[Congressional Record Volume 151, Number 139 (Thursday, October 27, 2005)]
[Senate]
[Pages S12009-S12013]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. WYDEN:
S. 1927. A bill to amend the Internal Revenue Code of 1986 to make
the Federal income tax system simpler, fairer, and more fiscally
responsible, and for other purposes; to the Committee on Finance.
Mr. WYDEN. Mr. President, today I am proposing a Fair Flat Tax Act
that will finally provide real tax relief to America's hurting middle
class. It will do so by making the tax system simpler, flatter and
fairer. And at the same time, it will begin to reduce the deficit that
is destabilizing our economy, our security and our future.
This tax reform proposal is simpler because it's easier to understand
and use. My legislation will include a new, simplified 1040 form that
is one page, 30 lines, for every individual taxpayer.
This plan is flatter because it collapses the current system of six
individual tax brackets down to three--15, 25 and 35 percent--and
creates a flat corporate rate of 35 percent.
Ultimately, this plan is fairer because it changes the laws that
disproportionately favor the most affluent Americans and corporations
at the expense of the middle class. Instead, it provides a major
middle-class tax cut--paid for by the elimination of scores of tax
breaks in the individual and corporate income tax breaks, and by
repealing the Bush tax cuts that favored the most fortunate few at the
expense of the many.
This plan is fairer for American taxpayers because it treats work and
wealth equally.
This is a radical statement about tax law: America can do better than
a two-tier system which forces a policeman to pay a higher effective
tax rate than an investor who makes his income on capital gains and
dividends.
Under the current Federal Tax Code, all income is not created equal
in this country. Americans who work for wages, in effect, subsidize the
tax cuts and credits and deferrals of those who make money through
unearned income--the dividends from investments. It's time to treat all
taxpayers the same.
Let me be clear: I am not interested in soaking investors. I am a
Democrat who believes in markets, and creating wealth. But what our
country is all about is equality, and our Tax Code should treat
everyone's income more equally too.
My legislation, The Fair Flat Tax Act of 2005, adapts the flat tax
idea to help reduce the deficit instead, through fewer exclusions,
exemptions, deductions, deferrals, credits and special rates for
certain businesses and activities, and through the setting of a single,
flat corporate rate of 35 percent. On the individual side, it ends
favoritism for itemizers while improving deductions across the board:
The standard deduction would be tripled for single filers from $5,000
to $15,000 and raised from $10,000 to $30,000 for married couples. Six
individual rates are collapsed into three progressive rates of 15
percent, 25 percent and 35 percent, and income from all sources is
taxed the same.
Several deductions used most frequently by individuals, those for
home mortgage interest and charitable contributions, and the credits
for children, education and earned income are retained. No one would
have to calculate their taxes twice: this proposal eliminates the
individual Alternative Minimum Tax (AMT), which could snare as many as
21 million American taxpayers in 2006.
This proposal would eliminate an estimated $20 billion each year in
special breaks for corporations, and direct the Treasury Secretary to
identify and report to Congress an additional $10 billion in savings
from tax expenditures that subsidize inefficiencies in the health care
system. Eliminating these breaks would sustain current benefits for our
men and women in uniform, our veterans and the elderly and disabled--as
well as breaks that promote savings and help families pay for health
care and education.
What makes the Fair Flat Tax Act truly unique is that it corrects one
of the most glaring inequities in the current tax system: regressive
State and local taxes. Under current law, low and middle income
taxpayers get hit with a double whammy: compared to wealthy Americans,
they pay more of their income in State and local taxes. Poor families
pay more than 11 percent and middle income families pay about 10
percent of their income in State and local taxes, while wealthier
taxpayers only pay five percent. And because many low and middle income
taxpayers don't itemize, they get no credit on their Federal form for
paying State and local taxes. In fact, two-thirds of the Federal
deduction for State and local taxes goes to those with incomes above
$100,000. Under the Fair Flat Tax Act for the first time the Federal
code would look at the entire picture, at an individual's combined
Federal, State and local tax burden, and give credit to low and middle
income individuals to correct for regressive State and local taxes.
[[Page S12010]]
Repealing some individual tax credits, deductions and exclusions from
income--along with some serious changes to the corporate Tax Code--
enables larger standard deductions and broader middle-class tax relief.
