subparagraph (A) of paragraph (1) of this subsection, or
       (ii) the amount on which a tax is determined under such 
     subparagraph (C) (without regard to this subsection), plus
       (B) 20 percent of the excess (if any) of--
       (i) the amount on which a tax is determined under such 
     subparagraph (C) (without regard to this subsection), over
       (ii) the amount on which a tax is determined under 
     subparagraph (A) of this paragraph.
       (3) For purposes of applying section 55(b)(3) of such Code, 
     rules similar to the rules of paragraphs (1) and (2) of this 
     subsection shall apply.
       (4) In applying this subsection with respect to any pass-
     thru entity, the determination of when gains and loss are 
     properly taken into account shall be made at the entity 
     level.
       (5) For purposes of applying section 1(h)(11) of such Code, 
     as added by section 302 of this Act, to this subsection, 
     dividends which are qualified dividend income shall be 
     treated as gain properly taken into account for the portion 
     of the taxable year on or after May 6, 2003.
       (6) Terms used in this subsection which are also used in 
     section 1(h) of such Code shall have the respective meanings 
     that such terms have in such section.
       (d) Effective Dates.--
       (1) In general.--Except as otherwise provided by this 
     subsection, the amendments made by this section shall apply 
     to taxable years ending on or after May 6, 2003.
       (2) Withholding.--The amendment made by subsection 
     (a)(2)(C) shall apply to amounts paid after the date of the 
     enactment of this Act.
       (3) Small business stock.--The amendments made by 
     subsection (b)(3) shall apply to dispositions on or after May 
     6, 2003.

     SEC. 302. DIVIDENDS OF INDIVIDUALS TAXED AT CAPITAL GAIN 
                   RATES.

       (a) In General.--Section 1(h) (relating to maximum capital 
     gains rate), as amended by section 301, is amended by adding 
     at the end the following new paragraph:
       ``(11) Dividends taxed as net capital gain.--
       ``(A) In general.--For purposes of this subsection, the 
     term `net capital gain' means net capital gain (determined 
     without regard to this paragraph), increased by qualified 
     dividend income.
       ``(B) Qualified dividend income.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualified dividend income' 
     means dividends received during the taxable year from 
     domestic corporations.
       ``(ii) Certain dividends excluded.--Such term shall not 
     include--

       ``(I) any dividend from a corporation which for the taxable 
     year of the corporation in which the distribution is made, or 
     the preceding taxable year, is a corporation exempt from tax 
     under section 501 or 521,

[[Page H3913]]

       ``(II) any amount allowed as a deduction under section 591 
     (relating to deduction for dividends paid by mutual savings 
     banks, etc.), and
       ``(III) any dividend described in section 404(k).

       ``(iii) Exclusion of certain dividends.--Such term shall 
     not include any dividend on any share of stock--

       ``(I) with respect to which the holding period requirements 
     of section 246(c) are not met, or
       ``(II) to the extent that the taxpayer is under an 
     obligation (whether pursuant to a short sale or otherwise) to 
     make related payments with respect to positions in 
     substantially similar or related property.

       ``(C) Special rules.--
       ``(i) Amounts taken into account as investment income.--
     Qualified dividend income shall not include any amount which 
     the taxpayer takes into account as investment income under 
     section 163(d)(4)(B).
       ``(ii) Extraordinary dividends.--If an individual receives, 
     with respect to any share of stock, qualified dividend income 
     from 1 or more dividends which are extraordinary dividends 
     (within the meaning of section 1059(c)), any loss on the sale 
     or exchange of such share shall, to the extent of such 
     dividends, be treated as long-term capital loss.
       ``(iii) Treatment of dividends from regulated investment 
     companies and real estate investment trusts.--A dividend 
     received from a regulated investment company or a real estate 
     investment trust shall be subject to the limitations 
     prescribed in sections 854 and 857.''
       (b) Exclusion of Dividends From Investment Income.--
     Subparagraph (B) of section 163(d)(4) (defining net 
     investment income) is amended by adding at the end the 
     following flush sentence:

     ``Such term shall include qualified dividend income (as 
     defined in section 1(h)(11)(B)) only to the extent the 
     taxpayer elects to treat such income as investment income for 
     purposes of this subsection.''
       (c) Treatment of Dividends From Regulated Investment 
     Companies.--
       (1) Subsection (a) of section 854 (relating to dividends 
     received from regulated investment companies) is amended by 
     inserting ``section 1(h)(11) (relating to maximum rate of tax 
     on dividends and interest) and'' after ``For purposes of''.
       (2) Paragraph (1) of section 854(b) (relating to other 
     dividends) is amended by redesignating subparagraph (B) as 
     subparagraph (C) and by inserting after subparagraph (A) the 
     following new subparagraph:
       ``(B) Maximum rate under section 1(h).--
       ``(i) In general.--If the aggregate dividends received by a 
     regulated investment company during any taxable year are less 
     than 95 percent of its gross income, then, in computing the 
     maximum rate under section 1(h)(11), rules similar to the 
     rules of subparagraph (A) shall apply.
       ``(ii) Gross income.--For purposes of clause (i), in the 
     case of 1 or more sales or other dispositions of stock or 
     securities, the term `gross income' includes only the excess 
     of--

       ``(I) the net short-term capital gain from such sales or 
     dispositions, over
       ``(II) the net long-term capital loss from such sales or 
     dispositions.''

       (3) Subparagraph (C) of section 854(b)(1), as redesignated 
     by paragraph (2), is amended by striking ``subparagraph (A)'' 
     and inserting ``subparagraph (A) or (B)''.
       (4) Paragraph (2) of section 854(b) is amended by inserting 
     ``the maximum rate under section 1(h)(11) and'' after ``for 
     purposes of''.
       (5) Subsection (b) of section 854 is amended by adding at 
     the end the following new paragraph:
       ``(5) Coordination with section 1(h)(11).--For purposes of 
     paragraph (1)(B), an amount shall be treated as a dividend 
     only if the amount is qualified dividend income (within the 
     meaning of section 1(h)(11)(B)).''
       (d) Treatment of Dividends Received From Real Estate 
     Investment Trusts.--Section 857(c) (relating to restrictions 
     applicable to dividends received from real estate investment 
     trusts) is amended to read as follows:
       ``(c) Restrictions Applicable to Dividends Received From 
     Real Estate Investment Trusts.--
       ``(1) Section 243.--For purposes of section 243 (relating 
     to deductions for dividends received by corporations), a 
     dividend received from a real estate investment trust which 
     meets the requirements of this part shall not be considered a 
     dividend.
       ``(2) Section 1(h)(11).--For purposes of section 1(h)(11) 
     (relating to maximum rate of tax on dividends), rules similar 
     to the rules of section 854(b)(1)(B) shall apply to dividends 
     received from a real estate trust which meets the 
     requirements of this part.''
       (e) Conforming Amendments.--
       (1) Paragraph (3) of section 1(h), as redesignated by 
     section 301, is amended to read as follows:
       ``(3) Adjusted net capital gain.--For purposes of this 
     subsection, the term `adjusted net capital gain' means the 
     sum of--
       ``(A) net capital gain (determined without regard to 
     paragraph (11)) reduced (but not below zero) by the sum of--
       ``(i) unrecaptured section 1250 gain, and
       ``(ii) 28-percent rate gain, plus
       ``(B) qualified dividend income (as defined in paragraph 
     (11)).''
       (2) Subsection (f) of section 301 is amended adding at the 
     end the following new paragraph:
       ``(4) For taxation of dividends received by individuals at 
     capital gain rates, see section 1(h)(11).''
       (3) Paragraph (1) of section 306(a) is amended by adding at 
     the end the following new subparagraph:
       ``(D) Treatment as dividend.--For purposes of section 
     l(h)(11), any amount treated as ordinary income under this 
     paragraph shall be treated as a dividend received from the 
     corporation.''
       (4)(A) Subpart C of part II of subchapter C of chapter 1 
     (relating to collapsible corporations) is repealed.
       (B)(i) Section 338(h) is amended by striking paragraph 
     (14).
       (ii) Sections 467(c)(5)(C), 1255(b)(2), and 1257(d) are 
     each amended by striking ``, 341(e)(12),''.
       (iii) The table of subparts for part II of subchapter C of 
     chapter 1 is amended by striking the item related to subpart 
     C.
       (5) Section 531 is amended by striking ``equal to'' and all 
     that follows and inserting ``equal to 15 percent of the 
     accumulated taxable income.''
       (6) Section 541 is amended by striking ``equal to'' and all 
     that follows and inserting ``equal to 15 percent of the 
     undistributed personal holding company income.''
       (7) Section 584(c) is amended by adding at the end the 
     following new flush sentence:

     ``The proportionate share of each participant in the amount 
     of dividends received by the common trust fund and to which 
     section 1(h)(11) applies shall be considered for purposes of 
     such paragraph as having been received by such participant.''
       (8) Paragraph (5) of section 702(a) is amended to read as 
     follows:
       ``(5) dividends with respect to which section 1(h)(11) or 
     part VII of subchapter B applies,''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 303. SUNSET OF TITLE.

       All provisions of, and amendments made by, this title shall 
     not apply to taxable years beginning after December 31, 2012, 
     and the Internal Revenue Code of 1986 shall be applied and 
     administered to such years as if such provisions and 
     amendments had never been enacted.

          TITLE IV--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003

     SEC. 401. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

       Notwithstanding section 6655 of the Internal Revenue Code 
     of 1986, 52 percent of the amount of any required installment 
     of corporate estimated tax which is otherwise due in 
     September 2003 shall not be due until October 1, 2003.
  The SPEAKER pro tempore. The gentleman from California (Mr. Thomas) 
and the gentleman from New York (Mr. Rangel) each will control 30 
minutes.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  The Members should know that we have a statement of administration 
policy on this bill, and it reads in part: ``The administration 
strongly supports House passage of H.R. 2 and commends the House for 
including all the elements of the jobs and growth plan proposed by the 
President.'' I would also like to call Members' attention to today's 
Congressional Record. In the Congressional Record, beginning on page 
3829 is the first analysis of a tax bill by the Joint Committee on 
Taxation utilizing the power provided to the joint committee by rule 
XIII. It says in part that ``in accordance with House rule XIII, this 
document, prepared by the staff of the Joint Committee on Taxation . . 
. provides a macroeconomic analysis of H.R. 2.
  ``The analysis presents the results of simulating the changes 
contained in H.R. 2 under three economic models of the economy. The 
models employ a variety of assumptions regarding Federal fiscal policy, 
monetary policy, and behavioral responses to the proposed changes in 
law.''
  It then goes on on page 3830, 3831, 3832, to examine this bill under 
those three macroeconomic models, and it explains in detail the models 
that are used. It says, for example, if Members take the time to look 
on page 3831 of the May 8 Congressional Record, in part: ``The 
estimated change in Gross Domestic Product (`GDP') due to this proposal 
can range at least from a 0.3 percent (an average of $43 billion) to a 
1.5 percent (an average of $183 billion) increase in nominal, or 
current dollar GDP over the first 5 years, and 0.2 to a 1.2 percent 
increase over the second 5 years.''
  This bill, according to the bipartisan professional staff at the 
Joint Committee on Taxation, says this bill grows the economy. In 
addition, they say, that up to 900,000 jobs in the first 5 years will 
be created ``as the effects of the acceleration of individual rate 
cuts, and the initial increase in investment prevail. Employment 
increases in the first 5 years because of both the positive labor 
supply incentive from the individual rate cuts, and the economic 
stimulus effect of the proposals taken as a whole.'' The bipartisan, 
professional Joint Committee on Taxation says this bill creates jobs 
and stimulates the economy.
  It probably would be more fun for either side to read the effects of 
the bill

[[Page H3914]]

based upon some particular ax-grinding institute that has a really 
fair-sounding name that is funded by various organizations because the 
hyperbole in the way they examine the bill is a whole lot more fun. It 
is not very realistic, but it is a whole lot more fun.
  This is the professional bipartisan staff of the Joint Committee on 
Tax under rule XIII concluding on page 3831: ``As the simulations 
indicate, depending on how much temporary demand stimulus is generated 
by the proposal, the revenue feedback,'' money coming back to the 
Federal Government by spending money in this bill to cut people's 
taxes, give it back to them, ``the revenue feedback could range from 
5.8 percent to 27.5 percent in the first 5 years, and'' between ``2.6 
and 23.4 percent over the 10-year budget period.''
  It stimulates the economy, creates jobs, brings more revenue back to 
the Federal Government. That is what this bill is about.
  Mr. Speaker, I reserve the balance of my time.


                         Parliamentary Inquiry

  Mr. RANGEL. Mr. Speaker, parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman may inquire.
  Mr. RANGEL. Mr. Speaker, last evening in the Committee on Rules, the 
chairman of the Committee on Ways and Means said that he would allow 
the Democrats to bring their substitute to the floor but only under the 
conditions that no waivers of points of order be made; and then he went 
further and told the committee, the Committee on Rules, that is, that 
he did not want any waivers of points of order himself.

                              {time}  1130

  So, Mr. Speaker, my parliamentary inquiry is that there is a 
provision of the Budget Act that makes it not in order to consider 
legislation in the House that reduces amounts deposited in the Social 
Security Trust Fund. It is clear that the bill before us today will 
reduce the amounts deposited into both the Social Security and Medicare 
Trust Fund.
  In view of the fact that the gentleman from California (Mr. Thomas) 
has asked that points of order not be waived, is not this bill before 
us today in violation of that rule?
  The SPEAKER pro tempore (Mr. Simpson). The Chair cannot make a 
hypothetical ruling. The House did adopt House Resolution 227, which 
waives all points of order.
  Mr. RANGEL. Mr. Speaker, it is difficult for me to hear you. The 
House is not in order.
  The SPEAKER pro tempore. The House will be in order.
  The Chair cannot make a hypothetical ruling on what might have been 
said in the Committee on Rules. The House did adopt House Resolution 
227, which provides for consideration of this bill without intervention 
of any point of order.
  Mr. RANGEL. The Speaker is saying that the Committee on Rules waived 
the points of order that the chairman of the Committee on Ways and 
Means said last night was not necessary. Is that the ruling of the 
Chair?
  The SPEAKER pro tempore. The House adopted the resolution waiving all 
points of order.
  Mr. THOMAS. Will the gentleman yield?
  The SPEAKER pro tempore. At this time the Chair is entertaining a 
parliamentary inquiry.
  The gentleman from New York is recognized.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, it is clear that this is a day that is going to be 
remembered in America, in this House of Representatives. A bill has 
come on the floor. The chairman said he did not want points of order. 
It is clear that the bill is in violation of the parliamentary rules of 
this House unless the points of order were waived. It is clear that 
they planned in the middle of the night to say it is ``their way or the 
highway.''
  It is a bad bill. But to deny Democrats an opportunity for an 
alternative, knowing that they have the votes, I think has damaged the 
reputation of this House of Representatives for days and for months and 
for years to come. Shame on you for doing it.
  Mr. Speaker, I reserve the balance of my time.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, on my time, to respond to the gentleman from New York, I 
asked that the measures be treated equally and fairly. That was my 
position. But apparently the Committee on Rules rejected my position, 
and, notwithstanding the fact that I was trying to support the 
gentleman from New York, in the opinion of the Committee on Rules, 
apparently the gentleman's bill was so far out of the normal procedure 
that they determined not to make it in order.
  I had asked that the Committee on Rules treat both bills the same 
way, and I was denied in my request to the Committee on Rules.
  Mr. Speaker, it is my pleasure to yield 2 minutes to the gentleman 
from Texas (Mr. Sam Johnson), a member of the committee.
  (Mr. SAM JOHNSON of Texas asked and was given permission to revise 
and extend his remarks.)
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I rise in support of the Jobs 
and Growth Tax Reconciliation Act. This bill is going to provide much-
needed tax relief for individuals and businesses to help create jobs 
today, while generating long-term economic growth for the future.
  According to the Heritage Foundation, this bill creates 67,000 jobs 
in Texas in this year alone. That is great news for those who want a 
paycheck, not an unemployment benefit.
  The bonus depreciation and small business expensing provisions 
effectively put business purchases ``on sale.'' These provisions are 
vital to the telecommunications corridor in North Texas, because 
businesses that have delayed replacing their telecom equipment should 
find it easier to make these purchases.
  Our economy has been driven by consumer spending, and these 
depreciation and expensing provisions should help jump-start business 
purchases.
  The rate cuts, marriage penalty relief and child credit improvements 
help families as well as sole proprietorships, for whom the individual 
tax rate is their corporate rate.
  I am glad to have a significant reduction in the double taxation of 
dividends. This is not necessarily the proposal I would have written, 
because I believe, like the President, we ought to eliminate double 
taxation of dividends. But reducing the tax on dividends from an 
individual's normal tax rate to the 5 percent or 15 percent rate will 
help millions of seniors who depend upon dividend income for their day-
to-day expenses, as well as help millions of other Americans who own 
stock.
  Mr. Speaker, it is time to give this economy a jump-start by passing 
this bill today.
  I rise in support of the jobs and growth tax act.
  This bill will provide much-needed tax relief for individuals and 
businesses to help create jobs today, while generating long-term 
economic growth for the future.
  According to the Heritage Foundation, this bill creates 67,000 jobs 
in Texas in 2004 alone! That's great news for those who want a pay 
check, not an unemployment benefit.
  The bonus depreciation and small business expensing provisions 
effectively put business purchases ``on sale.'' These provisions are 
vital to the telecommunications corridor in north Texas because 
businesses that have delayed replacing their telecom equipment should 
find it easier to make these purchases.
  Our economy has been driven by consumer spending and these 
depreciation and expensing provisions should help to jump start 
business purchases.
  The rate cuts, marriage penalty relief and child credit improvements 
will help families as well as sole proprietorships, for whom the 
individual tax rate is their corporate rate.
  I am glad to have a significant reduction in the double taxation of 
dividends. This is not the proposal I would have written because I want 
to eliminate the double taxation of dividends.
  Reducing the tax on dividends from an individual's normal tax rate to 
the 5 percent or 15 percent rate will help millions of seniors who 
depend upon dividend income for their day-to-day expenses as well as 
help millions of other Americans who own stock.
  I will qualify my support for the dividends portion of this bill due 
to the fact that it discriminates against Americans who own stock in 
foreign companies.
  Among the thousands of employee-shareholders in my district who would 
be seriously affected are the employees of Nortel, Aegon, Nokia, 
Alcatel Ericsson and Gadbury Schweppes.
  I want this penalty to be gone the next time we vote on tax relief.

[[Page H3915]]

  It is time to give this economy a jumpstart by passing this bill 
today.


                         Parliamentary Inquiry

  Mr. RANGEL. Mr. Speaker, I have a parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state it.
  Mr. RANGEL. Mr. Speaker, the staff has given me four violations of 
the Budget Act, section 401, section 311, and other violations of the 
House rules.
  Am I to assume that the initial ruling of the Chair on the waiving of 
points of order would apply to all of the violations that Republicans 
have as it relates to the rules of the House?
  The SPEAKER pro tempore. The Chair would advise the Member that the 
House just moments ago by majority vote adopted House Resolution 227, 
which provides that upon its adoption, it shall be in order without 
intervention of any point of order to consider in the House H.R. 2.
  It waives all points of order that might otherwise be argued to lie. 
Therefore, the question is moot.
  Mr. RANGEL. Mr. Speaker, will this apply to other violations that the 
minority is not even aware of now?
  The SPEAKER pro tempore. The Chair will repeat that it waives all 
points of order.
  Mr. RANGEL. I thank the gentleman. Mr. Speaker, in view of that 
protection that the majority gave itself, I yield 1 minute to the 
gentleman from Michigan (Mr. Dingell), the Dean of the House of 
Representatives.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, this is a bad bill and a bad rule. It is 
unfair. It is a bill which could best be entitled ``leave no 
millionaire behind.'' It has not worked before, it will not work again.
  If this bill passes, it will cost my State of Michigan $111 million 
in revenue. I would note that the millionaires will get $100,000 a year 
back. Ordinary citizens are going to be lucky if they get $100. It is 
going to raid Social Security, Medicare and Medicaid. It is going to 
put the education of our kids at risk, and put our State and local 
governments in more of a straitjacket than they already are 
financially.
  I would note there is one outrageous provision in this piece of 
legislation which defines American corporations like Chrysler, Mazda, 
National Steel and BASF as foreigners. Chrysler employs better than 
100,000 American workers and contributes to the American economy better 
than 1 percent of its total gross domestic product.
  I would urge the President or my Republican friends over there to 
come back to Michigan to see the new plant being built at Dundee, 
Michigan, to provide jobs and opportunities for the American people.
  This is an outrageous procedure, an outrageous bill, and it should be 
voted down.
  Mr. THOMAS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Wisconsin (Mr. Ryan), a member of the committee, for the 
purpose of a colloquy.
  Mr. RYAN of Wisconsin. Mr. Speaker, I would like to engage the 
chairman of the Committee on Ways and Means in a colloquy. I would like 
to speak specifically about one provision in the bill before the House 
today regarding the double taxation of dividends.
  As drafted, the bill applies a new 15 percent-5 percent rate 
structure to dividends paid by domestic corporations, while dividends 
paid by foreign corporations will be taxed at the new individual rates 
of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and as 
much as 35 percent.
  U.S. subsidiaries of foreign-based firms are a very important part of 
our economy and economic recovery. These companies employ 5.6 million 
workers right here in America. Furthermore, American taxpayers own 
approximately $1.8 trillion worth of foreign stocks. Approximately 900 
non-U.S. companies are traded on U.S. stock changes.
  Will the chairman correct this discrepancy as we move forward so as 
to ensure that the final bill passed by Congress reduces taxes on the 
dividends paid by both domestic and foreign-owned corporations and 
treats them equally?
  Mr. THOMAS. Mr. Speaker, will the gentleman yield?
  Mr. RYAN of Wisconsin. I yield to the gentleman from California.
  Mr. THOMAS. I will tell the gentleman he raises an important point, 
but it is also a part of a larger tax policy problem.
  Currently, as the gentleman may know, under the U.S. Tax Code we 
punish U.S. corporations for being U.S. corporations. Several 
provisions of our Tax Code put U.S. corporations at a disadvantage 
versus their international competitors. These flaws in the Tax Code 
force U.S. companies to move their headquarters overseas in order to 
compete. We must reform our Tax Code to improve our international 
competitiveness. The Committee on Ways and Means will be addressing 
this larger issue in this Congress.
  With regard to the specific issue of dividend payments to U.S. 
citizens by foreign corporations, it is my intent as the legislation 
process proceeds to craft a solution that treats all American 
shareholders of either domestic or foreign-owned corporations fairly 
and equally, while improving the competitiveness of the U.S. Tax Code.
  Mr. RYAN of Wisconsin. Mr. Speaker, reclaiming my time, I thank the 
chairman for engaging in this colloquy.


                         Parliamentary Inquiry

  Mr. RANGEL. Mr. Speaker, I have a parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state it.
  Mr. RANGEL. Mr. Speaker, in view of the fact that the majority has 
waived the points of order on their major tax cut bill, and further 
that the minority will not have the opportunity to introduce a 
substitute, under the rule, does the minority have the opportunity to 
have a motion to recommit?
  The SPEAKER pro tempore. Under the rule, a motion to recommit will be 
available.
  Mr. RANGEL. Will the minority then have the same advantage as the 
majority in terms of waiving the points of order at least for the 10 
minutes that the minority would have on its motion to recommit?
  The SPEAKER pro tempore. The rule allows for a motion to recommit 
that is otherwise in order under the rules.
  Mr. RANGEL. Mr. Speaker, I understand that you are saying that we are 
entitled to the motion to recommit. The parliamentary inquiry is will 
the points of order be waived for the minority under the motion to 
recommit?
  The SPEAKER pro tempore. The rule does not waive points of order for 
the motion to recommit.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. Stark), a senior member of the Committee on Ways and 
Means and the ranking member on the Subcommittee on Health.
  (Mr. STARK asked and was given permission to revise and extend his 
remarks.)
  Mr. STARK. Mr. Speaker, I rise today to oppose H.R. 2, which benefits 
only the wealthy among us. It is interesting as this bill becomes law 
my 2003 tax cut will be equal to my daughter's entire annual income as 
a fifth grade teacher in California, while she will receive less than 
$8 a week as a tax cut, and that is wrong.
  Republicans are throwing $550 billion down the drain to the richest 5 
percent among us. Let us take a moment to see who loses. Nearly 9 
million unemployed workers are going to lose out, because they will get 
no unemployment benefits. Our children will lose out, because they will 
be left behind and they will get no education benefits. America's 
seniors will see Medicare and Social Security weakened. Low income 
mothers and children who depend on Medicaid and CHIP for their health 
care will lose out because these programs are being slashed.
  Why are Republicans pursuing this tax cut? They hate poor people.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentlewoman from Washington (Ms. Dunn), a member of the committee.
  Ms. DUNN. Mr. Speaker, I rise in support of this legislation to 
strengthen our economy, to create jobs and to provide tax relief to 
millions of America's workers and their families. This is a sensible, 
thoughtful approach to stimulate economic growth and job creation.
  The people I represent in Washington State are particularly aware of 
the need in our economy for a stimulus. Our State's unemployment rate 
is approximately 7 percent. My State is ranked consistently in the top 
three States with the highest unemployment rate in the Nation.

[[Page H3916]]

  In this Congress we have been especially sensitive in extending 
numerous times unemployment benefits to provide a safety net for those 
workers who have lost their jobs, but we also all know that the very 
best safety net for our workers is to stimulate the job market so these 
folks can go back to work.

                              {time}  1145

  Estimators predict that this legislation will create over 1 million 
jobs by the end of 2004. In Washington State alone, this legislation 
would create 17,000 jobs within the next 18 months.
  These jobs are going to be created largely by the millions of small 
businesses in our Nation. We all know that small business is the engine 
of our economy. Nearly 80 percent of the benefits from reducing the 
highest marginal tax rates will help small business owners.
  Equally important, this legislation touches the lives of tens of 
millions of American individuals and their families. Beyond the 
stimulus of economic effects, we ensure that taxpayers can keep more of 
their own money.
  By raising the child tax credit, parents can pay for the child care 
services their children may need.
  By reducing the marginal income tax rates, individuals will have more 
take-home pay through lower withholding. By eliminating the marriage 
penalty sooner rather than later, couples can save for their first 
home.
  By reducing the tax on dividends, we are directly helping senior 
citizens who depend on dividend income to supplement their Social 
Security payments; and by reducing capital gains taxes, we are also 
helping older parents whose children have moved away and who now are 
downsizing by selling their homes.
  This constructive tax cut package will stimulate economic growth, it 
will create jobs, and it will leave more money with the people who 
earned those dollars in the first place.
  This is exactly how we should help our economy, Mr. Speaker; and I 
urge my colleagues to join in support for this bill.
  Mr. RANGEL. Mr. Speaker, may I inquire from the chairman of the 
Committee on Ways and Means, since so few Republicans want to speak in 
support of the bill, whether he would consider yielding some time to 
the Democrats.
  Mr. THOMAS. Mr. Speaker, will the gentleman yield?
  Mr. RANGEL. I yield to the gentleman from California.
  Mr. THOMAS. Mr. Speaker, in examining the number of Members who are 
enthusiastic on my side of the aisle about this bill, what I am trying 
to do is figure out a way to allow for senior members on the committee 
to have a full expression of their support in a particular manner, and 
there are many other Members of the Republican Conference who are not 
on the committee and have requested time to speak as well. And what I 
am trying to do is manage the time in a way that the more-senior 
members have an opportunity to present the particulars of the bill and 
that the other Members also have a chance to speak.
  So we are going to be working on trying to fit all of the people in.
  Mr. RANGEL. Mr. Speaker, reclaiming my time, I want to thank the 
gentleman from California for whatever he said.
  Mr. Speaker, I yield 1 minute to the gentleman from Michigan (Mr. 
Levin), a senior member of the Committee on Ways and Means and the 
ranking member of the Subcommittee on Trade.
  (Mr. LEVIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LEVIN. Mr. Speaker, the Republican bill is not a growth bill; it 
is fiscally irresponsible for this Nation and is unfair to individual 
taxpayers. Only 9 percent of the tax cuts will take effect this year. 
It would mean more and more and more deficits. This bill should carry 
on with the sign, ``Deficits don't Matter.'' A family with $1 million 
in income this year would save 95,000 bucks in taxes. A family with 
$40,000 to $75,000, only $218.
  A rising tide of tax breaks for the very, very, very wealthy will not 
raise all boats, only very big yachts. I urge a ``no'' vote.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1\1/2\ minutes to 
the gentleman from Georgia (Mr. Collins), a member of the Committee on 
Ways and Means.
  Mr. COLLINS. Mr. Speaker, this is a workers' bill. This bill will 
benefit the American worker. It will open jobs, 1.2 million by the end 
of 2004, half a million by the end of this year. This is good news for 
the American worker.
  We hear about 6 percent unemployment, but we do not hear the flip 
side: 94 percent of Americans are employed. This bill is about 
maintaining those jobs and adding jobs and making workers more 
competitive in the global marketplace.
  There is talk about unemployment benefits. Mr. Speaker, the best 
unemployment benefit is a job so that people in this country can 
collect a paycheck. This bill does that.
  This bill helps businesses grow so jobs will grow. Provisions of this 
bill will keep American companies here in America and keep those jobs 
here.
  There is nothing that the American worker cannot do. Given a level 
playing field of tax policies, American workers can out-produce, out-
compete, and out-perform any other nation's workforce.
  Some people claim this tax bill is only for the rich. That is wrong, 
and they know it. The President has submitted a tax bill here that will 
help 104 million American taxpayers. Two-thirds of this workers' bill 
goes to child tax credits, expanding the number of taxpayers in the 10 
percent bracket, eliminating the marriage penalty, accelerating 
marginal rate cuts, and ensuring that middle-income families do not 
face the alternative minimum tax.
  Mr. Speaker, this is a good bill. The biggest problem is that it does 
not go far enough. I would like to see more. However, it will stimulate 
the economy, it will grow jobs, it will make American workers more 
competitive than foreign workers. I support this bill and urge my 
colleagues to do the same.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland (Mr. Cardin), a senior member of the Committee on Ways and 
Means and an outstanding Member of the Congress.
  Mr. CARDIN. Mr. Speaker, I thank the gentleman from New York for 
yielding me this time.
  Make no mistake about it, this bill is extreme and reckless. Mr. 
Speaker, $550 billion-plus, every dollar must be borrowed. The 
Republican budget, by its own numbers, doubles the national debt from 
$6 trillion to $12 trillion over the next 10 years. Two-thirds of the 
relief on the capital gains and on the dividend exclusion goes to those 
people who have incomes over $200,000. Yet, not one dime for the 
unemployed.
  Yes, we have an urgent need. We have an urgent need to act to extend 
unemployment insurance benefits that expire at the end of this month. 
That is immediate, fiscally responsible. We have the money in our trust 
account, and it will help create jobs. Two million Americans in the 
next 6 months will exhaust their State unemployment insurance benefits 
and will get no relief.
  This bill is extreme, it is reckless, and it is wrong.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from Illinois (Mr. Weller), a member of the Committee on Ways 
and Means.
  Mr. WELLER. Mr. Speaker, I rise in very strong support of this 
legislation that deserves bipartisan support. The jobs and growth 
package that is before us today is projected by independent economists 
to generate 1.2 million jobs over the next couple of years, and we do 
it in 2 ways: by putting extra money in the pocketbooks of working 
Americans, by raising their take-home pay, by lowering their taxes, and 
by providing incentives for businesses to invest. If we want to create 
jobs, we need investment and we need consumers to spend.
  Two-thirds of this tax package goes to individuals. In fact, the 
average family, the average tax-paying family, if you pay taxes, 
Federal taxes, you benefit from this proposal. Two-thirds of this 
package goes to working Americans, individuals. Over $1,000, it is 
projected, the average family will see in higher take-home pay by 
doubling the child tax credit, this year; by lowering the rates for 
everybody, this year; and by eliminating the marriage penalty,

[[Page H3917]]

this year. In fact, I have a couple in my district I have often talked 
about, Jose and Magdalena Castillo of Jolie, Illinois, laborers, 
construction workers. As a result of this legislation, their marriage 
tax penalty will be eliminated this year. This is $1,400 that they will 
be able to spend back home. Think about that. Spend it back home in 
Jolie, Illinois, rather than back here in Washington, as some do.
  But this legislation also creates jobs. It is estimated that it is 
going to create jobs by encouraging business investment, up to 1.2 
million new jobs. The way it does that is that it encourages investment 
in manufacturing jobs, technology jobs, real estate and development 
jobs for construction workers. In fact, by doing this, we provide for 
the bonused appreciation or what some called accelerated appreciation, 
50 percent expensing. We should think about that. If we are investing 
in a business, investing in new security for a plant or a workplace to 
protect workers and customers and visitors, we will be able to deduct 
50 percent of the cost of that this year, creating a job for a 
technology worker, or someone that is producing that security product. 
The same thing if it is a machine tool or a company car, or 
telecommunications equipment.
  We encourage business to purchase a product, which the bonused 
appreciation will do now, and that is why this legislation is going to 
be so effective in jump-starting the economy now, creating 1.2 million 
jobs. These are all good provisions and are going to create good jobs 
for working Americans.
  Mr. RANGEL. Mr. Speaker, it is a great pleasure to yield 1 minute to 
the gentleman from Texas (Mr. Rodriguez), a national leader in his own 
right, a leader in the Congress, and the chairman of the Hispanic 
Caucus.
  (Mr. RODRIGUEZ asked and was given permission to revise and extend 
his remarks.)
  Mr. RODRIGUEZ. Mr. Speaker, there is a little saying that goes that 
if you dig yourself into a hole, one of the only ways to get out of 
that hole is to stop digging.
  Well, the Republicans have dug ourselves into a hole, including us, 
and promised jobs with the first $1.3 trillion tax cut that we had the 
first year of the administration. Where are the jobs? The only way we 
can get out of it is to stop digging.
  Unemployment is growing, the Federal deficit is growing, the sense of 
frustration and despair among hard-working Americans is growing. The 
only thing that is not growing is the economy. And the tax bill we are 
debating today fails to deliver on the promise of new jobs.
  The President and the Republicans here in Congress are continuing to 
push for more and more tax cuts and, at the same time, not allowing us 
to have the opportunity under a democratic process to be able to submit 
our own alternative. The tax cut bill we are debating today does little 
to alleviate the problems facing our families. While the bill under 
consideration today promises jobs and growth, the tax cuts are targeted 
primarily at the wealthiest of this country. It is greed, and that 
greed is going to choke the economy.
  Mr. THOMAS. Mr. Speaker, I really have a difficult time understanding 
the concept that giving people back their own money is greed.
  Mr. Speaker, it is my pleasure to yield 1\1/2\ minutes to the 
gentleman from California (Mr. Herger), a member of the Committee on 
Ways and Means.
  Mr. HERGER. Mr. Speaker, I rise in strong support of the legislation 
before us appropriately titled the Jobs and Growth Act of 2003. That is 
exactly what our efforts today are all about: growing our economy and 
creating jobs.
  This legislation provides immediate tax relief while also making our 
Tax Code more investor-friendly and less of an impediment to future 
economic growth. Specifically, this bill accelerates the income tax 
rate reductions enacted 2 years ago, rather than phasing in over the 
next several years as previously planned. These lower rates would take 
effect beginning this year.
  This legislation will increase the child tax credit from $600 per 
child to $1,000 per child. This means real tax relief for families 
struggling to make ends meet.
  This bill also speeds up relief from the unfair marriage tax penalty 
and increases the exemption amount for the alternative minimum tax, or 
AMT, meaning that fewer families will be subjected to this burdensome 
tax.
  I am especially pleased that this legislation makes it easier for 
small businesses to make new business purchases by raising the amount 
of new investment that small businesses can deduct from their taxes, 
from $25,000 a year to $100,000 a year. This provision will be of great 
benefit to millions of small businesses across America.
  Mr. Speaker, the government cannot grow the economy or create new 
jobs. Good government policies, however, can allow the ingenuity of the 
American people to flourish. Let us get our economy moving again. I 
urge all of my colleagues to support this bill.

                              {time}  1200

  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Washington (Mr. McDermott), a member of the Committee on Ways and Means 
and an outstanding Member of the House.
  Mr. McDERMOTT. Mr. Speaker, the Chair, in a rare moment of clarity 
last night in the Committee on Rules, told us this is like a poker 
game. The money on the table at the end of the game is just the same as 
when you started, just different people have the money than they did at 
the beginning. And he is absolutely right. The rich get the money in 
this bill and the middle class gets stiffed.
  We cannot trust the middle class to make decent decisions. Eighty 
percent of this money, of the $500 billion goes to people above 
$75,000; $105,000 for millionaires; $325 for people making $40,000.
  Now, Mr. Speaker, this is not a poker game. This is a crap game we 
are in, and we have got loaded dice. It is crooked and we have got to 
shut this game down in 2004 or the middle class is going to be 
slaughtered.
  This Congress is only one thing, and I brought what everybody ought 
to get. I got one of these. It says here, I approve of everything 
George Bush does, Member of Congress. This is the rubber stamp, crooked 
crap game Congress.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, one of the things I really do enjoy about the gentleman 
from Washington (Mr. McDermott) is that he is consistent. His 
description of my quote and the meaning of it is consistent with the 
way in which he presents his version of the facts.
  Mr. Speaker, I yield 2 minutes to the gentlewoman from Connecticut 
(Mrs. Johnson), a member of the committee.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise in strong support of 
this bill and congratulate the gentleman from California (Mr. Thomas) 
on a very strong and timely proposal to help people and to get our 
economy moving.
  In my district, manufacturing is struggling. Small manufacturers are 
at risk. Jobs from those industries, the machine tool industry, the 
electronic components industry, the aircraft industry are hemorrhaging, 
reaching 20 percent in the last 2 years. We have got to act.
  This bill provides not only the right to go back for 5 years and, 
carry net operating losses back to recover taxes paid, but also some 
dramatic, incentives, the most generous expensing provisions enhanced 
depreciation bonuses, to help companies invest in the equipment they 
need to compete with China and the equipment they need to hire more 
people. You can go back and recapture. In my district a lot of small 
manufacturing companies are losing money this year. They lost money 
last year. But now they can go back and recapture tax dollars to keep 
themselves going, to keep employment up, to stay alive during this 
period or to invest in new machinery and equipment to make themselves 
more productive and more competitive in the future.
  This is the best bill for manufacturing that has ever come to the 
floor of the House in my 21 years in this Congress, because it puts 
more money in the pockets of the people of America through accelerating 
the brackets and it strengthens small manufacturing. The capital gains 
and dividend provisions will also strengthen the economy and provide 
some real stimulus at a time when economic activity is all too flat and 
the number of unemployed is all too great.

