[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
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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.
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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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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.
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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.
____________________