The deductions most important to most Americans remain in place: the
home mortgage deduction stays, as do child credits and charitable
contributions, higher education and health savings.
What all this means for American taxpayers is--the vast majority of
taxpayers will see a cut, particularly the middle class. Congressional
Research Service experts tell us that middle class families and
families with wage and salary incomes up to $150,000 will see tax
relief.
On the corporate side--this plan does something that may not be
popular, but it's right.
Each of us, including America's corporations, need to pay our fair
share. Corporations that have used tax loopholes to avoid paying their
fair share of taxes are going to see those loopholes close and they're
going to contribute.
This legislation makes concrete progress toward deficit reduction.
There's a long way to go to stop the hemorrhaging in the Federal
budget, but this legislation makes a real start by whittling the
deficit down approximately $100 billion over five years.
Some may wonder if what I am proposing today is a response to the
President's Tax Reform Advisory Panel. To date, the Panel hasn't
officially released its recommendations. I can't respond to something
that hasn't been introduced yet. But I am troubled by the fact that the
recommendations trickling out from the Panel would continue to twist
the Tax Code away from equal treatment of all income, widening the
chasm between people who get wages and people who collect dividends.
I am introducing The Fair Flat Tax Act of 2005 today to provide
Americans a plan based on common-sense principles that can make the Tax
Code work better.
Making the Tax Code simpler and flatter is going to make it fairer.
My legislation is going to provide real relief to the middle class. It
will treat work and wealth equally. It will make a start at reducing
the deficit. I am ready to get to work with my colleagues and move it
forward.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 1927
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.
(a) Short Title.--This Act may be cited as the ``Fair Flat
Tax Act of 2005''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Purpose.
TITLE I--INDIVIDUAL INCOME TAX REFORMS
Sec. 101. 3 progressive individual income tax rates for all forms of
income.
Sec. 102. Increase in basic standard deduction.
Sec. 103. Refundable credit for State and local income, sales, and real
and personal property taxes.
Sec. 104. Earned income child credit and earned income credit for
childless taxpayers.
Sec. 105. Repeal of individual alternative minimum tax.
Sec. 106. Termination of various exclusions, exemptions, deductions,
and credits.
TITLE II--CORPORATE AND BUSINESS INCOME TAX REFORMS
Sec. 201. Corporate flat tax.
Sec. 202. Treatment of travel on corporate aircraft.
Sec. 203. Termination of various preferential treatments.
Sec. 204. Elimination of tax expenditures that subsidize inefficiencies
in the health care system.
Sec. 205. Pass-through business entity transparency.
TITLE III--TECHNICAL AND CONFORMING AMENDMENTS; SUNSET
Sec. 301. Technical and conforming amendments.
Sec. 302. Sunset.
SEC. 2. PURPOSE.
The purpose of this Act is to amend the Internal Revenue
Code of 1986--
(1) to make the Federal individual income tax system
simpler, fairer, and more transparent by--
(A) recognizing the overall Federal, State, and local tax
burden on individual Americans, especially the regressive
nature of State and local taxes, and providing a Federal
income tax credit for State and local income, sales, and
property taxes,
(B) providing for an earned income tax credit for childless
taxpayers and a new earned income child credit,
(C) repealing the individual alternative minimum tax,
(D) increasing the basic standard deduction and maintaining
itemized deductions for principal residence mortgage interest
and charitable contributions,
(E) reducing the number of exclusions, exemptions,
deductions, and credits, and
(F) treating all income equally,
(2) to make the Federal corporate income tax rate a flat 35
percent and eliminate special tax preferences that favor
particular types of businesses or activities, and
(3) to partially offset the Federal budget deficit through
the increased revenues resulting from these reforms.
TITLE I--INDIVIDUAL INCOME TAX REFORMS
SEC. 101. 3 PROGRESSIVE INDIVIDUAL INCOME TAX RATES FOR ALL
FORMS OF INCOME.
(a) Married Individuals Filing Joint Returns and Surviving
Spouses.--The table contained in section 1(a) is amended to
read as follows:
The tax is:e income is:
15% of taxable income. ................................................
$3,750, plus 25% of the excess over $25,000 ...........................
$27,500, plus 35% of the excess over $120,000''........................