[[Page H3918]]

  So if you want a strong manufacturing and a vibrant economy to get 
moving, this is a good bill at the right time.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Wisconsin (Mr. Kleczka), an outstanding member of the committee and the 
Congress.
  Mr. KLECZKA. Mr. Speaker, jobs, jobs, jobs. Two years ago the 
Republicans in Congress passed a tax cut totaling $1.3 trillion, and 
that bill was to stimulate the economy, create jobs, get this country 
moving again, $1.3 trillion. And you know what happened? We lost 2 
million jobs in this country. So now the Republicans have another way 
to create jobs and that is another tax cut bill. This one totals about 
$1 trillion if you add up the true cost of the bill.
  The problem with that is 70 percent of the benefits are going to go 
to the richest 5 percent of households in the country. And you do not 
create jobs by giving rich people capital gains breaks, profits in 
stocks and bonds or on dividends. That is not going to create jobs. The 
only thing that this bill is going to stimulate, the only thing that is 
going to be stimulated with an election next year is campaign 
contributions to those who support it.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I invite the gentleman from Wisconsin to perhaps read 
page 3831 of the Congressional Record in which the Bipartisan Joint 
Committee on Taxation says that up to 900,000 new jobs in the first 5 
years will be created by the acceleration of individual rate cuts and 
the initial increase in investments prevail.
  The gentleman does not want to believe and he has every right not to 
believe; but, frankly, the facts refute his position.
  Mr. Speaker, I yield 2 minutes to the gentleman from Arizona (Mr. 
Hayworth), a member of the Committee on Ways and Means.
  Mr. HAYWORTH. Mr. Speaker, I thank the gentleman, the chairman of the 
full committee, for his work on this legislation and would urge my 
colleagues to adopt it.
  Let me start with a point of agreement with the preceding speaker in 
the well, my good friend, the gentleman from Wisconsin (Mr. Kleczka). 
Jobs, jobs, and more jobs. That is precisely what this legislation is 
about, to offer economic opportunities, to create new jobs. We can do 
that. And, indeed, I would commend to my friend a bill we passed a 
couple of years ago where we reduced the top rate on capital gains 
taxation, where we offered primary residential exemption. What did we 
do for our friends in construction, in the building trades? We put 
people to work. People were buying homes. People had more of their 
money to save, spend, and invest. And rather than the notion of 
economic passive visit, and rather than the notion of greed, quite the 
contrary has been true.
  When the American people have more of their own money, it helps Main 
Street. It helps Wall Street. Mr. Speaker, it helps your street, 
because people have money to spend. New jobs will be created. The 
chairman pointed out the findings. We know it has worked. It has worked 
time and again so it will work in this instance.
  Support this legislation precisely because we want to create jobs. 
Support this legislation precisely because we want to promote economic 
growth.
  Now on a sad note of discord, this Chamber has been compared to many 
different settings. It is sad that some on the left want to compare 
this to the Grand Old Opry because in the words of that great country 
ballad, that is their story and they are sticking to it, that somehow 
this only helps the rich.
  Let me tell you, Mr. Speaker, we are talking about real money staying 
in the pockets of real families. We are talking about accelerating the 
per child tax credit to $1,000 this year. We are talking about 
eliminating the marriage penalty this year. We are talking about moving 
forward this year to help our economy grow, to create jobs, and to get 
it done now rather than hesitating, rather than waiting, rather than 
remaining in the economic doldrums. Support the legislation.
  Mr. RANGEL. Mr. Speaker, I ask unanimous consent, in view of the 
overwhelming interest in America and in the House on this bill, that 
the amount of time for debate be extended an additional hour.
  Mr. CUNNINGHAM. Mr. Speaker, I object.
  The SPEAKER pro tempore. Objection is heard.
  Mr. RANGEL. Mr. Speaker, I ask the chairman of the committee whether 
he would join with me since he was so cooperative yesterday in the 
Committee on Rules.
  The SPEAKER pro tempore. There is an objection heard.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Georgia (Mr. Lewis), the conscience of the Congress and a civil rights 
leader, since the Republicans object to the discussion.
  Mr. LEWIS of Georgia. Mr. Speaker, I rise today to express my outrage 
at this irresponsible and unfair tax bill. Those at the very top would 
get a generous tax cut, but those at the bottom would do no better. And 
there is no evidence that this bill would create even one job.
  We can do better. We have the ability. We have the capacity to do 
better and we must do better. We owe it to the hardworking American who 
will not benefit under this bill, and we owe it to the 2.7 million 
people who have lost their jobs since President Bush took office.
  This bill has no compassion, not one ounce of compassion. It is a 
shame and it is a disgrace and I just do not understand it. I cannot 
for the life of me understand how we can spend billions of dollars to 
rebuild Iraq, to build schools, to provide health care, and yet we 
cannot find a cent for the unemployed here at home. That is not right. 
That is not fair and that is not just. As a great Nation we must do 
better. I ask my colleagues to vote down this irresponsible and unfair 
deal.
  Mr. THOMAS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Minnesota (Mr. Ramstad), a member of the committee.
  (Mr. RAMSTAD asked and was given permission to revise and extend his 
remarks.)
  Mr. RAMSTAD. Mr. Speaker, I thank the gentleman for yielding me time. 
I rise in strong support of this economic growth package to put 
Minnesotans back to work.
  Mr. Speaker, too many people in Minnesota have lost their jobs, and, 
as a result, too many families are hurting.
  Nationally, over 1 million Americans have lost their jobs over the 
last 2 years because of sagging economic growth.
  We must pass H.R. 2, the economic growth and jobs package, to 
stimulate economic growth and create jobs. Economists predict this 
package of tax incentives and tax reductions will result in the 
creation of at least 1.4 million new jobs in the next 2 years.
  Unfortunately, our friends on the other side who oppose this job-
creating legislation fail to understand that economic growth is the key 
not only to job creation, but also to increased tax revenues to fund 
the necessary functions of government.
  More jobs mean more taxpayers, which mean more revenues, the 
fundamental point missed by critics of this economy growth package from 
our Ways and Means Committee.
  This critical job-creating legislation will accelerate the rate cuts, 
marriage penalty elimination and child tax credits; increase small 
business expensing to provide the core of our economy with incentives 
to grow; and cut taxes on corporate dividends and capital gains to give 
the stock market a boost and promote private investment.
  Mr. Speaker, Minnesotans looking for work need jobs. The economy 
needs a boost. We need to increase business spending, consumer spending 
and investment. This legislation will provide the incentives and tax 
relief for the economic growth and job creation we need now.
  Let's pass this legislation and help put people back to work.
  Mr. THOMAS. Mr. Speaker, might I inquire about the division of time.
  The SPEAKER pro tempore. The gentleman from California (Mr. Thomas) 
has 9 minutes remaining. The gentleman from New York (Mr. Rangel) has 
20\1/2\ minutes remaining.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Massachusetts (Mr. Neal), an outstanding member of Committee on Ways 
and Means.
  Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman from 
New York (Mr. Rangel).
  Mr. Speaker, let me stand in opposition today to this Republican 
deficit plan and remind my colleagues of the warning that is often 
cited about not learned from the mistakes of history.

[[Page H3919]]

  Let us talk about the wise reflections today of David Stockman, who 
essentially said that what was proposed 20 years ago was fiscal folly 
and suggested in his memoirs that not only was it irresponsible, it 
represented a threat to the long term fiscal stability of this Nation. 
He concluded that more debt would be rolled up than all of the debts 
accumulated by Reagan's 39 predecessors. And after leaving as Reagan's 
Budget Director he said, ``We were not headed toward a brave new world 
as I had thought in February. We were not headed toward a vindication 
of the President's half-revolution, as Don Regan and the supply-siders 
fatuously insisted in November. Where we were headed was toward fiscal 
catastrophe.''
  These tax cuts are geared and aimed towards the wealthiest of 
Americans. Again, the argument in this Chamber essentially is this: It 
is okay today to have a huge deficit after this economy soared when we 
repaired that philosophy just a few years ago.
  Fiscal catastrophe indeed, Mr. Speaker, that is where we are headed.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from New 
York (Mr. McNulty), my colleague and a member of the Committee on Ways 
and Means.
  Mr. McNULTY. Mr. Speaker, let us talk for a moment about deficit and 
debts. I am willing to give the President the benefit of the doubt when 
he first proposed that huge tax cut in the year 2001. Maybe we did not 
quite know where the economy was going. We certainly did not know about 
September 11 and the impact that would have on the economy. But we know 
where we are today.
  Last year we had a $159 billion budget deficit. According to the 
President's own numbers, this year we will have a $347 billion deficit, 
the biggest in the history of the country. Next year $385 billion, then 
the biggest in the history of the country. The following year $295 
billion. Do the quick math. Over the next 3 years a trillion dollars 
added to an already existing $6.4 trillion in national debt upon which 
we paid $332 billion in interest last year.
  Let us stop mortgaging the future of our children and our 
grandchildren. This must stop. Reject this bill.
  Always remembering the famous words of my friend, the gentleman from 
Texas (Mr. Stenholm), when he said, Down where I come from, you find 
yourself in a deep hole, the first rule is stop digging.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Louisiana (Mr. Jefferson), an outstanding member of the Committee on 
Ways and Means.
  Mr. JEFFERSON. Mr. Speaker, I thank the gentleman for yielding me 
time.
  Mr. Speaker, the folks at home must be really confused about this 
debate today. A few years ago we heard the Republican leadership come 
to the floor with a tax bill saying we were awash in cash and we needed 
to give the people back their money. And the government should not have 
the money, the people should have it.

                              {time}  1215

  The trouble is before we could give the folks their money back, the 
government spent the money. Now we are back telling them the same 
thing, it is the people's money, we ought to give them back their 
money, but the only way to give them back the money this time is to 
borrow the money.
  This does not make any sense. It is about like a businessperson 
saying I do not have any money, do not have any cash, do not have any 
profits, but I want to give my folks a distribution. I am going to go 
borrow money at the bank, give it back and give folks a distribution 
and pay for it later somehow, some way.
  This is called a stimulus package but a stimulus package ought to be 
temporary in effect. It ought to stimulate consumption. The only 
stimulus package we can have to make any sense is have consumption on 
the part of States, on individuals or on the part of business.
  We leave the folks out of this package who could probably provide the 
stimulus that we are looking for. The folks who are in the 10 and 15 
percent bracket do not get a break under this deal. The folks who work 
every day and who do not pay income taxes, who pay payroll taxes 
through the nose, do not get a break under this bill. These folks would 
actually consume something in this economy if we put the money back in 
their hands.
  This is a wrong-headed bill. I urge it be voted down.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Tennessee (Mr. Tanner), a member of the Committee on Ways and Means.
  Mr. TANNER. Mr. Speaker, I adopt everything that has been said about 
the debt of this country. We are going broke, if anybody looks at it, 
but I want to say one thing here this morning.
  This is a sad day. My colleagues can hide a lot of things around 
theories of job creation and so forth, but there is one thing they 
cannot hide today, and that is we are borrowing money after we sent 
young men and women in uniform to die in Iraq. We buried one in west 
Tennessee last week, and my colleagues cannot deny the fact that what 
is going on here this morning is shameful.
  They are borrowing money to give a tax cut to people like me, to give 
the bill to the kids that died in Vietnam and Cambodia and everywhere 
else over there, but today in Iraq and Afghanistan they are doing it. 
They are borrowing the money and giving them a bill and they have got 
to pay interest on it. There is no honor in that. No President and no 
Congress since the war of 1812 has sent people into war and then tried 
in no way to pay for it, no way, and what they are doing is there is no 
honor here this morning. This room reeks with the stain of what we are 
doing.
  Mr. RANGEL. Mr. Speaker, could I get some understanding of the time 
that is remaining?
  The SPEAKER pro tempore (Mr. Simpson). The gentleman from New York 
(Mr. Rangel) has 16\1/2\ minutes remaining. The gentleman from 
California (Mr. Thomas) has 9 minutes remaining.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. Becerra), a member of Committee on Ways and Means.
  Mr. BECERRA. Mr. Speaker, I think my colleague from Tennessee was 
right.
  We talk these days about shared sacrifice. We have men and women in 
uniform who are returning from service where they were in harm's way. 
These are individuals, all of our enlisted men and women, who earn 
incredibly less than $30,000 a year. They put their life on the line 
for us. They are looking to come back home and have a job.
  It is true, jobs, jobs, jobs are what matter. Yet today we are 
hemorrhaging 75,000 jobs per month in this country. We have lost nearly 
3 million jobs since President Bush took office in 2001. We need jobs, 
not deficits. Yet, that is what we are getting from this tax cut bill. 
Deficits do matter.
  A $550 billion tax cut mostly for the wealthy will blow up the bank. 
We have a $350 billion deficit for this year. We pay a quarter of a 
trillion dollars a year in interest on the national debt.
  What is the message to our returning soldiers? It is $100,000 for a 
millionaire in tax cuts. They will get about $200 for the year, about 
enough to pay for a tank of gas a month. Our children will pay for this 
tax cut. Let us defeat this bill.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1\1/2\ minutes to 
the gentleman from Michigan (Mr. Camp), a member of the Committee on 
Ways and Means.
  Mr. CAMP. Mr. Speaker, I rise to commend the chairman for putting 
together a balanced jobs bill. This legislation helps families, wage 
earners and employers by improving incentives for job creation, work 
and savings.
  The child credit is doubled, strengthening families. For wage earners 
the marriage penalty relief and tax rate cuts are accelerated, 
particularly effective in small and medium businesses and family farms. 
These flow-through family businesses result for more than 40 percent of 
the net income in this country.
  The legislation provides job creation incentives for all employers by 
increasing expensing for small business employers, by increasing the 
bonus depreciation element for other employers.
  Michigan has the largest unemployment they have had in 9 years. By 
lowering the Federal tax burden, we will help expand the economy. 
Faster economic growth would create jobs and,

[[Page H3920]]

particularly in the small business area, will allow them to remain the 
engine of economic growth in this country.
  Vote for this bill.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Texas 
(Mr. Doggett), a member of the Committee on Ways and Means.
  Mr. DOGGETT. Mr. Speaker, when it comes to turning around this 
economy, assisting the many who have lost their jobs since President 
Bush got his, this Administration does not have a clue. With a deficit 
larger than a fleet of aircraft carriers, these Republicans have no 
idea how to bring our struggling economy in for a soft landing.
  As always, their snake oil cure-all is the same old ``Dr. George's 
red-ink elixir.'' No matter how irresponsible, no matter how many lives 
are endangered, they award more tax breaks to the fat cats, and if you 
are not among the elite few, than, frankly, my dear, they do not give a 
flip.
  With the largest deficit in American history adding to a national 
debt spiraling to almost unimaginable heights, extremists borrow more 
from us all in order to give tax breaks to a few, and the funds they so 
freely loot are the very hard-earned dollars we contribute for our 
Social Security and Medicare.
  In Texas, we are suffering a freeze on hiring teachers, no new 
textbooks, and meanwhile while the President breaks his promise to fund 
$9 billion of the ``Leave no child behind'' law. This revenue depleting 
vote is the major education vote of the year. The bill does not raise 
all boats. It hangs an immense anchor of debt on the necks of our 
children to whom it denies opportunity.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from North 
Dakota (Mr. Pomeroy), a member of the Committee on Ways and Means.
  Mr. POMEROY. Mr. Speaker, we have before us a bill that will add more 
than half a trillion dollars to the national debt. Advertised as a jobs 
bill, 89 percent of this budget buster does not do a thing this 
calendar year. According to the New York Times, the benefits go 
overwhelmingly to the wealthiest few in this country.
  We could do so much better and it is pretty darn clear they cannot 
even defend this monstrosity. Why else would they reduce debate to a 
single hour? Why else would they deny all amendments? Why else would 
they deprive the minority of our historic right to offer an 
alternative, one that stimulates the economy with tax cuts to small 
businesses and working families without exploding the deficit?
  If the majority was so confident about this proposal, one would think 
they would welcome debate. One would think they would love a side-by-
side vote, their proposal and our proposal. Instead, they are 
shamefully jamming this proposal through this House, sticking our 
children with hundreds of hundreds of billions of dollars of additional 
national debt to fund a tax cut windfall to the wealthiest few in this 
country.
  Reject this shameful bill.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Ohio (Mrs. Jones), a member of the Committee on Ways and Means.
  (Mrs. JONES of Ohio asked and was given permission to revise and 
extend her remarks.)
  Mrs. JONES of Ohio. Mr. Speaker, over the past 5 months I have had 
the opportunity to have my first service on the Committee on Ways and 
Means, and I must say it has been very, very interesting and a 
wonderful experience.
  Right now, in the State of Ohio where my colleague who sits on Ways 
and Means with me, we have 57,000 jobs that were lost in the City of 
Cleveland, 167,000 jobs that were lost in the State of Ohio, since this 
President took office.
  What I would have wanted to see is the people of the State of Ohio 
who have been laid off and blocked out having to have the opportunity 
to get unemployment benefits. What I wanted to see is when we are in a 
terrible situation, a recession, that my State would have received some 
money to help the people who need a prescription drug benefit, the kids 
who need child care and day care. What I did not see in this tax cut 
proposal presented by the chairman of the committee is any help for 
them.
  I understand business and business wants support, but all the 
business people in my community said do not give me a tax cut, help the 
poor.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1\1/2\ minutes to 
the gentleman from Ohio (Mr. Portman), one of the most senior members 
of the Committee on Ways and Means.
  Mr. PORTMAN. Mr. Speaker, I thank the chairman for yielding me the 
time, and I thank my colleague from Ohio who just spoke.
  One thing that excites me about this bill is it will create 1.2 
million new jobs by the end of next year, including over 34,000 new 
jobs in the State of Ohio. The folks from Cincinnati where I come from 
who are unemployed want a job, and that is what this bill is all about.
  I congratulate the chairman, I congratulate the President for taking 
us down this track. This bill addresses what ails us in our economy.
  First, consumer demand is down. We provide more money in people's 
pockets this year. Someone just said it is not this year. It is this 
year. Companies will withhold less this year. They will have more money 
to spend, increasing consumer demand.
  Second, it helps small business, very directly, and that is the 
engine of new economic growth and new jobs.
  Third, and most importantly I believe, it gets business investment 
back where it ought to be. In the last 3 years, every economist, right, 
left or center, will tell my colleagues the same thing, business 
investment is down. We have got to increase that. That is what the 
dividends tax piece is about. That is what the capital gains piece is 
about. It is to get businesses back in the business of expanding plant 
and equipment and creating new jobs.
  I would ask my colleagues on the other side, what it is their idea? I 
know some of my colleagues think by sending money from Washington back 
to the States it creates jobs, but that is government-to-government 
transfer. I do not see that as creating jobs to ensure that 
unemployment does go down. It is 6 percent now. It is too high. It is 
too high in Ohio, it is too high around the country.
  To ensure that the stock market goes up, which this bill will do, the 
economists, again, regardless of their affiliation with what 
organization, right, left or center, say it will help bring the stock 
market up.
  Finally, in order to get this economy on a growth path again, I 
strongly support this legislation. I hope my colleagues will do so on a 
bipartisan basis.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  The gentleman from Ohio had the audacity to say what is our idea 
after they stayed up all night to deny us the opportunity to express 
our ideas. I am telling my colleagues, in New York they call that 
hutzpah.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from California (Ms. Waters).
  (Ms. WATERS asked and was given permission to revise and extend her 
remarks.)
  Ms. WATERS. Mr. Speaker, I rise in strong opposition to the Thomas 
tax plan. The reckless tax cut contained in the Thomas plan is unfair 
and is irresponsible.
  Mr. Speaker, I rise in strong opposition to the Thomas Tax Plan. The 
reckless tax cut contained in the Thomas bill is unfair, fiscally 
irresponsible, and the perverse and persistent Republican obsession 
with dividend cuts will do nothing to create the jobs that our people 
so desperately need.
  Mr. Speaker, mark my words: This bill will continue the pattern of 
tax increases in states and municipalities throughout our country as 
our state and local governments struggle to replace the resources that 
the Federal government no longer is providing.
  True to the Republican Party's credo, the Thomas bill is a rich 
persons' bill, with relief completely targeted toward those who need it 
least. It will load up our children and grandchildren with massive 
debt, debt that middle class families simply cannot carry. The 
Republicans will euphemistically call this a jobs bill, but just whom 
do they think that they are kidding?

  This bill is hostile to families and loaded with accounting gimmicks 
calculated to conceal the size and cost of the Thomas proposal. Can you 
imagine that anyone genuinely interested in middle class families would 
offer a bill with a $1000 child tax credit for 2005 that actually 
reduces the child tax credit to $700 in 2006?
  While this bill is a very bad deal for low-and middle-income 
families, it's an answered prayer for millionaires. According to the 
Tax Policy

[[Page H3921]]

Center, on average, the House GOP tax package would provide tax cuts of 
$93,500 to those making over $1 million, while the typical taxpayer 
would get an average tax cut of $217 (even less than the President's 
plan)--less than 60 cents a day. In fact, 53 percent of taxpayers would 
get less than $100 under the House GOP plan.
  Mr. Speaker, our fiscal future is on the line. Where is the targeted 
tax relief for middle-class families in this bill? Do we want a plan 
that will create more than 1 million jobs and promote long-term 
economic growth as the Democrats have proposed, or do we just want to 
continue the Republican predisposition to pay attention solely to the 
wealthy?
  I will continue to stand for low-and middle-income families, for Main 
Street, not Wall Street. All of us should. Reject the Republicans' 
latest early Christmas gift to the wealthy. Reject this ill-considered 
tax cut. Reject the Thomas bill.
  Mr. RANGEL. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from Texas (Ms. Jackson-Lee).
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman very 
much for yielding to me.
  I rise in vigorous opposition to this very horrific bill.
  Mr. Speaker, I rise in vehement opposition to H.R. 2, the ``Job and 
Growth Reconciliation Tax Act of 2003.'' I am completely against this 
bill for many reasons. First, and foremost, the provisions of this bill 
fail to address the employment and economic needs of struggling 
Americans. Second, I oppose H.R. 2 because the rule governing debate of 
the bill did not allow for consideration of the Democratic substitute, 
a better bill for Americans and the economy.


                  h.r. 2 vs. democratic stimulus plan

  The economic plan set out in H.R. 2 is neither fair, nor fast-acting, 
nor fiscally responsible. H.R. 2, like the President's plan before it, 
proposes a reckless tax cut that will not create jobs and will hurt 
long-term economic growth by saddling our children with massive debt. 
The Democrats' substitute plan will create more than 1 million jobs and 
promote long-term ecnomic growth.
  To jumpstart the economy, my Democratic colleagues have offered a 
real economic growth plan that would create more than 1 million jobs in 
2003, with significant investments and tax relief in 2003 for middle-
class families. In contrast, the Republicans' plan, set out in H.R. 2, 
only puts in place 11 percent of the tax cuts this year, when it is 
essential to provide rapid economic growth.
  Like President Bush's plan, H.R. 2 centers on a tax proposal, a 
dividend tax cut, and a capital gains tax cut. None of these measures 
will create jobs. Not only do my Democratic colleagues oppose H.R. 2, 
expert economists and Wall Street financiers have said that the 
dividend tax cut in the Republican proposal is one of the least 
efficient means to stimulate economic growth.


                  h.r. 2 is a phony economic stimulus

  H.R. 2 is an economic sham. The Republicans have focused on tax cuts, 
which is fiscally irresponsible. When the Bush administration took 
office, the United States had a projected $5.6 trillion 10-year 
surplus. If the tax cuts in H.R. 2 are passed they will have created a 
$2 trillion deficit over the next 10 years. That is a loss of $7.6 
trillion.
  Even Federal Reserve Chairman Alan Greenspan, says that these huge 
deficits actually threaten economic growth. On April 30, 2003, in 
testimony before the Senate Banking Committee, Chairman Greenspan said, 
``It is very important for us to maintain the degree of fiscal 
restraint over the years ahead, because it's only under those 
conditions that I think we can create a fiscal policy which 
significantly assists in acceleration of economic growth.''
  The increased Child Tax Credit is also a sham. The Republicans make 
the increase in the child tax credit a temporary afterthought. The so-
called increase proposed in H.R. 2 for the child tax credit will drop 
in 2006 from $1000 to $700. This is no way to put families and our 
children first. In H.R. 2 the Republicans clearly display their 
priorities. The Republicans give tax breaks to the wealthy, while 
America's middle class and poor families are shortchanged.


                        shortchanging the future

  Next year, the Republican plan proposes tax cuts totaling nearly $44 
billion to individuals who make $374,000 a year or more. The Republican 
tax cuts not only shortchange families and children, but also America's 
senior citizens.
  At the beginning of this Administration, the government was projected 
to save every dollar of the Social Security surplus. However, under 
H.R. 2, Republicans would borrow and spend all of the money from the 
Social Security Trust Fund over the next 10 years. Furthermore, H.R. 2 
provides tax cuts of $93,500 to those making over $1 million. Yet, 
taxpayers in the low to middle income bracket would get an average tax 
cut of only $217, far too little to stimulate our sluggish economy.


                       the 18th district of texas

  A tax cut that saves Americans an average of only 60 cents per day is 
insufficient. In my district, the 18th Congressional District of Texas, 
which includes Houston, Harris County and other areas, the Republican 
plan will cut $13,508 for taxpayers making the top 2 percent of area 
incomes. For taxpayers in the lower 56 percent of incomes, the 
Republican plan cuts merely $136. Clearly, the Republican tax cuts do 
little for the majority of taxpayers in my district.
  The Republican's capital gains provisions likewise do little for my 
District. Ninety percent of taxpayers in the 18th District of Texas 
earn less than $100,000 per year. Those individuals would received an 
average of $38 from the capital gains and dividend tax cut. In my 
District, 82 percent of taxpayers would receive no benefit at all from 
the reduction of capital gains taxes, while 79 percent of taxpayers in 
my district would receive no benefit from the reduction of dividend 
taxes.
  One might call H.R. 2 the ``do little'' tax plan. In my district, 
many could call this the ``do nothing'' plan because nothing is what 
they will receive if the Republican bill passes. H.R. 2 will not create 
real growth in my District or anywhere else in our economy. Similarly, 
H.R. 2 will not create real relief for the many Americans who are 
struggling to provide for themselves and their families during these 
trying economic times.
  Although the unemployment rate continues to climb, the Republican 
bill causes the extended unemployment benefits program to expire on May 
31. That will lead to millions of families being denied needed 
unemployment insurance at the end of this month. Not only would 
extending benefits help the families of nearly 5 million out-of-
work Americans pay their bills. It would also efficiently put money 
into the pockets of consumers who will stimulate the economy through 
spending.

  H.R. 2 professes to create about 1 million jobs in this country with 
a $550 billion tax cut. In other words, those new jobs, even if they 
were created, would come at a cost of over $550,000 per job. Let me say 
that another way, the Republicans plan to create only 2 jobs for every 
$1 million dollars of federal investment. That is a terrible return.
  A better investment would be to put that $1 million into state and 
local health care programs. An investment in those programs would 
support 26 jobs, instead of just 2. Investing $1 million into the 
public schools creates 28 jobs.
  In other state and local programs such as homeland security, police 
or fire protection $1 million can produce 27 jobs. Putting $1 million 
into these programs create 13 or 14 times more jobs than the Republican 
plan. The Democratic plan costs less and produces more. Our plan 
invests money where it will make the most significant and immediate 
impact. Under our plan, the money goes to the people and states that 
will spend, and create jobs right now.


         Democratic Substitute Creates Jobs And Promotes Growth

  In January, Democrats unveiled a short-term economic growth plan to 
help jump-start the economy now. Now, Democrats have built on that plan 
by focusing on both short-term and long-term strategies to create jobs. 
Our plan, which does not add to the deficit, includes economic 
proposals that are worthy of this country.
  The Minority party has heard the cries of our constituents, we have 
listened to economic experts, and we know that tax cuts for the middle-
class encourage spending and create jobs. The Democratic plan increases 
the current child tax credit to $800, and speeds up marriage penalty 
relief and the expansion of the 10 percent bracket.


       Funds for Financially-Pressed Families And The Unemployed

  The Democratic plan pumps money into the economy by extending 
unemployment benefits to the millions of unemployed workers who cannot 
get jobs. The Democratic bill would continue the extended unemployment 
benefits program for an additional 9 months. The Democratic plan will 
also double the duration of unemployment benefits from 3 to 26 weeks, 
and provide more coverage for millions of workers who have already 
exhausted their federal unemployment benefits but are still out of 
work. Economists have estimated that each $1.00 of unemployment 
benefits leads to $1.73 in economic growth.


                   Support for States And Localities

  Almost every state in America is burdened with a deficit. Many states 
are laying off teachers and canceling needed maintenance on school 
buildings. Yet, the Republican economic plan fails to provide one penny 
for state aid, while calling for $1.2 trillion in new tax cuts. Fiscal 
crises in the states are forcing tax increases and cuts not only in 
education but also in other critical programs in the states.

[[Page H3922]]

The cuts undermine the economy's recovery and decimate planning for the 
future. The Democratic plan provides states with $44 billion this year 
to avoid these cuts.
  Allocating $44 billion to the states will address critical needs for 
our constituents in the areas of health care, education, homeland 
security, transportation, and infrastructure. Among other things, the 
Democratic plan provides $18 billion for a 1-year increase in the 
Medicaid payments to states for children, low-income seniors, people in 
nursing homes, and the disabled. Funding programs such as these create 
more economic stimulus than hefty tax cuts for the wealthy.


                  business Incentives for Job Creation

  The Democratic plan includes $32 billion in tax relief for the small 
businesses that are the backbone of our economy, as well as other 
business investments. The Democratic plan provides immediate tax relief 
for small businesses and enables them to generate investment and jobs 
in 2003 and 2004. The Democratic plan triples the amount small 
businesses can write off their taxes for new investments made in 2003 
and in 2004 from $25,000 to $75,000.
  In addition, the Democratic plan provides immediate tax relief for 
all businesses to invest in new plant and equipment in 2003. 
Specifically, the plan speeds up bonus depreciation provisions, so that 
businesses can write off 50 percent for investments in plants and 
equipment in 2003. These provisions will encourage new investments now 
when the economy needs it most.
  The Democratic plan also includes a business tax cut that directly 
helps the long-term unemployed get new jobs. This tax cut encourage 
business to hire people who have been out of work at least 6 months, 
the plan provides these companies with a tax credit worth up to $2,400 
(40 percent of the first $6000 in annual wages).
  By encouraging companies to start hiring again, this credit helps 
grow the economy by putting people back to work at the same time as it 
helps the specific businesses that hire people.


                               conclusion

  Mr. Speaker, for these many reasons I oppose H.R. 2, and encourage my 
colleagues not to pass this misguided legislation.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Mississippi (Mr. Taylor).
  Mr. TAYLOR of Mississippi. Mr. Speaker, 2 years ago today, my son's 
13th birthday, the gentleman from California (Mr. Thomas) told us that 
his tax breaks then would create jobs. It did, 229 of them, but the 
rest of America lost 2 million jobs. He said it would stimulate growth. 
It did, $817 billion of new debt that my kids and other kids and those 
kids coming home from Afghanistan, those kids coming home from Iraq are 
going to have to pay.
  I think it is incredibly important that 2 years to the day that my 
colleagues have increased the debt by $817 billion, they are saying let 
us do it again, and when I go home and see my son tonight, I have got 
to look him in the eye and say, I failed you, I failed you because I 
let folks think for the present at the expense of the future. I let 
folks like the gentleman from California (Mr. Thomas) and others who 
promised to be for a balanced budget, who promised to be fiscally 
responsible, I failed because I did not get them to keep their promise.
  I am going to keep my promise and be fiscally responsible. I beg my 
colleagues to do the same.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 15 seconds to the 
gentleman from California (Mr. Cunningham).

                              {time}  1230

  Mr. CUNNINGHAM. Mr. Speaker, in response to the gentleman from 
Mississippi (Mr. Taylor), when I first came here, there was a $5.2 
trillion debt. That is nearly a billion dollars a day. We paid off over 
$400 billion in debt when we balanced the budget. It is hard to 
decrease that when we inherit a 5.3.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Texas 
(Mr. Stenholm), a voice that is heard in the Congress and throughout 
the United States.
  (Mr. STENHOLM asked and was given permission to revise and extend his 
remarks.)
  Mr. STENHOLM. Mr. Speaker, we can shout down the gentleman from 
Mississippi, but the facts are the debt is going to go up $1.4 trillion 
in less than 2 years' time under the leadership of this side of the 
aisle. That is more than occurred in the first 205 years of this 
country. This tax cut that we vote today will borrow $800-plus billion 
over the next 10 years just to pay for it.
  I am standing up for my grandchildren today. The other side of the 
aisle can continue to ignore it; but let me point out all of the charts 
we have seen up here today, I assume for this moment they are all 
accurate, doing everything they profess to do over their economic game 
plan, we will owe $12 trillion at the end of 10 years' time. And some 
time between now and July 1, they are going to have to stand up and 
vote to increase the debt ceiling to pay for that which they argue for 
today.
  Do they really want to do that for our grandchildren? Or should we 
start looking into the future and not continue to look for what is good 
for us today? My vote today is with my grandchildren, not for us.
  Mr. RANGEL. Mr. Speaker, can I get a reading on the remaining time on 
this short debate?
  The SPEAKER pro tempore (Mr. Simpson). The gentleman from New York 
(Mr. Rangel) has 10 minutes remaining, and the gentleman from 
California (Mr. Thomas) has 6\1/4\ minutes remaining.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Maine 
(Mr. Michaud).
  (Mr. MICHAUD asked and was given permission to revise and extend his 
remarks.)
  Mr. MICHAUD. Mr. Speaker, today in some parts of Maine, unemployment 
is over 30 percent. Under this plan, 94 percent of the people in my 
district will get an average tax cut totaling only $52 from the cuts on 
capital gains and dividends. How will this plan put money in their 
pockets to spend and consume so we can stimulate the economy? How will 
this help them get jobs?
  I spent the last 29 years before I was elected to Congress working in 
a paper mill. I know what working people need, and this bill will not 
help the working people at all. I have no problem with tax cuts. I 
support the marriage penalty relief, estate relief tax, bonus 
depreciation, additional expensing, and expanding the 10 percent tax 
bracket; but we have got to choose measures that we can afford, and we 
have to choose measures that actually stimulate the economy.
  Let us not run up a greater deficit or put Social Security in danger 
with a tax cut that even Alan Greenspan thinks will not help the 
economy.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from South 
Carolina (Mr. Spratt), one of the major drafters of the substitute 
bill.
  Mr. SPRATT. Mr. Speaker, when I was last up here on the rule, we had 
this chart here which shows what happens, the damage done to the 
deficit, to the bottom line. It is $426 billion this year, $494 
billion, totalling $4 trillion over 10 years. I ask the question: Is 
there not a better way? Indeed, we had a better way. We had an 
alternative which, for no impact on the deficit long term, we could 
have added, according to the macroeconomic economic adviser's model, 
the same one they are using, 1 million new jobs stimulating the economy 
to that effect in calendar year 2003 for seven times the amount of 
money.
  For the $550 billion tax cut here, we only get 600,000 jobs. Why 
would they not at least allow us to come here in the well of this 
House, this free market, this forum for America, and present what is 
manifestly a better plan if we want to create jobs, twice as many jobs 
as their proposal will create, and it has no long-term effect on the 
budget? That is because what we are going to do here is start up the 
economy, but we are not going to increase the deficit and the idea is 
because that will stifle growth and kill jobs. We had a better plan, 
and they would not let us offer it. The question is why.
  Mr. RANGEL. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Virginia (Mr. Moran).
  (Mr. MORAN of Virginia asked and was given permission to revise and 
extend his remarks.)
  Mr. MORAN of Virginia. Mr. Speaker, I rise today to oppose this 
reckless Republican tax cut in a budget already plagued by deficits as 
far as the eye can see.
  In light of the worst fiscal reversal in the nation's history, the 
Republican leadership has decided to propose more of the same failed 
policies. In addition, the leadership is stymieing debate by bringing a 
closed rule to the floor and prohibiting the Democrats from offering an 
alternative proposal.

[[Page H3923]]

  This proposal to be debated today will do nothing to stimulate the 
economy, create jobs, increase investor confidence, or put money back 
in the hands of the people who need it the most. In fact, all this tax 
bill will do give tax breaks to people who don't need it on the backs 
of our children and grandchildren.
  The Republican tax bill is cloaked in a series of half-truths. The 
leadership has placed a $550 billion price tag on this measure, but we 
all know that because major provisions of the bill are scheduled to 
expire after the three years, the true cost of the tax cut will be much 
higher.
  How can this body even justify considering large upper-bracket tax 
cuts that will worsen the long-term deficit to $1.2 trillion over the 
next 10 years? We should be paying down the national debt to prepare 
for the retirement of the baby boom generation, set to begin in 5 
years.
  If Democrats were given the opportunity to offer our plan, the 
Democratic Jobs and Economic Growth Plan, people would see a true 
contrast. They would see a responsible economic proposal designed to 
stimulate the economy now. Our plan is a fair, fast-acting, and 
fiscally sound alternative.
  The Democratic plan includes tax cuts for working families and small 
businesses, and creates more than one million jobs by the end of 2003 
and does not inflict the long-term damage to the budget that the 
Republican plan does.
  Finally, by providing tax cuts to working families and extending 
unemployment benefits, the Democratic plan helps average Americans, the 
people most likely to spend money and boost consumer demand, thus 
creating jobs.
  I am sure this body will end up passing this dangerous Republican tax 
bill, and when it does, we will be adding another $2 trillion of debt 
that our children and grandchildren are going to have to pay. It is 
almost criminal to be saddling future generations with having to 
finance a tax cut for us today.
  Mr. Speaker, this tax cut is reckless and irresponsible and not in 
the best interests of this nation. I strongly urge this body to oppose 
this measure.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. George Miller).
  Mr. GEORGE MILLER of California. Mr. Speaker, we are now $2 trillion 
into the Republican economic scheme. First, they gave away a trillion 
dollars because we had such a big surplus, they wanted to return it to 
the people. Now we have trillions of dollars of debt. Now they want 
another trillion dollars, and they have not created a single job. The 
American people have been waiting for 2, 2.5 years for jobs, and this 
bill does nothing to create a job.
  This bill does nothing but increase the deficit. It does nothing but 
increase the giveaways to the wealthiest people in this country. Yet 
the American people and their families are waiting to have the 
opportunity to go back to work, to stimulate the economy. But that is 
not what this legislation does. This legislation ignores the needs of 
working people in this country, ignores the needs of those families of 
working people in this country, and ignores the needs of those children 
who live in those families of working people in this country. How does 
it do it? By simply showering a trillion dollars over the next 10 years 
on Americans who do not need this money, many of whom have come to us 
and said, do something productive with it, and ignores the problems in 
the economy of this country.
  Mr. THOMAS. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Louisiana (Mr. McCrery), a member of the Committee on Ways and Means.
  Mr. McCRERY. Mr. Speaker, I believe the Federal Reserve's recent 
warning about the dangers of deflation is worth noting in the context 
of this debate. The spectre of deflation, I believe, raises the stakes 
in this debate over a growth and jobs plan. In fact, the May 6 
statement of the Federal Reserve Board's Open Market Committee can 
itself be read as a plea to Congress to take the steps necessary to 
spur economic growth and prevent deflation.
  The Wall Street Journal on its editorial page recently said, ``In any 
case, Mr. Greenspan's main duty is monetary policy, and that is where 
his words really matter. His deflation warning ought to be a wake-up 
call to Congress.''
  Lower tax rates to stimulate growth and greater liquidity to prevent 
deflation is exactly the right policy mix. The Fed has supplied the 
liquidity; it is up to us in the Congress to supply the lower tax 
rates.
  Our Nation's economy is in trouble. Americans expect the President 
and the Congress to take action to get the economy out of the ditch, 
back on the road creating jobs. Republicans and Democrats may differ on 
how best to use fiscal policy to help the economy, but to do nothing 
should not be an option. This President should be given a chance to use 
his policies to turn around our economy. This bill does just that. It 
obtains all of the elements of the President's economic growth and jobs 
proposal. Let us pass this bill; give the President a chance to lead us 
out of economic darkness.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Tennessee (Mr. Ford).
  Mr. FORD. Mr. Speaker, this debate has boiled down to simply a 
difference in priorities. I agree with a lot of my colleagues that a 
tax cut is probably needed; but we followed the advice of the other 
side of the aisle 2 years ago, and we have heard my colleagues, and the 
other side knows the facts because they hear from their constituents as 
well. Their package produced 2 million less jobs, 1 million people with 
fewer insurance.
  What we are asking for on this side is that more people have the 
opportunity to enjoy a tax cut, not simply rich people or poor people, 
the wrong people. I do not accept some of the language. I just think 
more people should benefit. The Republican Party used to stand for 
that. The Republican Party used to stand for balancing budgets and not 
running a deficit. I guess power breeds a different kind of mentality 
here.
  Mr. Speaker, the last thing I would say is this, every State for 
every Member here is running a deficit. My State is running a $400 
million deficit, North Carolina has already cut $2 billion and has to 
cut $400 million more. Michigan has a $1.8 billion deficit; and I would 
say to the gentleman from Michigan (Mr. Camp), we should help the 
States.
  We made an argument to help the airlines, and it was the right thing 
to do. States do not have the advantage we have here at the Federal 
level. They cannot go borrowing and borrowing and borrowing. They have 
to make ends meet. We should help them because we would save jobs and 
save their economy.
  Last, I speak to the University of Tennessee graduates tomorrow at 9 
a.m. about jobs. I cannot brag about what the other side is doing, and 
they cannot either. Let us pass a real jobs package; let us reject the 
Republican package and accept the Democratic package.
  The SPEAKER pro tempore. The gentleman's time has expired.
  The Chair would ask Members to respect the time yielded to them.
  Mr. FORD. Mr. Speaker, I ask unanimous consent for 5 additional 
minutes.
  Mr. HULSHOF. I object.
  The SPEAKER pro tempore. Objection is heard.
  Mr. FORD. Mr. Speaker, I ask unanimous consent for 5 additional 
minutes on this side and 5 additional minutes on the Republican side.
  Mr. HULSHOF. I object.
  The SPEAKER pro tempore. Objection is heard. The gentleman will take 
his seat.
  Mr. RANGEL. Mr. Speaker, has the Chair ruled on the unanimous consent 
request of the gentleman from Tennessee (Mr. Ford)?
  The SPEAKER pro tempore. An objection was heard.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. Farr).
  (Mr. FARR asked and was given permission to revise and extend his 
remarks.)
  Mr. FARR. Mr. Speaker, I rise in strong opposition to this bill. I 
rise in opposition because the author of this bill is from the great 
State of California. This bill cuts $850 million out of the State 
budget, a budget that is already bankrupt. That bankruptcy affects 
every school district in California, every city and county in 
California, every hospital in California, every police force and fire 
department in California.
  How can Members say at a time when these States are in such financial 
need we are going to help them by pulling the rug out from underneath 
them? This tax cut is the worse thing that could happen to the State of 
California, and it is shameful that a Republican from California is 
offering it.
  Mr. Speaker, I rise today to read some headlines from my state of 
California. These

[[Page H3924]]

are just from the last few days, but they are illustrative of the kinds 
of headlines that we have been seeing across our state during the past 
year: ``Parents scramble to save popular school programs'', the San 
Francisco Chronicle, May 8th; ``San Jose faces service cuts, fee 
increases: Budget plan calls for loss of 231 jobs'', San Jose Mercury, 
May 3rd; ``Budget anxiety--California's teachers worry about layoff'', 
Los Angeles Times, May 6th; ``Financial crunch hits extra hard'', 
Monterey Herald, May 4th; and ``Proposed Section 8 changes feared'', 
Santa Cruz Sentinel, May 2nd.
  Across the state of California, both statewide government agencies 
and local municipalities are feeling the crush of the approximately $35 
billion budget shortfall. The state is looking for help. We are asking, 
much like New York City did in 1975, for help from our national 
leaders. And, much like Ford did in that day, the President and 
Republican leaders here in Congress are sending a message to 
California: G.O.P. to California: Drop dead.
  The so-called ``stimulus package'' proposed by Representative Thomas 
calls for--depending on who you listen to--somewhere between $300 and 
$500 billion in tax cuts. Included in this package is legislation that 
would do away with taxes on dividends.
  What the President and the Republicans, and even Representative 
Thomas, a California, have not told you is that this elimination of 
taxes on dividends will not just affected the amount of revenue coming 
into the federal government, it will also affect the amount of money 
collected by the states. The Legislative Analysis office of the State 
of California has calculated the State will lose approximately $850 
million in income tax revenues if dividends are no longer counted as 
taxable income. $850 million. This will only serve to increase the 
budget gap that already exists. I am fairly certain the returns to 
individual California as a result proposed will not be as great as the 
losses the entire state.
  Unlike the Senate proposal. Thomas' proposal does not include any 
direct assistance to the states. In fact, the President is seeking to 
cut funding entirely to programs that have been beneficial to 
California.
  The COPs program has been a wildly successful program in the state of 
California, which provided 437 more police officers on the streets in 
California last year. What does Bush do? He eliminates the funding from 
his proposed budget.
  The State Criminal Alien Assistance Program assists California in 
jailing alien criminals. What does Bush do? He eliminates the funding 
in his proposed budget.
  Section 8 housing funds for low-income citizens, administered by the 
HUD, has provided millions of families into housing across the nation. 
Sure, it's not a perfect program, but the President would like to see 
the states administrater the program instead. He claims this will save 
the Federal government money--but it he at all concerned with the 
costs, administrative and otherwise, but will be passed onto the states 
as a result?
  There is not one penny in this legislation to assist the states. 
There is not one shred of hope for the state of California, or the 
nearly 250,000 people who are unemployed, in this bill. How can anyone 
in the California delegation allow our state to suffer? How can you 
present them with this kind of legislation and not offer them any kind 
of assistance? I urge my colleagues to vote against this bill and allow 
the Democratic substitute to be debated--which includes $40 billion in 
direct assistance to the states. Otherwise, I can see the headlines 
now: ``State Falls Deeper into Debt''; ``More jobs eliminated''; and 
``Schools closing across California.''
  Let's change the headlines. Let's do it now, vote down the Thomas 
bill and consider the democratic alternative immediately.
  Mr. THOMAS. Mr. Speaker, I yield 1 minute to the gentleman from 
Pennsylvania (Mr. English), a member of the Committee on Ways and Means 
who understands when someone stands up and says give us more, that is 
all they ever talk about, just give us more.
  Mr. ENGLISH. Mr. Speaker, the bill before us is perhaps the most 
important bill for our economy that we are going to be voting on this 
year, and I strongly support it because it is a measure that provides a 
powerful tonic for economic growth and job creation.
  We estimate that over a million jobs will be created as a result of 
this bill, and what I want to underscore here is that this bill is 
strongly and powerfully pro-manufacturing. It will stimulate 
manufacturing jobs in a sector which has been battered by the economic 
slowdown. Two provisions, the increase on the business expensing 
allowance and a 5-year carryback of net operating losses, will go 
directly toward preserving and creating high-paying manufacturing jobs 
in our economy.
  A strong expensing allowance is the right medicine for the ailing 
manufacturing sector. It significantly reduces the cost of capital so 
that manufacturers can invest in new equipment and machinery and in the 
process dramatically increase workers' productivity. Allowing 
businesses to deduct more quickly the cost of capital investments makes 
those investments more affordable. This is seed corn for the economy. 
We need it now, and I urge passage of this legislation.
  Mr. RANGEL. Mr. Speaker, could I have information as to how much 
limited time remains.
  The SPEAKER pro tempore. The gentleman from New York (Mr. Rangel) has 
5 minutes remaining, and the gentleman from California (Mr. Thomas) has 
3\3/4\ minutes remaining.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Texas 
(Mr. Green).
  (Mr. GREEN of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. GREEN of Texas. Mr. Speaker, I rise in opposition to this 
legislation. I think it is misguided and will not produce the economic 
stimulus that our Nation needs. The lesson we do not need to learn 
twice is that 2 years ago we enacted a tax cut that was heavily tilted 
toward the wealthy. It failed to stimulate our economy, and it wiped 
out every last bit of what budget surplus we had.
  Mr. Speaker, it is high time we learn from our mistakes. We want to 
stimulate our economy. We need to get businesses investing in our 
customers and spending; but in cutting dividend and capital gains 
taxes, this bill is a long way from doing the job.
  Mr. Speaker, in my home district, the 29th Congressional District of 
Texas, 94 percent of my taxpayers bring home less than $100,000.

                              {time}  1245

  How do these tax cuts affect them? The dividend tax cut will give 
them a whopping $39 in tax savings. Ninety-four percent will receive 
$39. That is not incentive. I have a district that consumes, they are 
people that work and they will spend the money, but let us give it to 
the folks that actually do that. Some 80 percent of my constituents do 
not report any capital gains or dividend income on their tax returns. 
Four out of five of my constituents see no tax relief from these cuts 
and that is not right.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from 
Illinois (Mr. Emanuel).
  Mr. EMANUEL. Mr. Speaker, I thank the gentleman from New York for 
yielding time.
  The American people find themselves in the middle of a job recession. 
This tax bill does nothing to kick-start the economy. In Illinois, in 
Chicago, we have lost 56,000 jobs, one of the greatest losses. Fifteen 
months ago, we passed one of the largest tax cuts in history. The net 
result? 2.5 million Americans have lost their jobs, 5 million Americans 
have lost their health care, $1 trillion worth of corporate assets have 
been foreclosed on and 2 million Americans who were at one time in the 
middle class are now in poverty. That has been the net result of a tax 
plan that was passed 14 months ago. That is how it has affected the 
American people.
  This tax cut only does exactly what the first tax cut did. It puts 
its foot on the accelerator and does nothing to focus its benefits on 
the economy and the job recession the American people find themselves 
in today. If we would focus on jobs and job creation, we would have a 
tax plan that would get bipartisan support. That is the goal of what 
our plan does, which is to produce jobs and kick-start the economy 
today so we can get economic growth. Less than 10 percent of this tax 
plan is designed on the economy today. That is why it will continue the 
sluggishness that our U.S. Treasury Secretary acknowledged the economy 
is in and continue the jobless recession that has been produced by the 
first tax cut of 2001.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1 minute to the 
gentleman from Missouri (Mr. Hulshof).
  Mr. HULSHOF. Mr. Speaker, in the real world if a family's house's 
foundation begins to crumble and the family does not have savings 
enough to make the necessary repairs, they would take out a home equity 
loan, a short-term

[[Page H3925]]

loan, in order to rebuild the foundation of their family's home. It 
seems that the majority opinion on the minority side is to repudiate 
the economic policies of President John F. Kennedy, that a rising tide 
lifts all boats. The substitute that was offered last night says that 
in order to stimulate the economy we should spend more money. Were that 
the case, America would never experience a recession because Congress 
always spends more money.
  The other side has said that the judgment of individual Members of 
Congress seems to be superior to the judgement of America's families as 
they sit around the kitchen table trying to pay the bills. We are 
trying to embrace consumer confidence and investor confidence.
  Mr. Speaker, I urge passage of H.R. 2. Our economy's foundation is 
crumbling and it is time that we repair it.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from North 
Carolina (Mr. Ballance).
  Mr. BALLANCE. Mr. Speaker, I thank the gentleman from New York (Mr. 
Rangel) for yielding me this time.
  As a new Member of this 108th Congress, I recently traveled 
throughout the rural areas of North Carolina. I find that the people 
who sent me down to Washington, D.C. are hurting. We are losing 
manufacturing jobs. When I go into the farm community, our farmers are 
suffering. They have huge tractors that they do not need and they 
cannot pay for. They have built barns that cost $15,000 that they do 
not have any tobacco to put in them. I find that many of these same 
farmers have hired workers to take care of their crops. They no longer 
have an opportunity to pay these people who can then support their 
families.
  We are hurting in rural America. We need an opportunity to put some 
money in the pockets of people who will spend it and spur this economy, 
not this plan that is being sent by the majority.
  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Ohio 
(Mr. Ryan).
  Mr. RYAN of Ohio. Mr. Speaker, I thank the gentleman for yielding me 
this time and I appreciate the opportunity.
  I think the main point that we all need to understand is we are going 
to borrow $550 billion, not to invest in education, not to invest in 
health care but a giveaway to the top 1 percent. Four out of five 
people in my congressional district will see no benefit from the 
capital gains. Four out of five people in my district will not see any 
benefit from the dividend tax. If you make $40,000 a year in Akron, 
Ohio or in Youngstown, Ohio, you get 100 bucks. Meanwhile, tuition is 
up 12 percent. Health care is up 12 percent.
  This is voodoo economics. It is bait and switch. It is an economic 
joke and it reminds me of the old country song that the gentleman cited 
a few minutes ago: You get the elevator; we get the shaft.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 30 seconds to the 
gentleman from Texas (Mr. Brady).
  Mr. BRADY of Texas. Mr. Speaker, common sense tells you the best 
thing we can do to balance the budget and pay down our debt is to get 
people back to work, because when you are not working, you are not 
paying Federal taxes, you are not paying into Social Security, you are 
not helping States balance their budget.
  In my home State of Texas, the President's job bill will create 
42,000 new jobs each year. That is the equivalent of taking the 
Pentagon, the world's largest office building, building it in Texas and 
filling it each and every year with new Texas workers. This is real 
jobs at a time when we need it the most. And with so many new jobs 
waiting to occur, we ought not wait another day to get this to the 
President's desk.
  The SPEAKER pro tempore (Mr. Simpson). The gentleman from New York 
(Mr. Rangel) has 1 minute remaining and the gentleman from California 
(Mr. Thomas) has 2\1/4\ minutes remaining.
  Mr. RANGEL. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from Michigan (Ms. Kilpatrick).
  (Ms. KILPATRICK asked and was given permission to revise and extend 
her remarks.)
  Ms. KILPATRICK. Mr. Speaker, I rise in strong opposition to this bill 
that America does not want. America needs jobs.
  Mr. Speaker, I come to the floor of the House today with a profound 
sense of outrage. I am outraged that the majority has once again 
brought a tax cut bill to the floor that will further exacerbate the 
spiraling deficits that confront our government. I am also outraged 
that the majority has denied Democrats the opportunity to offer and 
debate a substitute. Finally, I am outraged at the disservice that the 
American public has to endure because they will not be afforded the 
opportunity to witness a full debate on the merits of the bill we are 
considering.
  The bill under consideration provides tax cuts for individuals and 
businesses totaling $549.5 billion over 11 years. The facts of the 
matter are, this horrific bill fails to provide real solutions to the 
problems of stagnant economic growth, unemployment and the fiscal 
crises in the States. This bill is overwhelmingly skewed toward the 
wealthy. According to the Center on Budget and Policy Priorities and 
the Tax Policy Center, taxpayers with incomes of more than $1 million 
will receive an average tax cut of $105,600 in 2003, with $42,800 of 
that coming from cuts in the capital gains and dividends tax rate. 
Middle income taxpayers would receive an average tax cut of just $218. 
The top 5 percent of households would receive 75 percent of the 
benefits. Only one-fifth of households with income between $40,000 and 
$50,000 a year receive any benefit at all.
  A look at the facts reveals that this bill will result in staggering 
long-term deficits that will burden future generations, forcing cuts in 
vital programs such as Social Security and Medicare and further 
weakening economic growth. I am astonished that my colleagues have the 
temerity to bring this bill to the floor, especially when Federal 
Reserve Chairman Alan Greenspan recently warned against costly new tax 
cuts when the government is already facing record-high deficits. It is 
very interesting that the majority will tout Chairman Greenspan when it 
suits them, and discounts his counsel when it runs counter to their 
political agenda.
  I am also outraged the bill before us does absolutely noting to 
address the budget crises affecting States. States are facing their 
worst budget gaps since World War II.
  Unlike the Federal Government, States must balance their budgets 
every year and have been forced to cut programs and lay off thousands 
of workers. I believe that the best way to stimulate the economy is to 
put money into the coffers of State governments, and into the hands of 
a everyday workers like those who live and work in my district. This 
bill will do nothing to support programs related to education and 
health care, hiring back furloughed employees, or extending 
unemployment benefits to millions of the unemployed.
  My concerns are quite simple, unemployment is now at 6 percent and 
the number of workers who have been unemployed for more than 6 months 
account for 20 percent of all unemployed workers, the largest 
proportion in a decade. The economy has lost 2.7 million jobs in the 
last 2 years, but this bill does nothing to help the unemployed. 
Contrary to what the bill's supporters believe, a tax cut for wealthy 
investors does nothing to help unemployed workers pay the bills.
  This is the third economic stimulus package of the Bush 
administration. The first two did little to stimulate the economy and 
this one will only increase the misery index for many Americans. 
America cannot endure another stimulus plan that results in more 
economic stagnation, sagging consumer confidence and rising 
unemployment. This bill does not include a 26-week extension of 
unemployment benefits nor temporary grants to States to provide 
benefits to low-wage and part-time workers.
  Mr. Speaker, today the majority is engaged in another reckless tax 
cut endeavor that is steeped in unfairness and will contribute to 
staggering deficits. I am outraged that Democrats have been denied the 
opportunity to provide a viable alternative and Americans are being 
deprived of the opportunity to hear a full and open debate.
  I cannot and will not support this bill and urge my colleagues to be 
courageous and hold and similarly cast a dissenting vote.
  Mr. RANGEL. Mr. Speaker, I would like for our minority leader to 
close the debate on behalf of the Democrats that were denied the 
substitute. So could I make inquiry of the chairman of the Committee on 
Ways and Means as to how many speakers he has remaining?
  Mr. THOMAS. I believe we have at least three remaining.
  Mr. RANGEL. Would you mind if I waited until they got down to one?
  The SPEAKER pro tempore. Does the gentleman reserve the balance of 
his time?
  Mr. RANGEL. Yes.
  Mr. THOMAS. Mr. Speaker, I yield 1 minute to the gentleman from 
Florida (Mr. Foley), a member of the Committee on Ways and Means.

[[Page H3926]]

  Mr. FOLEY. Mr. Speaker, between the Senate's attempt to raise taxes 
and the Democrats' desire to spend more of your money, we will never 
see economic growth in this country. There is a reason the Joint 
Economic Committee calls this bill near-term stimulus and long-term 
growth.
  I understand on the other side of the aisle their Small Business 
Caucus must be very small because they must have missed the business 
and investment incentives: Bonus depreciation, small business 
expensing, net operating loss carryback. They must have missed for 
children and families the child tax credit which increases to $1,000 
the credit available for parents trying to raise their children. An 
expansion of the 10 percent bracket. Marriage penalty relief. These are 
good things to stimulate the economy. Yet the only thing they can come 
up with is a complaint that our Chief Executive and Commander in Chief 
landed his plane on an aircraft carrier.
  People need jobs. This bill is about jobs. People need tax relief. 
This bill is about tax relief. I owned a small business. I know how to 
work our way out of a difficult economy. I wish we had more 
cooperation. I wish we had more participation.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 30 seconds to the 
gentleman from Texas (Mr. DeLay), the majority leader of the House of 
Representatives.
  Mr. DeLAY. I thank the gentleman for yielding me this time.
  Mr. Speaker, this bill before us will lower taxes for individuals, 
married couples, parents, small businesses, investors, and workers at 
every income level, and it will create jobs. I thank Chairman Thomas 
for producing a great bill, and I thank him for agreeing to perfect it 
as this process moves forward.
  Mr. Speaker, this jobs and growth package will not only grow the 
national economy but through that growth it will help us support and 
fund the war on terror and our other priorities for years to come. The 
American people understand the relationship between the war on terror 
and economic recovery, even if the opposition does not.
  They understand success in one depends on the other. Indeed, history 
has proven, even in the last 19 months, that prosperity without 
security is fleeting and security without prosperity is impossible. 
Today the United States may be the most prosperous and secure Nation on 
Earth, but make no mistake about it, people are hurting. Unemployment 
is on the rise and anxiety runs high. Investment is chilled and the 
stock market is stagnant. Many Americans are unsure about their jobs 
and many small businesses are on the brink.
  Mr. Speaker, on behalf of the Republican majority: This will not 
stand. Great nations do not cringe when their prosperity and security 
are threatened. But that is exactly what the opposition proposed.
  Last month when Americans cheered as Allied troops liberated 24 
million Iraqis and removed a terrorist dictator from power, Democrats 
grumbled that we could have brought down that statue for a lot less 
money. And now this month they have the gall to suggest that we twiddle 
our thumbs as Americans struggle to feed their families. They make time 
to block qualified judicial nominees and critique the President's 
travel wardrobe, but not to develop a serious plan that creates jobs. 
So embarrassing is the minority's lack of leadership on the economy 
that they did not even propose a remedy to the economy until just 
yesterday. And that proposal? To raise taxes. How unimaginative. How 
pathetic. How typical.
  Just as they failed to propose serious alternatives to the energy 
bill, the budget and Operation Iraqi Freedom, the Democrats have once 
again walked away from the national debate. They have ignored the 
troubles of the American people and surrendered the field of public 
discourse. And they demonstrated once again that they are unwilling--
indeed incapable--of governing in these very serious times. So be it. 
The American people saw the differences between the parties on how best 
to deal with threats to our security, and today they will see our 
differences on how best to deal with threats to our prosperity.
  To those who would follow the timid path of the do-nothing Democrats, 
I have to thank you. Your vote will only make those differences all the 
clearer to the American people. But to those who would join the 
President and the majority today to pass this bill, you will be 
remembered, years from now, as the men and women of the 108th who got 
our economy moving again and who made the United States a safer and a 
more prosperous place.
  For your vote, I do not have to thank you. History will.
  Mr. RANGEL. Mr. Speaker, I yield the balance of my time to the 
gentlewoman from California (Ms. Pelosi).
  Ms. PELOSI. I thank the ranking member for yielding me this time.
  Mr. Speaker, today the House of Representatives has a very historic 
decision to make. Other speakers have referenced the sacrifice of our 
young men and women in uniform in Iraq and the gratitude we have to 
them for the sacrifice that they were willing to make. They were 
successful in their mission. Our mission is to build a future worthy of 
their sacrifice. That cannot be done by voting for the reckless, 
irresponsible proposal put forth by the Republican majority on this 
floor today.
  The distinguished majority leader said we did not have a plan until 
yesterday. We had a plan the day before the President had a plan in 
January, a plan that was fair, fast-acting and fiscally sound.

                              {time}  1300

  And the plan that we brought to the Committee on Rules yesterday was 
consistent with those provisions and those principles. But so 
frightened were the Republicans of the truth on this floor that they 
would not allow the Democratic plan for job creation and economic 
growth to be brought to this floor. So frightened were they of the 
truth that they have tried to silence the voice of over 100 million 
people in our country who are represented on this side of the aisle.
  We are building a visitors center outside for people to come and 
witness democracy. What do we tell them when we say that so many 
Americans cannot have their voices heard on this floor around the 
debate of a proposal for economic growth and job creation?
  This day is a historic day. In many ways it is a sad day. And I would 
like to put it in perspective. Ten years ago, faced with a struggling 
economy and a growing deficit, a new Congress and a new President 
courageously passed a budget bill that took us on a path to fiscal 
soundness. The stock markets responded, the economy prospered, and we 
had a record of economic growth that is unsurpassed in our Nation's 
history. We did that with Democratic votes only. Not one Republican was 
willing to step up to the plate for fiscal soundness and economic 
growth and job creation. At the end of the Clinton administration, by 
the end of the Clinton administration, 22 million new jobs were 
created. The country was on the path of a record surplus of $5.6 
trillion, and the unemployment rate was at an all-time low. To achieve 
that, it took leadership and it took courage.
  Mr. Speaker, the debate today is about leadership. Sadly, that 
leadership is lacking from both President Bush and from the Republican 
Congress. What a difference 2 years makes. President Bush and the 
Republicans in Congress have presided over the most dramatic 
deterioration in our economic health in our Nation's history. Since 
President Bush took office, we have gone from the strongest economy 
ever in the United States to a weak, struggling economy that was 
described by the majority leader just a moment ago. We have gone from 
historically low unemployment rate to losing 2.7 million jobs in the 
first 2 years of the President's term. In fact it is 27 months, 2.7 
million jobs, the worst record of job creation in nearly 6 decades.
  I call my colleagues' attention to this chart. Every President since 
World War II is on the upside of the line of job creation. Every 
President except one, George W. Bush. President Clinton, 22 million 
jobs in 8 years. President Bush, losing 2.7 million jobs in the first 2 
years of his term. That was a result of his failed economic policies.
  And what is his answer to this record unemployment? The same warmed-
over stew. The same recipe for economic disaster. This number, 563, 
drives home the point in a personal way. Since President Bush became 
President, every working hour of every working

[[Page H3927]]

day, 563 Americans lose their jobs. A little more than the number of 
people who serve in the Congress, House and Senate combined, lose their 
jobs every hour of every working day since the President has taken 
office. Under the Republican leadership, April's unemployment rate 
reached 6 percent. Nearly 9 million Americans are out of work, the 
worst job slump since the Great Depression. Another 9 million have 
either given up looking for work at all or are working part time. That 
is why today is so tragic. Tragedy is about missed opportunities.
  We have an opportunity today to create jobs and build a strong 
economy without endangering our fiscal responsibility. Instead, the 
reckless tax plan the President and the Republicans in Congress have 
set forth is not only irresponsible in its substance; it is 
irresponsible in the bad example that the President and the White House 
set. They created a feeding frenzy of tax cuts, of trying to outdo each 
other, making matters worse. That is what is lacking in leadership. Not 
leadership to grow the economy and create jobs, but a bad example to 
take us on the opposite course.
  So instead of having our plan on the floor today which is fair, fast-
acting in creating jobs, again, fair in who benefits from it, and a 
fiscally sound plan that is paid for, instead we have a reckless tax 
plan that the President has proposed. None of these proposals, the 
President's, the House Republicans', the Senate Republicans', none of 
them is affordable. They do not create jobs and certainly in no way are 
commensurate with the cost involved.
  Give them the benefit of the doubt. They keep saying they are going 
to create 550,000 new jobs, fewer jobs than were lost in January and 
February of this year and at the cost of a tax bill of $550 billion, a 
cost of $1 million a job. Where is the fiscal soundness in that? Where 
is the taxpayer getting his or her money's worth? The Republican plan 
spends every penny of the Social Security trust fund that comes in over 
the next decade just as the baby boomers begin to retire.
  This is so irresponsible, but do not just take my word for it. The 
Committee for Economic Development, a 60-year-old independent group of 
CEOs and civic leaders, calls the President's tax plan ``arsenic 
poisoning for the economy'' which worsens ``a fiscal crisis that 
threatens our future standard of living.'' Four hundred economists 
including 10 Nobel Laureates warn that ``passing these tax cuts will 
worsen the long-term budget outlook, adding to the Nation's projected 
chronic deficits'' and will ``reduce the capacity of the Government to 
finance Social Security and Medicare benefits as well as investments in 
schools, health, (and) infrastructure.''
  The American people want, they expect, and they deserve an economic 
recovery plan that is fair, fast-acting, and fiscally responsible. The 
Republican tax plan fails on all three counts. They are profoundly 
unfair to working families. They do not create jobs. Even the 
President's own economic advisors admit that his plan will not create 
enough jobs to make up for those lost in the first 2 months, much less 
in the last 2 years. And the Republican tax cuts are a fiscal budgetary 
disaster.
  Now Republicans claim that the stark deficits somehow do not matter 
and that they will be erased by a growing economy. But Federal Reserve 
Chairman Alan Greenspan testified before Congress: ``There's no 
question that as deficits go up,'' he said, ``contrary to what some 
have said, it does affect long-term interest rates. It does have a 
negative impact on the economy,'' and, ``Economic growth alone cannot 
be safely counted on to eliminate deficits.''
  Americans need to understand what these huge Republican deficits will 
mean for the future of our country. The President's own projections 
show that the interest we will pay on the national debt will exceed all 
discretionary spending foreclosing the opportunity to make critical and 
necessary investments in the future, again, in education, homeland 
security, health care for seniors, transportation, and the environment 
for years to come.
  With that, Mr. Speaker, I want to say that it is within our power in 
this body for us to do what is right for the American people. It is 
within our power to support, although the Republicans will not let us 
bring it to the floor, a Democratic plan for real job growth and real 
economic growth, one that actually creates jobs and economic growth now 
and is fully paid for. The Democratic plan stands in stark contrast to 
the Republican recklessness. The Democratic plan, again, is fair, it 
gives tax cuts to all taxpayers, all taxpayers, including those most 
likely to spend it, low- and middle-income working families.
  One of our colleagues on the other side said earlier our answer to 
this was to spend more money. Our plan is paid for, and those 
initiatives to help small businesses which in turn create jobs and 
create capital are fiscally sound. Our support for extending the 
unemployment benefits, it is the most dynamic investment we can make. 
It injects demand into the economy, putting purchasing power into the 
hands of working families, especially those who are out of work and are 
going to purchase necessities. We get $1.73 of value for every dollar 
spent on that unemployment benefit extension. We get 9 cents for every 
dollar spent on the dividend tax exclusion.
  So I say to my colleagues this is the choice that America faces. This 
is the choice we should have been able to debate and to vote on today. 
But the Republican leaders know that our plan is fair, fast-acting, and 
fiscally responsible, and theirs is not. So they will not even allow us 
the opportunity to bring to the floor, to this people's House our plan 
for an up-or-down vote. The Republican plan harms the economy and 
repeats the failed policies that have deepened this job slump. Instead 
of investing in our children, the plan indebts them.
  Mr. Speaker, I urge my colleagues to reject this reckless, 
irresponsible Republican tax cut for millionaires that leaves working 
families out in the cold. I urge my colleagues to say no to raiding the 
Social Security trust fund. I urge my colleagues to say no to indebting 
our children instead of investing in them and their future. I urge my 
colleague to say no to the unfairness of the Republican tax plan that 
overwhelmingly benefits those who need it least at the expense of 
working families of America, job creation, and economic growth. And I 
urge my colleagues to reject their plan because it is not true, it is 
not faithful to our mission to make a future worthy of the sacrifice 
that was made by our young men and women so recently for our country.
  Mr. THOMAS. Mr. Speaker, has all time expired on the other side of 
the aisle?
  The SPEAKER pro tempore (Mr. Simpson). All time has expired for the 
gentleman from New York (Mr. Rangel).
  Mr. THOMAS. Mr. Speaker, it is my pleasure, then, to yield the 
remainder of my time to the honorable Speaker of the House of 
Representatives, the gentleman from Illinois (Mr. Hastert).

                              {time}  1315

  Mr. HASTERT. Mr. Speaker, I thank the chairman for yielding me time.
  I rise today to make a simple plea: Support this bill and support job 
creation in this country.
  Before I got into this game of politics I taught economics and 
history. In the study of history you find that sometimes two people 
look back at the same event and see different occurrences and that 
different things happened. There a lot of different interpretations of 
the Civil War, the War Between the States, whatever you might have.
  I think there are also a lot of interpretations of what happened in 
the nineties to the economy. I remember that vote that the minority 
leader talked about that night. It was at a time when the Clinton 
administration was in the doldrums, it was a time when their economy 
was floundering. They did have a vote, and I think the subsequent 
result of that was we came with a Republican majority. But there are a 
lot of different views on how history develops.
  Today we see the result of that bubble of the nineties deflating. We 
see the result, where businesses and corporations who based their 
growth on debt found out that maybe that was wrong-minded. We find it 
is a time that maybe we need to make investments, so corporations, the 
creator of jobs, and small businesses, the creator of jobs, actually 
put out dollars, so that you can create jobs, and not debt,

[[Page H3928]]

where you could grow on debt because it is deductible on your taxes.
  What we want is for people to invest their money. We want small 
businesses to say we are going to invest in that new pickup truck, or 
that new product, or a tractor, so that we can put somebody on it, so 
we can create a job, so that we can expense it and create more economic 
activity in this country.
  Our unemployment rate is now at 6 percent. I have to say that that is 
unacceptable and we have to do something about it.
  We have heard that onomatopoeia of rhetoric, of negative words, but 
words only last so long. Words sometimes are an important tool in this 
place, but the fact is truth is important, and the truth is we need to 
get the economy going again.
  There are a couple of ways to do it. You can bring consumer 
confidence back. You can give families the confidence they need so they 
can start to buy and invest in this economy.
  You can make sure that small business people feel that they have the 
confidence and they have the capital that they need to invest in jobs 
and create jobs. You can create an environment to make people feel 
comfortable to invest their money, and that is almost all of us. 
Anybody who has a 401(k) or a pension plan or a mutual fund, we are all 
investors, and we have seen in these rocky times some of those 
investments go down. But we need to give those folks the confidence 
that they can invest in this economy and see it grow again.
  Mr. Speaker, the Committee on Ways and Means and the chairman of the 
Committee on Ways and Means put together a bill that does those things. 
Eighty percent of all jobs are created by small business, so the 
gentleman from California (Chairman Thomas) and the Committee on Ways 
and Means made sure that this legislation takes steps to ease the 
burden on small business. This is one way to help them grow, so they 
are going to expand and so business will hire more workers.
  Consumers drive this economy, so this package is designed to put more 
money in the hands of the consumers so that they can invest in the 
economy. That is why we accelerate the tax cuts passed last year. That 
is why we accelerate the marriage penalty relief. That is why we speed 
up the child tax deduction.
  That is not for rich people. That is for real people, people that go 
to work every day, people that punch a time clock, people that make 
this economy work.
  Finally, yes, we need to get some confidence back in the market. 
Almost every family has lost some of their wealth because of the 
decline in our economy. We have had a decline in the economy; we have 
had 9/11; we have had a war in Iraq; and we have had a war in 
Afghanistan. But it is time to change the focus, it is time to get this 
economy going again, and there is one way to do it, and that is, today, 
put your card in that slot and say let us get this economy going again.
  Vote for this package. Get America back on its feet. It is our 
responsibility to create that environment for the economy, and we have 
this chance to do it today. Let us do it.
  Mr. KING of Iowa. Mr. Speaker, I support the Jobs and Growth Package, 
H.R. 2, and want to express my appreciation to President Bush, House 
Leadership and the Ways and Means Committee members for their 
commitment to tax relief for Americans. Tax relief and simplification 
are desperately needed by working Americans all across this country and 
in my home state of Iowa. At a time when many families are feeling the 
pinch, it is essential that we allow Americans to keep more of their 
hard-earned dollars. Two hundred billion dollars will be brought into 
the economy by the end of next year with this legislation, giving much 
needed relief to over-taxed Americans and businesses.
  Small business and farming are the backbone of Iowa's economy. What I 
believe may be the most important components of this tax package are 
the provisions encouraging business investment. Accelerated 
depreciation incentives and increasing the amount small businesses can 
expense to $100,000 are crucial to the success of entrepreneurs in 
Iowa. Our tax code is laden with anti-business provisions, and I am 
delighted that my colleagues in the House of Representatives have 
reversed trends and are growing American pocketbooks and not 
government. Our collective appreciation should really be for all the 
innovative and dedicated entrepreneurs who have run the gauntlet of 
high taxes and excessive regulation. Overall, this measure will create 
over 9,000 jobs in my home state in just the first year.
  One of the most damaging elements of our tax code is the capital 
gains tax. It is unconscionable that we deliberately punish success. 
America's capital gains tax rates affect the cost of capital, 
investment and our economy's overall growth. By bringing down those 
rates in H.R. 2, we promote growth, raise the value of stocks and 
retirement plans, reduce tax on savings, and inject fairness into our 
tax code. I wholly expect that we will do much more in the very near 
future to rid this blight on America's economy.
  I applaud the President for his unyielding support for a reduction in 
the tax paid by individuals on stock dividends. Half of all Americans 
who receive dividend income are seniors. As I represent one of the most 
senior districts in the country, I am grateful that the House of 
Representatives has chosen to support this vital priority of the 
President.
  There is much more to like about the tax relief efforts included in 
H.R. 2. This initiative leads us in the right direction toward 
simplification and limiting government interference. Hopefully soon we 
can simplify the tax code right out of existence. As our economy grows, 
we should heed the lessons of unburdening Americans. If a lot of tax 
relief helps, what would a little do? H.R. 2 reduces the marriage 
penalty.
  The House of Representatives has done well to support the 
overwhelming majority of Americans who support and need tax relief. 
Americans seeking jobs, need, and expect us, to free up investment. 
H.R. 2 will have a positive impact in stimulating the economy and 
growing the private sector and that means more jobs. I support tax 
cuts, I support our President and I support H.R. 2.
  Ms. McCARTHY of Missouri. Mr. Speaker, I rise in support of the 
Democratic Jobs and Economic Growth Plan and in opposition to the 
Republican tax cut. The Democratic package is fair, fast acting, and 
fiscally responsible, while the Republican plan is not fiscally 
responsible nor will it stimulate the economy. Unfortunately, debate 
has once again been stifled and we will not even have the opportunity 
to vote on the Democratic package which provides real tax relief to 
more Americans at no cost to the Federal Treasury over 10 years. By 
continuing down the path of irresponsible tax cuts that add to deficits 
and increase long term costs, the Republican plan will do nothing to 
stimulate the economy. Federal Reserve Chairman Alan Greenspan has said 
that by increasing the budget deficit through tax cuts, as the majority 
party is attempting to do today, Congress will ``induce a rise in long-
term interest rates . . . significantly undercutting the benefits that 
would be achieved from the tax cuts.''
  I am a long time supporter of lower capital gains taxes, but the bill 
before us takes an irresponsible approach. I am proud to be an original 
cosponsor of H.R. 44, the Investment Tax Incentive Act. This bill would 
take a responsible and stimulative approach to cutting the capital 
gains tax by creating a 2 year investment window allowing investors to 
lock in lower rates on capital gains by purchasing new assets now. The 
higher cost of the Republican tax plan before us today does not result 
in increased economic stimulus because $115 billion of the $297 billion 
from the capital gains portion will go to the 184,000 households who 
make more than $1 million annually. This results in an investment tax 
cut of $625,000 per millionaire household over 10 years. Accelerating 
income tax rates as lucrative as the dividend tax proposal, so that it 
returns funds to only a few Americans without putting money in the 
hands of the middle class, who will spend the money. According to the 
Urban Institute, the average American household will receive $217 per 
year in tax relief, which will do little if anything to spark economic 
growth. On May 2, a Goldman Sachs Economics Analyst said ``the dividend 
tax exclusion looks especially ineffective as a stimulative measure, 
providing only 8 cents on the dollar.'' Let's not drive future 
generations further into debt with irresponsible and ineffective 
financial policy.