(b) Heads of Households.--The table contained in section
1(b) is amended to read as follows:
The tax is:e income is:
15% of taxable income. ................................................
$2,400, plus 25% of the excess over $16,000 ...........................
$24,650, plus 35% of the excess over $105,000''........................
(c) Unmarried Individuals (Other Than Surviving Spouses and
Heads of Households.--The table contained in section 1(c) is
amended to read as follows:
The tax is:e income is:
15% of taxable income. ................................................
$2,250, plus 25% of the excess over $15,000 ...........................
$16,000, plus 35% of the excess over $70,000''.........................
(d) Married Individuals Filing Separate Returns.--The table
contained in section 1(d) is amended to read as follows:
The tax is:e income is:
15% of taxable income. ................................................
$1,875, plus 25% of the excess over $12,500 ...........................
$13,750, plus 35% of the excess over $60,000''.........................
(e) Conforming Amendments to Inflation Adjustment.--Section
1(f) is amended--
(1) by striking ``1993''in paragraph (1) and inserting
``2006'',
(2) by striking ``except as provided in paragraph (8)'' in
paragraph (2)(A),
(3) by striking ``1992'' in paragraph (3)(B) and inserting
``2005'',
(4) by striking paragraphs (7) and (8), and
(5) by striking ``Phaseout of Marriage Penalty in 15-
Percent Bracket;'' in the heading thereof.
(f) Repeal of Rate Differential for Capital Gains and
Dividends.--
(1) Repeal of 2003 rate reduction.--Section 303 of the Jobs
and Growth Tax Relief Reconciliation Act of 2003 is amended
by striking ``December 3, 2008'' and inserting ``December 31,
2005''.
(2) Termination of pre-2003 capital gain rate differential
.--Section 1(h) is amended (after the application of
paragraph (1)) by adding at the end the following new
paragraph:
``(13) Termination.--This section shall not apply to
taxable years beginning after December 31, 2005.''.
(g) Additional Conforming Amendments.--
(1) Section 1 is amended by striking subsection (i).
(2) The Internal Revenue Code of 1986 is amended by
striking ``calendar year 1992'' each place it appears and
inserting ``calendar year 2005''.
(3) Section 1445(e)(1) (after the application of subsection
(g)(1)) is amended by striking ``(or, to the extent provided
in regulations, 20 percent)''.
(h) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 102. INCREASE IN BASIC STANDARD DEDUCTION.
(a) In General.--Paragraph (2) of section 63(c) (defining
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)),
[[Page S12011]]
``(B) $26,250 in the case of a head of household (as
defined in section 2(b)), or
``(C) $15,000 in any other case.''.
(b) Conforming Amendment to Inflation Adjustment.--Section
63(c)(4)(B)(i) is amended by striking ``(2)(B), (2)(C), or''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 103. REFUNDABLE CREDIT FOR STATE AND LOCAL INCOME,
SALES, AND REAL AND PERSONAL PROPERTY TAXES.
(a) General Rule.--Subpart C of part IV of subchapter A of
chapter 1 (relating to refundable credits) is amended by
redesignating section 36 as section 37 and by inserting after
section 35 the following new section:
``SEC. 36. CREDIT FOR STATE AND LOCAL INCOME, SALES, AND REAL
AND PERSONAL PROPERTY TAXES.
``(a) Allowance of Credit.--In the case of an individual,
there shall be allowed as a credit against the tax imposed by
this subtitle for the taxable year an amount equal to 10
percent of the qualified State and local taxes paid by the
taxpayer for such year.
``(b) Qualified State and Local Taxes.--For purposes of
this section, the term `qualified State and local taxes'
means--
``(1) State and local income taxes,
``(2) State and local general sales taxes,
``(3) State and local real property taxes, and
``(4) State and local personal property taxes.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) State or local taxes.--A State or local tax includes
only a tax imposed by a State, a possession of the United
States, or a political subdivision of any of the foregoing,
or by the District of Columbia.
``(2) General sales taxes.--
``(A) In general.--The term `general sales tax' means a tax
imposed at one rate with respect to the sale at retail of a
broad range of classes of items.
``(B) Application of rules.--Rules similar to the rules
under subparagraphs (C), (D), (E), (F), (G), and (H) of
section 164(b)(5) shall apply.