  The Democratic growth package offers $44 billion in aid to prevent 
sales and property tax increases and education cuts. If these cuts 
continue at the state level, economic growth will continue to slow, 
regardless of what Congress does. For less than 20 percent of the cost 
of the Republican dividend tax cut, we would give states $50 billion to 
prevent sales and property tax increases and education cuts during 
these difficult economic times. Rather than act responsibly, the 
Republicans have again turned to failed tax cuts policies which have 
resulted in the loss of 2.7 million jobs since January 2001. History 
has demonstrated that the failed tax policies of 1981 revisited in the 
tax policy before us today will result in the same dire consequences 
for working men and woman in America.

[[Page H3929]]

  To avoid raising taxes, the Missouri House and Senate agreed 
Wednesday to cut elementary and secondary education fundings by $200 
million, which will result in fewer teachers, larger class sizes, and 
other adverse conditions. As a former Missouri State Representative, I 
know firsthand the difficulties that the states are facing today having 
experienced similar budget shortfalls in the 1980's when the economy 
was soft and impacted by the Regan era tax cuts. Also, a former 
teacher, it breaks my heart to see critically needed investments 
removed from educating our children. Instead of the House passing tax 
cuts that create larger deficits, we should create policies which 
invest in children, not borrow from them.

  The Democratic package focuses on job creation and helping all 
Americans, not just millionaires. The plan expands the 10 percent 
income tax bracket, giving each working American a tax cut. In 
addition, the package immediately increases the child tax credit to 
$800 per child and eases the marriage penalty. I strongly support these 
two provisions alone for their immediate benefits to working men and 
women. For businesses, the plan encourages investment and creates jobs 
by increasing small business expensing and accelerating depreciation 
for all businesses. These provisions will help business invest today 
when the economy needs it most. The package also provides 6 months of 
extended unemployment benefits and broadens coverage to include low 
wage earners and part time workers. Economy.com cites this as the top 
way to stimulate the economy, injecting $1.72 into the economy for each 
federal dollar spent. Best of all, the Democratic package is fiscally 
responsible, and it is 100 percent offset by freezing top income tax 
brackets at today's rates and closing offshore tax shelters.
  I urge my colleagues to oppose the reckless tax plan and vote on a 
plan which will offer real tax relief for all Americans without 
breaking the budget. Our future generations must not be forced to pay 
for our actions today.
  Ms. LORETTA SANCHEZ of California. Mr. Speaker, I rise today to 
express my disappointment over the Rules Committee's decision that the 
amendment offered by myself and several other distinguished members of 
the Select Committee on Homeland Security's Subcommittee on 
Infrastructure and Border Security was not ruled in order.
  Furthermore, debate was once again stifled in this House by the 
majority's decision not to allow even the democratic substitute offered 
by my friend, Mr. Rangle.
  My amendment would have addressed critical vulnerabilities in our 
nation's infrastructure, vulnerabilities that if exploited by our 
enemies will have terrible costs in both lives and dollars.
  It would have done this by delaying for only one year the 
implementation of the dividend portion of the tax cut.
  As I speak, several areas of critical infrastructure remain 
vulnerable to terrorist attacks.
  We are, without a doubt, still living in a dangerous time. Neither 
Saddam Hussein nor his weapons of mass destruction have been found.
  The next attack on America could come at any time. We cannot afford 
to wait any longer to shore up our homeland defenses.
  Due to the urgent nature of this request, we felt that delaying a 
portion of the tax cut package was the obvious way to pay for these 
critical projects.
  That delay would have generated 4 billion dollars. That represents 
only seven-tenths of one percent of the tax cut we are discussing 
today. Seven-tenths of one percent!
  For that comparatively small cost, the citizens of this country could 
have been made a lot safer.
  That tiny fraction of this tax package would have been used to:
  Help safeguard millions of our citizens by completing necessary 
chemical plant vulnerability assessments;
  Increase the National Guard's Civil Support teams so that they are 
protecting the citizens of all 50 states;
  Provide needed physical security at federal dams and waterways all 
across this country;
  Enhance port security by funding port security grants;
  Increase the size of our Coast Guard;
  Increase the number of inspectors at our border;
  Enhance the safety and efficacy of our firefighters with firefighter 
assistance grants and grants for interoperability with police and 
emergency medical personnel;
  And provide more security to our Nation's food and water supplies. 
And this is only a portion of the programs my amendment would fund.
  Once again, I must highlight how much we could have gotten--for so 
little. As I said earlier, this amendment would not have affected 99.3 
percent of the tax cut package.
  Sadly, the message from the Republicans is clear: They care more 
about cutting taxes for the wealthy than protecting the public.
  They will not even sacrifice less than one percent of their ill-
advised tax cut to help keep the citizens of our country safe from 
terrorist threats.
  H.R. 2 violates 4 Rules of the House, so the Rules Committee granted 
H.R. 2 special protections. Instead of being fair and granting the same 
protections to my amendment or the Democratic Substitute, they refused 
and ruled us out of order.
  They did the same thing to all the other important amendments offered 
by the Democrats.
  The Republicans have turned this House, the people's House, into a 
dark place where debate is feared because it just might shine some 
light on the unjust policies that they want to shove down the throats 
of the American people.
  This is not right, it is not fair, it is un-democratic, and it is un-
American.
  Mr. CASTLE. Mr. Speaker, I oppose H.R. 2, the ``Jobs and Growth 
Reconciliation Tax Act of 2003'' as currently drafted. I applaud the 
President's leadership in trying to strengthen our economy. However, to 
accomplish this goal I believe that any legislation intended to help 
the economy must be targeted to help working Americans and business 
now, and not worsen our long-term budget situation. In its current 
from, this legislation does not meet these two important tests. The 
bill goes beyond what is needed to provide immediate tax to American 
workers and families and its overall cost could jeopardize our ability 
to get the budget back in balance as soon as possible.
  Throughout my public service, I have been a strong supporter of 
balanced budgets. A balanced budget tells our citizens its government 
is managing their money well. That increases confidence and strengthens 
the economy. When I served as Governor of Delaware, we balanced our 
state budget every year and cut taxes three separate times for both 
individuals and businesses. When I came to Congress, one of my top 
priorities was to help balance the federal budget. I was proud to 
support the Balanced Budget Act of 1997 which helped lead to a balanced 
federal budget from 1998 to 2001, and included the largest tax relief 
since 1981. In 2001, when the federal government projected a $4 
trillion surplus for the next ten years, I supported President Bush's 
$1.35 trillion of tax cut that delivered broad based income tax relief 
and marriage penalty relief to hundreds of thousands of Delawareans.
  As a result of an economic downturn made worse by terrorist attacks 
on our nation, the federal budget is facing deficits for the 
foreseeable future. At the same time we have critical demands to fight 
the war on terrorism, rebuild Iraq, protect our nation at home, and pay 
for important programs like health and education. In particular, we are 
still trying to address the need for a Medicare prescription drugs plan 
and its significant costs. With these challenges we must review all 
spending and revenue changes carefully to ensure they are absolutely 
needed. We are rightly limiting new government spending in our budget, 
but we must also take a hard look at any cuts that are not narrowly 
targeted toward immediate economic stimulus or do not take into account 
the long term consequences of federal deficits.
  Some have argued that we must have the largest tax cut possible, 
stating that it will pay for itself because stimulating the economy 
will produce new tax revenue for the federal government. I have 
listened to these arguments, but reports from independent sources like 
the Congressional Budget Office indicated that deficits will increase 
an additional $2.7 trillion by 2013 if the tax cut and spending 
initially proposed were enacted.
  Others have argued that the deficit is still small as a percentage of 
Gross National Product, that it will not damage the economy, and that 
Congress should not be concerned about the impact this tax cut will 
have on the deficit. Again, I have listened to these arguments, but far 
more persuasive are the warnings by independent, conservative 
economists like Federal Reserve Chairman Alan Greenspan and the fiscal 
conservatives at the Concord Coalition who state that both large tax 
cuts and spending increases must be paid for or they will worsen the 
looming deficit problems our country will face when the baby boom 
generation retires and begins drawing down their Social Security and 
Medicare benefits.
  Americans want prudent action, fairness and common sense from their 
government. In Delaware, the average hardworking person is not asking 
for the largest tax cut possible. They would support a reasonable plan 
to help boost the economy that does not put our economic future at 
risk. I have studied the tax relief proposals and it is clear that we 
could provide immediate tax relief to every working American, as well 
as help to businesses, especially small businesses within a package of 
$350 billion over ten years. That could include speeding up the 
reductions in all individual tax rates from the 2001 tax bill, 
increasing the tax credit for children to $1,000, eliminating the 
marriage penalty, and providing expensing and accelerated depreciation 
relief for businesses. Even the Wall Street Journal agrees

[[Page H3930]]

that speeding up the reduction in tax rates would have the most 
immediate stimulus on the economy by putting money in peoples' pockets 
and giving businesses relieve for their investment in equipment and 
other expenses.
  Unfortunately, in the current bill, the most costly single provision 
remains the sharp reduction in the tax on dividends. In fact, the shape 
and long-term cost of the bill is distorted by the effort to maximize 
the reduction in dividend and capital gains taxes. The bill would 
phase-out much of the tax relief for families and individuals to pay 
for this section. The alternative is to extend those tax provisions 
later, but initial estimates indicate that would cost another $210 
billion, which is $34 billion more than what President Bush requested 
in tax relief. If we are serious about keeping the deficit in check and 
giving straightforward tax relief, that is not the right decision. 
Although some reduction in dividend taxes is reasonable, we must 
acknowledge that we simply cannot afford steep reductions in taxes on 
dividends at this time. Further reductions in taxes on dividends should 
be addressed as part of a long-term tax reform effort when we are not 
facing the deficits that are a real threat to the federal budget and 
our economy.
  Effective governing requires careful decisions and often painful 
compromises. There are those who honestly believe that tax relief is 
absolutely necessary at this time. There are others who urge caution to 
protect against deficits at a time when we face the dual challenges of 
a war on terrorism and the needs of an aging population. Enacting some 
tax relief to immediately strengthen the economy is a fair compromise, 
but this bill does not achieve that goal. It is possible that a more 
affordable tax relief bill will emerge from final negotiations with the 
Senate. I urge the leaders of both the House and the Senate to work 
toward a bill that provides immediate relief now to all working 
Americans. We need a bill that does not exacerbate long-term deficits 
or the need to address prescription drug relief, the war on terrorism, 
and Social Security. I think those goals can be accomplished in a $350 
billion tax package or one slightly higher if Congress can come to 
agreement on closing abusive tax loopholes.
  I must oppose this legislation and will continue to work toward a 
more fiscally responsible bill that helps all Americans without 
jeopardizing our budget and economic future.
  Ms. DeLAURO. Mr. Speaker, I rise in strong opposition to this 
legislation. At a time when 8.8 million Americans are out of work, when 
their unemployment benefits are about to expire and when our economy 
has not created a new job in nearly two-and-a-half years, Congress 
should be rushing to get our economy moving again.
  But by cutting taxes for only the wealthiest taxpayers, this bill 
will do nothing to jumpstart job creation. In fact, Goldman Sachs has 
rated the dividend tax cut as one of the least effective options in 
terms of stimulating economic growth. Under this plan, people making 
more than $1 million will get a $93,537 tax break--while those making 
between $20,000 and $30,000 will get only $189.
  Our States are already facing fiscal crises and cuts in vital 
services. They are cutting education, child care and health services. 
In fact, half of the Nation's Governors--Democrat and Republican 
alike--have already proposed tax increases out of necessity. This bill 
does nothing to provide aid to States, and in fact, the budget chief 
for my State's Republican Governor said the President's dividends tax 
plan would cost Connecticut $100 million.
  Instead of a dividend tax cut that will cost States millions--a tax 
cut even Alan Greenspan says will explode the deficit--the Democratic 
plan provides real tax cuts for working families. Our plan proposes an 
immediate increase in the child tax credit to $800 per child, 
refundable for low-wage families. It provides investment tax incentives 
for business and targeted assistance for those looking for work, 
including a long-overdue extension in fiscal relief, so that we do not 
end up leaving them with no choice but to raise taxes.
  Let's do the right thing for our families, turn aside this bill and 
pass a meaningful economic package that provides tax cuts for families 
and ensures long-term growth for our economy.
  Mr. MANZULLO. Mr. Speaker, today we are considering H.R. 2, the Jobs 
and Growth Tax Act of 2003. The bill will provide tax cuts for American 
taxpayers of $550 billion over the next 10 years. This reduction in 
taxes is an appropriate measure to kick-start a lackluster economy and 
will permit the economy to grow at a faster rate for many years to 
come.
  As Chairman of the House Small Business Committee, I am particularly 
pleased that the bill before us includes a number of significant 
provisions to assist America's small business owners. By quadrupling 
small business expensing from $25,000 to $100,000, many small business 
owners will be able to increase capital investment in their businesses. 
The increase in the overall investment limit to $400,000 and the fact 
these figures will be indexed for inflation are also tremendously 
helpful.
  The acceleration of the tax rate cuts, originally enacted in 2001, 
will also greatly assist small business owners. More than 85 percent of 
all small businesses pay individual, instead of corporate, income 
taxes. Accelerating the scheduled reduction in the individual income 
tax rates will immediately put money back into the hands of small 
business owners, allowing those owners to infuse their businesses with 
much needed capital.
  Also, according to the Joint Economic Committee, small business 
owners receive 80 percent of the tax relief from reducing the top 
marginal rate to 35 percent. Marginal rate cuts increase the likelihood 
that a small business owner will hire additional employees and will 
lead to higher wages and/or benefits for those workers.
  Lastly, the reduction in the taxation of capital gains also will 
benefit small business owners who sell their businesses at retirement 
or at other times. In addition, small business owners will benefit from 
the general improvement in the economy that will result from the lower 
taxation of capital gains and dividends generally.
  I urge my colleagues to join with me in support of America's small 
businesses. Join with me in voting for the bill on final passage.
  Mr. LEACH. Mr. Speaker, it is with great reluctance that I rise to 
oppose this tax cut at this time. I do so recognizing that the bill 
contains a number of attractive features--a reduction in capital gains, 
greater flexibility for business depreciation schedules, for instance. 
I also acknowledge that the Ways and Means Committee has markedly 
improved on the administration's initial proposal, reducing by several 
hundred billion the magnitude of the tax cut and tying dividend income 
to capital gains rates rather than eliminating taxes on dividends 
entirely.
  But as appealing as all tax cuts are, they must meet tests of 
appropriateness and fairness. These tests are not met.
  It is true that the national and world economy is to some degree 
stalled. It is not true, however, that fiscal policy changes are always 
stimulative, particularly in the short run. Monetary policy--the 
interest rate and money supply controls of the Federal Reserve--are 
more effective short term stimulus instruments. They must, however, 
work within the constraints of fiscal policy. To the degree they are 
blunted by deficit financing, stimulus may be weakened. Here, it should 
be noted that deficit financing is definitely linked to interest rate 
hikes. While deficits that are tax cut driven may not be as harmful to 
the general economy as those that are spending related, they 
nevertheless have cost of capital implications.
  Here it should be noted that liberals in Congress in general favor 
stimulating the economy with substantial programmatic spending 
increases. Conservatives, on the other hand, tend to favor tax cuts. I 
find the conservative case preferable to the liberal one, but I believe 
the case for a steady rudder is more compelling than either. I voted 
for the House budget resolution which sets limits on how much Congress 
can appropriate and reduce taxes because I believe the case for holding 
spending increases to levels near or at inflation levels is reasonable, 
but I have grave doubts about a significant tax cut at this time. 
Whether one believes the war with Iraq was wise, or will prove to 
accelerate or decelerate international terrorism, it and its aftermath 
must be fiscally accommodated. Wars cannot be paid for with tax cuts.
  Advocates of the tax cut properly point out that in relation to the 
GNP the tax cut might be considered more modest than the hyperbolic 
rhetoric that has been associated with it. This may be true, but at 
some point a difference in degree can become one in kind.
  For a variety of reasons related to foreign challenges and a weakened 
domestic economy we have returned to deficits at the Federal as well as 
State levels of government. But there is a profound distinction between 
a $50 to $100 billion deficit and a half trillion dollar one. 
Legislative budgets, like family budgets, must be subjected to common 
sense discipline. At the governmental level this is particularly the 
case in the coming decade which will be characterized by a three to 
four Americans of working are relative to retired. In the decades 
after, significant demographic changes will take place in our society 
and the number of retired citizens relative to working age Americans 
will increase. If we cannot operate with fiscal prudence today, we will 
have a calamitously difficult time managing our economy in the future.

  One aspect of the economy today makes deficits and the attendant need 
for debt repayment even more problemsome. Debt management is generally 
easier at lower rates of interest but in deflationary times such as the 
1930s debt repayment even at low interest rates become the singularly 
most difficult challenge in the economy. Today we have general 
deflation and sectoral deflation, but the intertwining of international 
politics, particularly terrorism,

[[Page H3931]]

with the competitive pressures wrought by the global living will make 
general deflationary pressures real. In this circumstance prudent debt 
management is critical for government as well as the family. Deficits 
might have to be contemplated but interest rates could be more 
difficult to manage than in inflationary times when dollars become 
cheapened and easier to acquire, whether in business through profits or 
government through taxes.
  As for fairness, I have always believed there is a compelling case 
for tax simplification--a reduction in rates tied to the elimination of 
the vast majority of deductions that have come to dominate our tax 
code. But I also believe in credible progressivity. A well-to-do 
citizen should pay a somewhat higher rate than a less well-to-do 
individual. So I have had doubts about flat taxes. But what the 
proposal before us today does is invert the curve. Not only will taxes 
not be flat, but high income citizens who receive dividends will pay a 
lower rate of taxes than the working middle class. Economists call this 
regressive taxation. Some Americans will benefit. Others will consider 
it unfair. Tax systems depend on social acceptance. The approach before 
us today may undercut the faith of a lot of Americans in the system and 
as importantly take pressure off the need for fundamental tax reform.
  The precept that an extremely well-to-do person who receives 
dividends and may not hold a job should pay taxes at a substantially 
lower rate than a middle class citizen who works for a living demands 
review.
  At issue is the question of wealth distribution and wealth divisions 
in society. In the decade of the '90s the divisions between rich and 
poor widened. What this tax bill does is accentuate these divisions. 
Government tax policy will be redistributive in ways never before 
countenanced. Burdens will be shifted from the rich to the middle 
class.
  At the risk of presumption, let me turn for a minute to the problems 
State governments are having, which the changes contemplated today may 
exacerbate. Many State income tax codes are based on a percentage of 
the Federal obligation, so a tax cut at the Federal level becomes one 
at the State, too. Perhaps State governments will react by cutting 
services further or raising taxes, but they, like the Federal 
Government, seem inclined to take the less disciplined way out and 
deficit finance.
  In my home State, in the name of ``economic development'' a lot of 
new funding is being proposed subject to bonds being issued. The 
problem is that just as tax cuts are advanced by conservatives as 
``stimulative,'' bonding is proposed by liberals as good for ``economic 
development.'' But precepts are conjectural.
  There is, of course, a profound case in a State like Iowa for bonding 
facility construction for public services such as a new hygienics lab 
or dormitories for students, but States should not presume to be banks, 
sources for credit that would otherwise be available to the private 
sector. Iowa, for instance, has more a jobs than a credit crunch. What 
attracts business to come to or stay in the State is less likely to 
relate to availability of State development funds as it will to whether 
the State has quality services and competitive levels of taxation. All 
States have a budget crunch. To the degree Iowa can distinguish itself 
with fiscal balance, it will be the long term beneficiary.
  My concern is that if common sense fiscal discipline is abandoned by 
legislatures at all levels, there will be a run on governmental 
confidence. A run on governmental confidence can produce a run on our 
economic system.
  What is needs is a sense of proportion. Good ideas must be measured 
against social costs. To grow an economy we must recognize that 
discipline is essential. Good tax cut ideas, just as good spending 
initiatives, cannot always be afforded.
  Mr. CASTLE. Mr. Speaker, I oppose H.R. 2, the ``Jobs and Growth 
Reconciliation Tax Act of 2003'' as currently drafted. I applaud the 
President's leadership in trying to strengthen our economy. However, to 
accomplish this goal I believe that any legislation intended to help 
the economy must be targeted to help working Americans and businesses 
now, and not worsen our long-term budget situation. In its current 
form, this legislation does not meet these two important tests. The 
bill goes beyond what is needed to provide immediate tax relief to 
American workers and families and its overall cost could jeopardize our 
ability to get the budget back in balance as soon as possible.
  Throughout my public service, I have been a strong supporter of 
balanced budgets. A balanced budget tells our citizens its government 
is managing their money well. That increases confidence and strengthens 
the economy. When I served as Governor of Delaware, we balanced our 
State budget every year and cut taxes three separate times for both 
individuals and businesses. When I came to Congress, one of my top 
priorities was to help balance the Federal budget. I was proud to 
support the Balanced Budget Act of 1997 which helped lead to a balanced 
Federal budget from 1998 to 2001, and included the largest tax relief 
since 1981. In 2001, when the Federal Government projected a $4 
trillion surplus for the next 10 years, I supported President Bush's 
$1.35 trillion tax cut that delivered broad based income tax relief and 
marriage penalty relief to hundreds of thousands of Delawareans.
  As a result of an economic downturn made worse by terrorist attacks 
on our Nation, the Federal budget is facing deficits for the 
foreseeable future. At the same time we have critical demands to fight 
the war on terrorism, rebuild Iraq, protect our Nation at home, and pay 
for important programs like health care and education. In particular, 
we are still trying to address the need for a Medicare prescription 
drug plan and its significant costs. With these challenges we must 
review all spending and revenue changes carefully to ensure they are 
absolutely needed. We are rightly limiting new Government spending in 
our budget, but we must also take a hard look at any tax cuts that are 
not narrowly targeted toward immediate economic stimulus or do not take 
into account the long term consequences of Federal deficits.
  Some have argued that we must have the largest tax cut possible, 
stating that it will pay for itself because stimulating the economy 
will produce new tax revenue for the Federal Government. I have 
listened to these arguments, but reports from independent sources like 
the Congressional Budget Office indicate that deficits will increase an 
additional $2.7 trillion by 2013 if the tax cut and spending initially 
proposed were enacted.
  Others have argued that the deficit is still small as a percentage of 
Gross National Product, that it will not damage the economy, and that 
Congress should not be concerned about the impact this tax cut will 
have on the deficit. Again, I have listened to these arguments, but far 
more persuasive are the warnings by independent, conservative 
economists like Federal Reserve Chairman Alan Greenspan and the fiscal 
conservatives at the Concord Coalition who state that both large tax 
cuts and spending increases must be paid for or they will worsen the 
looming deficit problems our country will face when the baby boom 
generation retires and begins drawing down their Social Security and 
Medicare benefits.
  Americans want prudent action, fairness and common sense from their 
government. In Delaware, the average hardworking person is not asking 
for the largest tax cut possible. They would support a reasonable plan 
to help boost the economy that does not put our economic future at 
risk. I have studied the tax relief proposals and it is clear that we 
could provide immediate tax relief to every working American, as well 
as help to businesses, especially small businesses within a package of 
$350 billion over ten years. That could include speeding up the 
reductions in all individual tax rates from the 2001 tax bill, 
increasing the tax credit for children to $1,000, eliminating the 
marriage penalty, and providing expensing and accelerated depreciation 
relief for businesses. Even the Wall Street Journal agrees that 
speeding up the reduction in tax rates would have the most immediate 
stimulus on the economy by putting money in people's pockets and giving 
businesses relief for their investment in equipment and other expenses.
  Unfortunately, in the current bill, the most costly single provision 
remains the sharp reduction in the tax on dividends. In fact, the shape 
and long-term cost of the bill is distorted by the effort to maximize 
the reduction in dividend and capital gains taxes. The bill would 
phase-out much of the tax relief for families and individuals to pay 
for this section. The alternative is to extend those tax provisions 
later, but initial estimates indicate that would cost another $210 
billion, which is $34 billion more than what President Bush requested 
in tax relief. If we are serious about keeping the deficit in check and 
giving straight forward tax relief, that is not the right decision. 
Although some reduction in dividend taxes is reasonable, we must 
acknowledge that we simply cannot afford steep reductions in taxes on 
dividends at this time. Further reductions in taxes on dividends should 
be addressed as part of a long-term tax reform effort when we are not 
facing the deficits that are a real threat to the Federal budget and 
our economy.
  Effective governing requires careful decisions and often painful 
compromises. There are those who honestly believe that tax relief is 
absolutely necessary at this time. There are others who urge caution to 
protect against deficits at a time when we face the dual challenges of 
a war on terrorism and the needs of an aging population. Enacting some 
tax relief to immediately strengthen the economy is a fair compromise, 
but this bill does not achieve that goal. It is possible that a more 
affordable tax relief bill will emerge from final negotiations with the 
Senate. I urge the leaders of both the House and the Senate to work 
toward a bill that provides immediate relief now to all working 
Americans. We need a bill that does not exacerbate long-term deficits 
or the need to address prescription drug relief, the

[[Page H3932]]

war on terrorism, and Social Security. I think those goals can be 
accomplished in a $350 billion tax package or one slightly higher if 
Congress can come to agreement on closing some abusive tax loopholes.
  I must oppose this legislation and will continue to work toward a 
more fiscally responsible bill that helps all Americans without 
jeopardizing our budget and economic future.
  Mr. FILNER. Mr. Speaker, I rise in opposition to the Republican 
majority's ineffective stimulus package. This plan will not accomplish 
its stated goal of stimulating the economy. In order for tax relief to 
be effective and fair in stimulating the economy quickly, it must be 
targeted at those who need it and those who will actually spend it. 
Giving money to those who will spend it is the most effective way to 
pump money into the economy.
  The Republicans refuse to acknowledge the importance of targeting 
relief appropriately. The vast majority of the benefits in the 
Republican plan will go to wealthy individuals. It ignores many groups 
that are in dire need and attempts to placate others by offering 
temporary benefits. The benefits for the rich are long term and this 
administration intends them to be permanent. Rather than calling this 
an economic stimulus, let's call it what it really is: the renewal of 
trickle-down economics.
  The Democratic alternative provides tax relief to those who need it 
and those who will spend the money that they receive. Families need a 
tax cut and the Democratic plan delivers with a permanent increase in 
the child tax credit, an immediate expansion of the 10-percent tax-rate 
bracket, and elimination of the marriage penalty. This relief will go 
to low- and middle-income Americans who will put it back into the 
American economy immediately. Those who lost their job in the economic 
slowdown need assistance and the Democratic package helps them with an 
extension of their unemployment benefits. This money will be spent 
right away to pay bills and provide for the needs of their families. 
The States are in need of economic assistance and the Democratic 
package gives them the direct aid that they need to the tune of $44 
billion over 10 years. This is money that will be immediately invested 
in education, healthcare, and homeland security so that States won't 
have to lay-off any more workers and can begin to hire some back. Small 
businesses need a stimulus and the Democratic package provides them 
with tax incentives that encourage investment, foster expansion, and 
reward those who hire workers who have been unemployed for at least 6 
months.
  I believe we should go even further in targeting relief to those who 
need it. I have proposed a plan that provides an exemption from 
approximately the first $20,000 of payroll tax, FICA, for all taxpayers 
and businesses. This will put about $1,300 into the pockets of those 
who will spend it to stimulate the economy and be a big boon to small 
business. Ask any low- and middle-income family how they would spend a 
couple of thousand dollars and they will give you a list of things they 
need right now. To keep the Social Security Fund whole, the bill 
eliminates the current $87,000 cap on FICA contributions--meaning that 
those earning more than $107,000 a year would pay their fair share.
  These alternative proposals would be fast-acting and effective. 
Equally important, they would be fully paid for. They don't add one 
dime to our record deficits.
  The contrast could not be clearer--the President only seems to trust 
the richest Americans to receive more of their money back, while my 
proposal, and the Democratic plan, would provide a significant benefit 
to low- and middle-income families who would actually spend the money 
to stimulate the economy--and be an equally significant benefit to 
small business.
  Mr. ORTIZ. Mr. Speaker, in August 2001, this Government began a 
reckless rush towards higher deficits under the guise of ``tax cuts.'' 
Obviously the 2001 attacks and subsequent wars added to the deficit, 
but it was precisely the August 2001 tax cut that began this 
Government's return to deficit spending.
  While ``tax cuts'' should mean the Government already has the money 
to ``return'' to taxpayers--in 21st Century politics, ``tax cuts'' are 
made without having the money to do it. They are billed as ``economic 
development'' but really mean: wealthier Americans get nearly all the 
tax breaks; the greater tax burden is moved to working Americans; and 
tax increases are now part of the equation among Republicans in order 
to stem the flow of red ink from this country.
  Government should always pay its way and not run such enormous 
deficits. If we are returning taxpayers' money, it must already be in 
hand, not just hoped for. In a democracy, governments have an open 
debate about adding $549.5 billion to the Nation's already escalating 
debt. Today, in the House of Representatives, the leadership is ramming 
this bill through without allowing Democrats to offer an alternative 
out of fear that anything else offered on the floor would beat this 
awful bill
  It might be another story if there were any evidence that tax cuts 
worked, in a healthy or unhealthy economy. We know from past painful, 
expensive, experience that tax cuts do not stimulate the economy, in 
fact: the weaker the economy, the more damage they do to the economy.
  I oppose this bill with fuzzy Enron math that adds hundreds of 
billions of dollars to an already outrageous deficit.
  Mr. SMITH of Texas. Mr. Speaker, the Jobs and Growth Tax Act of 2003 
includes relief from the marriage tax, child care tax credits, small 
business expensing, and a dividend tax reduction.
  According to an analysis by the Heritage Foundation, the bill creates 
approximately 1.2 million jobs by the end of 2004. This includes 61,000 
jobs in Texas. In addition, it will inject $200 billion into the 
economy to help drive consumer spending and job creation.
  A key piece of this legislation is dividend relief. It also promotes 
investment by reducing the tax on capital gains. These two 
modifications simplify the tax code by creating similar tax treatment 
for both capital gains and dividends.
  Eighty-four million or over 50 percent of adult Americans invest in 
the stock market. And over 70 million own a home. The Jobs and Growth 
Tax Act puts dollars back into the pockets of millions of families by 
reducing the tax on dividends and capital gains to 5 percent for the 
lowest two tax brackets and 15 percent for the remaining brackets. This 
increases economic growth, as well as the incomes of working Americans.
  Seniors, who tend to own a larger share of stocks than other age 
group will benefit greatly from the much-needed tax relief in this 
bill.
  What does our economy need? The answer is before the House today: 
more jobs and tax relief. We must create more jobs and the best way to 
help companies, investors and entrepreneurs to create good, private-
sector jobs is to reduce taxes across-the-board. And the best way to 
refuel the economy and ensure our ability to compete is to reduce 
taxes.
  I urge my colleagues to support this bill.
  Mr. UDALL of Colorado. Mr. Speaker, I cannot vote for this bill. The 
bill does include some features that I support--but, overall, it does 
too little to address the real needs of the economy and the country, 
and it does too much to make our budgetary problems worse. The bill's 
supporters, reading from a script written by the White House, say that 
the bill will create jobs. That sounds like good salesmanship, because 
in fact there is a desperate need for an increase in employment to 
begin to make up for the millions of jobs that have disappeared over 
the last two years. But as any salesman knows, a good slogan can't 
disguise a product that won't perform--and when it comes to creating 
jobs, I am convinced this bill won't perform as advertised.
  No analysis I have seen--whether by the Congressional Budget Office, 
Federal Reserve Chairman Alan Greenspan, or any other expert--supports 
the claim that enacting this bill will help put very many people back 
to work anytime soon. Of course, the bill's supporters--like the 
pitchman in the old TV ad--say we have their word on it. Excuse my 
doubts, but I don't think that's proof enough.
  On the other hand, while its claimed benefits are doubtful, there is 
no doubt about how the bill will affect the federal budget--it will 
throw it further out of balance and lead to much deeper deficits. I 
think this is well summarized by the analyses of the Tax Policy Center 
and the Center on Budget and Policy Priorities, which show that the 
bill's effect on revenues is much greater than claimed.
  In fact, according to those experts, the bill ``fit[s] within the 
$550 billion allotted to the Ways and Means Committee only by using 
gimmicks that cloak its true cost. If the provisions scheduled to 
terminate before 2013 are extended--as Chairman Thomas envisions and as 
Congress would be likely to do--the total cost of the plan would be 
between $865 billion and $1.1 trillion through 2013. In other words . . 
. the plan could be twice as costly as advertised. [It] .  .  . thus 
manages both to be more tilted to the very well-off and more expensive 
than the original Bush proposal, which would cost $726 billion through 
2013.''
  This concerns me because I think we need to take deficits seriously, 
for reasons well stated in recent testimony by The Concord Coalition's 
President, Peter G. Peterson to the Committee on Financial Services.
  I was struck by Mr. Peterson's statement that ``A future of mounting 
deficits is a cause for grave concern. Mounting deficits can slow and 
even halt the steady growth in material living standards that has 
always nourished the American Dream. When such deficits are incurred in 
order to fund a rising transfer from young to old, they also constitute 
an injustice against future generations . . . This policy, after all, 
constitutes an explicit decision by today's adults to collectively 
shift the current cost of government from themselves to their children 
and grandchildren.''
  In other words, because it would lead to deeper deficits, this bill 
would do just what

[[Page H3933]]

President Bush, in his State of the Union address, said we should not 
do--instead of meeting today's challenges, it would simply create new 
problems for our children.
  I don't think that is sound policy--especially when a better 
alternative is available. And that is why I voted for the motion to 
recommit offered by Representative Rangel. If that motion had been 
approved, that alternative would have come to the floor.
  That alternative included very meaningful tax cuts. It included an 
increase in the child tax credit to $800 per child, an immediate 
expansion of the 10-percent tax-rate bracket to levels that under the 
2001 tax bill would be reached in 2008, and immediate elimination of 
the ``marriage penalty'' aspect of the income tax. It also included 
investment tax credits for small businesses, such as business expensing 
up to $75,000 and bonus depreciation.
  Those cuts would immediately put money into the pockets of middle-
income Americans, who are the people most likely to spend it promptly, 
boosting consumer demand and thus helping set the stage for an increase 
business investment needed to meet that demand.
  The alternative also had other important provisions to respond to the 
immediate needs of our country and the American people.
  It provided for extending and expanding unemployment insurance, whose 
benefits go to the families most affected by the economic downturn--the 
ones who need real help now. And it included a provision to create a 
permanent, revenue-neutral corporate tax deduction to encourage 
American manufacturing companies to expand their operations, as well as 
a new tax incentive to provide a tax credit of up to $2,400 to 
businesses that hire people who now are unemployed.
  And, while the administration and our Republican colleagues seem 
ready to forget the states, which are experiencing their worst fiscal 
crisis since World War II, the alternative did not. It would have 
provided $44 billion over 10 years in direct aid to states for homeland 
security, education, health care for senior citizens, and highway and 
other infrastructure improvements.
  And, just as important as everything else, the alternative was 
fiscally responsible--fully paid for over 10 years. So, it would have 
added as many as a million new jobs without adding anything to the 
deficit.
  Mr. Speaker, I don't know why the Republican leadership refused to 
let the House even consider that alternative--but maybe those salesmen 
didn't want us to have that choice. For me, the choice would have been 
clear. I would have voted for the alternative--but I cannot vote for 
the bill.
  Mr. DAVIS of Illinois. Mr. Speaker, I rise today again speaking on 
our need to ``Build a Sound Economy''. Taxation is a financial burden 
that must be equally shared by all Americans, blessed with the ability 
to earn an income. Thomas Paine, an American Free-thinker once reminded 
us that; ``War involves in its progress such a train of unforeseen and 
unsupposed circumstances that no human wisdom can calculate the end. It 
has but one thing certain, and that is to increase taxes.'' And yet, at 
the end of our War efforts in Iraq, we are at this time considering the 
reduction of taxes.
  Through Taxation, we as Americans are afforded the opportunity to 
ensure the prosperity of our nation, and our citizens. Whether our 
citizens are from the Farms of Iowa, the Factories of Tennessee, or the 
Financial Districts of New York City or my home District of Chicago, 
their earning power and its fruits are what make America Great. Many 
Americans have worked all their lives, and are now in retirement. 
Others are still working in the various industries which breathe the 
life blood into our Great Nation. And yet, still others, whether due to 
underage, infirmity, or other unique circumstances are unable to impart 
into the American Economy, but their contributions in their communities 
are cherished by those who know them.

  When the President took office, the government was projected to save 
every dollar of the Social Security surplus. But under the GOP tax 
plan, Republicans in the House would borrow and spend all of the money 
from the Social Security Trust Fund over the next 10 years, just as the 
Baby Boomers are about to retire. The single issue which we must not 
forget when we consider the Stability of our Economy is that it is 
closely tied to the Equality of our Tax System, and our governance over 
the Social Security Trust Funds. Our Tax System is a means to ensure an 
equitable distribution of the responsibility of paying taxes. Plato, 
the noted Philosopher once said, ``When there is an income tax, the 
just man will pay more and the unjust less on the same amount of 
income.'' This is our opportunity to learn from Plato. In the 
President's Tax Plan, the two provisions making up more than half of 
the tax package, (cutting the tax on stock dividends by more than a 
half and the capital gains tax cut), primarily benefit the wealthy and 
in fact are the only permanent tax cuts in the plan.
  Voltaire, the famed writer stated, ``In the matter of taxation, every 
privilege is an injustice''. We must work diligently to root out the 
injustices currently being considered for inclusion in our Tax System. 
The citizens of my home state of Illinois are waiting for us, their 
elected officials to come together to ensure that we protect them, and 
guard their earnings against any and all unfair concessions.

  Mr. Speaker, Gentlemen and Ladies of the House let us not fail our 
citizens in our efforts to place us finally on the Road to Economic 
Growth. We must remain steadfast in our efforts to accomplish that 
heavy task, to clearly and evenly mete out portions of the tax burden 
amongst our citizens.
  Mr. OWENS. Mr. Speaker, I rise in opposition to the voodoo economics 
of the Republican 550 billion dollar tax package. I support the more 
practical and better targeted Democratic alternative legislation. We 
are taking action today; however, the quest for a meaningful tax policy 
for our nation must continue with the widest possible participation in 
the debate. One constructive component of a new and fairer tax policy 
must be a greater allocation of the tax burden to the corporate sector. 
We must have less pain for individual and family income tax payers and 
more responsibility shouldered by profit making corporations. This 
process should start now with a surcharge imposed on corporate profits 
to pay for the Iraq war and occupation.
  Mr. Speaker, I have introduced the Domestic Budget Protection Act, 
H.R. 1804, which will eliminate the Iraqi War competition for federal 
funds and allow the Congress to resume the necessary funding for vital 
domestic programs. The following important facts must be considered:
  While the Congress has allocated 79 billion dollars for the Iraq War 
and occupation, unprecedented hardship devastates state, local, and 
education agencies--
  Thousands of teachers and government employees are threatened with 
layoffs--
  Since the Bush Administration offers no revenue sharing relief, taxes 
are being increased in states and localities across the nation--
  During past wars a surcharge on corporate profits has lessened the 
competition of the military budget with domestic budget priorities--
  In H.R. 1804, the following is cited: The Congress finds that there 
is an established precedent for the long-term financing of a U.S. War 
effort. A special tax on the profits of the nation's largest 
corporations would be in accordance with previous precedents: World War 
I, World War II, Korea and Vietnam.
  The Congress finds that in the last 25 years corporations have 
steadily borne less and less of the overall tax burden. The corporate 
share of the tax burden has dropped from a high of 35 percent in 1945 
to a level of 8 percent in the year 2002. At the same time the 
individual income tax share of the tax burden has grown from 13 percent 
in 1940 to 46 percent in 2002.
  The Congress finds that it is necessary to suspend further reductions 
in assistance to domestic programs. It is also imperative that any 
increases in basic revenue be utilized to increase assistance to vital 
domestic programs.
  Historically, a special tax placed on the profits of the nation's 
largest corporations has been used to fund the U.S. War effort. The 
Domestic Budget Protection Act follows in these historic steps and 
offers a solution to increase assistance to domestic programs by 
placing a surcharge on corporations with assets greater than 10 million 
dollars. This special revenue will be used to fund the war and 
occupation and thus free up other revenue to fund domestic programs. In 
the last 25 years corporations have borne less and less of the overall 
tax burden. Their share, while dropping as low as 6 percent within the 
last 20 years, is currently 8 percent. On the other hand, individual 
income taxes as a share of the overall burden has risen from 13.6 
percent in 1940 to the present level of 46.3 percent.
  In conclusion, Mr. Speaker, let me emphasize the fact that the 
Republican Majority is determined to hide: America is the richest 
nation that ever existed on the face of the earth. We have the 
resources to do whatever we decide is important. Our greatest untapped 
pool of wealth is the pool of corporate profits which grow boundlessly 
as a result of the favorable economic, political, and militarily 
security environment maintained by the American people. We must have 
less pain for the family taxpayers and more revenue responsibility by 
corporations. Members should begin by supporting the Domestic Budget 
Protection Act--H.R. 1804.
  Mr. COSTELLO. Mr. Speaker, I rise today in opposition to H.R. 2, the 
Republican Jobs and Growth Tax Reconciliation Act.
  This bill will not put unemployed Americans back to work. The tax 
cuts that were enacted in 2001 have done little to stimulate the 
economy over the last two years. Instead, unemployment is up, and 
governments on every level--from local to federal--are facing severe 
deficits.

[[Page H3934]]

  I am extremely disappointed that the Republicans adopted a rule that 
prohibited the Democrats from offering a substitute. The Republican 
bill will cost the U.S. taxpayer $549.5 billion over the life of the 
bill while the Democratic bill is fully paid for over that same time 
period.
  The Democratic alternative would have provided immediate stimulus and 
jobs creation by extending benefits for the long-term unemployed and 
expanding the work opportunity jobs credit. It targets tax relief to 
those who needed it most, by increasing the child tax credit and 
providing this credit to more Americans, accelerating the widening of 
the 10 percent tax-bracket and accelerating marriage penalty relief.
  It also provides funds immediately to the states to meet their 
critical needs by including funding for Medicaid, homeland security, 
and transportation infrastructure.
  The Democratic alternative would also provide for long-term job 
creation and growth by expanding the amount of new investments that a 
small business can deduct and by allowing all companies an accelerated 
depreciation of 50 percent for 12 months. It also reduces corporate tax 
rates by 3.5 percent.
  In addition, the Democratic alternative would have prevented 
companies from expatriating to tax-shelter countries like Bermuda and 
stopped top corporate executives from protecting their own retirement 
benefits at the expense of their workers.
  I am deeply disappointed that we will not have an opportunity to 
fully debate this bill's impact on the economy, and that we were unable 
to offer any amendments to the Republican bill. The Republican bill is 
flawed and I urge my colleagues to join me in voting no on this bill, 
which will not help our hard-working and unemployed Americans.
  Mr. EVANS. Mr. Speaker, I am here today to address my concerns 
regarding the pending tax cut legislation. This so-called ``economic 
growth'' bill will do nothing to grow the economy, increase the number 
of jobs, or help the middle or low income families that make up the 
backbone of this great nation.
  This program is directed at cutting the taxes of the rich in an 
attempt to resurrect fiscal policies that have been proven to fail. The 
only way to stimulate growth is to employ people, providing them with 
good paying jobs and an income that allows for purchasing the items 
that we produce. That means that we need a plan that creates jobs and 
assists those who are currently unemployed. The Democrat plan does 
that, the plan that is on this floor does not. It cuts taxes that 
advantage the top 1 percent of the population. That means we do not 
affect the other 99 percent, which by my accounting seems to mean that 
the majority of Americans are left behind looking for work with no 
support from those of us who were sent here to help.
  Additionally, the plan before us will do nothing stimulate the 
economy now, and sacrifices the economy of the future. Without jobs 
now, without assistance to the states now, without sensible policies 
now, we will simply create a shortfall that will be paid for out of 
Social Security and our children's future. Currently, schools are 
closing early, the unemployment rate is growing, and states are 
struggling to provide basic services at minimal levels. The direction 
taken in this legislation is fiscally irresponsible if we expect to 
live up to the promise we made to the people of the United States.
  I urge my colleagues to vote against this irresponsible legislation 
and set this Congress in the direction of true job and economic growth.
  Mr. TOM DAVIS of Virginia. Mr. Speaker, I rise today in support of 
H.R. 2, the Jobs and Growth Tax Act of 2003.
  Although there is general consensus among many economic forecasters 
that our economy is poised to grow at a faster pace than it has over 
the last year, action is necessary in order to hasten the recovery. 
While GDP has continued to increase, the modest increases we have been 
witnessing are not sufficient to stabilize employment. Consumer 
confidence and spending have improved, however business and investor 
confidence have not followed suit. The legislation before us today will 
stimulate growth and investment, and expedite our economic recovery.
  First, this legislation will increase purchasing power for all 
Americans through an acceleration of the 2001 tax cuts for individuals. 
Accelerating tax relief from the marriage penalty, increasing the child 
tax credit, expansion of the 10 percent tax bracket and providing 
working families with relief from the AMT will help to give our economy 
an immediate stimulus.
  Secondly, this package creates business and investment incentives to 
spur business growth, ultimately leading to job creation. Increases in 
depreciation allowances for business and an increased allowance for 
expensing capital purchases for small business will promote capital 
investment, putting more money back into the economy and creating more 
jobs. These provisions will work to counteract the general climate of 
caution in the business sector that has resulted in layoffs, a 
reluctance to invest in new capacities, and aggressive actions to 
maintain low levels of inventories.
  Finally, the bill reduces the tax rate on dividends and capital gains 
to spur investment and business growth. Today, we are faced with the 
simple fact that the overall economy cannot improve until the stock 
market recovers. Additionally, today, eighty-four million Americans, 
over 50 percent of our population, are invested in the stock market, 
and investment plays an increasingly important role in our individual 
financial security. With much of this investment in 401(k)s, IRAs and 
pension plans, it is vital to many Americans that we do all we can to 
increase the growth of the stock market. Additionally, capital gains 
tax reductions have historically resulted in freeing stranded capital 
locked in mature investments as well as increasing capital for new 
investment. The reduction of the tax rate on dividends and capital 
gains to 5 percent and 15 percent will increase the purchasing power of 
individuals, stimulate investment and capital formation in business, 
and increase job creation through business growth.
  For these reasons, Mr. Speaker, I rise in support of this measure, in 
support of an immediate stimulus and infusion of confidence in our 
economy, in support of creating jobs, and in support of long-term 
economic stability and growth for the future.
  Mr. CRENSHAW. Mr. Speaker, the way the other side shapes this debate, 
you'd think keeping money in Washington is going to boost the economy, 
create jobs, and give business owners the incentive to hire more 
workers. Nothing could be further from reality. But that's where this 
debate has gone.
  ``We can't afford it,'' they say. ``It's too much money,'' they 
argue. ``Deficits until the cows come home,'' they claim. The reality 
is that taxes are the leg irons on economic growth. That's the big 
picture. We are in a situation where economic growth has plodded along 
at a snail's pace since 1999. Then we were hit by a number of 
circumstances beyond our control--but each with a huge impact on the 
economy.
  So what do we propose? Well, the best way to create jobs is to kick-
start our economy. The best way to improve our economy is to let people 
keep more of their money. The vehicle that will get us there is H.R. 2, 
the Jobs and Growth package. H.R. 2 will empower consumers, encourage 
investment, and enhance the retirement of our senior citizens.
  The Jobs and Growth package is $550 billion in job creation. It lets 
families keep more of the money they've earned creating opportunities 
for every American who wants to work. On that note: Every American who 
wants to work, ought to have an opportunity. Who are we to stand in the 
way of growth and prosperity?
  You simply can't keep pooling the money here in Washington and expect 
the economy to grow. This package creates 1.2 million new jobs this 
year, 45,000 of those in my home State of Florida. H.R. 2 is pro job, 
pro family, and pro economy. This package creates work opportunities, 
and accelerates real relief for real families this year. This package 
increases the child tax credit to $1,000.
  This package reduces the marriage tax penalty. This bill will allow a 
family to buy a new washing machine this year, save for their child's 
education next year, and buy a new car the year after that. This 
package lets 27 million taxpayers benefit from the increased child tax 
credit. Two-thirds of this package goes to individuals.
  This plan provides some relief to 10 million senior citizens who 
currently pay the wrong and immoral double taxation of dividends. This 
will relieve at least some of their worry that they'll outlive their 
retirement nest egg.
  This plan gives the backbone of our economy--small business owners--
the freedom to invest in their business, hire more employees, and 
create more taxpayers. The federal government is not going to spend us 
out of a slowdown. That is not an option. You want to increase the tax 
rolls? Then increase the opportunities for work. You do that by 
empowering consumers, employing workers, growing the economy.
  This is the taxpayer's money, not the federal government's. I urge my 
colleagues to pass this bill. H.R. 2 is the kick-start this economy 
needs.
  Mr. BLUMENAUER. Mr. Speaker, in Oregon the economic pain of 
unemployment and state budget deficits is not an abstraction. The 
nation's highest unemployment rate of 7.6 percent is compounded by 
failure of the federal government to meet its commitments for hometown 
security, healthcare and education. Not only is the rate of 
unemployment high, many are experiencing long-term unemployment. 
Nationally, nearly 2 million workers have been out of work for at least 
6 months, the highest level in 20 years.
  Oregonians are clear about their priorities:
  (a) Education--We must fully fund IDEA and the President's own 
signature education bill.

[[Page H3935]]

  (b) Healthcare--Oregon's budget crisis is forcing reductions, cuts 
and closures to critical programs for our seniors, disadvantaged, and 
poor. We must fund these basic services.
  (c) Spending on Crumbling Bridges--Infrastructure investments put 
people to work tomorrow, improve economic efficiency and better our 
communities. Replacing Oregon's bridges will cost over $4 billion and 
would provide 190,000 jobs and $25 billion in economic activity.
  (d) Hometown Security--My constituents are concerned about security 
from terrorism and health threats such as SARS. We should invest in 
projects and programs that will make our communities safer and 
healthier.
  (e) Unemployment Benefits--We need to extend the unemployment 
benefits due to expire.
  We should reject the Enron-style accounting used in this tax bill, 
which distorts the true costs and intent of the tax cut package. The 
Republican estimate of ``only'' $550 billion was accomplished by 
putting in unrealistic ``sunsets'' to various tax provisions. The tax 
cuts they have every intention of making permanent will increase 
deficits by over $1.1 trillion if in place over the next 10 years.
  Current budget realities, a wavering economy, and international 
conflicts have resulted in tumultuous and complicated times. However, a 
simple course of fiscal responsibility and domestic security can be 
achieved by taking common sense actions:
  No tax cuts before we meet our obligations;
  Be honest about the actual costs of tax cuts and spending;
  Meet federal obligations to programs that are staggering state and 
local budgets;
  Help those who need it the most, not the least;
  Don't mortgage the future by playing fast and loose with the truth 
today and the economy tomorrow.
  Mr. MARKEY. Mr. Speaker, it's been said that the French drink 
champagne only when they're happy or when they're sad. Otherwise, they 
never touch it . . . unless they're thirsty.
  This is kind of like the Republicans' approach to tax cuts. 
Republicans propose tax cuts when the budget is in surplus. They 
propose tax cuts when the budget is in deficit. Otherwise, they never 
propose tax cuts . . . unless they're thirsty for more giveaways for 
the rich.
  President Bush took office with a projected $5.6 trillion budget 
surplus and the Republicans immediately called for a huge tax cut. Now 
the Republicans have turned that surplus into what will be a $4.0 
trillion budget deficit by 2011, and they are still calling for a huge 
tax cut.
  Republicans have violated the First Law of Holes, which is ``When 
you're in one, stop digging.''
  Although the war in Iraq has ended, but President Bush has dropped 
his own version of the MOAB--the Mother Of All Budgets--on the American 
economy.
  Unlike the Army's MOAB, the Bush MOAB devastates the Medicare program 
and the Social Security trust fund.
  The Bush MOAB pounds the Social Security and Medicare trust funds for 
the Greatest Generation who built this country.
  The Bush MOAB shells funding for health care for America's veterans.
  And the Bush MOAB obliterates education funding for our children and 
jobs for Americans out of work.
  As the Bush administration and this Republican Congress drop a MOAB 
on the American people and our economy, they are also air dropping 
bottles of champagne on the wealthiest individuals and corporations in 
our country who will be the primary beneficiaries of this selfish and 
unprecedented tax cut. Because according to the GOP, there is no bad 
time for a tax cut--if you ask a majority of Americans, they'll tell 
you that in a devastated economy at a time of war, it is IMMORAL to cut 
taxes for the wealthiest at the expense of the poorest Americans.
  We should be putting funds aside to help care for the estimated 14 
million Americans who will have Alzheimer's by the middle of the 
century, the more than 1 million people who suffer from Parkinson's 
Disease, or the 30,000 Americans afflicted with Lou Gehrig's Disease.
  We should be putting funds aside to care for the Baby Boomers, who 
will be retiring in huge numbers at the end of the decade. This group 
will soon begin drawing an estimated $25 trillion in Social Security 
and Medicare benefits, which are currently unfunded.
  This Republican tax cut and Bush MOAB blows up our country's fiscal 
future and the potential for our government to take care of those who 
built this country and fought for this country.
  Mr. HOLT. Mr. Speaker, I favor cutting taxes, but in balanced and 
fiscally responsible ways. That's why I have been one of the few 
Democrats in Congress who has been willing to cross party lines to vote 
for eliminating the estate tax, to vote for eliminating the marriage 
penalty, to vote for cutting taxes for small businesses, to vote for 
cutting taxes to help people pay for education and retirement, and to 
vote for cutting taxes for senior citizens.
  With a war in Iraq and looming postwar costs, increased expenses for 
domestic security and a ballooning budget deficit, Congress must 
exercise restraint on both revenues and spending to prevent fiscal 
policy from spiraling out of control. The consensus in favor of 
balancing the budget over the long term must be re-established.
  The fiscal outlook is much worse than official administration 
projections indicate. These projections assume that the tax cuts 
enacted in 2001 will expire at the end of 2010. They also assume that 
discretionary spending, the part of the budget that pays for national 
defense, domestic security, education and transportation, will shrink 
continuously as a share of the economy. Neither of these assumptions is 
realistic.
  We need a tax bill that recognizes the ballooning budget deficit and 
address the economic realities of the world we are facing.
  No one denies that our economy needs an immediate stimulus. 
Unfortunately, this measure fails to provide such a stimulus, but 
instead gives away billions to the wealthy while creating precious few 
jobs.
  This tax bill is completely out of touch with the economic realities 
facing the federal government, the states, and millions of American 
taxpayers and workers. It fails to provide real solutions to the 
problems of stagnant economic growth, unemployment and the fiscal 
crises in the states. For the past two and a half years, this Congress 
has given the President everything he wanted on economic policy, and it 
has led to a total economic disaster. We've lost more jobs than any 
time since the Second World War. Why would we want to vote for more of 
the same?
  In addition to being ineffective, today's bill is also unfair. 
Benefits targeted to low- and middle-income families, such as the 
expansion of the 10 percent tax bracket and the increase in the child 
tax credit, are temporary, while the centerpiece of the measure--a 
massive cut in the dividend and capital gains tax rates costing nearly 
$280 billion--is essentially permanent, sun setting at the end of the 
budget period.
  According to the Center on Budget and Policy Priorities and the Tax 
Policy Center, taxpayers with incomes of more than $1 million will 
receive an average tax cut of $105,600 in 2003, with $42,800 of that 
coming from cuts in the capital gains and dividends tax rate, while 
middle income taxpayers would receive an average tax cut of just $218. 
The top 5 percent of households would receive 75 percent of the 
benefits from the dividend and capital gains rate cut, while only one-
fifth of households with income between $40,000 and $50,000 a year 
receive any benefit at all.

  In return for cutting taxes for the wealthy, the government will be 
saddled with staggering long-term deficits that will burden future 
generations. As a result, it will reduce our ability to support vital 
programs such as Social Security and Medicare, as well as make needed 
investments in schools, health care, infrastructure, and basic 
research.
  Long-term deficits also weaken economic growth. Just last week, 
Federal Reserve Chairman Alan Greenspan warned against costly new tax 
cuts when the government is already facing record-high deficits. Wall 
Street analysts estimate that annual deficits over the next 10 years 
could total $4 trillion, with a possible budget deficit this year alone 
of nearly $500 billion--the highest annual deficit in the history of 
the republic. Just two years ago, the projected surplus was $5.6 
trillion. As the deficits increases, interest rates go up--which makes 
it harder on families to pay for mortgages, education loans, credit 
card bills, and car payments.
  Further, the bill does nothing to address the budget crises affecting 
the states, which are facing their worst budget gaps since World War 
II. Unlike the federal government, states must balance their budgets 
every year and have been forced to cut programs and lay off thousands 
of workers.
  Mr. Speaker the unemployment rate is now at 6 percent and the number 
of workers who have been unemployed for more than six months account 
for 20 percent of all unemployed workers, the largest proportion in a 
decade. There are almost 9 million officially unemployed Americans and 
another 9 million who are either working part-time because they can't 
find full-time work or who are so completely discouraged that they have 
stopped looking for work. The economy has lost over 2 million jobs in 
the last two years, but this bill does nothing to help the unemployed.
  In his State of the Union address earlier this year, the president 
said that ``we will not pass along our problems to other Congresses, 
other presidents, and other generations.'' But this bill does exactly 
that. This is the third ``economic stimulus'' package of the Bush 
administration. The first two did little to stimulate the economy and 
no one, including the Congressional Budget Office, expects this bill 
will do much better. Why on earth would we want to saddle today's 
children with debt to give bonuses to wealthy people, knowing full well 
that

[[Page H3936]]

economic benefits will not trickle down to middle income people? We 
need real stimulus that will create jobs, fuel the economy, and help 
our states through their current fiscal crises.
  Mr. CHOCOLA. Mr. Speaker, last week, Congress received some troubling 
economic news. The unemployment rate is now at 6 percent.
  That news ought to send a clear signal to members of this body that 
we need a strong economic recovery plan.
  You see, when the economy grows, somebody is more likely to find 
work. Therefore, we ought to be asking the questions: How do we 
encourage economic growth? What can this Congress do to promote job 
creation here in America?
  The other day I was speaking with someone who doesn't agree that 
cutting taxes are a good thing. They expressed to me their concern that 
if we continue to cut taxes that we will only continue deeper into 
deficits. They said, ``Aren't you at all concerned about deficits?''
  I responded that of course I was concerned and there are three proven 
steps we can take to control them.
  I said, ``The way I see it, there are three things we can do to 
control deficits--we can either raise taxes, control spending, or cut 
taxes.''
  I asked if they were in favor of raising taxes. Of course not, was 
their immediate response.
  I then asked, which programs do you want to significantly cut to 
control spending. They responded they couldn't think of anything that 
should be cut.
  I then said, well, you have to be for cutting taxes. It's the only 
other option for controlling deficits.
  They sat there silent for a second, thinking about what I had said. 
They then turned to me and said, you know what--you're right.
  Mr. Speaker, I believe the best way to achieve growth is for hard 
working people to keep more of their own money. This bill achieves the 
result of putting money back into the taxpayer's pocket, which will in 
turn stimulate economic activity, and create much needed jobs.
  The Jobs and Growth Tax Act before us today is an important sign that 
members of both parties in the House of Representatives now recognize 
that tax relief helps create jobs.
  This legislation will lower taxes on capital gains, lower taxes on 
dividends that small businesses could write off, and reduce individual 
income tax rates.
  If you're interested in job creation, if you're interested in a pro-
growth package, then let's enact meaningful tax relief and pass this 
bill so more Americans can find work.
  Mr. KIND. Mr. Speaker, today we are considering the legislative 
follow-up to the majority's irresponsible budget resolution narrowly 
passed earlier this year. It is another chance to ask ourselves if what 
we are doing is the right choice for America, and the right choice for 
future generations. I can only hope that this House reflects on past 
performance, and switches course away from the path toward fiscal 
oblivion that the majority is leading our nation.
  Based on the policies promoted by the President and the majority, the 
Federal Government will be running deficits as far as the eye can see, 
with a record $400 billion deficit in 2004 alone. Just to keep things 
in perspective, the Congressional Budget Office estimated in 2000 that 
by 2010, we would have a $5.6 trillion budget surplus. That projected 
surplus has turned into a projected $2 trillion deficit over ten 
years--a reverse of $8 trillion since President Bush took office.
  Now, it is understandable that in a time of economic slowdown, 
increased terrorist threats, and military action in Iraq, government 
spending priorities change, and we may have to run some short-term 
budget deficits to meet new challenges. However, the most disturbing 
thing about the majority's fiscal policy is that they make no effort to 
stem this deficit trend.
  This is an important problem because deficits do matter. Contrary to 
what the President and the congressional leadership are claiming to the 
American people that deficits somehow, some way, magically do not 
matter anymore in regards to economic performance, history, and leading 
economists, tell us different.
  In an opinion article printed in the New York Times on April 9, 2003, 
titled ``No New Tax Cuts,'' members of the nonpartisan and widely 
respected Concord Coalition, including former Senators Bob Kerrey, Sam 
Nunn, and Warren B. Rudman, former cabinet secretaries Peter G. 
Peterson and Robert E. Rubin, and former Federal Reserve chairman Paul 
A. Volcker, outlined their opposition to the majority's plan because of 
its long-term fiscal impacts.
  In the article, they state that ``Congress cannot simply conclude 
that deficits don't matter. Over the long term, deficits matter a great 
deal. They lower future economic growth by reducing the level of 
national savings that can be devoted to productive investments. They 
raise interest rates higher than they would be otherwise. They raise 
interest payments on the national debt. They reduce the fiscal 
flexibility to deal with unexpected developments. If we forget these 
economic consequences, we risk creating an insupportable tax burden for 
the next generation.''
  We cannot in good conscience pass along an unconquerable debt to 
future generations. Further, we should not be enacting unbalanced tax 
cuts that will fail to stimulate the economy.
  For example, the Republican tax package is heavily weighted toward 
the top 0.1 percent of income earners (those making over $1 million 
annually) with approximately 25 percent of the $550 billion package 
going to this top 0.1 percent. This amount is equal to what 90 percent 
of the rest of all taxpayers will see from the proposal.
  This imbalance is highlighted in the most talked about portions of 
this legislation, the dividend and capital gains tax cuts. These cuts 
will do little if anything to stimulate the economy and will be of very 
little benefit to most Americans. In fact, nearly 80 percent of 
Americans making less than $100,000 per year report no dividend income. 
Further, the Republicans attempt to mask the total cost of their 
proposal by sunseting many of their cuts after five years. With a plan 
that excludes the vast majority of Americans, it is not surprising that 
economic experts from across the political spectrum have stated clearly 
that the Republican plan makes little sense at this time.
  A statement issued by ten Nobel prize winning economists on February 
10, 2003, supports this point. It reads ``regardless of how one views 
the specifics of the Bush plan, there is wide agreement that its 
purpose is a permanent change in the tax structure and not the creation 
of jobs and growth in the near-term. The permanent dividend tax cut, in 
particular, is not credible as short-term stimulus. As tax reform, the 
dividend tax cut is misdirected in that it targets individuals rather 
than corporations, is overly complex, and could be, but is not, part of 
a revenue-neutral tax reform effort.''
  What makes the least sense is that the Republicans are moving this 
ineffective tax cut package at exactly the worst moment in our Nation's 
history, when we have 80 million baby boomers rapidly approaching 
retirement age and starting to enter the Social Security and Medicare 
systems. Instead of the irresponsible budget before us, we should be 
practicing fiscal discipline to get the Nation on sound fiscal footing 
in anticipation of that demographic time bomb going off.
  We have an alternative proposal ready that offers real and 
responsible economic stimulus, while ensuring the viability of Social 
Security and Medicare. Unfortunately, the majority has refused to allow 
debate on this Democratic alternative.
  The alternative focuses on the middle class by permanently increasing 
the child tax credit, ending the marriage penalty tax, and providing 
$32 billion to small businesses so they can expand and create jobs. 
Most importantly, however, the Democratic plan is fast acting, will 
create more jobs than the Republican plan, and is fully paid for so our 
children and grandchildren are not left holding a bag full of I.O.U.s 
and debt.
  The Democratic plan also extends unemployment benefits to some of the 
2.7 million workers who have lost their jobs, mostly in manufacturing, 
since President Bush took office. This is particularly important for my 
home state of Wisconsin, which had the third highest rate of new 
unemployment filings in March. Economists estimate this investment in 
our workforce will yield $1.73 in economic growth for every $1 
invested, compared to $0.09 for every dollar spent in the majority's 
plan.
  The President has gotten everything he has requested for the economy 
from Congress, and the results show the worst economic performance 
under any President in the last 50 years. Now is the time to stop the 
bleeding, and start making responsible fiscal decisions. It is time to 
start investing in our children, instead of borrowing against their 
future.
  I urge my colleagues to reject the majority's irresponsible tax 
package and pass the motion to recommit so that we can bring forward 
the Democratic alternative.
  Mr. LEWIS of Georgia. Mr. Speaker, I rise today to express my outrage 
at this irresponsible, not to mention unfair, tax bill that the 
majority has concocted.
  This bill is full of gimmicks to hide its real cost, but when all is 
said and done, the total cost of the President's package combined with 
his previously enacted tax cuts will result in a $2.8 trillion deficit 
by 2013.
  $2.8 trillion.
  That's some feat considering that this President inherited a $5.6 
trillion surplus.
  This bill is beyond irresponsible. And, if that weren't bad enough, 
this plan is unfair.
  Those at the very top will get a generous tax cut, but those at the 
bottom will do no better.
  In the first year, households with incomes of more than $1 million 
would receive an average tax cut of over $93,000, while households

[[Page H3937]]

earning between $40,000 and $50,000 would average a cut of only $452.
  Despite their claims to the contrary, there is no evidence that this 
bill will create even one job.
  Nor will it lead to sustained, long-term economic growth. It will 
undermine our economy and create record deficits that will burden our 
future generations.
  The simple truth is that Republicans designed this bill to give their 
wealthy friends huge tax breaks, while offering nothing for those who 
truly need tax relief--the working families and individuals of America.
  What little help they do offer to the middle class expires at the end 
of 2005, while the capital gains and dividend tax cuts continue through 
2013. But, it's not secret that the majority intends to extend them 
indefinitely thereafter.
  They did it before, and you had better believe that they'd do it 
again. And when they do, this $550 billion plan will end up costing us 
more than $1 trillion.
  This bill is unacceptable.
  We can do better. We have the ability, we have the capacity to do 
better, and we must do better. We owe it to the hardworking Americans 
who won't benefit under this bill.
  And, we owe it to the 2.7 million people who've lost their jobs since 
President Bush took office. This bill has no compassion for them. 
They're left out in the cold under this proposal.
  It is a shame and it is a disgrace. I just don't understand it.
  I can't for the life of me understand how we can spend billions of 
dollars to rebuild Iraq--to build schools, to provide health care--yet 
we can't find a cent for our unemployed here at home.
  That is not right, that is not fair, and that is not just.
  As a great nation, we must do better.
  I urge my colleagues to vote no on this irresponsible and unfair 
bill.
  Mr. THOMPSON of California. Mr. Speaker, on April 24, President Bush 
told the workers of Canton, Ohio that the best way to solve the deficit 
is to grow the revenues--and have fiscal sanity in Washington, DC.
  As a member of the Blue Dog Coalition, I've been championing fiscal 
sanity since I first came to Congress. But, I just don't see the fiscal 
sanity of passing a $550 billion tax cut package that we flat out can't 
afford.
  Especially when it's a tax package touted as help for the working 
person and the elderly but structured to help those in the top income 
brackets.
  The corner stone of this bill is a proposal to reduce the tax paid on 
dividends and capital gains.
  We've heard all about how this is going to stimulate the economy and 
create jobs, and boy is it ever going to help out seniors, with over 
half of them receiving dividend income.
  Well, yes. Over half of our Nation's seniors receive dividend income. 
And, this bill will cut their taxes. But, if they make less than 
$50,000 a year, their tax cut will be a grand total of $44.
  Since the average senior income is far less than $50,000, it doesn't 
seem that this bill is going to help seniors as much as some might like 
you to think.
  And, this bill certainly doesn't help America's workers as much as 
some might like you to think.
  The White House claims that this bill will create 190,000 jobs in 
this year alone. That's great, because the Labor Department says that 
we just lost 190,000 jobs in March and April. In fact, we've lost 2.7 
million jobs since the last round of tax cuts were passed--over 239,000 
in California alone.
  And this new tax bill doesn't mean more jobs for California. In fact, 
this tax bill doesn't do anything good for California.
  Over 146,000 jobs will be lost and state revenue will be cut by more 
than $1.2 billion. And, at the end of the day, most Californians, 47 
percent, will get a tax cut of less than $100.
  Where's the fiscal sanity in growing the deficit through a $550 
billion tax cut, when the people who really need our help aren't the 
ones who are getting it?
  Right now, this country is over $6.4 trillion in debt.
  We increased our debt limit by $450 billion just 10 months ago--and 
we've already spent all of it. Now, we are trying to increase the debt 
limit by an additional $980 billion.
  But, it doesn't look like that increase will come in time; it seems 
we've spent our money so quickly that we need to borrow an additional 
$79 billion just to meet our bills in May and June.
  If we can't pay our bills now, how are we going to do it once we've 
shrunk revenues by $550 billion? Will we just borrow more?
  At the rate we're going, this Nation is going to be over $12 trillion 
in debt within 10 years.
  And, don't forget--we pay interest on that debt. Today, it costs us 
over $1 billion a day. Ten years from now, under a best case scenario 
of interest rates not going up, it will cost us over $2 billion a day.
  Some say that debt only matters in comparison to our GDP. Well, if 
things don't change, by 2013 our debt will be almost 50 percent of our 
GDP. That matters. And, it matters now, when debt is almost 35 percent 
of our GDP.
  Debt does matter. Deficits do matter.
  They matter less in times of war, but they are still critically 
important factors in our overall economic security.
  And, passing measures that will only worsen our economic projections 
and pass the buck--and the bill--to future generations is neither 
fiscally responsible nor fiscally sane.
  Mr. BACA. Mr. Speaker, I rise in opposition to H.R. 2. This is simply 
another tax cut for the rich that will have no real effect on the 
economy. Its only effect will be to put more Americans out of work, and 
leave more Americans out of luck.
  Let's be honest with the American people, this bill is about 
overhauling the Tax Code bit by bit until working families pay the 
lion's share of the taxes. It has nothing to do with getting the 
economy moving again.
  This package fails to create jobs or create the conditions for an 
economic recovery. Ironically enough, this bill that the Republicans 
are calling an economic stimulus plan actually does the exact opposite.
  It fails to extend the unemployment benefits that millions of 
Americans are depending on to pay for groceries, utilities, and rent, 
and makes it more difficult for Americans to get back to work.
  And it pushes us into the abyss of deficit spending, which will only 
create more drag on the economy.
  It just doesn't make sense.
  Four hundred economists, including eight Nobel Prize winners and FED 
Chairman Greenspan, have all expressed severe doubts about whether this 
bill will do anything other than jeopardize Social Security and 
increase the deficit to $1.4 trillion.
  While school districts are suffering from the nationwide State budget 
crisis, Republicans aim to deny States the money owed to them from the 
No Child Left Behind Act. While the shelves at food banks are empty 
Republicans are cutting back on government programs like food stamps, 
welfare and others that help people during difficult times.
  How is this bill going to stimulate the economy? Only 9 percent of 
the tax cuts would take place this year. The rest of the plan centers 
on the President's dividend tax cut. It cuts the tax on stocks and 
dividends by more than 50 percent. American working families don't live 
from dividend check to dividend check; they live from paycheck to 
paycheck.
  Last, we should remember that the war in Iraq didn't cause the 
massive budget deficit. The deficit is due to the millionaire-only tax 
cut that Congress passed 2 years ago. The deficit has only grown worse 
because of the Bush economy, the war, and corporate scandals in the 
last year.
  We cannot afford to make the same mistake twice. American working 
families deserve better.
  Mr. Speaker, I will not vote for this, and I encourage my colleagues 
on both sides of the aisle to call for a real economic stimulus plan 
and a budget that will help put American working families back on their 
feet.
  Mr. FRELINGHUYSEN. Mr. Speaker, today, I rise in strong support of 
H.R. 2, the Jobs and Growth Tax Act. It is clear our Nation's economy 
needs a spark, and I believe H.R. 2 will provide that needed spark.
  The President said that we need more demand for goods and services so 
more Americans can find work, and I agree. The best way to encourage 
demand for goods and services is to let taxpayers keep their hard-
earned money.
  Our economic growth plan calls for speeding up the historic tax 
relief we passed in 2001 so individuals and families get the benefits 
of those tax cuts today, when we need it most. Under the House plan, 
nearly every American who pays income taxes will get much needed tax 
relief.
  This tax relief will help small business men and women expand their 
businesses. The job growth measures contained in this bill means an 
average of nearly 20,000 jobs will be created in New Jersey, each year 
for the next 4 years--with 25,000 jobs created in 2004 alone.
  It will also mean for nearly 800,000 parents in New Jersey, a check--
this year, within weeks of the bill's signing--for up to $400 for each 
eligible child who qualifies for the increased child tax credit, which 
under current law stands at $600 per child, but under the bill we 
passed today would be increased to $1,000.
  Ninety-two million American taxpayers would receive, on average, a 
tax cut of $1,083 in 2003--putting nearly $100 billion back into the 
economy over the next 12 months.
  Three million moderate-income families would see their income tax 
burden eliminated entirely.