``(3) Personal property taxes.--The term `personal property
tax' means an ad valorem tax which is imposed on an annual
basis in respect of personal property.
``(4) Application of rules to property taxes.--Rules
similar to the rules of subsections (c) and (d) of section
164 shall apply.
``(5) No credit for married individuals filing separate
returns.--If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if
the taxpayer and the taxpayer's spouse file a joint return
for the taxable year.
``(6) Denial of credit to dependents.--No credit shall be
allowed under this section to any individual with respect to
whom a deduction under section 151 is allowable to another
taxpayer for a taxable year beginning in the calendar year in
which such individual's taxable year begins.
``(7) Denial of double benefit.--Any amount taken into
account in determining the credit allowable under this
section may not be taken into account in determining any
credit or deduction under any other provision of this
chapter.''.
(b) Technical Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting ``or from section 36 of
such Code'' before the period at the end.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 is amended by striking the item
relating to section 36 and inserting the following:
``Sec. 36. Credit for state and local income, sales, and real and
personal property taxes.
``Sec. 37. Overpayments of tax.''.
(c) Report Regarding Use of Credit by Renters.--Not later
than 180 days after the date of the enactment of this Act,
the Secretary of the Treasury shall report to the Committee
on Finance of the Senate and the Committee on Ways and Means
of the House of Representatives recommendations regarding the
treatment of a portion of rental payments in a manner similar
to real property taxes under section 36 of the Internal
Revenue Code of 1986 (as added by this section).
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 104. EARNED INCOME CHILD CREDIT AND EARNED INCOME CREDIT
FOR CHILDLESS TAXPAYERS.
(a) In General.--Subsection (a) of section 32 (relating to
earned income) is amended to read as follows:
``(a) Allowance of Earned Income Child Credit and Earned
Income Credit.--
``(1) In general.--There shall be allowed as a credit
against the tax imposed by this subtitle for the taxable
year--
``(A) in the case of any eligible individual with 1 or more
qualifying children, an amount equal to the earned income
child credit amount, and
``(B) in the case of any eligible individual with no
qualifying children, an amount equal to the earned income
credit amount.
``(2) Earned income child credit amount.--For purposes of
this section, the earned income child credit amount is equal
to the sum of--
``(A) the credit percentage of so much of the taxpayer's
earned income for the taxable year as does not exceed the
earned income limit amount, plus
``(B) the supplemental child credit amount determined under
subsection (n) for such taxable year.
``(3) Earned income credit amount.--For purposes of this
section, the earned income credit amount is equal to the
credit percentage of so much of the taxpayer's earned income
for the taxable year as does not exceed the earned income
limit amount.
``(4) Limitation.--The amount of the credit allowable to a
taxpayer under paragraph (2)(A) or (3) for any taxable year
shall not exceed the excess (if any) of--
``(A) the credit percentage of the earned income amount,
over
``(B) the phaseout percentage of so much of the adjusted
gross income (or, if greater, the earned income) of the
taxpayer for the taxable year as exceeds the phaseout
amount.''.
(b) Supplemental Child Credit Amount.--Section 32 is
amended by adding at the end the following new subsection:
``(n) Supplemental Child Credit Amount.--
``(1) In general.--For purposes of subsection (a)(2)(B),
the supplemental child credit amount for any taxable year is
equal to the lesser of--
``(A) the credit which would be allowed under section 24
for such taxable year without regard to the limitation under
section 24(b)(3) with respect to any qualifying child as
defined under subsection (c)(3), or
``(B) the amount by which the aggregate amount of credits
allowed by subpart A for such taxable year would increase if
the limitation imposed by section 24(b)(3) were increased by
the excess (if any) of--
``(i) 15 percent of so much of the taxpayer's earned income
which is taken into account in computing taxable income for
the taxable year as exceeds $10,000, or
``(ii) in the case of a taxpayer with 3 or more qualifying
children (as so defined), the excess (if any) of--
``(I) the taxpayer's social security taxes for the taxable
year, over
``(II) the credit allowed under this section for the
taxable year.
The amount of the credit allowed under this subsection shall
not be treated as a credit allowed under subpart A and shall
reduce the amount of credit otherwise allowable under section
24(a) without regard to section 24(b)(3).