[[Page H3938]]

  The marriage tax penalty would be reduced for working couples this 
year, instead of waiting until 2009. In New Jersey, this means relief 
for nearly 1.2 million married couples.
  America has made tremendous strides in the strengthening of our 
national security, and now we must take steps that are just as bold to 
protect our economic security. Tax relief that will help create jobs, 
let taxpayers keep more of the hard-earned money and immediately inject 
millions into our market-based economy is the answer.
  For those reasons and more, H.R. 2 is an important step on the path 
toward renewed economic growth and job security for all Americans. I 
urge my colleagues to vote in favor of H.R. 2.
  Mr. WELDON of Florida. Mr. Speaker, I rise in strong support of H.R. 
2, the Jobs and Growth Tax Reconciliation Act of 2003. This economic 
plan will lead to the creation of jobs and stimulate our economy both 
in the short-term and the long-term.
  This plan provides much needed tax relief for seniors, families and 
for small businesses all with the aim of creating jobs and getting our 
economy going.
  First, as an age group, senior citizens will be the most benefited by 
cutting the dividend tax. Seniors are more likely than most Americans 
to own dividend-paying stocks, receiving 47 percent of all dividends.
  Since 1978, half of all dividend-paying stocks have stopped paying 
dividends, primarily because they are double taxed by the Federal 
Government. A drastic reduction in the dividend tax will (1) encourage 
businesses to pay higher dividends, (2) give a more dependable return 
on investments, and (3) lead to better corporate accountability.
  Many seniors took the necessary steps to provide for their retirement 
and double taxation of dividends hurts them and must be eliminated. 
Eliminating the double taxation of dividends will put billions of 
dollars back into the economy each year and enhance the retirement 
savings of all Americans.
  Small businesses are the backbone of our economy and unfortunately 
they are being taxed out of business. Passage of the President's tax 
plan will provide small businesses with significant tax incentives to 
expand their operations. Specifically, the bill will boost the economy 
by allowing small businesses to write-off in the first year, $100,000 
in new equipment purchases. Current law allows them to deduct only 
$25,000. This level of tax relief will lead to equipment purchases, 
which will in turn create jobs and increase productivity.
  In addition to the provisions above, other provisions of the tax bill 
will further benefit American families, who are hardest hit by Federal 
tax policies.
  Adoption of the President's tax plan will increase and expand the 
child tax credit to $1,000 per child today, instead of waiting until 
2010 as is in the current law. The bill also cuts the marriage penalty, 
which unfairly forces married couples to pay more in taxes.
  Increasing the per child tax credit and cutting the marriage penalty, 
empower American families by letting them keep more of the money they 
have worked so hard to earn.
  This is vital legislation and I urge my colleagues, for the sake of 
America's workers, seniors and families, to vote yes for H.R. 2, the 
Jobs Growth Tax Reconciliation Act of 2003.
  Mr. SCHIFF. Mr. Speaker, scores of Americans continue to lose their 
jobs each day, the deficit climbs to new and unprecedented heights, 
states and local communities struggle to find the resources to protect 
their communities from potential terrorist threats, and we have only 
made a down payment on the expenses of the war on terrorism.
  These are not circumstances which cry out for a half-trillion dollar 
tax cut. Far from it--they call for prudence, for fiscal 
responsibility, and for an acknowledgement that the government cannot 
denude itself of the ability to defend itself by increasing spending 
and cutting taxes with no end in sight.
  I rise today to urge my colleagues to oppose this fiscally 
irresponsible tax plan that will only saddle future generations with 
enormous debt and put us on a path of almost permanent deficits.
  Over the last 2 years, a staggering 2.7 million private sector jobs 
have been lost and the number of people unemployed for 6 months or 
longer has tripled. My Democratic colleagues have responded to this 
crisis by delivering a job creation plan to jumpstart our economy and 
put Americans back to work. By putting money directly in the pockets of 
those who need it most and those most likely to spend it, the 
Democratic plan will get our economy moving again.
  The House leadership plan, on the other hand, ignores the desires and 
demands of Americans. By making room for a dividend tax cut proposal 
and tax cuts for the wealthy, the House leadership has indicated a 
willingness to sacrifice funding for important domestic priorities such 
as education, health care, and a significant Medicare prescription drug 
benefit.
  We must work harder, we must do better, to ensure that budget 
decisions are made in a balanced and thoughtful way that maintains 
fiscal discipline, continues to pay down our debt, and supports 
priorities like Social Security and Medicare.
  In years past, my colleagues on the other side of the aisle have 
touted the virtues of fiscal responsibility. I urge them to return to 
that position by joining us in embracing a fiscally responsible 
approach to stimulating our economy and providing relief and investment 
for all Americans.
  Mr. CROWLEY. Mr. Speaker, this debate is all about jobs and job 
creation. One side has a plan, and the other side has failed ideas that 
have yet to help America or create one new job. Since George Bush 
assumed the Presidency, America has seen 2.7 million American jobs 
disappear. But what does the President and the Republicans think we 
should do--give millionaires a tax break on their stock dividends.
  This will not create one new job. Even the conservative Wall Street 
Journal has stated that this Republican tax give-away will actually 
destroy job creation in America, something the Republicans have become 
very good at in 3 short years.
  The Wall Street Journal states, ``The elimination of taxes on 
dividends will diminish the abilities of businesses to take tax 
incentives on capital investment and R&D--things that actually create 
jobs''.
  All the while, Democrats support a plan that will actually create one 
million new jobs here in America, while extending unemployment benefits 
for the millions of Americans who have lost their jobs due to the 
failed economic policies of George Bush and the Republican Party.
  Oppose Bush-onomics, which has seen the disappearance of over 3,100 
jobs a day since January 2001 and start to fight for Americans and 
American jobs.
  Mr. PASTOR. Mr. Speaker, I rise today in total and complete 
opposition to this ill-advised legislation that masquerades as a 
vehicle for creating jobs. There is nothing, I repeat, nothing in this 
bill that will create any jobs.
  The President has traveled throughout the country saying this is a 
jobs bill and if we, once again, give massive tax cuts to the top 10 
percent of earners in this country, we will have more jobs. Nothing 
could be further from the truth.
  Have we forgotten that in this very month, just 2 years ago, we 
passed the Economic Growth and Tax Relief Act Reconciliation Act which 
cut taxes by $1.35 trillion. And, do the Members of this House realize 
that unemployment, now, 2 years later, remains at 6 percent. This House 
passed one of the largest tax cuts in the history of the Nation in 
2001, in hopes of creating jobs and growing the economy, and we have 
created no jobs, in fact, we have lost almost 2.7 million private 
sector jobs, and the economy grows at a measly 1.6 percent, the weakest 
economic growth in 50 years.
  Bottom line, Mr. Chairman, huge tax cuts for upper income individuals 
do nothing to create jobs.
  What this bill will do, though, is continue to add to the Nation's 
debt. This tax cut will mean that we will have annual budget deficits 
year after year after year. This House has already passed a budget 
resolution with a projected deficit of $385 billion in fiscal year 
2004. And, if we don't use the Social Security trust fund to mask this 
deficit, we are going to put ourselves $558.4 billion further in debt 
just this year.
  Economist after economist, including Alan Greenspan who testified to 
the Financial Service Committee just last week, say that the increased 
deficits caused by these tax cuts will actually damage the economy. 
Even our own Congressional Budget Office has said that the effect of 
this tax cut is not obvious.
  Mr. Chairman, over 74,000 hardworking Americans are losing their jobs 
every month. In the last 3 months, more than a half million people have 
lost their jobs. The President and this House choose to address that 
crisis by providing another massive tax cut to the wealthiest of 
Americans, in hopes that this will somehow put these people back to 
work. I must admit that I am missing the logic in this argument. And 
the millions of Americans who have lost their jobs since the last tax 
cut in May 2001 are also missing the logic, in fear.
  Mr. Chairman, we should send this bill back to the committee and to 
the White House and ask that they come back with meaningful and serious 
proposals to move this economy forward. If we want to cut taxes, cut 
the taxes of those middle class Americans who will actually put that 
money back into the economy. If we want to create jobs, let's pass 
legislation that increases educational and training programs and makes 
sure that large and small businesses invest their funds in programs to 
put people back to work. This bill does neither.
  It is time for serious solutions to serious problems. Politically 
motivated tax cuts for the wealthiest of Americans will not help the 
elderly pay for their prescription drugs. These tax

[[Page H3939]]

cuts will not help the unemployed father live his dream of putting his 
children through college. These tax cuts will do nothing to help the 
single mother, who works in a factory or cleans 50 hotel rooms a day, 
find a better job in hopes of giving her children a better life.
  Let us reject this masquerade. Let us do something to help those who 
need our help.
  Mrs. McCARTHY of New York. Mr. Speaker, I rise in opposition to this 
bill because it is a shortsighted attempt to appease special interests 
at the expense of driving our country deeper into debt and 
shortchanging important programs.
  America is going through very trying times. The economy is stagnant, 
unemployment is up, consumer confidence is down and our Armed Forces 
have just fought a war with Iraq. Tax relief and stimulating the 
economy for Long Island have been my priorities since I came to 
Congress, and given the current state of the economy, are critical now 
more than ever.
  The debate surrounding an economic stimulus package comes down to 
simply asking the question, ``What stimulates the economy?'' There is a 
fine balance between giving our economy a shot in the arm, slowing the 
growth of the deficit, giving families and small businesses the tax 
relief they need and protecting our country's national security 
concerns.
  Today's proposal falls short from achieving this balance because the 
bulk of its stimulus is aimed at providing dividend and capital gains 
tax relief. This $280 billion proposal, more than half the cost of the 
entire bill, does not provide our economy the bang for the buck needed 
for future growth.
  In fact, I'm concerned this proposal could actually have serious 
impacts on other segments of the economy. For example, if we provide 
special tax treatment for companies that offer dividends, what happens 
to smaller companies who do not offer dividends, but instead use 
additional income to invest in their company, i.e. technology, etc.? 
Would they have a difficult time attracting investors? Moreover, what 
happens to the bond market? Municipalities rely heavily on bonds to 
finance school construction and other public works projects. How will 
they compete against companies that offer dividends with this new tax 
treatment?
  Instead of spending the bulk of a stimulus plan on a proposal that 
only benefits companies offering dividends, we should help the areas of 
our economy that could benefit most from a stimulus. For example, State 
and local governments are struggling as the faltering economy has 
caused huge fiscal problems for the States, at the same time that 
States need to spend more on critical investments, such as homeland 
security, healthcare, and education. In fact, States are facing budget 
deficits in the range of $60 to $85 billion for State fiscal year 2004, 
larger than any time in the last half-century.
  We can help our States by investing in infrastructure and homeland 
security projects that create jobs and lowers unemployment. In 
addition, it would cost a fraction of the $280 billion dividend 
proposal Republicans insist on passing today.
  What I find equally upsetting is the disregard for our national debt. 
This bill pushes our country $550 billion deeper into debt. And 
although Republicans claim that going deeper in debt is necessary to 
get out of debt, you must carefully examine the polices that claim to 
bring us back into balance. Unfortunately, Republicans have failed to 
show why we should support a dividend tax break instead of helping our 
States and middle-income households. If we are going into debt, it 
shouldn't be on the back of flawed policy.
  As the majority, House leadership could have allowed plenty of time 
to debate the merits of their proposal, but instead they choose not to 
allow anyone to offer amendments and limit debate to 2 hours. This 
balant disregard of the Democratic process is yet another example of 
this Republican Congress cowering to special interests and forcing 
another flawed policy on the American people. This take it or leave it 
attitude does nothing to improve the state of our ailing economy. It 
does, however, jeopardize what we leave behind to our children.
  Mr. UDALL of New Mexico. Mr. Speaker, as the national data continue 
to show how bad this Bush recession really is hurting the American 
people, the GOP majority has once again missed a golden opportunity to 
pass an economic growth plan that really helps working men and women, 
the very people who have suffered the most under this administration's 
unsound policies.
  Today, we have before us an irresponsible $550 billion Republican tax 
bill that is based on the President's goal of eliminating taxes on 
dividend income and continues the Republican mismanagement of our 
Nation's economy by recklessly borrowing from future generations to 
reward the wealthy.
  I support an alternative economic growth plan that creates over 1 
million jobs, provides assistance to individuals, small businesses and 
States through a fair distribution of benefits without gimmicks, and 
makes investments in homeland security, infrastructure, and health 
care. I support a plan that provides for greater economic stability by 
committing to fiscal responsibility, preserving Social Security, and 
ensuring minimal long-term debt. Even Federal Reserve Chairman Alan 
Greenspan recently has reiterated his position that the Nation is best 
served when the cost of any new tax cuts are offset, something the 
Rangel plan does. The cost of the Rangel plan is offset by suspending 
scheduled future tax cuts for the top two income tax brackets--
taxpayers with incomes about $151,300.
  The plan I support, offered by Mr. Rangel, provides a stark contrast 
to the Bush administration's indifference to the growing unemployment 
crisis. Over 2 million job shave been lost since 2001. It is therefore 
critical that we extend emergency unemployment benefits for another 6 
months and also increase benefits by 13 weeks to 26 weeks total. The 
Rangel plan does exactly that. But again, just like last year, the 
majority is not addressing these real needs to help the unemployed--
those who are, in fact, most likely to actually spent money and get our 
economy back on track. We cannot wait for unemployment benefits to 
expire before we act.
  Another stark contrast between the Rangel plan and the Bush plan is 
the assistance provided for State and local governments. With 
collective State and local deficits of $200 billion from fiscal year 
2002-2004, the Federal Government has a major responsibility to help 
our State and local governments in many key areas such as health care, 
homeland security and infrastructure. We should provide assistance to 
State and local governments. This will bolster national security and 
create job by temporarily expanding the Federal Medicaid Assistance 
Percentage (FMAP). We should target money to Homeland Security and 
infrastructure projects that are ready to go.

  The Rangel plan would also expand the child tax credit, thereby 
covering nearly 2 million additional children and boosting the level of 
the child tax credit from $600 to $800 per child. The income threshold 
would be dropped from $10,000 to $7,500 and the percentage of the 
credit that would be refundable for lower-income taxpayers would be 
increased from 10 to 15 percent. In addition, I would accelerate the 
start of marriage penalty relief, boosting current law standard 
deduction and EITC provisions.
  I also believe that we should accelerate the 10 percent income 
bracket and immediately expand the 10 percent marginal income tax rate 
to 2008 levels, from $6,000 to $7,000 for single individuals and from 
$12,000 to $14,000 for married taxpayers filing jointly. Providing the 
targeted tax relief to this bracket and marginal income tax rate will 
have a much stronger stimulating effect on the economy instead of 
targeting the wealthiest in America who will end up saving instead of 
spending anyway.
  Furthermore, I believe Congress and the President must focus on job 
creation for small businesses and foster U.S.-based production by 
including business investment incentives to create and retain jobs in 
the United States.
  This can be done by allowing greater small business expensing and 
bonus depreciation and by closing the most egregious tax shelter 
loopholes and corporate expatriation techniques. Under the Rangel plan, 
small businesses would be allowed to expense up to $75,000 of new 
investment costs, a $50,000 increase from the current $25,000 that 
businesses are allowed to expense. Additionally, all companies would 
benefit from bonus depreciation that is revised to provide for 50 
percent bonus depreciation over the next 12 months and a 30 percent 
bonus for the last half of 2004. Also, the Rangel plan would repeal the 
Foreign Sales Corporation (FSC)/Extraterritorial Income (ETI) Tax 
Program and replace it with a corporate rate deduction for domestic 
manufacturers. This would provide American companies with a strong 
incentive to maintain and expand their operations in the United States, 
protect and create jobs and allow U.S. manufacturers to remain 
competitive in the global marketplace.
  Our country needs responsible tax policies that do not further 
increase the deficit already built up under this administration's 
watch. Apparently the majority believes the only way to create jobs is 
by borrowing more money, ignoring the current deficit, and increasing 
the national debt. I disagree with this strategy. I disagree with their 
plan. And I strongly oppose passage of this misnamed jobs and growth 
plan.
  Unfortunately, the Rangel plan will not be given the vote it deserves 
on the House floor today. I am confident that if the American people 
really knew what was in the Thomas plan, every Member of Congress would 
hear the outcry from their constituents to vote no on it. Apparently 
the majority is concerned about the same. How else can one explain the 
all-too-familiar blow they strike at the Democratic process by not 
allowing a substitute to come to the floor?

[[Page H3940]]

  I urge my colleagues to vote no on the Thomas plan, vote yes on the 
motion to recommit and support a responsible and effective stimulus 
plan.
  The SPEAKER pro tempore (Mr. Simpson). All time for debate has 
expired.
  Pursuant to House Resolution 227, the previous question is ordered on 
the bill, as amended.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.


                Motion to Recommit Offered by Mr. Rangel

  Mr. RANGEL. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. RANGEL. I am, Mr. Speaker, in its present form.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:
  Mr. RANGEL moves to recommit the bill, H.R. 2, with instructions to 
report the same back to the House forthwith with the following 
amendment:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Jobs and 
     Growth Reconciliation Tax Act of 2003''.
       (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 of this Act 
     is as follows:
Sec. 1. Short title; references; table of contents.

              TITLE I--IMMEDIATE STIMULUS AND JOB CREATION

                     Subtitle A--Family Tax Relief

Sec. 101. Acceleration of increase in child tax credit.
Sec. 102. Increase in standard deduction for married taxpayers filing 
              joint returns accelerated.
Sec. 103. Acceleration of 10-percent individual income tax rate bracket 
              expansion.
Sec. 104. Acceleration of elimination of marriage penalty in earned 
              income credit.

        Subtitle B--Incentives to Hire the Long-Term Unemployed

Sec. 111. Incentives to hire the long-term unemployed.

             Subtitle C--Extension of Unemployment Benefits

Sec. 121. Short title.

          Part I--Temporary Extended Unemployment Compensation

Sec. 131. References.
Sec. 132. Extension of the Temporary Extended Unemployment Compensation 
              Act of 2002.
Sec. 133. Entitlement to additional weeks of temporary extended 
              unemployment compensation.
Sec. 134. Extended benefit periods.

  Part II--Unemployment Benefits for Individuals Qualifying Based on 
              Part-time Work or an Alternative Base Period

Sec. 141. Federal-State agreements.
Sec. 142. Payments to States having agreements under this part.
Sec. 143. Financing provisions.
Sec. 144. Definitions.
Sec. 145. Applicability.

                Part III--Enhanced Unemployment Benefits

Sec. 151. Federal-State agreements.
Sec. 152. Payments to States having agreements under this part.
Sec. 153. Definitions.
Sec. 154. Applicability.

         Subtitle D--Trust Fund to Meet Nation's Pressing Needs

Sec. 161. Trust fund to meet nation's pressing needs.

              TITLE II--LONG-TERM JOB CREATION AND GROWTH

Sec. 201. Increase and extension of bonus depreciation.
Sec. 202. Increased expensing for small business.
Sec. 203. Deduction relating to income attributable to United States 
              production activities.

 TITLE III--FISCAL RESPONSIBILITY AND PROVISIONS ADDRESSING CORPORATE 
                                 ABUSE

                    Subtitle A-- General Provisions

Sec. 301. Freeze of top individual income tax rates.
Sec. 302. Restoration of phaseouts of deductions for personal 
              exemptions and of itemized deductions.
Sec. 303. Repeal of exclusion for extraterritorial income.

  Subtitle B--Abusive Tax Shelter Shutdown and Taxpayer Accountability

          Part I--Provisions Designed to Curtail Tax Shelters

Sec. 311. Clarification of economic substance doctrine.
Sec. 312. Penalty for failing to disclose reportable transaction.
Sec. 313. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 314. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 315. Modifications of substantial understatement penalty for 
              nonreportable transactions.
Sec. 316. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 317. Disclosure of reportable transactions.
Sec. 318. Modifications to penalty for failure to register tax 
              shelters.
Sec. 319. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 320. Modification of actions to enjoin certain conduct related to 
              tax shelters and reportable transactions.
Sec. 321. Understatement of taxpayer's liability by income tax return 
              preparer.
Sec. 322. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 323. Frivolous tax submissions.
Sec. 324. Regulation of individuals practicing before the department of 
              treasury.
Sec. 325. Penalty on promoters of tax shelters.
Sec. 326. Statute of limitations for taxable years for which listed 
              transactions not reported.
Sec. 327. Denial of deduction for interest on underpayments 
              attributable to nondisclosed reportable and noneconomic 
              substance transactions.

                       Part II--Other Provisions

Sec. 331. Limitation on transfer or importation of built-in losses.
Sec. 332. Disallowance of certain partnership loss transfers.
Sec. 333. No reduction of basis under section 734 in stock held by 
              partnership in corporate partner.
Sec. 334. Repeal of special rules for fasits.
Sec. 335. Expanded disallowance of deduction for interest on 
              convertible debt.
Sec. 336. Expanded authority to disallow tax benefits under section 
              269.
Sec. 337. Modifications of certain rules relating to controlled foreign 
              corporations.
Sec. 338. Basis for determining loss always reduced by nontaxed portion 
              of dividends.
Sec. 339. Affirmation of consolidated return regulation authority.

Subtitle C--Prevention of Corporate Expatriation To Avoid United States 
                               Income Tax

Sec. 341. Prevention of corporate expatriation to avoid United States 
              income tax.

 Subtitle D--Inclusion in Gross Income of Funded Deferred Compensation 
                         of Corporate Insiders

Sec. 351. Inclusion in gross income of funded deferred compensation of 
              corporate insiders.

              TITLE I--IMMEDIATE STIMULUS AND JOB CREATION

                     Subtitle A--Family Tax Relief

     SEC. 101. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.

       (a) In General.--The items relating to calendar years 2001 
     through 2008 in the table contained in paragraph (2) of 
     section 24(a) (relating to per child amount) are amended to 
     read as follows:

  ``2003 thru 2009...........................................$ 800 ....

   2010 or thereafter......................................1,000''.....

       (b) Acceleration of Increase in Refundable Portion of 
     Credit.--
       (1) In general.--Clause (i) of section 24(d)(1)(B) is 
     amended to read as follows:
       ``(i) 15 percent of so much of the taxpayer's earned income 
     (within the meaning of section 32) which is taken into 
     account in computing taxable income for the taxable year as 
     exceeds $7,500, or''.
       (2) Conforming amendment.--Paragraph (3) of section 24(d) 
     is amended--
       (A) by striking ``$10,000'' and inserting ``$7,500'', and
       (B) by striking ``2000'' and inserting ``2002''.
       (c) Effective Dates.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 102. INCREASE IN STANDARD DEDUCTION FOR MARRIED 
                   TAXPAYERS FILING JOINT RETURNS ACCELERATED.

       (a) In General.--Subparagraph (A) of section 63(c)(2), as 
     amended by the Economic Growth and Tax Relief Reconciliation 
     Act of 2001, is amended by striking ``the applicable 
     percentage of'' and inserting ``twice''.
       (b) Conforming Amendments.--
       (1) Section 301(d) of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended by striking ``2004'' 
     and inserting ``2002''.
       (2) Section 63(c) is amended by striking paragraph (7).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 103. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION.

       (a) In General.--Clause (i) of section 1(i)(1)(B) (relating 
     to the initial bracket

[[Page H3941]]

     amount) is amended by striking ``($12,000 in the case of 
     taxable years beginning before January 1, 2008)''.
       (b) Inflation Adjustment.--Subparagraph (C) of section 
     1(i)(1) is amended to read as follows:
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f)--
       ``(i) no adjustment shall be made in the $14,000 amount for 
     any taxable year beginning before 2004, and
       ``(ii) the adjustment in such amount with respect to 
     taxable years beginning after 2003 shall be determined under 
     subsection (f)(3) by substituting `2003' for `1992' in 
     subparagraph (B) thereof.''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2002.
       (2) Tables for 2003.--The Secretary of the Treasury shall 
     modify each table which has been prescribed under section 
     1(f) of the Internal Revenue Code of 1986 for taxable years 
     beginning in 2003 and which relates to the amendment made by 
     this section to reflect such amendment.

     SEC. 104. ACCELERATION OF ELIMINATION OF MARRIAGE PENALTY IN 
                   EARNED INCOME CREDIT.

       (a) In General.--Subparagraph (B) of section 32(b)(2) is 
     amended to read as follows:
       ``(B) Joint returns.--In the case of a joint return filed 
     by an eligible individual and such individual's spouse, the 
     phaseout amount determined under subparagraph (A) shall be 
     increased by $3,000.''
       (b) Conforming Amendment.--Clause (ii) of section 
     32(j)(1)(B) is amended by striking ``2007'' and inserting 
     ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

        Subtitle B--Incentives to Hire the Long-Term Unemployed

     SEC. 111. INCENTIVES TO HIRE THE LONG-TERM UNEMPLOYED.

       (a) In General.--Paragraph (1) of section 51(d) (relating 
     to members of targeted groups) is amended by striking ``or'' 
     at the end of subparagraph (G), by striking the period at the 
     end of subparagraph (H) and inserting ``, or'', and by adding 
     at the end the following new subparagraph:
       ``(I) a qualified long-term unemployed individual.''
       (b) Qualified Long-Term Unemployed Individual.--Subsection 
     (d) of section 51 is amended by redesignating paragraphs 
     (10), (11), and (12) as paragraphs (11), (12), and (13), 
     respectively, and by inserting after paragraph (9) the 
     following new paragraph:
       ``(10) Qualified long-term unemployed individual.--
       ``(A) In general.--The term `qualified long-term unemployed 
     individual' means any individual who is certified by the 
     designated local agency--
       ``(i) as having exhausted, during the 1-year period ending 
     on the hiring date, all rights to regular unemployment 
     compensation under State or Federal law, and
       ``(ii) as having a hiring date which is during the 1-year 
     period beginning on the date of the enactment of this 
     paragraph.

     Subsection (c)(4) shall not apply to any qualified long-term 
     unemployed individual.
       ``(B) Exhaustion of benefits.--For purposes of subparagraph 
     (A), an individual shall be deemed to have exhausted such 
     individual's rights to regular compensation when--
       ``(i) no payments of regular compensation can be made under 
     such law because such individual has received all regular 
     compensation available to such individual based on employment 
     or wages during such individual's base period, or
       ``(ii) such individual's rights to such compensation have 
     been terminated by reason of the expiration of the benefit 
     year with respect to which such rights existed.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after the date of the enactment of this Act.

             Subtitle C--Extension of Unemployment Benefits

     SEC. 121. SHORT TITLE.

       This subtitle may be cited as the ``Unemployment Benefits 
     Extension Act''.

          PART I--TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION

     SEC. 131. REFERENCES.

       Except as otherwise expressly provided, whenever in this 
     part an amendment is expressed in terms of an amendment to a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Temporary 
     Extended Unemployment Compensation Act of 2002 (Public Law 
     107-147; 26 U.S.C. 3304 note).

     SEC. 132. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT 
                   COMPENSATION ACT OF 2002.

       (a) Extension of Program.--Section 208 is amended to read 
     as follows:

     ``SEC. 208. APPLICABILITY.

       ``(a) In General.--Subject to subsection (b), an agreement 
     entered into under this title shall apply to weeks of 
     unemployment--
       ``(1) beginning after the date on which such agreement is 
     entered into; and
       ``(2) ending before March 1, 2004.
       ``(b) Transition.--In the case of an individual who is 
     receiving temporary extended unemployment compensation for 
     the week which immediately precedes the first day of the week 
     that includes March 1, 2004, temporary extended unemployment 
     compensation shall continue to be payable to such individual 
     for any week thereafter from the account from which such 
     individual received compensation for the week immediately 
     preceding that termination date. No compensation shall be 
     payable by reason of the preceding sentence for any week 
     beginning after October 31, 2004.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the enactment of the 
     Temporary Extended Unemployment Compensation Act of 2002 
     (Public Law 107-147; 116 Stat. 21).

     SEC. 133. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY 
                   EXTENDED UNEMPLOYMENT COMPENSATION.

       (a) Weeks of TEUC Amounts.--Paragraph (1) of section 203(b) 
     is amended to read as follows:
       ``(1) In general.--The amount established in an account 
     under subsection (a) shall be equal to 26 times the 
     individual's weekly benefit amount for the benefit year.''.
       (b) Weeks of TEUC-X Amounts.--Section 203(c)(1) is amended 
     by striking ``an amount equal to the amount originally 
     established in such account (as determined under subsection 
     (b)(1))'' and inserting ``7 times the individual's weekly 
     benefit amount for the benefit year''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section--
       (A) shall take effect as if included in the enactment of 
     the Temporary Extended Unemployment Compensation Act of 2002 
     (Public Law 107-147; 116 Stat. 21); but
       (B) shall apply only with respect to weeks of unemployment 
     beginning on or after the date of enactment this Act, subject 
     to paragraph (2).
       (2) Special rules.--In the case of an individual for whom a 
     temporary extended unemployment account was established 
     before the date of enactment of this Act, the Temporary 
     Extended Unemployment Compensation Act of 2002 (as amended by 
     this part) shall be applied subject to the following:
       (A) Any amounts deposited in the individual's temporary 
     extended unemployment compensation account by reason of 
     section 203(c) of such Act (commonly known as ``TEUC-X 
     amounts'') before the date of enactment of this Act shall be 
     treated as amounts deposited by reason of section 203(b) of 
     such Act (commonly known as ``TEUC amounts''), as amended by 
     subsection (a).
       (B) For purposes of determining whether the individual is 
     eligible for any TEUC-X amounts under such Act, as amended by 
     this part--
       (i) any determination made under section 203(c) of such Act 
     before the application of the amendments made by this part 
     shall be disregarded; and
       (ii) any such determination shall instead be made by 
     applying section 203(c) of such Act, as amended by this 
     part--

       (I) as of the time that all amounts established in such 
     account in accordance with section 203(b) of such Act (as 
     amended by this part, and including any amounts described in 
     subparagraph (A)) are in fact exhausted, except that
       (II) if such individual's account was both augmented by and 
     exhausted of all TEUC-X amounts before the date of enactment 
     of this Act, such determination shall be made as if 
     exhaustion (as described in section 203(c)(1) of such Act) 
     had not occurred until such date of enactment.

     SEC. 134. EXTENDED BENEFIT PERIODS.

       (a) Application of Revised Rate of Insured Unemployment.--
     Section 207 is amended--
       (1) by striking ``In'' and inserting ``(a) In General.--
     In''; and
       (2) by adding at the end the following:
       ``(b) Insured Unemployment Rate.--For purposes of carrying 
     out section 203(c) with respect to weeks of unemployment 
     beginning on or after the date of enactment of this 
     subsection, the term `rate of insured unemployment', as used 
     in section 203(d) of the Federal-State Extended Unemployment 
     Compensation Act of 1970 (26 U.S.C. 3304 note), has the 
     meaning given such term under section 203(e)(1) of such Act, 
     except that individuals exhausting their right to regular 
     compensation during the most recent 3 calendar months for 
     which data are available before the close of the period for 
     which such rate is being determined shall be taken into 
     account as if they were individuals filing claims for regular 
     compensation for each week during the period for which such 
     rate is being determined, and section 203(d)(1)(A) of such 
     Act shall be applied by substituting `either (or both)' for 
     `each'.''.
       (b) Additional Extended Benefit Period Trigger.--
       (1) In general.--Section 203(c) is amended by adding at the 
     end the following:
       ``(3) Additional extended benefit period trigger.--
       ``(A) In general.--Effective with respect to compensation 
     for weeks of unemployment beginning on or after the date of 
     enactment of this paragraph, an agreement under this title 
     shall provide that, in addition to any other extended benefit 
     period trigger, for purposes of beginning or ending any 
     extended benefit period under this section--
       ``(i) there is a State `on' indicator for a week if--

       ``(I) the average rate of total unemployment in such State 
     (seasonally adjusted) for the period consisting of the most 
     recent 3 months for which data for all States are published 
     before the close of such week equals or exceeds 6 percent; 
     and

[[Page H3942]]

       ``(II) the average rate of total unemployment in such State 
     (seasonally adjusted) for the 3-month period referred to in 
     subclause (I) equals or exceeds 110 percent of such average 
     rate for either (or both) of the corresponding 3-month 
     periods ending in the 2 preceding calendar years; and

       ``(ii) there is a State `off' indicator for a week if 
     either the requirements of subclause (I) or (II) of clause 
     (i) are not satisfied.
       ``(B) No effect on other determinations.--Notwithstanding 
     the provisions of any agreement described in subparagraph 
     (A), any week for which there would otherwise be a State `on' 
     indicator shall continue to be such a week and shall not be 
     determined to be a week for which there is a State `off' 
     indicator.
       ``(C) Determinations made by the secretary.--For purposes 
     of this subsection, determinations of the rate of total 
     unemployment in any State for any period (and of any seasonal 
     adjustment) shall be made by the Secretary.''.
       (2) Conforming amendment.--Section 203(c)(1) is amended by 
     inserting ``or (3)'' after ``paragraph (2)''.

  PART II--UNEMPLOYMENT BENEFITS FOR INDIVIDUALS QUALIFYING BASED ON 
              PART-TIME WORK OR AN ALTERNATIVE BASE PERIOD

     SEC. 141. FEDERAL-STATE AGREEMENTS.

       (a) In General.--Any State which desires to do so may enter 
     into and participate in an agreement under this part with the 
     Secretary of Labor (hereinafter in this part referred to as 
     the ``Secretary''). Any State which is a party to an 
     agreement under this part may, upon providing 30 days' 
     written notice to the Secretary, terminate such agreement.
       (b) Provisions of Agreement.--
       (1) In general.--Any agreement under subsection (a) shall 
     provide that the State agency of the State will make payments 
     of regular compensation to individuals in amounts and to the 
     extent that they would be determined if the State law were 
     applied with the modifications described in paragraph (2).
       (2) Modifications described.--The modifications described 
     in this paragraph are as follows:
       (A) In the case of an individual who is not eligible for 
     regular compensation under the State law because of the use 
     of a definition of base period that does not count wages 
     earned in the most recently completed calendar quarter, 
     eligibility for compensation under this part shall be 
     determined by applying a base period ending at the close of 
     the most recently completed calendar quarter.
       (B) In the case of an individual who is not eligible for 
     regular compensation under the State law because such 
     individual does not meet requirements relating to 
     availability for work, active search for work, or refusal to 
     accept work, because such individual is seeking, or is 
     available for, less than full-time work, compensation under 
     this part shall not be denied by such State to an otherwise 
     eligible individual who seeks less than full-time work or 
     fails to accept full-time work.
       (c) Coordination Rule.--The modifications described in 
     subsection (b)(2) shall also apply in determining the amount 
     of benefits payable under any Federal law to the extent that 
     those benefits are determined by reference to regular 
     compensation payable under the State law of the State 
     involved.

     SEC. 142. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS 
                   PART.

       (a) General Rule.--There shall be paid to each State which 
     has entered into an agreement under this part an amount equal 
     to--
       (1) 100 percent of any regular compensation made payable to 
     individuals by such State by virtue of the modifications 
     which are described in section 141(b)(2) and deemed to be in 
     effect with respect to such State pursuant to section 
     141(b)(1), and
       (2) 100 percent of any regular compensation--
       (A) which is paid to individuals by such State by reason of 
     the fact that its State law contains provisions comparable to 
     the modifications described in section 141(b)(2), but only
       (B) to the extent that those amounts would, if such amounts 
     were instead payable by virtue of the State law's being 
     deemed to be so modified pursuant to section 141(b)(1), have 
     been reimbursable under paragraph (1).
       (b) Determination of Amount.--Sums under subsection (a) 
     payable to any State by reason of such State having an 
     agreement under this part shall be payable, either in advance 
     or by way of reimbursement (as may be determined by the 
     Secretary), in such amounts as the Secretary estimates the 
     State will be entitled to receive under this part for each 
     calendar month, reduced or increased, as the case may be, by 
     any amount by which the Secretary finds that the Secretary's 
     estimates for any prior calendar month were greater or less 
     than the amounts which should have been paid to the State. 
     Such estimates may be made on the basis of such statistical, 
     sampling, or other method as may be agreed upon by the 
     Secretary and the State agency of the State involved.
       (c) Administrative and Other Expenses.--There is hereby 
     appropriated out of the employment security administration 
     account of the Unemployment Trust Fund (as established by 
     section 901(a) of the Social Security Act) $500,000,000 to 
     reimburse States for the costs of the administration of 
     agreements under this part (including any improvements in 
     technology in connection therewith) and to provide 
     reemployment services to unemployment compensation claimants 
     in States having agreements under this part. Each State's 
     share of the amount appropriated by the preceding sentence 
     shall be determined by the Secretary according to the factors 
     described in section 302(a) of the Social Security Act and 
     certified by the Secretary to the Secretary of the Treasury.

     SEC. 143. FINANCING PROVISIONS.

       (a) In General.--Funds in the extended unemployment 
     compensation account (as established by section 905(a) of the 
     Social Security Act), and the Federal unemployment account 
     (as established by section 904(g) of the Social Security 
     Act), of the Unemployment Trust Fund shall be used, in 
     accordance with subsection (b), for the making of payments 
     (described in section 142(a)) to States having agreements 
     entered into under this part.
       (b) Certification.--The Secretary shall from time to time 
     certify to the Secretary of the Treasury for payment to each 
     State the sums described in section 142(a) which are payable 
     to such State under this part. The Secretary of the Treasury, 
     prior to audit or settlement by the General Accounting 
     Office, shall make payments to the State in accordance with 
     such certification by transfers from the extended 
     unemployment compensation account (or, to the extent that 
     there are insufficient funds in that account, from the 
     Federal unemployment account) to the account of such State in 
     the Unemployment Trust Fund.

     SEC. 144. DEFINITIONS.

       For purposes of this part:
       (1) In general.--The terms ``compensation'', ``regular 
     compensation'', ``base period'', ``State'', ``State agency'', 
     ``State law'', and ``week'' have the respective meanings 
     given such terms under section 205 of the Federal-State 
     Extended Unemployment Compensation Act of 1970, subject to 
     paragraph (2).
       (2) State law and regular compensation.--In the case of a 
     State entering into an agreement under this part--
       (A) ``State law'' shall be considered to refer to the State 
     law of such State, applied in conformance with the 
     modifications described in section 201(b)(2), and
       (B) ``regular compensation'' shall be considered to refer 
     to such compensation, determined under its State law (applied 
     in the manner described in subparagraph (A)),

     except as otherwise provided or where the context clearly 
     indicates otherwise.

     SEC. 145. APPLICABILITY.

       An agreement entered into under this part shall apply to 
     weeks of unemployment--
       (1) beginning after the date on which such agreement is 
     entered into, and
       (2) ending before July 1, 2004.

                PART III--ENHANCED UNEMPLOYMENT BENEFITS

     SEC. 151. FEDERAL-STATE AGREEMENTS.

       (a) In General.--Any State which desires to do so may enter 
     into and participate in an agreement under this part with the 
     Secretary of Labor (hereinafter in this part referred to as 
     the ``Secretary''). Any State which is a party to an 
     agreement under this part may, upon providing 30 days' 
     written notice to the Secretary, terminate such agreement.
       (b) Provisions of Agreement.--
       (1) In general.--Any agreement under subsection (a) shall 
     provide that the State agency of the State will make payments 
     of regular compensation to individuals in amounts and to the 
     extent that they would be determined if the State law were 
     applied with the modification described in paragraph (2).
       (2) Modification described.--The modification described in 
     this paragraph is that the amount of regular compensation 
     (including dependents' allowances) payable for any week shall 
     be equal to the amount determined under the State law (before 
     the application of this paragraph), plus an additional--
       (A) 15 percent, or
       (B) $25,
     whichever is greater.
       (c) Nonreduction Rule.--Each agreement shall provide that 
     such agreement shall not apply (or shall cease to apply) upon 
     a determination by the Secretary that the method governing 
     the computation of regular compensation under the State law 
     of that State has been modified in a way such that--
       (1) the average weekly amount of regular compensation which 
     will be payable during the period of the agreement 
     (determined disregarding the modification described in 
     subsection (b)(2)) will be less than
       (2) the average weekly amount of regular compensation which 
     would otherwise have been payable during such period under 
     the State law, as in effect on September 11, 2001.
       (d) Coordination Rule.--The modification described in 
     subsection (b)(2) shall also apply in determining the amount 
     of benefits payable under any Federal law to the extent that 
     those benefits are determined by reference to regular 
     compensation payable under the State law of the State 
     involved.

     SEC. 152. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS 
                   PART.

       (a) General Rule.--There shall be paid to each State which 
     has entered into an agreement under this part an amount equal 
     to 100 percent of any regular compensation made payable to 
     individuals by such State by virtue of the modification 
     described in section 151(b)(2) and deemed to be in effect 
     with respect to such State pursuant to section 151(b)(1).

[[Page H3943]]

       (b) Determination of Amount.--Sums under subsection (a) 
     payable to any State by reason of such State having an 
     agreement under this part shall be payable, either in advance 
     or by way of reimbursement (as may be determined by the 
     Secretary), in such amounts as the Secretary estimates the 
     State will be entitled to receive under this part for each 
     calendar month, reduced or increased, as the case may be, by 
     any amount by which the Secretary finds that the Secretary's 
     estimates for any prior calendar month were greater or less 
     than the amounts which should have been paid to the State. 
     Such estimates may be made on the basis of such statistical, 
     sampling, or other method as may be agreed upon by the 
     Secretary and the State agency of the State involved.

     SEC. 153. DEFINITIONS.

       For purposes of this part:
       (1) In general.--The terms ``compensation'', ``regular 
     compensation'', ``extended compensation'', ``additional 
     compensation'', ``benefit year'', ``base period'', ``State'', 
     ``State agency'', ``State law'', and ``week'' have the 
     respective meanings given such terms under section 205 of the 
     Federal-State Extended Unemployment Compensation Act of 1970, 
     subject to paragraph (2).
       (2) State law and regular compensation.--In the case of a 
     State entering into an agreement under this part--
       (A) ``State law'' shall be considered to refer to the State 
     law of such State, applied in conformance with the 
     modification described in section 151(b)(2), subject to 
     section 151(c), and
       (B) ``regular compensation'' shall be considered to refer 
     to such compensation, determined under its State law (applied 
     in the manner described in subparagraph (A)),

     except as otherwise provided or where the context clearly 
     indicates otherwise.

     SEC. 154. APPLICABILITY.

       (a) In General.--An agreement entered into under this part 
     shall apply to weeks of unemployment--
       (1) beginning after the date on which such agreement is 
     entered into, and
       (2) ending before January 1, 2004.

         Subtitle D--Trust Fund to Meet Nation's Pressing Needs

     SEC. 161. TRUST FUND TO MEET NATION'S PRESSING NEEDS.