``(2) Social security taxes.--For purposes of paragraph
(1)--
``(A) In general.--The term `social security taxes' means,
with respect to any taxpayer for any taxable year--
``(i) the amount of the taxes imposed by section 3101 and
3201(a) on amounts received by the taxpayer during the
calendar year in which the taxable year begins,
``(ii) 50 percent of the taxes imposed by section 1401 on
the self-employment income of the taxpayer for the taxable
year, and
``(iii) 50 percent of the taxes imposed by section
3211(a)(1) on amounts received by the taxpayer during the
calendar year in which the taxable year begins.
``(B) Coordination with special refund of social security
taxes.--The term `social security taxes' shall not include
any taxes to the extent the taxpayer is entitled to a special
refund of such taxes under section 6413(c).
``(C) Special rule.--Any amounts paid pursuant to an
agreement under section 3121(l) (relating to agreements
entered into by American employers with respect to foreign
affiliates) which are equivalent to the taxes referred to in
subparagraph (A)(i) shall be treated as taxes referred to in
such paragraph.
``(3) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2005, the $10,000
amount contained in paragraph (1)(B) shall be increased by an
amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2000'
for `calendar year 1992' in subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $50.''.
(c) Conforming Amendment.--Section 24(d) is amended by
adding at the end the following new paragraph:
``(4) Termination.--This subsection shall not apply with
respect to any taxable year beginning after December 31,
2005.''.
(d) Certain Treatment of Earned Income Made Permanent.--
Clause (vi) of section 32(c)(2)(B) is amended to read as
follows:
``(vi) a taxpayer may elect to treat amounts excluded from
gross income by reason of section 112 as earned income.''.
(e) Repeal of Disqualified Investment Income Test.--
Subsection (i) of section 32 is repealed.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 105. REPEAL OF INDIVIDUAL ALTERNATIVE MINIMUM TAX.
(a) In General.--Section 55(a) (relating to alternative
minimum tax imposed) is amended by adding at the end the
following new flush sentence:
``For purposes of this title, the tentative minimum tax on
any taxpayer other than a corporation for any taxable year
beginning after December 31, 2005, shall be zero.''.
(b) Modification of Limitation on Use of Credit for Prior
Year Minimum Tax Liability.--Subsection (c) of section 53
(relating to credit for prior year minimum tax liability) is
amended to read as follows:
[[Page S12012]]
``(c) Limitation.--
``(1) In general.--Except as provided in paragraph (2), the
credit allowable under subsection (a) for any taxable year
shall not exceed the excess (if any) of --
``(A) the regular tax liability of the taxpayer for such
taxable year reduced by the sum of the credits allowable
under subparts A, B, D, E, and F of this part, over
``(B) the tentative minimum tax for the taxable year.
``(2) Taxable years beginning after 2005.--In the case of
any taxable year beginning after 2005, the credit allowable
under subsection (a) to a taxpayer other than a corporation
for any taxable year shall not exceed 90 percent of the
regular tax liability of the taxpayer for such taxable year
reduced by the sum of the credits allowable under subparts A,
B, D, E, and F of this part.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 106. TERMINATION OF VARIOUS EXCLUSIONS, EXEMPTIONS,
DEDUCTIONS, AND CREDITS.
(a) In General.--Subchapter C of chapter 90 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7875. TERMINATION OF CERTAIN PROVISIONS.
``The following provisions shall not apply to taxable years
beginning after December 31, 2005:
``(1) Section 44 (relating to credit for expenditures to
provide access to disabled individuals).
``(2) Section 62(a)(2)(D) (relating to deduction for
certain expenses of elementary and secondary school
teachers).
``(3) Section 67 (relating to 2-percent floor on
miscellaneous itemized deductions).
``(4) Section 74(c) (relating to exclusion of certain
employee achievement awards).
``(5) Section 79 (relating to exclusion of group-term life
insurance purchased for employees).
``(6) Section 104(a)(1) (relating to exclusion of workmen's
compensation).
``(7) Section 104(a)(2) (relating to exclusion of damages
for physical injuries and sickness).
``(8) Section 107 (relating to exclusion of rental value of
parsonages).
``(9) Section 119 (relating to exclusion of meals or
lodging furnished for the convenience of the employer).
``(10) Section 125 (relating to exclusion of cafeteria plan
benefits).