       (a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Pressing Domestic Needs Trust Fund', consisting of such 
     amounts as may be transferred to the Trust Fund as provided 
     in this section.
       (b) Transfers to Fund.--There are hereby transferred from 
     the general Fund of the Treasury to the Pressing Domestic 
     Needs Trust Fund so much of the additional amounts received 
     in the Treasury by reason of the amendments made by title III 
     of this Act as does not exceed--
       (1) $18,000,000,000 to be used for increasing Federal 
     matching funds under medicaid, and
       (2) $26,000,000,000 to be used for infrastructure 
     improvements, homeland security, community development, and 
     education.
       (c) Expenditures.--Amounts in the Pressing Domestic Needs 
     Trust Fund shall be available, as provided by appropriation 
     Acts, for purposes and in the amount specified in subsection 
     (b).

              TITLE II--LONG-TERM JOB CREATION AND GROWTH

     SEC. 201. INCREASE AND EXTENSION OF BONUS DEPRECIATION.

       (a) In General.--Section 168(k) (relating to special 
     allowance for certain property acquired after September 10, 
     2001, and before September 11, 2004) is amended by adding at 
     the end the following new paragraph:
       ``(4) 50-percent bonus depreciation for certain property.--
       ``(A) In general.--In the case of 50-percent bonus 
     depreciation property--
       ``(i) paragraph (1)(A) shall be applied by substituting `50 
     percent' for `30 percent', and
       ``(ii) except as provided in paragraph (2)(C), such 
     property shall be treated as qualified property for purposes 
     of this subsection.
       ``(B) 50-percent bonus depreciation property.--For purposes 
     of this subsection, the term `50-percent bonus depreciation 
     property' means property described in paragraph (2)(A)(i)--
       ``(i) the original use of which commences with the taxpayer 
     after April 30, 2003,
       ``(ii) which is acquired by the taxpayer after April 30, 
     2003, and before May 1, 2004, but only if no written binding 
     contract for the acquisition was in effect before May 1, 
     2003, and
       ``(iii) which is placed in service by the taxpayer before 
     January 1, 2005, or, in the case of property described in 
     paragraph (2)(B) (as modified by subparagraph (C) of this 
     paragraph), before January 1, 2006.
       ``(C) Special rules.--Rules similar to the rules of 
     subparagraphs (B) and (D) of paragraph (2) shall apply for 
     purposes of this paragraph; except that reference to 
     September 10, 2001, shall be treated as references to April 
     30, 2003.
       ``(D) Automobiles.--Paragraph (2)(E) shall be applied by 
     substituting `$9,200' for `$4,600' in the case of 50-percent 
     bonus depreciation property.
       ``(E) Election of 30 percent bonus.--If a taxpayer makes an 
     election under this subparagraph with respect to any class of 
     property for any taxable year, subparagraph (A)(i) shall not 
     apply to all property in such class placed in service during 
     such taxable year.''
        (b) Modification to 30-Percent Bonus Depreciation 
     Property.--
       (1) Portion of basis taken into account.--Subparagraphs 
     (B)(ii) and (D)(i) of section 168(k)(2) are each amended by 
     striking ``September 11, 2004'' each place it appears and 
     inserting ``January 1, 2005''.
       (2) Election.--Clause (iii) of section 168(k)(2)(C) is 
     amended by adding at the end the following: ``The preceding 
     sentence shall be applied separately with respect to property 
     treated as qualified property by paragraph (4) and other 
     qualified property.''
       (3) Acquisition date.--Clause (iii) of section 168(k)(2)(A) 
     is amended by striking ``September 11, 2004'' each place it 
     appears and inserting ``January 1, 2005''.
       (c) Conforming Amendments.--
       (1) The subsection heading for section 168(k) is amended by 
     striking ``September 11, 2004'' and inserting ``January 1, 
     2005''.
       (2) The heading for clause (i) of section 1400L(b)(2)(C) is 
     amended by striking ``30-percent additional allowable 
     property'' and inserting ``Bonus depreciation property under 
     section 168(k)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 202. INCREASED EXPENSING FOR SMALL BUSINESS.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000 ($75,000 in the case of taxable 
     years beginning in 2003 or 2004).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 203. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED 
                   STATES PRODUCTION ACTIVITIES.

       (a) In General.--Part VIII of subchapter B of chapter 1 
     (relating to special deductions for corporations) is amended 
     by adding at the end the following new section:

     ``SEC. 250. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION 
                   ACTIVITIES.

       ``(a) In General.--In the case of a corporation, there 
     shall be allowed as a deduction an amount equal to 10 percent 
     of the qualified production activities income of the 
     corporation for the taxable year.
       ``(b) Phasein.--In the case of taxable years beginning in 
     2006, 2007, 2008 or 2009, subsection (a) shall be applied by 
     substituting for the percentage contained therein the 
     transition percentage determined under the following table:

      The transitions
      percentage is:
        16.............................................................
        27.............................................................
        48.............................................................
        99.............................................................

       ``(c) Qualified Production Activities Income.--For purposes 
     of this section, the term `qualified production activities 
     income' means the product of--
       ``(1) the portion of the modified taxable income of the 
     taxpayer which is attributable to domestic production 
     activities, and
       ``(2) the domestic/foreign fraction.
       ``(d) Determination of Income Attributable to Domestic 
     Production Activities.--For purposes of this section--
       ``(1) In general.--The portion of the modified taxable 
     income which is attributable to domestic production 
     activities is so much of the modified taxable income for the 
     taxable year as does not exceed--
       ``(A) the taxpayer's domestic production gross receipts for 
     such taxable year, reduced by
       ``(B) the sum of--
       ``(i) the costs of goods sold that are allocable to such 
     receipts,
       ``(ii) other deductions, expenses, or losses directly 
     allocable to such receipts, and
       ``(iii) a ratable portion of other deductions, expenses, 
     and losses that are not directly allocable to such receipts 
     or another class of income.
       ``(2) Allocation method.--Except as provided in 
     regulations, allocations under clauses (ii) and (iii) of 
     paragraph (1)(B) shall be made under the principles used in 
     determining the portion of taxable income from sources within 
     and without the United States.
       ``(3) Special rule.--
       ``(A) For purposes of determining costs under clause (i) of 
     paragraph (1)(B), any item or service brought into the United 
     States without a transfer price meeting the requirements of 
     section 482 shall be treated as acquired by purchase, and its 
     cost shall be treated as not less than its value when it 
     entered the United States. A similar rule shall apply in 
     determining the adjusted basis of leased or rented property 
     where the lease or rental gives rise to domestic production 
     gross receipts.
       ``(B) In the case of any property described in subparagraph 
     (A) that had been exported by the taxpayer for further 
     manufacture, the increase in cost (or adjusted basis) under 
     subparagraph (A) shall not exceed the difference between the 
     value of the property when exported and the value of the 
     property when brought back into the United States after the 
     further manufacture.
       ``(4) Modified taxable income.--The term `modified taxable 
     income' means taxable income computed without regard to the 
     deduction allowable under this section.
       ``(e) Domestic Production Gross Receipts.--For purposes of 
     this section--

[[Page H3944]]

       ``(1) In general.--The term `domestic production gross 
     receipts' means the gross receipts of the taxpayer which are 
     derived from--
       ``(A) any sale, exchange, or other disposition of, or
       ``(B) any lease, rental or license of,

     qualifying production property which was manufactured, 
     produced, grown, or extracted in whole or in significant part 
     by the taxpayer within the United States.
       ``(2) Special rule.--The term `domestic production gross 
     receipts' includes gross receipts of the taxpayer from the 
     sale, exchange, or other disposition of replacement parts 
     if--
       ``(A) such parts are sold by the taxpayer as replacement 
     parts for qualified production property produced or 
     manufactured in whole or significant part by the taxpayer in 
     the United States, and
       ``(B) the taxpayer (or a related party) owns the designs 
     for such parts.
       ``(3) Related party.--The term `related party' means any 
     corporation which is a member of the taxpayer's expanded 
     affiliated group.
       ``(f) Qualifying Production Property.--For purposes of this 
     section--
       ``(1) In general.--Except as otherwise provided in this 
     paragraph, the term `qualifying production property' means--
       ``(A) any tangible personal property,
       ``(B) any computer software, and
       ``(C) any films, tapes, records, or similar reproductions.
       ``(2) Exclusions from qualifying production property.--The 
     term `qualifying production property' shall not include--
       ``(A) consumable property that is sold, leased, or licensed 
     by the taxpayer as an integral part of the provision of 
     services,
       ``(B) oil or gas (or any primary product thereof),
       ``(C) electricity,
       ``(D) water supplied by pipeline to the consumer,
       ``(E) any unprocessed timber which is softwood,
       ``(F) utility services, or
       ``(G) any property (not described in paragraph (1)(B)) 
     which is a film, tape, recording, book, magazine, newspaper, 
     or similar property the market for which is primarily topical 
     or otherwise essentially transitory in nature.

     For purposes of subparagraph (E), the term `unprocessed 
     timber' means any log, cant, or similar form of timber.
       ``(g) Domestic/Foreign Fraction.--For purposes of this 
     section--
       ``(1) In general.--The term `domestic/foreign fraction' 
     means a fraction--
       ``(A) the numerator of which is the value of the domestic 
     production of the taxpayer, and
       ``(B) the denominator of which is the value of the 
     worldwide production of the taxpayer.
       ``(2) Value of domestic production.--The value of domestic 
     production is the excess of--
       ``(A) the domestic production gross receipts, over
       ``(B) the cost of purchased inputs allocable to such 
     receipts that are deductible under this chapter for the 
     taxable year.
       ``(3) Purchased inputs.--
       ``(A) In general.--Purchased inputs are any of the 
     following items acquired by purchase:
       ``(i) Services (other than services of employees) used in 
     manufacture, production, growth, or extraction activities.
       ``(ii) Items consumed in connection with such activities.
       ``(iii) Items incorporated as part of the property being 
     manufactured, produced, grown, or extracted.
       ``(B) Special rule.--Rules similar to the rules of 
     subsection (d)(3) shall apply for purposes of this 
     subsection.
       ``(4) Value of worldwide production.--
       ``(A) In general.--The value of worldwide production shall 
     be determined under the principles of paragraph (2), except 
     that--
       ``(i) worldwide production gross receipts shall be taken 
     into account, and
       ``(ii) paragraph (3)(B) shall not apply.
       ``(B) Worldwide production gross receipts.--The worldwide 
     production gross receipts is the amount that would be 
     determined under subsection (e) if such subsection were 
     applied without any reference to the United States.
       ``(5) Special rule for affiliated groups.--
       ``(A) In general.--In the case of a taxpayer that is a 
     member of an expanded affiliated group, the domestic/foreign 
     fraction shall be the amount determined under the preceding 
     provisions of this subsection by treating all members of such 
     group as a single corporation.
       ``(B) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a), determined--
       ``(i) by substituting `50 percent' for `80 percent' each 
     place it appears, and
       ``(ii) without regard to paragraphs (2), (3), and (4) of 
     section 1504(b).
       ``(h) Definitions and Special Rules.--
       ``(1) United states.--For purposes of this section, the 
     term `United States' includes the Commonwealth of Puerto Rico 
     and any other possession of the United States.
       ``(2) Special rule for partnerships.--For purposes of this 
     section, a corporation's distributive share of any 
     partnership item shall be taken into account as if directly 
     realized by the corporation.
       ``(3) Coordination with minimum tax.--The deduction under 
     this section shall be allowed for purposes of the tax imposed 
     by section 55; except that for purposes of section 55, 
     alternative minimum taxable income shall be taken into 
     account in determining the deduction under this section.
       ``(4) Ordering rule.--The amount of any other deduction 
     allowable under this chapter shall be determined as if this 
     section had not been enacted.
       ``(5) Coordination with transition rules.--For purposes of 
     this section--
       ``(A) domestic production gross receipts shall not include 
     gross receipts from any transaction if the binding contract 
     transition relief of section 303(c)(2) of the Jobs and Growth 
     Reconciliation Tax Act of 2003 applies to such transaction, 
     and
       ``(B) any deduction allowed under section 2(e) of such Act 
     shall be disregarded in determining the portion of the 
     taxable income which is attributable to domestic production 
     gross receipts.''.
       (b) Clerical Amendment.--The table of sections for part 
     VIII of subchapter B of chapter 1 is amended by adding at the 
     end the following new item:

``Sec. 250. Income attributable to domestic production activities.''.

       (c) Effective Date.--
       ``(1) In general.--The amendments made by this section 
     shall apply to taxable years beginning after 2005.
       ``(2) Application of section 15.--Section 15 of the 
     Internal Revenue Code of 1986 shall apply to the amendments 
     made by this section as if they were changes in a rate of 
     tax.

 TITLE III--FISCAL RESPONSIBILITY AND PROVISIONS ADDRESSING CORPORATE 
                                 ABUSE

                    Subtitle A-- General Provisions

     SEC. 301. FREEZE OF TOP INDIVIDUAL INCOME TAX RATES.

       (a) Freeze of Top Individual Income Tax Rates.--Paragraph 
     (2) of section 1(i) (relating to reductions in rates after 
     June 30, 2001) is amended--
       (1) in the column for the highest rate--
       (A) by striking ``37.6'' and inserting ``38.6'', and
       (B) by striking ``35.0'' and inserting ``38.6'', and
       (2) in the column for the next highest rate--
       (A) by striking ``34.0'' and inserting ``35.0'', and
       (B) by striking ``33.0'' and inserting ``35.0''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
       (c) Restoration of Rate Reductions If Funds Not Committed 
     to Meet Nation's Pressing Needs.--
       (1) In general.--On December 31, 2003, the Director of the 
     Office of Management and Budget shall determine whether there 
     is a noncommitted balance in the Pressing Domestic Needs 
     Trust Fund (established by section 161 of this Act). If such 
     a noncommitted balance is determined, the Secretary of the 
     Treasury shall reduce the rates otherwise applicable under 
     the amendment made by subsection (a) so that the total 
     revenue raised by such amendment is reduced by the amount of 
     such noncommitted balance.
       (2) Noncommitted balance.--For purposes of paragraph (1), 
     the noncommitted balance of the trust fund is the portion of 
     the amounts in the trust fund which are not committed to 
     meeting the pressing needs specified in section 161.
       (d) Restoration of Rate Reductions If Balanced Budget.--The 
     amendments made by this section shall cease to apply to any 
     taxable year beginning after a calendar year if there is no 
     deficit in the Federal budget for the fiscal year ending in 
     such calendar year.

     SEC. 302. RESTORATION OF PHASEOUTS OF DEDUCTIONS FOR PERSONAL 
                   EXEMPTIONS AND OF ITEMIZED DEDUCTIONS.

       (a) Phaseout of Personal Exemptions.--Paragraph (3) of 
     section 151(d) is amended by striking subparagraphs (E) and 
     (F).
       (b) Phaseout of Itemized Deductions.--Section 68 (relating 
     to overall limitation on itemized deductions) is amended by 
     striking subsections (f) and (g).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 303. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

       (a) In General.--Section 114 is hereby repealed.
       (b) Conforming Amendments.--
       (1) Subpart E of part III of subchapter N of chapter 1 
     (relating to qualifying foreign trade income) is hereby 
     repealed.
       (2) The table of subparts for such part III is amended by 
     striking the item relating to subpart E.
       (3) The table of sections for part III of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     114.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to transactions occurring after the date of the 
     enactment of this Act.
       (2) Binding contracts.--The amendments made by this section 
     shall not apply to any transaction in the ordinary course of 
     a trade

[[Page H3945]]

     or business which occurs pursuant to a binding contract--
       (A) which is between the taxpayer and a person who is not a 
     related person (as defined in section 943(b)(3) of such Code, 
     as in effect on the day before the date of the enactment of 
     this Act), and
       (B) which is in effect on April 11, 2003, and at all times 
     thereafter.

     For purposes of this paragraph, a binding contract shall 
     include a purchase option, renewal option, or replacement 
     option which is included in such contract.
       (d) Revocation of Section 943(e) Elections.--
       (1) In general.--In the case of a corporation that elected 
     to be treated as a domestic corporation under section 943(e) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of this Act)--
       (A) the corporation may revoke such election, effective as 
     of the date of the enactment of this Act, and
       (B) if the corporation does revoke such election--
       (i) such corporation shall be treated as a domestic 
     corporation transferring (as of the date of the enactment of 
     this Act) all of its property to a foreign corporation in 
     connection with an exchange described in section 354 of the 
     Internal Revenue Code of 1986, and
       (ii) no gain or loss shall be recognized on such transfer.
       (2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall 
     not apply to gain on any asset held by the revoking 
     corporation if--
       (A) the basis of such asset is determined in whole or in 
     part by reference to the basis of such asset in the hands of 
     the person from whom the revoking corporation acquired such 
     asset,
       (B) the asset was acquired by transfer (not as a result of 
     the election under section 943(e) of such Code) occurring on 
     or after the 1st day on which its election under section 
     943(e) of such Code was effective, and
       (C) a principal purpose of the acquisition was the 
     reduction or avoidance of tax.
       (e) General Transition.--
       (1) In general.--In the case of a taxable year ending after 
     the date of the enactment of this Act and beginning before 
     January 1, 2009, for purposes of chapter 1 of such Code, each 
     current FSC/ETI beneficiary shall be allowed a deduction 
     equal to the transition amount determined under this 
     subsection with respect to such beneficiary for such year.
       (2) Current fsc/eti beneficiary.--The term ``current FSC/
     ETI beneficiary'' means any corporation which entered into 
     one or more transactions during its taxable year beginning in 
     calendar year 2001 with respect to which FSC/ETI benefits 
     were allowable.
       (3) Transition amount.--For purposes of this subsection--
       (A) In general.--The transition amount applicable to any 
     current FSC/ETI beneficiary for any taxable year is the 
     phaseout percentage of the adjusted base period amount.
       (B) Phaseout percentage.--
       (i) In general.--In the case of a taxpayer using the 
     calendar year as its taxable year, the phaseout percentage 
     shall be determined under the following table:
      The phaseout
      percentage is:
        100and 2005....................................................
         75............................................................
         75............................................................
         50............................................................
          0and thereafter..............................................
       (ii) Special rule for 2003.--The phaseout percentage for 
     2003 shall be the amount that bears the same ratio to 100 
     percent as the number of days after the date of the enactment 
     of this Act bears to 365.
       (iii) Special rule for fiscal year taxpayers.--In the case 
     of a taxpayer not using the calendar year as its taxable 
     year, the phaseout percentage is the weighted average of the 
     phaseout percentages determined under the preceding 
     provisions of this paragraph with respect to calendar years 
     any portion of which is included in the taxpayer's taxable 
     year. The weighted average shall be determined on the basis 
     of the respective portions of the taxable year in each 
     calendar year.
       (4) Adjusted base period amount.--For purposes of this 
     subsection--
       (A) In general.--In the case of a taxpayer using the 
     calendar year as its taxable year, the adjusted base period 
     amount for any taxable year is the base period amount 
     multiplied by the applicable percentage, as determined in the 
     following table:
      The applicable
      percentage is:
        100............................................................
        100............................................................
        105............................................................
        110............................................................
        115............................................................
        120............................................................
          0and thereafter..............................................

       (B) Base period amount.--The base period amount is the 
     aggregate FSC/ETI benefits for the taxpayer's taxable year 
     beginning in calendar year 2001.
       (C) Special rules for fiscal year taxpayers, etc.--Rules 
     similar to rules of clauses (ii) and (iii) of paragraph 
     (3)(B) shall apply for purposes of this paragraph.
       (5) FSC/ETI benefit.--For purposes of this subsection, the 
     term `FSC/ETI benefit' means--
       (A) amounts excludable from gross income under section 114 
     of such Code, and
       (B) the exempt foreign trade income of related foreign 
     sales corporations from property acquired from the taxpayer 
     (determined without regard to section 923(a)(5) of such Code 
     (relating to special rule for military property), as in 
     effect on the day before the date of the enactment of the FSC 
     Repeal and Extraterritorial Income Exclusion Act of 2000).

     In determining the FSC/ETI benefit there shall be excluded 
     any amount attributable to a transaction with respect to 
     which the taxpayer is the lessor unless the leased property 
     was manufactured or produced in whole or in part by the 
     taxpayer.
       (6) Special rule for farm cooperatives.--Under regulations 
     prescribed by the Secretary, determinations under this 
     subsection with respect to an organization described in 
     section 943(g)(1) of such Code, as in effect on the day 
     before the date of the enactment of this Act, shall be made 
     at the cooperative level and the purposes of this subsection 
     shall be carried out by excluding amounts from the gross 
     income of its patrons.
       (7) Certain rules to apply.--Rules similar to the rules of 
     section 41(f) of such Code shall apply for purposes of this 
     subsection.
       (8) Coordination with binding contract rule.--The deduction 
     determined under paragraph (1) for any taxable year shall be 
     reduced by the phaseout percentage of any FSC/ETI benefit 
     realized for the taxable year by reason of subsection (c)(2). 
     The preceding sentence shall not apply to any FSC/ETI benefit 
     attributable to a transaction described in the last sentence 
     of paragraph (5).
       (9) Special rule for taxable year which includes date of 
     enactment.--In the case of a taxable year which includes the 
     date of the enactment of this Act, the deduction allowed 
     under this subsection to any current FSC/ETI beneficiary 
     shall in no event exceed--
       (A) 100 percent of such beneficiary's adjusted base period 
     amount for calendar year 2003, reduced by
       (B) the aggregate FSC/ETI benefits of such beneficiary with 
     respect to transactions occurring during the portion of the 
     taxable year ending on the date of the enactment of this Act.

  Subtitle B--Abusive Tax Shelter Shutdown and Taxpayer Accountability

          PART I--PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS

     SEC. 311. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Clarification of Economic Substance Doctrine; Etc.--
       ``(1) General rules.--
       ``(A) In general.--In applying the economic substance 
     doctrine, the determination of whether a transaction has 
     economic substance shall be made as provided in this 
     paragraph.
       ``(B) Definition of economic substance.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--A transaction has economic substance 
     only if--

       ``(I) the transaction changes in a meaningful way (apart 
     from Federal tax effects and, if there is any Federal tax 
     effects, also apart from any foreign, State, or local tax 
     effects) the taxpayer's economic position, and
       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

       ``(ii) Special rule where taxpayer relies on profit 
     potential.--A transaction shall not be treated as having 
     economic substance by reason of having a potential for profit 
     unless--

       ``(I) the present value of the reasonably expected pre-tax 
     profit from the transaction is substantial in relation to the 
     present value of the expected net tax benefits that would be 
     allowed if the transaction were respected, and
       ``(II) the reasonably expected pre-tax profit from the 
     transaction exceeds a risk-free rate of return.

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means

[[Page H3946]]

     the common law doctrine under which tax benefits under 
     subtitle A with respect to a transaction are not allowable if 
     the transaction does not have economic substance or lacks a 
     business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Substantial nontax purpose.--In applying subclause 
     (II) of paragraph (1)(B)(i), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax.
       ``(D) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(E) Treatment of lessors.--In applying subclause (I) of 
     paragraph (1)(B)(ii) to the lessor of tangible property 
     subject to a lease, the expected net tax benefits shall not 
     include the benefits of depreciation, or any tax credit, with 
     respect to the leased property and subclause (II) of 
     paragraph (1)(B)(ii) shall be disregarded in determining 
     whether any of such benefits are allowable.
       ``(4) Other common law doctrines not affected.--Except as 
     specifically provided in this subsection, the provisions of 
     this subsection shall not be construed as altering or 
     supplanting any other rule of law, and the requirements of 
     this subsection shall be construed as being in addition to 
     any such other rule of law.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection. Such regulations may include 
     exemptions from the application of this subsection.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 13, 
     2003.

     SEC. 312. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

       (a) In General.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by inserting 
     after section 6707 the following new section:

     ``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE 
                   TRANSACTION INFORMATION WITH RETURN OR 
                   STATEMENT.

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,
     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Coordination With Other Penalties.--The penalty 
     imposed by this section is in addition to any penalty imposed 
     under this title.''
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

     SEC. 313. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662 the following new section:

     ``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERSTATEMENTS WITH RESPECT TO REPORTABLE 
                   TRANSACTIONS.

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--
       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.

     For purposes of subparagraph (A), any reduction of the excess 
     of deductions allowed for the taxable year over gross income 
     for such year, and any reduction in the amount of capital 
     losses which would (without regard to section 1211) be 
     allowed for such year, shall be treated as an increase in 
     taxable income.

[[Page H3947]]

       ``(2) Items to which section applies.--This section shall 
     apply to any item which is attributable to--
       ``(A) any listed transaction, and
       ``(B) any reportable transaction (other than a listed 
     transaction) if a significant purpose of such transaction is 
     the avoidance or evasion of Federal income tax.
       ``(c) Higher Penalty for Nondisclosed Listed and Other 
     Avoidance Transactions.--
       ``(1) In general.--Subsection (a) shall be applied by 
     substituting `30 percent' for `20 percent' with respect to 
     the portion of any reportable transaction understatement with 
     respect to which the requirement of section 6664(d)(2)(A) is 
     not met.
       ``(2) Rules applicable to compromise of penalty.--
       ``(A) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which paragraph (1) 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(B) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements and 
     noneconomic substance transaction understatements for 
     purposes of determining whether such understatement is a 
     substantial understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements and noneconomic substance transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement and a 
     noneconomic substance transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6662B or 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement or noneconomic substance 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).
       ``(5) Cross reference.--
  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''
       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:

     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies and 
     without regard to items with respect to which a penalty is 
     imposed by section 6662B.''
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a reportable 
     transaction understatement if it is shown that there was a 
     reasonable cause for such portion and that the taxpayer acted 
     in good faith with respect to such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.

     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account the possibility that a return will not be audited, 
     such treatment will not be raised on audit, or such treatment 
     will be resolved through settlement if it is raised.
       ``(B) Certain opinions may not be relied upon.--
       ``(i) In general.--An opinion of a tax advisor may not be 
     relied upon to establish the reasonable belief of a taxpayer 
     if--

       ``(I) the tax advisor is described in clause (ii), or
       ``(II) the opinion is described in clause (iii).

       ``(ii) Disqualified tax advisors.--A tax advisor is 
     described in this clause if the tax advisor--

       ``(I) is a material advisor (within the meaning of section 
     6111(b)(1)) who participates in the organization, management, 
     promotion, or sale of the transaction or who is related 
     (within the meaning of section 267(b) or 707(b)(1)) to any 
     person who so participates,
       ``(II) is compensated directly or indirectly by a material 
     advisor with respect to the transaction,
       ``(III) has a fee arrangement with respect to the 
     transaction which is contingent on all or part of the 
     intended tax benefits from the transaction being sustained, 
     or
       ``(IV) as determined under regulations prescribed by the 
     Secretary, has a continuing financial interest with respect 
     to the transaction.

       ``(iii) Disqualified opinions.--For purposes of clause (i), 
     an opinion is disqualified if the opinion--

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),
       ``(II) unreasonably relies on representations, statements, 
     findings, or agreements of the taxpayer or any other person,
       ``(III) does not identify and consider all relevant facts, 
     or
       ``(IV) fails to meet any other requirement as the Secretary 
     may prescribe.''

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--
       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,
     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''
       (3) Section 6662(d)(2) is amended by striking subparagraphs 
     (C) and (D).
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

     ``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERPAYMENTS.''

       (B) The table of sections for part II of subchapter A of 
     chapter 68 is amended by striking the item relating to 
     section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 314. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662A the following new section:

     ``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       ``(a) Imposition of Penalty.--If a taxpayer has an 
     noneconomic substance transaction understatement for any 
     taxable year, there shall be added to the tax an amount equal 
     to 40 percent of the amount of such understatement.
       ``(b) Reduction of Penalty for Disclosed Transactions.--
     Subsection (a) shall be applied by substituting `20 percent' 
     for `40 percent' with respect to the portion of any 
     noneconomic substance transaction understatement with respect 
     to which the relevant facts affecting the tax treatment of 
     the item

[[Page H3948]]

     are adequately disclosed in the return or a statement 
     attached to the return.
       ``(c) Noneconomic Substance Transaction Understatement.--
     For purposes of this section--
       ``(1) In general.--The term `noneconomic substance 
     transaction understatement' means any amount which would be 
     an understatement under section 6662A(b)(1) if section 6662A 
     were applied by taking into account items attributable to 
     noneconomic substance transactions rather than items to which 
     section 6662A would apply without regard to this paragraph.
       ``(2) Noneconomic substance transaction.--The term 
     `noneconomic substance transaction' means any transaction 
     if--
       ``(A) there is a lack of economic substance (within the 
     meaning of section 7701(m)(1)) for the transaction giving 
     rise to the claimed tax benefit or the transaction was not 
     respected under section 7701(m)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable To Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which this section 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 6707A(d) shall apply for purposes of 
     paragraph (1).
       ``(e) Coordination With Other Penalties.--Except as 
     otherwise provided in this part, the penalty imposed by this 
     section shall be in addition to any other penalty imposed by 
     this title.
       ``(f) Cross References.--

  ``(1) For coordination of penalty with understatements under section 
6662 and other special rules, see section 6662A(e).
  ``(2) For reporting of penalty imposed under this section to the 
Securities and Exchange Commission, see section 6707A(e).''
       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68 is amended by inserting after 
     the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 13, 
     2003.

     SEC. 315. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY 
                   FOR NONREPORTABLE TRANSACTIONS.

       (a) Substantial Understatement of Corporations.--Section 
     6662(d)(1)(B) (relating to special rule for corporations) is 
     amended to read as follows:
       ``(B) Special rule for corporations.--In the case of a 
     corporation other than an S corporation or a personal holding 
     company (as defined in section 542), there is a substantial 
     understatement of income tax for any taxable year if the 
     amount of the understatement for the taxable year exceeds the 
     lesser of--
       ``(i) 10 percent of the tax required to be shown on the 
     return for the taxable year (or, if greater, $10,000), or
       ``(ii) $10,000,000.''
       (b) Reduction for Understatement of Taxpayer Due to 
     Position of Taxpayer or Disclosed Item.--
       (1) In general.--Section 6662(d)(2)(B)(i) (relating to 
     substantial authority) is amended to read as follows:
       ``(i) the tax treatment of any item by the taxpayer if the 
     taxpayer had reasonable belief that the tax treatment was 
     more likely than not the proper treatment, or''.
       (2) Conforming amendment.--Section 6662(d) is amended by 
     adding at the end the following new paragraph:
       ``(3) Secretarial list.--For purposes of this subsection, 
     section 6664(d)(2), and section 6694(a)(1), the Secretary may 
     prescribe a list of positions for which the Secretary 
     believes there is not substantial authority or there is no 
     reasonable belief that the tax treatment is more likely than 
     not the proper tax treatment. Such list (and any revisions 
     thereof) shall be published in the Federal Register or the 
     Internal Revenue Bulletin.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 316. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

       (a) In General.--Section 7525(b) (relating to section not 
     to apply to communications regarding corporate tax shelters) 
     is amended to read as follows:
       ``(b) Section Not To Apply to Communications Regarding Tax 
     Shelters.--The privilege under subsection (a) shall not apply 
     to any written communication which is--
       ``(1) between a federally authorized tax practitioner and--
       ``(A) any person,
       ``(B) any director, officer, employee, agent, or 
     representative of the person, or
       ``(C) any other person holding a capital or profits 
     interest in the person, and
       ``(2) in connection with the promotion of the direct or 
     indirect participation of the person in any tax shelter (as 
     defined in section 1274(b)(3)(C)).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to communications made on or after the date of 
     the enactment of this Act.

     SEC. 317. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended to read as follows:

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.
     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, promoting, selling, implementing, 
     or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of reportable transactions.''

       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS 
                   MUST KEEP LISTS OF ADVISEES.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.
     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''

       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH 
                   RESPECT TO REPORTABLE TRANSACTIONS.''

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions with respect to which material 
     aid, assistance, or advice referred to in section 
     6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as 
     added by this section) is provided after the date of the 
     enactment of this Act.

     SEC. 318. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING 
                   REPORTABLE TRANSACTIONS.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or

[[Page H3949]]

       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,

     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the reportable transaction before the date 
     the return including the transaction is filed under section 
     6111.

     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Rescission Authority.--The provisions of section 
     6707A(d) (relating to authority of Commissioner to rescind 
     penalty) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

     SEC. 319. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

       (a) In General.--Subsection (a) of section 6708 is amended 
     to read as follows:
       ``(a) Imposition of Penalty.--
       ``(1) In general.--If any person who is required to 
     maintain a list under section 6112(a) fails to make such list 
     available upon written request to the Secretary in accordance 
     with section 6112(b)(1)(A) within 20 business days after the 
     date of the Secretary's request, such person shall pay a 
     penalty of $10,000 for each day of such failure after such 
     20th day.
       ``(2) Reasonable cause exception.--No penalty shall be 
     imposed by paragraph (1) with respect to the failure on any 
     day if such failure is due to reasonable cause.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 320. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT 
                   RELATED TO TAX SHELTERS AND REPORTABLE 
                   TRANSACTIONS.

       (a) In General.--Section 7408 (relating to action to enjoin 
     promoters of abusive tax shelters, etc.) is amended by 
     redesignating subsection (c) as subsection (d) and by 
     striking subsections (a) and (b) and inserting the following 
     new subsections:
       ``(a) Authority To Seek Injunction.--A civil action in the 
     name of the United States to enjoin any person from further 
     engaging in specified conduct may be commenced at the request 
     of the Secretary. Any action under this section shall be 
     brought in the district court of the United States for the 
     district in which such person resides, has his principal 
     place of business, or has engaged in specified conduct. The 
     court may exercise its jurisdiction over such action (as 
     provided in section 7402(a)) separate and apart from any 
     other action brought by the United States against such 
     person.
       ``(b) Adjudication and Decree.--In any action under 
     subsection (a), if the court finds--
       ``(1) that the person has engaged in any specified conduct, 
     and
       ``(2) that injunctive relief is appropriate to prevent 
     recurrence of such conduct,
     the court may enjoin such person from engaging in such 
     conduct or in any other activity subject to penalty under 
     this title.
       ``(c) Specified Conduct.--For purposes of this section, the 
     term `specified conduct' means any action, or failure to take 
     action, subject to penalty under section 6700, 6701, 6707, or 
     6708.''
       (b) Conforming Amendments.--
       (1) The heading for section 7408 is amended to read as 
     follows:

     ``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO 
                   TAX SHELTERS AND REPORTABLE TRANSACTIONS.''

       (2) The table of sections for subchapter A of chapter 67 is 
     amended by striking the item relating to section 7408 and 
     inserting the following new item:

``Sec. 7408. Actions to enjoin specified conduct related to tax 
              shelters and reportable transactions.''

       (c) Effective Date.--The amendment made by this section 
     shall take effect on the day after the date of the enactment 
     of this Act.

     SEC. 321. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME 
                   TAX RETURN PREPARER.

       (a) Standards Conformed to Taxpayer Standards.--Section 
     6694(a) (relating to understatements due to unrealistic 
     positions) is amended--
       (1) by striking ``realistic possibility of being sustained 
     on its merits'' in paragraph (1) and inserting ``reasonable 
     belief that the tax treatment in such position was more 
     likely than not the proper treatment'',
       (2) by striking ``or was frivolous'' in paragraph (3) and 
     inserting ``or there was no reasonable basis for the tax 
     treatment of such position'', and
       (3) by striking ``Unrealistic'' in the heading and 
     inserting ``Improper''.
       (b) Amount of Penalty.--Section 6694 is amended--
       (1) by striking ``$250'' in subsection (a) and inserting 
     ``$1,000'', and
       (2) by striking ``$1,000'' in subsection (b) and inserting 
     ``$5,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to documents prepared after the date of the 
     enactment of this Act.

     SEC. 322. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

       (a) In General.--Section 5321(a)(5) of title 31, United 
     States Code, is amended to read as follows:
       ``(5) Foreign financial agency transaction violation.--
       ``(A) Penalty authorized.--The Secretary of the Treasury 
     may impose a civil money penalty on any person who violates, 
     or causes any violation of, any provision of section 5314.
       ``(B) Amount of penalty.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the amount of any civil penalty imposed under subparagraph 
     (A) shall not exceed $5,000.
       ``(ii) Reasonable cause exceptionNo penalty shall be 
     imposed under subparagraph (A) with respect to any violation 
     if--

       ``(I) such violation was due to reasonable cause, and
       ``(II) the amount of the transaction or the balance in the 
     account at the time of the transaction was properly reported.

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--
       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

       ``(I) $25,000, or
       ``(II) the amount (not exceeding $100,000) determined under 
     subparagraph (D), and

       ``(ii) subparagraph (B)(ii) shall not apply.
       ``(D) Amount.--The amount determined under this 
     subparagraph is--
       ``(i) in the case of a violation involving a transaction, 
     the amount of the transaction, or
       ``(ii) in the case of a violation involving a failure to 
     report the existence of an account or any identifying 
     information required to be provided with respect to an 
     account, the balance in the account at the time of the 
     violation.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to violations occurring after the date of the 
     enactment of this Act.

     SEC. 323. FRIVOLOUS TAX SUBMISSIONS.

       (a) Civil Penalties.--Section 6702 is amended to read as 
     follows:

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

       ``(a) Civil Penalty for Frivolous Tax Returns.--A person 
     shall pay a penalty of $5,000 if--
       ``(1) such person files what purports to be a return of a 
     tax imposed by this title but which--
       ``(A) does not contain information on which the substantial 
     correctness of the self-assessment may be judged, or
       ``(B) contains information that on its face indicates that 
     the self-assessment is substantially incorrect; and
       ``(2) the conduct referred to in paragraph (1)--
       ``(A) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(B) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(b) Civil Penalty for Specified Frivolous Submissions.--
       ``(1) Imposition of penalty.--Except as provided in 
     paragraph (3), any person who submits a specified frivolous 
     submission shall pay a penalty of $5,000.
       ``(2) Specified frivolous submission.--For purposes of this 
     section--
       ``(A) Specified frivolous submission.--The term `specified 
     frivolous submission' means a specified submission if any 
     portion of such submission--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified submission.--The term `specified 
     submission' means--
       ``(i) a request for a hearing under--

       ``(I) section 6320 (relating to notice and opportunity for 
     hearing upon filing of notice of lien), or
       ``(II) section 6330 (relating to notice and opportunity for 
     hearing before levy), and

       ``(ii) an application under--

       ``(I) section 6159 (relating to agreements for payment of 
     tax liability in installments),
       ``(II) section 7122 (relating to compromises), or
       ``(III) section 7811 (relating to taxpayer assistance 
     orders).

       ``(3) Opportunity to withdraw submission.--If the Secretary 
     provides a person with notice that a submission is a 
     specified

[[Page H3950]]

     frivolous submission and such person withdraws such 
     submission within 30 days after such notice, the penalty 
     imposed under paragraph (1) shall not apply with respect to 
     such submission.
       ``(c) Listing of Frivolous Positions.--The Secretary shall 
     prescribe (and periodically revise) a list of positions which 
     the Secretary has identified as being frivolous for purposes 
     of this subsection. The Secretary shall not include in such 
     list any position that the Secretary determines meets the 
     requirement of section 6662(d)(2)(B)(ii)(II).
       ``(d) Reduction of Penalty.--The Secretary may reduce the 
     amount of any penalty imposed under this section if the 
     Secretary determines that such reduction would promote 
     compliance with and administration of the Federal tax laws.
       ``(e) Penalties in Addition to Other Penalties.--The 
     penalties imposed by this section shall be in addition to any 
     other penalty provided by law.''
       (b) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, Etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''
       (e) Clerical Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by striking the item 
     relating to section 6702 and inserting the following new 
     item:

``Sec. 6702. Frivolous tax submissions.''