``(11) Section 132 (relating to certain fringe benefits),
except with respect to subsection (a)(5) thereof (relating to
exclusion of qualified transportation fringe).
``(12) Section 163(h)(4)(A)(i)(II) (relating to definition
of qualified residence).
``(13) Section 165(d) (relating to deduction for wagering
losses).
``(14) Section 217 (relating to deduction for moving
expenses).
``(15) Section 454 (relating to deferral of tax on
obligations issued at discount).
``(16) Section 501(c)(9) (relating to tax-exempt status of
voluntary employees' beneficiary associations).
``(17) Section 911 (relating to exclusion of earned income
of citizens or residents of the United States living abroad).
``(18) Section 912 (relating to exemption for certain
allowances).''.
(b) Conforming Amendment.--The table of sections for
subchapter C of chapter 90 is amended by adding at the end
the following new item:
``Sec. 7875. Termination of certain provisions.''.
TITLE II--CORPORATE AND BUSINESS INCOME TAX REFORMS
SEC. 201. CORPORATE FLAT TAX.
(a) In General.--Subsection (b) of section 11 (relating to
tax imposed) is amended to read as follows:
``(b) Amount of Tax.--The amount of tax imposed by
subsection (a) shall be equal to 35 percent of the taxable
income.''.
(b) Conforming Amendments.--
(1) Section 280C(c)(3)(B)(ii)(II) is amended by striking
``maximum rate of tax under section 11(b)(1)'' and inserting
``rate of tax under section 11(b)''.
(2) Sections 860E(e)(2)(B), 860E(e)(6)(A)(ii),
860K(d)(2)(A)(ii), 860K(e)(1)(B)(ii), 1446(b)(2)(B), and
7874(e)(1)(B) are each amended by striking ``highest rate of
tax specified in section 11(b)(1)'' and inserting ``rate of
tax specified in section 11(b)''.
(3) Section 904(b)(3)(D)(ii) is amended by striking
``(determined without regard to the last sentence of section
11(b)(1))''.
(4) Section 962 is amended by striking subsection (c) and
by redesignating subsection (d) as subsection (c).
(5) Section 1201(a) is amended by striking ``(determined
without regard to the last 2 sentences of section
11(b)(1))''.
(6) Section 1561(a) is amended--
(A) by striking paragraph (1) and by redesignating
paragraphs (2), (3), and (4) as paragraphs (1), (2), and (3),
respectively,
(B) by striking ``The amounts specified in paragraph (1),
the'' and inserting ``The'',
(C) by striking ``paragraph (2)'' and inserting ``paragraph
(1)'',
(D) by striking ``paragraph (3)'' both places it appears
and inserting ``paragraph (2)'',
(E) by striking ``paragraph (4)'' and inserting ``paragraph
(3)'', and
(F) by striking the fourth sentence.
(7) Subsection (b) of section 1561 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 to be used in computing the accumulated
earnings credit under section 535(c)(2) and (3) of 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.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 202. TREATMENT OF TRAVEL ON CORPORATE AIRCRAFT.
(a) In General.--Section 162 (relating to trade or business
expenses) is amended by redesignating subsection (q) as
subsection (r) and b inserting after subsection (p) the
following new subsection:
``(q) Treatment of Travel on Corporate Aircraft.--The rate
at which an amount allowable as a deduction under this
chapter for the use of an aircraft owned by the taxpayer is
determined shall not exceed the rate at which an amount paid
or included in income by an employee of such taxpayer for the
personal use of such aircraft is determined.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
SEC. 203. TERMINATION OF VARIOUS PREFERENTIAL TREATMENTS.
(a) In General.--Section 7875, as added by section 106, is
amended--
(1) by inserting ``(or transactions in the case of sections
referred to in paragraphs (21), (22), (23), (24), and (27))''
after ``taxable years beginning'', and
(2) by adding at the end the following new paragraphs:
``(19) Section 43 (relating to enhanced oil recovery
credit).
``(20) Section 263(c) (relating to intangible drilling and
development costs in the case of oil and gas wells and
geothermal wells).
``(21) Section 382(l)(5) (relating to exception from net
operating loss limitations for corporations in bankruptcy
proceeding).
``(22) Section 451(i) (relating to special rules for sales
or dispositions to implement Federal Energy Regulatory
Commission or State electric restructuring policy).
``(23) Section 453A (relating to special rules for
nondealers), but only with respect to the dollar limitation
under subsection (b)(1) thereof and subsection (b)(3) thereof
(relating to exception for personal use and farm property).
``(24) Section 460(e)(1) (relating to special rules for
long-term home construction contracts or other short-term
construction contracts).
``(25) Section 613A (relating to percentage depletion in
case of oil and gas wells).
``(26) Section 616 (relating to development costs).
``(27) Sections 861(a)(6), 862(a)(6), 863(b)(2), 863(b)(3),
and 865(b) (relating to inventory property sales source rule
exception).''.
(b) Full Tax Rate on Nuclear Decommissioning Reserve
Fund.--Subparagraph (B) of section 468A(e)(2) is amended to
read as follows:
``(B) Rate of tax.--For purposes of subparagraph (A), the
rate set forth in this subparagraph is 35 percent.''.
(c) Deferral of Active Income of Controlled Foreign
Corporations.--Section 952 (relating to subpart F income
defined) is amended by adding at the end the following new
subsection:
``(e) Special Application of Subpart.--
``(1) In general.--For taxable years beginning after
December 31, 2005, notwithstanding any other provision of
this subpart, the term `subpart F income' means, in the case
of any controlled foreign corporation, the income of such
corporation derived from any foreign country.
``(2) Applicable rules.--Rules similar to the rules under
the last sentence of subsection (a) and subsection (d) shall
apply to this subsection.''.
(d) Deferral of Active Financing Income.--Section
953(e)(10) is amended--
(1) by striking ``2006'' and inserting ``2005'', and
(2) by striking ``2007'' and inserting ``2006''.
(e) Depreciation on Equipment in Excess of Alternative
Depreciation System.--Section 168(g)(1) (relating to
alternative depreciation system) is amended by striking
``and'' at the end of subparagraph (D), by adding ``and'' at
the end of subparagraph (E), and by inserting after
subparagraph (E) the following new subparagraph:
``(F) notwithstanding subsection (a), any tangible property
placed in service after December 31, 2005,''.
(f) Effective Date.--The amendments made by subsections
(b), (c), and (d) shall apply to taxable years beginning
after December 31, 2005.
SEC. 204. ELIMINATION OF TAX EXPENDITURES THAT SUBSIDIZE
INEFFICIENCIES IN THE HEALTH CARE SYSTEM.
Not later than 180 days after the date of the enactment of
this Act, the Secretary of the Treasury shall report to the
Committee on Finance of the Senate and the Committee on Ways
and Means of the House of Representatives recommendations
regarding the elimination of Federal tax incentives which
subsidize inefficiencies in the health care
[[Page S12013]]
system and if eliminated would result in Federal budget
savings of not less than $10,000,000,000 annually.
SEC. 205. PASS-THROUGH BUSINESS ENTITY TRANSPARENCY.
Not later than 90 days after the date of the enactment of
this Act, the Secretary of the Treasury shall report to the
Committee on Finance of the Senate and the Committee on Ways
and Means of the House of Representatives regarding the
implementation of additional reporting requirements with
respect to any pass-through entity with the goal of the
reduction of tax avoidance through the use of such entities,
In addition, the Secretary shall develop procedures to share
such report data with State revenue agencies under the
disclosure requirements of section 6103(d) of the Internal
Revenue Code of 1986.
TITLE III--TECHNICAL AND CONFORMING AMENDMENTS; SUNSET
SEC. 301. TECHNICAL AND CONFORMING AMENDMENTS.
The Secretary of the Treasury or the Secretary's delegate
shall not later than 90 days after the date of the enactment
of this Act, submit to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the
Senate a draft of any technical and conforming changes in the
Internal Revenue Code of 1986 which are necessary to reflect
throughout such Code the purposes of the provisions of, and
amendments made by, this Act.
SEC. 302. SUNSET.
(a) In General.--All provisions of, and amendments made by,
this Act shall not apply to taxable years beginning after
December 31, 2010.
(b) Application of Code.--The Internal Revenue Code of 1986
shall be applied and administered to taxable years described
in subsection (a) as if the provisions of, and amendments
made by, this Act had never been enacted.
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