       (f) Effective Date.--The amendments made by this section 
     shall apply to submissions made and issues raised after the 
     date on which the Secretary first prescribes a list under 
     section 6702(c) of the Internal Revenue Code of 1986, as 
     amended by subsection (a).

     SEC. 324. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE 
                   DEPARTMENT OF TREASURY.

       (a) Censure; Imposition of Penalty.--
       (1) In general.--Section 330(b) of title 31, United States 
     Code, is amended--
       (A) by inserting ``, or censure,'' after ``Department'', 
     and
       (B) by adding at the end the following new flush sentence:

     ``The Secretary may impose a monetary penalty on any 
     representative described in the preceding sentence. If the 
     representative was acting on behalf of an employer or any 
     firm or other entity in connection with the conduct giving 
     rise to such penalty, the Secretary may impose a monetary 
     penalty on such employer, firm, or entity if it knew, or 
     reasonably should have known, of such conduct. Such penalty 
     shall not exceed the gross income derived (or to be derived) 
     from the conduct giving rise to the penalty and may be in 
     addition to, or in lieu of, any suspension, disbarment, or 
     censure.''
       (2) Effective date.--The amendments made by this subsection 
     shall apply to actions taken after the date of the enactment 
     of this Act.
       (b) Tax Shelter Opinions, Etc.--Section 330 of such title 
     31 is amended by adding at the end the following new 
     subsection:
       ``(d) Nothing in this section or in any other provision of 
     law shall be construed to limit the authority of the 
     Secretary of the Treasury to impose standards applicable to 
     the rendering of written advice with respect to any entity, 
     transaction plan or arrangement, or other plan or 
     arrangement, which is of a type which the Secretary 
     determines as having a potential for tax avoidance or 
     evasion.''

     SEC. 325. PENALTY ON PROMOTERS OF TAX SHELTERS.

       (a) Penalty on Promoting Abusive Tax Shelters.--Section 
     6700(a) is amended by adding at the end the following new 
     sentence: ``Notwithstanding the first sentence, if an 
     activity with respect to which a penalty imposed under this 
     subsection involves a statement described in paragraph 
     (2)(A), the amount of the penalty shall be equal to 50 
     percent of the gross income derived (or to be derived) from 
     such activity by the person on which the penalty is 
     imposed.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. 326. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH 
                   LISTED TRANSACTIONS NOT REPORTED.

       (a) In General.--Section 6501(e)(1) (relating to 
     substantial omission of items for income taxes) is amended by 
     adding at the end the following new subparagraph:
       ``(C) Listed transactions.--If a taxpayer fails to include 
     on any return or statement for any taxable year any 
     information with respect to a listed transaction (as defined 
     in section 6707A(c)(2)) which is required under section 6011 
     to be included with such return or statement, the tax for 
     such taxable year may be assessed, or a proceeding in court 
     for collection of such tax may be begun without assessment, 
     at any time within 6 years after the time the return is 
     filed. This subparagraph shall not apply to any taxable year 
     if the time for assessment or beginning the proceeding in 
     court has expired before the time a transaction is treated as 
     a listed transaction under section 6011.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act in taxable years ending after such date.

     SEC. 327. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND 
                   NONECONOMIC SUBSTANCE TRANSACTIONS.

       (a) In General.--Section 163 (relating to deduction for 
     interest) is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following new subsection:
       ``(m) Interest on Unpaid Taxes Attributable To Nondisclosed 
     Reportable Transactions and Noneconomic Substance 
     Transactions.--No deduction shall be allowed under this 
     chapter for any interest paid or accrued under section 6601 
     on any underpayment of tax which is attributable to--
       ``(1) the portion of any reportable transaction 
     understatement (as defined in section 6662A(b)) with respect 
     to which the requirement of section 6664(d)(2)(A) is not met, 
     or
       ``(2) any noneconomic substance transaction understatement 
     (as defined in section 6662B(c)).''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act in taxable years ending after such date.

                       PART II--OTHER PROVISIONS

     SEC. 331. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN 
                   LOSSES.

       (a) In General.--Section 362 (relating to basis to 
     corporations) is amended by adding at the end the following 
     new subsection:
       ``(e) Limitations on Built-in Losses.--
       ``(1) Limitation on importation of built-in losses.--
       ``(A) In general.--If in any transaction described in 
     subsection (a) or (b) there would (but for this subsection) 
     be an importation of a net built-in loss, the basis of each 
     property described in subparagraph (B) which is acquired in 
     such transaction shall (notwithstanding subsections (a) and 
     (b)) be its fair market value immediately after such 
     transaction.
       ``(B) Property described.--For purposes of subparagraph 
     (A), property is described in this paragraph if--
       ``(i) gain or loss with respect to such property is not 
     subject to tax under this subtitle in the hands of the 
     transferor immediately before the transfer, and
       ``(ii) gain or loss with respect to such property is 
     subject to such tax in the hands of the transferee 
     immediately after such transfer.

     In any case in which the transferor is a partnership, the 
     preceding sentence shall be applied by treating each partner 
     in such partnership as holding such partner's proportionate 
     share of the property of such partnership.
       ``(C) Importation of net built-in loss.--For purposes of 
     subparagraph (A), there is an importation of a net built-in 
     loss in a transaction if the transferee's aggregate adjusted 
     bases of property described in subparagraph (B) which is 
     transferred in such transaction would (but for this 
     paragraph) exceed the fair market value of such property 
     immediately after such transaction.''
       ``(2) Limitation on transfer of built-in losses in section 
     351 transactions.--
       ``(A) In general.--If--
       ``(i) property is transferred in any transaction which is 
     described in subsection (a) and which is not described in 
     paragraph (1) of this subsection, and
       ``(ii) the transferee's aggregate adjusted bases of the 
     property so transferred would (but for this paragraph) exceed 
     the fair market value of such property immediately after such 
     transaction,


[[Page H3951]]


     then, notwithstanding subsection (a), the transferee's 
     aggregate adjusted bases of the property so transferred shall 
     not exceed the fair market value of such property immediately 
     after such transaction.
       ``(B) Allocation of basis reduction.--The aggregate 
     reduction in basis by reason of subparagraph (A) shall be 
     allocated among the property so transferred in proportion to 
     their respective built-in losses immediately before the 
     transaction.
       ``(C) Exception for transfers within affiliated group.--
     Subparagraph (A) shall not apply to any transaction if the 
     transferor owns stock in the transferee meeting the 
     requirements of section 1504(a)(2). In the case of property 
     to which subparagraph (A) does not apply by reason of the 
     preceding sentence, the transferor's basis in the stock 
     received for such property shall not exceed its fair market 
     value immediately after the transfer.''
       (b) Comparable Treatment Where Liquidation.--Paragraph (1) 
     of section 334(b) (relating to liquidation of subsidiary) is 
     amended to read as follows:
       ``(1) In general.--If property is received by a corporate 
     distributee in a distribution in a complete liquidation to 
     which section 332 applies (or in a transfer described in 
     section 337(b)(1)), the basis of such property in the hands 
     of such distributee shall be the same as it would be in the 
     hands of the transferor; except that the basis of such 
     property in the hands of such distributee shall be the fair 
     market value of the property at the time of the 
     distribution--
       ``(A) in any case in which gain or loss is recognized by 
     the liquidating corporation with respect to such property, or
       ``(B) in any case in which the liquidating corporation is a 
     foreign corporation, the corporate distributee is a domestic 
     corporation, and the corporate distributee's aggregate 
     adjusted bases of property described in section 362(e)(1)(B) 
     which is distributed in such liquidation would (but for this 
     subparagraph) exceed the fair market value of such property 
     immediately after such liquidation.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act.

     SEC. 332. DISALLOWANCE OF CERTAIN PARTNERSHIP LOSS TRANSFERS.

       (a) Treatment of Contributed Property With Built-In Loss.--
     Paragraph (1) of section 704(c) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following:
       ``(C) if any property so contributed has a built-in loss--
       ``(i) such built-in loss shall be taken into account only 
     in determining the amount of items allocated to the 
     contributing partner, and
       ``(ii) except as provided in regulations, in determining 
     the amount of items allocated to other partners, the basis of 
     the contributed property in the hands of the partnership 
     shall be treated as being equal to its fair market value 
     immediately after the contribution.

     For purposes of subparagraph (C), the term `built-in loss' 
     means the excess of the adjusted basis of the property 
     (determined without regard to subparagraph (C)(ii)) over its 
     fair market value immediately after the contribution.''
       (b) Adjustment to Basis of Partnership Property on Transfer 
     of Partnership Interest If There Is Substantial Built-In 
     Loss.--
       (1) Adjustment required.--Subsection (a) of section 743 
     (relating to optional adjustment to basis of partnership 
     property) is amended by inserting before the period ``or 
     unless the partnership has a substantial built-in loss 
     immediately after such transfer''.
       (2) Adjustment.--Subsection (b) of section 743 is amended 
     by inserting ``or with respect to which there is a 
     substantial built-in loss immediately after such transfer'' 
     after ``section 754 is in effect''.
       (3) Substantial built-in loss.--Section 743 is amended by 
     adding at the end the following new subsection:
       ``(d) Substantial Built-In Loss.--
       ``(1) In general.--For purposes of this section, a 
     partnership has a substantial built-in loss with respect to a 
     transfer of an interest in a partnership if the transferee 
     partner's proportionate share of the adjusted basis of the 
     partnership property exceeds by more than $250,000 the basis 
     of such partner's interest in the partnership.
       ``(2) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of paragraph (1) and section 734(d), including regulations 
     aggregating related partnerships and disregarding property 
     acquired by the partnership in an attempt to avoid such 
     purposes.''
       (4) Clerical amendments.--
       (A) The section heading for section 743 is amended to read 
     as follows:

     ``SEC. 743. ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY WHERE 
                   SECTION 754 ELECTION OR SUBSTANTIAL BUILT-IN 
                   LOSS.''

       (B) The table of sections for subpart C of part II of 
     subchapter K of chapter 1 is amended by striking the item 
     relating to section 743 and inserting the following new item:

``Sec. 743. Adjustment to basis of partnership property where section 
              754 election or substantial built-in loss.''

       (c) Adjustment to Basis of Undistributed Partnership 
     Property if There Is Substantial Basis Reduction.--
       (1) Adjustment required.--Subsection (a) of section 734 
     (relating to optional adjustment to basis of undistributed 
     partnership property) is amended by inserting before the 
     period ``or unless there is a substantial basis reduction''.
       (2) Adjustment.--Subsection (b) of section 734 is amended 
     by inserting ``or unless there is a substantial basis 
     reduction'' after ``section 754 is in effect''.
       (3) Substantial basis reduction.--Section 734 is amended by 
     adding at the end the following new subsection:
       ``(d) Substantial Basis Reduction.--
       ``(1) In general.--For purposes of this section, there is a 
     substantial basis reduction with respect to a distribution if 
     the sum of the amounts described in subparagraphs (A) and (B) 
     of subsection (b)(2) exceeds $250,000.
       ``(2) Regulations.--

  ``For regulations to carry out this subsection, see section 
743(d)(2).''
       (4) Clerical amendments.--
       (A) The section heading for section 734 is amended to read 
     as follows:

     ``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP 
                   PROPERTY WHERE SECTION 754 ELECTION OR 
                   SUBSTANTIAL BASIS REDUCTION.''

       (B) The table of sections for subpart B of part II of 
     subchapter K of chapter 1 is amended by striking the item 
     relating to section 734 and inserting the following new item:

``Sec. 734. Adjustment to basis of undistributed partnership property 
              where section 754 election or substantial basis 
              reduction.''

       (d) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to contributions made after the date of the 
     enactment of this Act.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to transfers after the date of the enactment of 
     this Act.
       (3) Subsection (c).--The amendments made by subsection (c) 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 333. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK 
                   HELD BY PARTNERSHIP IN CORPORATE PARTNER.

       (a) In General.--Section 755 is amended by adding at the 
     end the following new subsection:
       ``(c) No Allocation of Basis Decrease to Stock of Corporate 
     Partner.--In making an allocation under subsection (a) of any 
     decrease in the adjusted basis of partnership property under 
     section 734(b)--
       ``(1) no allocation may be made to stock in a corporation 
     which is a partner in the partnership, and
       ``(2) any amount not allocable to stock by reason of 
     paragraph (1) shall be allocated under subsection (a) to 
     other partnership property.

     Gain shall be recognized to the partnership to the extent 
     that the amount required to be allocated under paragraph (2) 
     to other partnership property exceeds the aggregate adjusted 
     basis of such other property immediately before the 
     allocation required by paragraph (2).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 334. REPEAL OF SPECIAL RULES FOR FASITS.

       (a) In General.--Part V of subchapter M of chapter 1 
     (relating to financial asset securitization investment 
     trusts) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Paragraph (6) of section 56(g) is amended by striking 
     ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (2) Clause (ii) of section 382(l)(4)(B) is amended by 
     striking ``a REMIC to which part IV of subchapter M applies, 
     or a FASIT to which part V of subchapter M applies,'' and 
     inserting ``or a REMIC to which part IV of subchapter M 
     applies,''.
       (3) Paragraph (1) of section 582(c) is amended by striking 
     ``, and any regular interest in a FASIT,''.
       (4) Subparagraph (E) of section 856(c)(5) is amended by 
     striking the last sentence.
       (5) Paragraph (5) of section 860G(a) is amended by adding 
     ``and'' at the end of subparagraph (B), by striking ``, and'' 
     at the end of subparagraph (C) and inserting a period, and by 
     striking subparagraph (D).
       (6) Subparagraph (C) of section 1202(e)(4) is amended by 
     striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (7) Subparagraph (C) of section 7701(a)(19) is amended by 
     adding ``and'' at the end of clause (ix), by striking ``, 
     and'' at the end of clause (x) and inserting a period, and by 
     striking clause (xi).
       (8) The table of parts for subchapter M of chapter 1 is 
     amended by striking the item relating to part V.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2003.
       (2) Exception for existing fasits.--
       (A) In general.--Paragraph (1) shall not apply to any FASIT 
     in existence on the date of the enactment of this Act.

[[Page H3952]]

       (B) Transfer of additional assets not permitted.--Except as 
     provided in regulations prescribed by the Secretary of the 
     Treasury or the Secretary's delegate, subparagraph (A) shall 
     cease to apply as of the earliest date after the date of the 
     enactment of this Act that any property is transferred to the 
     FASIT.

     SEC. 335. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON 
                   CONVERTIBLE DEBT.

       (a) In General.--Paragraph (2) of section 163(l) is amended 
     by striking ``or a related party'' and inserting ``or equity 
     held by the issuer (or any related party) in any other 
     person''.
       (b) Conforming Amendment.--Paragraph (3) of section 163(l) 
     is amended by striking ``or a related party'' in the material 
     preceding subparagraph (A) and inserting ``or any other 
     person''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to debt instruments issued after the date of the 
     enactment of this Act.

     SEC. 336. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER 
                   SECTION 269.

       (a) In General.--Subsection (a) of section 269 (relating to 
     acquisitions made to evade or avoid income tax) is amended to 
     read as follows:
       ``(a) In General.--If--
       ``(1)(A) any person acquires stock in a corporation, or
       ``(B) any corporation acquires, directly or indirectly, 
     property of another corporation and the basis of such 
     property, in the hands of the acquiring corporation, is 
     determined by reference to the basis in the hands of the 
     transferor corporation, and
       ``(2) the principal purpose for which such acquisition was 
     made is evasion or avoidance of Federal income tax by 
     securing the benefit of a deduction, credit, or other 
     allowance,

     then the Secretary may disallow such deduction, credit, or 
     other allowance.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to stock and property acquired after February 13, 
     2003.

     SEC. 337. MODIFICATIONS OF CERTAIN RULES RELATING TO 
                   CONTROLLED FOREIGN CORPORATIONS.

       (a) Limitation on Exception From PFIC Rules for United 
     States Shareholders of Controlled Foreign Corporations.--
     Paragraph (2) of section 1297(e) (relating to passive 
     investment company) is amended by adding at the end the 
     following flush sentence:

     ``Such term shall not include any period if there is only a 
     remote likelihood of an inclusion in gross income under 
     section 951(a)(1)(A)(i) of subpart F income of such 
     corporation for such period.''
       (b) Determination of Pro Rata Share of Subpart F Income.--
     Subsection (a) of section 951 (relating to amounts included 
     in gross income of United States shareholders) is amended by 
     adding at the end the following new paragraph:
       ``(4) Special rules for determining pro rata share of 
     subpart f income.--The pro rata share under paragraph (2) 
     shall be determined by disregarding--
       ``(A) any rights lacking substantial economic effect, and
       ``(B) stock owned by a shareholder who is a tax-indifferent 
     party (as defined in section 7701(m)(3)) if the amount which 
     would (but for this paragraph) be allocated to such 
     shareholder does not reflect such shareholder's economic 
     share of the earnings and profits of the corporation.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years on controlled foreign 
     corporation beginning after February 13, 2003, and to taxable 
     years of United States shareholder in which or with which 
     such taxable years of controlled foreign corporations end.

     SEC. 338. BASIS FOR DETERMINING LOSS ALWAYS REDUCED BY 
                   NONTAXED PORTION OF DIVIDENDS.

       (a) In General.--Section 1059 (relating to corporate 
     shareholder's basis in stock reduced by nontaxed portion of 
     extraordinary dividends) is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Basis for Determining Loss Always Reduced by Nontaxed 
     Portion of Dividends.--The basis of stock in a corporation 
     (for purposes of determining loss) shall be reduced by the 
     nontaxed portion of any dividend received with respect to 
     such stock if this section does not otherwise apply to such 
     dividend.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to dividends received after the date of the 
     enactment of this Act.

     SEC. 339. AFFIRMATION OF CONSOLIDATED RETURN REGULATION 
                   AUTHORITY.

       (a) In General.--Section 1502 (relating to consolidated 
     return regulations) is amended by adding at the end the 
     following new sentence: ``In prescribing such regulations, 
     the Secretary may prescribe rules applicable to corporations 
     filing consolidated returns under section 1501 that are 
     different from other provisions of this title that would 
     apply if such corporations filed separate returns.''
       (b) Result Not Overturned.--Notwithstanding subsection (a), 
     the Internal Revenue Code of 1986 shall be construed by 
     treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as in 
     effect on January 1, 2001) as being inapplicable to the type 
     of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
       (c) Effective Date.--The provisions of this section shall 
     apply to taxable years beginning before, on, or after the 
     date of the enactment of this Act.

Subtitle C--Prevention of Corporate Expatriation To Avoid United States 
                               Income Tax

     SEC. 341. PREVENTION OF CORPORATE EXPATRIATION TO AVOID 
                   UNITED STATES INCOME TAX.

       (a) In General.--Paragraph (4) of section 7701(a) (defining 
     domestic) is amended to read as follows:
       ``(4) Domestic.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `domestic' when applied to a corporation or 
     partnership means created or organized in the United States 
     or under the law of the United States or of any State unless, 
     in the case of a partnership, the Secretary provides 
     otherwise by regulations.
       ``(B) Certain corporations treated as domestic.--
       ``(i) In general.--The acquiring corporation in a corporate 
     expatriation transaction shall be treated as a domestic 
     corporation.
       ``(ii) Corporate expatriation transaction.--For purposes of 
     this subparagraph, the term `corporate expatriation 
     transaction' means any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly 
     substantially all of the properties held directly or 
     indirectly by a domestic corporation, and
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation.

       ``(iii) Lower stock ownership requirement in certain 
     cases.--Subclause (II) of clause (ii) shall be applied by 
     substituting `50 percent' for `80 percent' with respect to 
     any nominally foreign corporation if--

       ``(I) such corporation does not have substantial business 
     activities (when compared to the total business activities of 
     the expanded affiliated group) in the foreign country in 
     which or under the law of which the corporation is created or 
     organized, and
       ``(II) the stock of the corporation is publicly traded and 
     the principal market for the public trading of such stock is 
     in the United States.

       ``(iv) Partnership transactions.--The term `corporate 
     expatriation transaction' includes any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly properties 
     constituting a trade or business of a domestic partnership,
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former partners of the domestic 
     partnership or related foreign partnerships (determined 
     without regard to stock of the acquiring corporation which is 
     sold in a public offering related to the transaction), and
       ``(III) the acquiring corporation meets the requirements of 
     subclauses (I) and (II) of clause (iii).

       ``(v) Special rules.--For purposes of this subparagraph--

       ``(I) a series of related transactions shall be treated as 
     1 transaction, and
       ``(II) stock held by members of the expanded affiliated 
     group which includes the acquiring corporation shall not be 
     taken into account in determining ownership.

       ``(vi) Other definitions.--For purposes of this 
     subparagraph--

       ``(I) Nominally foreign corporation.--The term `nominally 
     foreign corporation' means any corporation which would (but 
     for this subparagraph) be treated as a foreign corporation.
       ``(II) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)).
       ``(III) Related foreign partnership.--A foreign partnership 
     is related to a domestic partnership if they are under common 
     control (within the meaning of section 482), or they shared 
     the same trademark or tradename.''

       (b) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     apply to corporate expatriation transactions completed after 
     September 11, 2001.
       (2) Special rule.--The amendment made by this section shall 
     also apply to corporate expatriation transactions completed 
     on or before September 11, 2001, but only with respect to 
     taxable years of the acquiring corporation beginning after 
     December 31, 2003.

 Subtitle D--Inclusion in Gross Income of Funded Deferred Compensation 
                         of Corporate Insiders

     SEC. 351. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED 
                   COMPENSATION OF CORPORATE INSIDERS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 is amended by adding at the end the following new 
     section:

     ``SEC. 409A. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED 
                   COMPENSATION OF CORPORATE INSIDERS.

       ``(a) In General.--If an employer maintains a funded 
     deferred compensation plan--
       ``(1) compensation of any disqualified individual which is 
     deferred under such funded

[[Page H3953]]

     deferred compensation plan shall be included in the gross 
     income of the disqualified individual or beneficiary for the 
     1st taxable year in which there is no substantial risk of 
     forfeiture of the rights to such compensation, and
       ``(2) the tax treatment of any amount made available under 
     the plan to a disqualified individual or beneficiary shall be 
     determined under section 72 (relating to annuities, etc.).
       ``(b) Funded Deferred Compensation Plan.--For purposes of 
     this section--
       ``(1) In general.--The term `funded deferred compensation 
     plan' means any plan providing for the deferral of 
     compensation unless--
       ``(A) the employee's rights to the compensation deferred 
     under the plan are no greater than the rights of a general 
     creditor of the employer, and
       ``(B) all amounts set aside (directly or indirectly) for 
     purposes of paying the deferred compensation, and all income 
     attributable to such amounts, remain (until made available to 
     the participant or other beneficiary) solely the property of 
     the employer (without being restricted to the provision of 
     benefits under the plan), and
       ``(C) the amounts referred to in subparagraph (B) are 
     available to satisfy the claims of the employer's general 
     creditors at all times (not merely after bankruptcy or 
     insolvency).

     Such term shall not include a qualified employer plan.
       ``(2) Special rules.--
       ``(A) Employee's rights.--A plan shall be treated as 
     failing to meet the requirements of paragraph (1)(A) unless--
       ``(i) the compensation deferred under the plan is payable 
     only upon separation from service, death, or at a specified 
     time (or pursuant to a fixed schedule), and
       ``(ii) the plan does not permit the acceleration of the 
     time such deferred compensation is payable by reason of any 
     event.

     If the employer and employee agree to a modification of the 
     plan that accelerates the time for payment of any deferred 
     compensation, then all compensation previously deferred under 
     the plan shall be includible in gross income for the taxable 
     year during which such modification takes effect and the 
     taxpayer shall pay interest at the underpayment rate on the 
     underpayments that would have occurred had the deferred 
     compensation been includible in gross income on the earliest 
     date that there is no substantial risk of forfeiture of the 
     rights to such compensation.
       ``(B) Creditor's rights.--A plan shall be treated as 
     failing to meet the requirements of paragraph (1)(B) with 
     respect to amounts set aside in a trust unless--
       ``(i) the employee has no beneficial interest in the trust,
       ``(ii) assets in the trust are available to satisfy claims 
     of general creditors at all times (not merely after 
     bankruptcy or insolvency), and
       ``(iii) there is no factor that would make it more 
     difficult for general creditors to reach the assets in the 
     trust than it would be if the trust assets were held directly 
     by the employer in the United States.

     Except as provided in regulations prescribed by the 
     Secretary, such a factor shall include the location of the 
     trust outside the United States.
       ``(c) Disqualified Individual.--For purposes of this 
     section, the term `disqualified individual' means, with 
     respect to a corporation, any individual--
       ``(1) who is subject to the requirements of section 16(a) 
     of the Securities Exchange Act of 1934 with respect to such 
     corporation, or
       ``(2) who would be subject to such requirements if such 
     corporation were an issuer of equity securities referred to 
     in such section.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Qualified employer plan.--The term `qualified 
     employer plan' means--
       ``(A) any plan, contract, pension, account, or trust 
     described in subparagraph (A) or (B) of section 219(g)(5), 
     and
       ``(B) any other plan of an organization exempt from tax 
     under subtitle A.
       ``(2) Plan includes arrangements, etc.--The term `plan' 
     includes any agreement or arrangement.
       ``(3) Substantial risk of forfeiture.--The rights of a 
     person to compensation are subject to a substantial risk of 
     forfeiture if such person's rights to such compensation are 
     conditioned upon the future performance of substantial 
     services by any individual.
       ``(4) Treatment of earnings.--Except for purposes of 
     subsection (a)(1) and the last sentence of (b)(2)(A), 
     references to deferred compensation shall be treated as 
     including references to income attributable to such 
     compensation or such income.''
       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by adding at the end the following new 
     item:

``Sec. 409A. Inclusion in gross income of funded deferred compensation 
              of corporate insiders.''

       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts deferred after July 10, 2002.

  Mr. THOMAS (during the reading). Mr. Speaker, I ask unanimous consent 
that the motion to recommit be considered as read and printed in the 
Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  Mr. RANGEL. Mr. Speaker, I object.
  The SPEAKER pro tempore. Objection is heard. The Clerk will continue 
to read.
  The Clerk continued the reading of the motion to recommit.
  Mr. THOMAS (during the reading). Mr. Speaker, I ask unanimous consent 
that the motion to recommit be considered as read and printed in the 
Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  Mr. RANGEL. Mr. Speaker, I object.
  The SPEAKER pro tempore. Objection is heard. The Clerk will continue 
to read.
  Mr. RANGEL. Mr. Speaker, I ask unanimous consent that our substitute 
be made in order.


                             Point of Order

  Mr. THOMAS. Mr. Speaker, I make a point of order.
  The SPEAKER pro tempore. The gentleman will state his point of order.
  Mr. THOMAS. Mr. Speaker, the point of order is that the substitute 
was not made in order under the rule. Therefore, it is not germane.
  The SPEAKER pro tempore. The Clerk must first continue reading the 
motion to recommit.
  The Clerk continued the reading of the motion to recommit.
  Mr. RANGEL (during the reading). Mr. Speaker, I ask unanimous consent 
that the remainder of the motion to recommit be considered as read and 
printed in the Record. That concludes the references to the table of 
contents of this substitute bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.


                             Point of Order

  Mr. THOMAS. Mr. Speaker, I make a point of order.
  The SPEAKER pro tempore. The gentleman will state his point of order.
  Mr. THOMAS. Mr. Speaker, as is made imminently clear by the reading 
of the table of contents, the motion to recommit is not germane. It is 
in violation of clause 7 of rule XVI of the House because the motion to 
recommit relates to subject matter not contained in the underlying 
bill. The underlying bill only relates to reducing income taxation. 
Therefore, the amendment is not germane and, therefore, is out of 
order.
  The SPEAKER pro tempore. Do other Members wish to be heard on the 
point of order?
  Mr. RANGEL. Mr. Speaker, the gentleman from California said yesterday 
that he wanted an equality in the rule that was before this House. He 
said that he would not be supporting anything that would not allow us 
to be heard, and that he would also not ask for points of order to be 
waived on the majority's bill.
  It seems to me that if what they are saying is true, that this is 
supposed to be a jobs bill, how can anyone in this country, anyone in 
this Congress, say that giving some assistance to the millions of 
people that have lost their jobs during this administration, that 
giving some relief, giving some unemployment compensation, is out of 
order and not relevant?

                              {time}  1330

  How can we say that the working people who do not see any of the 
benefits of this tax cut, when we are talking about giving them 
benefits, giving them the opportunity to buy, to purchase, and to 
stimulate the economy, how can we say that it is not relevant? How can 
we say that Medicaid and giving assistance to our States that are in 
economic dire need, what kind of rule could they come up with, call it 
fair, call it equitable, and not give us a chance to express ourselves?
  I suggest to my colleagues that what we are trying to do is to have 
an alternative. That is not the Republican way, that is not the 
Democratic way, that is the American way, that we be allowed to be 
heard.
  Mr. Speaker, we made an appeal to the Committee on Rules. The 
chairman of the Committee on Ways and Means admitted this morning that 
he asked to have the same type of treatment for us as they were asking 
for themselves. True, he said, he was not going to ask for a waiver of 
the rules; but that is not the case. Somehow, between a nod and a 
blink, he got a waiver of the rules. We picked out five violations of

[[Page H3954]]

the budget; and yet they say that they got a waiver of the rules that 
we control ourselves by.
  So the only thing I am saying is this: they have got the votes. They 
have held this bill until they can get the votes. They have kept every 
Republican's foot to the fire in order to give tax relief for the 
richest people in the United States of America. We are not asking to 
win; we are merely asking to be heard. We are asking for the 
opportunity, using the same rules that they have had for themselves, 
for ourselves.
  Mr. Speaker, I hope that you allow this substitute to be heard, to be 
argued, and to be voted on.
  The SPEAKER pro tempore (Mr. Simpson). The Chair is prepared to rule 
on the point of germaneness.
  The gentleman from California makes a point of order that the motion 
to recommit is not germane.
  The motion to recommit instructs the Committee on Ways and Means to 
report forthwith the bill to the House with an amendment that provides, 
in pertinent part, for an extension of unemployment benefits under the 
Temporary Extended Unemployment Compensation Act of 2002.
  The bill, H.R. 2, amends the Internal Revenue Code to provide various 
economic growth incentives. The changes to the Code proposed by the 
bill are confined to the revenue jurisdiction of the Committee on Ways 
and Means.
  Clause 7 of rule 16 provides that no proposition on a ``subject 
different from that under consideration shall be admitted under the 
color of amendment.'' As recorded on page 678 of the House Rules and 
Manual, a general principle of the germaneness rule is that an 
amendment must relate to the subject matter under consideration. The 
amendment proposed in the motion to recommit would, in pertinent part, 
extend unemployment insurance benefits, a matter not addressed by the 
underlying bill and falling outside the revenue jurisdiction of the 
Committee on Ways and Means.
  Accordingly, the motion is not germane and the point of order is 
sustained.
  Mr. RANGEL. Mr. Speaker, with all due respect, in view of the 
inequities that exist in bringing this bill to the floor, I 
respectfully appeal the ruling of the Chair.
  The SPEAKER pro tempore. The question is, Shall the decision of the 
Chair stand as the judgment of the House?


                  Motion to Table Offered By Mr Thomas

  Mr. THOMAS. Mr. Speaker, the real American way is to play by the 
rules. I move to lay the appeal on the table.
  The SPEAKER pro tempore. The question is the motion offered by the 
gentleman from California (Mr. Thomas) that the appeal of the ruling of 
the Chair be laid on the table.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded Vote

  Mr. RANGEL. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 222, 
noes 202, not voting 11, as follows:

                             [Roll No. 180]

                               AYES--222

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Harris
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Ney
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NOES--202

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Clay
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Hall
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--11

     Boyd
     Clyburn
     Cole
     Combest
     Conyers
     Feeney
     Gephardt
     King (IA)
     Miller, Gary
     Northup
     Schrock


                Announcement By The Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Simpson) (during the vote). The Chair 
would advise Members that 2 minutes remain in this vote.

                              {time}  1351

  Ms. WOOLSEY and Mr. DOGGETT changed their vote from ``aye'' to 
``no.''
  So the decision of the Chair stands as the judgment of the House.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.


                Motion to Recommit Offered by Mr. Moore

  Mr. MOORE. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. MOORE. Yes, I am, Mr. Speaker.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:
  Mr. Moore moves to recommit the bill, H.R. 2, to the Committee on 
Ways

[[Page H3955]]

and Means with instructions to promptly report the same back to the 
House with an amendment that provides that the bill's provisions will 
not take effect until the Federal budget is in balance.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Kansas (Mr. Moore) is recognized for 5 minutes in support of his 
motion.
  Mr. MOORE. Mr. Speaker, I urge the Members of this body to vote for 
the motion to recommit. This is not a partisan issue to me. In fact, 2 
years ago, Mr. Speaker, I voted for the President's tax cut. But that 
was then and this is now. Two years ago we had a projected surplus of 
$5.6 trillion. Now we have a projected deficit of $400 billion. That 
was then and this is now.
  Deficits do matter. At one time or another all of us in this Chamber 
have said that deficits do matter, that debt does matter. We had then, 
2 years ago, a $5.7 trillion debt. Now we have a $6.4 trillion debt. 
The debt tax, the debt tax, not the death tax, Mr. Speaker, the debt 
tax is $1 billion a day. And this bill, if it is passed, will increase 
the debt tax and the party that is supporting this bill will increase 
taxes to every taxpayer in this country in the future if this bill 
passes. They want to raise that tax and I think that we should not do 
that, Mr. Speaker.
  They want to borrow money to pay for a tax cut now and pass the bill 
for that tax cut to our children and our grandchildren. That is the 
wrong thing to do. It is outrageous. It is selfish and we should vote 
that down. I urge the Members of this Congress to vote for the motion 
to recommit.
  Mr. Speaker, I yield to the gentleman from Texas (Mr. Stenholm).
  Mr. STENHOLM. Mr. Speaker, January 26, 1995, I joined with the 135 
remaining Members on this side of the aisle to pass a balanced budget 
constitutional amendment. It is one of the happier days of my now 24 
years in this House of Representatives. One of the saddest days was 
watching it be defeated by one vote on the floor of the Senate. Had the 
Senate voted for the balanced budget constitutional amendment, this 
bill could not be on the floor today, could not be on the floor today. 
But it is on the floor today.
  Suddenly deficits do not matter. Balancing the budget does not 
matter. It is all on the myth and projections that we have heard over 
and over and over again, not only by this bill today, but also the one 
in 2001 and 2002. And the facts will speak for themselves.
  I rise today in this motion to recommit and urge the 135 of you still 
here, including the Speaker, the majority leader, and all of the 
leaders on this side who will bring a constitutional amendment back to 
the floor by the first of July, I ask a simple question: How can you 
support this bill and at the same time say you believe that fiscal 
responsibility and balancing the budget matters?
  Deficits no longer matter, Mr. Speaker. They matter to me. I am just 
as consistent today in my vote no on final passage and yes on this as I 
was when I joined with you regarding the seriousness of balancing the 
budget. And to those that argue that this is a growth package, your own 
economics do not support that this will be paid for. You will have to 
borrow not just the $550 billion but the 240 in interest to pay for 
this. But you are perfectly willing to do it.
  I heard a moment ago the Speaker talking about debt and talking about 
how we want to change the corporate behavior. I agree with him, but you 
have got to start with us here right now. You cannot just talk about 
them. You have got to talk about us.
  Under your own game plan that you are bound and determined to pass 
and take full credit for, and you will deserve it, you will deserve it, 
this country will owe over $12 trillion at the end of this game plan, 
exactly the time the baby boomers begin to retire. And at no time have 
we spent one second trying to deal with the problem of the baby boomers 
in Social Security and Medicare in the future. It is all about us 
today.
  Mr. Speaker, if you are consistent in believing that balancing the 
budget does matter, I submit to you there is no way with a clean 
conscience you cannot vote for this motion to recommit and go back to 
the drawing board and at least give those of us who are willing to work 
for a more sensible economic game plan the opportunity to do so. Please 
join me in support of this motion to recommit and show that we are, in 
fact, sincere. Or if you are perfectly willing to assume the borrow and 
spend Republicans of the future, vote with this package today. I am for 
balancing the budget. I am not for borrowing and spending. It is not 
going to be in the best interest of this country in the future.
  Mr. MOORE. Mr. Speaker, I yield back the balance of my time.
  Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to 
recommit.
  The SPEAKER pro tempore. The gentleman from California (Mr. Thomas) 
is recognized for 5 minutes.
  Mr. THOMAS. Mr. Speaker, here we go again. This motion does not 
recommit the bill. It kills tax relief, job creation, and economic 
growth, because the motion to recommit contains the word ``promptly'' 
instead of ``forthwith.''
  Have you heard this before? Do you want me to stop?
  Vote no on the motion to recommit.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             Recorded Vote

  Mr. MOORE. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 202, 
noes 218, not voting 15, as follows:

                             [Roll No. 181]

                               AYES--202

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Case
     Clay
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Hall
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NOES--218

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cantor
     Capito
     Carson (OK)
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Collins
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Ehlers
     Emerson

[[Page H3956]]


     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Harris
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Ney
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--15

     Boyd
     Cannon
     Clyburn
     Cole
     Combest
     Cox
     Dunn
     Feeney
     Fossella
     Gephardt
     King (IA)
     LaHood
     Miller, Gary
     Northup
     Schrock


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Simpson) (during the vote). The Chair 
would announce that less than 2 minutes remain in this vote.

                              {time}  1415

  Mr. HOEFFEL changed his vote from ``no'' to ``aye.''
  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  Stated against:
  Mr. FOSSELLA. Mr. Speaker, on rollcall No. 181, I was inadvertently 
detained. Had I been present, I would have voted ``no.''
  The SPEAKER pro tempore (Mr. Simpson). The question is on the passage 
of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded Vote

  Mr. RANGEL. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 222, 
noes 203, not voting 10, as follows:

                             [Roll No. 182]

                               AYES--222

     Aderholt
     Akin
     Alexander
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Chabot
     Chocola
     Coble
     Collins
     Cox
     Cramer
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Hall
     Harris
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     Latham
     LaTourette
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (KY)
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Ney
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NOES--203

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Castle
     Clay
     Conyers
     Cooper
     Costello
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Houghton
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Leach
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--10

     Boyd
     Clyburn
     Cole
     Combest
     Feeney
     King (IA)
     LaHood
     Miller, Gary
     Northup
     Schrock


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Simpson) (during the vote). Members are 
advised that 2 minutes remain in this vote.

                              {time}  1431

  So the bill was passed.
  The result of the vote was announced as above recorded.
  The title of the bill was amended so as to read: ``A bill to provide 
for reconciliation pursuant to section 201 of the concurrent resolution 
on the budget for fiscal year 2004''.
  A motion to reconsider was laid on the table.

                          ____________________