[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Pages S110-S111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 102. A bill to amend the Internal Revenue Code of 1986 to extend 
and expand relief from the alternative minimum tax and to repeal the 
extension of the lower rates for capital gains and dividends for 2009 
and 2010; to the Committee on Finance.
  Mr. KERRY. Mr. President, today I am introducing legislation which 
addresses the individual alternative minimum tax (AMT) for 2007. Last 
Congress, a choice was made to extend lower capital gains and dividends 
rates that do not expire until the end of 2008 rather than address the 
AMT for 2007. My preference was to address the AMT for 2007 and I 
believe we still must take action to prevent taxpayers never intended 
to pay the AMT from being penalized this year.
  I opposed the Tax Increase Prevention and Reconciliation Act of 2005 
because it contained the wrong priorities for America leaving behind 
working families and substantially adding to the deficit. This law 
extended the lower rates on capital gains and dividends for 2009 and 
2010, but only addressed the individual AMT for 2006.
  According to the Joint Committee on Taxation, those earning $200,000 
or more will receive 84 percent of the benefit of the capital gains tax 
cut and 63 percent of the benefit of the dividends tax cuts. According 
to the Congressional Budget Office, 42.8 percent of taxpayers with 
income between $50,000 and $100,000 will be impacted by the AMT if the 
AMT is not fixed for 2007 a number that increases to 66 percent by 
2010. The Tax Increase Prevention and Reconciliation of Act of 2005 
extends a tax cut that does not expire to the end of 2008 with a price 
tag of $50 billion, but fails to protect the hard working families that 
will be impacted by the AMT. These families were never intended to be 
impacted by the AMT, a tax originally designed to prevent a small 
number of high-income taxpayers from avoiding taxation.
  Today, I am introducing legislation that will address the AMT for 
2007 and repeal the lower tax rates on capital dividends for 2009 and 
2010. To calculate the AMT, individuals add back certain ``preference 
items'' to their regular tax liability. These include personal 
exemptions, the standard deduction, and the itemized deduction for 
state and local taxes. From this amount, taxpayers subtract the AMT 
exemption amount, commonly referred to as the ``patch'' which reverted 
to lower levels at the end of 2005. The Tax Increase Prevention and 
Reconciliation Act of 2005 increased and extended the patch for 2006. 
The patch was increased in order to hold the same number of taxpayers 
harmless from the AMT in 2006 as in 2005.
  The problem with the AMT is that while the regular tax system is 
indexed for inflation, the AMT exemption amounts and tax brackets 
remain constant. This has the perverse consequence of punishing 
taxpayers for the mere fact their incomes rose due to inflation.
  In 2001 Congress opted to provide more tax cuts to those with incomes 
of over $1 million rather than fix a looming tax problem for the middle 
class. The Economic Growth and Tax Relief Reconciliation Act of 2001 
did include a small adjustment to the AMT, but it was not enough. And 
we knew then that the number of taxpayers subject to the AMT would 
continue to rise steadily because the combination of tax cuts and a 
minor adjustment to the AMT would cause the AMT to explode. We are 
rapidly approaching this explosion and without immediate action 
America's middle class will be harmed.
  My legislation extends and expands the AMT exemption amount for 2007 
to prevent additional taxpayers from being impacted by the AMT. Without 
increasing and extending the AMT exemption for 2007, an additional 19.5 
million taxpayers will be impacted by the AMT in 2007. Large families, 
with incomes as low as $49,438, will be hurt by the AMT. My legislation 
will allow nonrefundable personal credits such as the higher education 
tax credits and the dependent care credit against the AMT for 2007. 
This legislation is offset by repealing the lower rates on capital 
gains and dividends.
  My colleagues on the other side of the aisle have argued that the 
extension of the capital gains and dividends benefits is necessary to 
provide investor certainty. But I believe that the certainty of working 
families worried about paying the AMT should come first.
  About a third of long-term capital gains are reported by taxpayers 
who are impacted by the AMT and due to the interaction of the AMT, they 
do not fully benefit from the lower rates. Simply put, taxpayers forced 
to carry the AMT burden will not benefit from the lower capital gains 
and dividends rate.
  The AMT is a looming problem that is impacting hard-working families 
and for each year that we fail to address the AMT, it gets worse and 
more expensive. At a minimum we must address the AMT for 2007. My 
legislation is not a long-term cure to the AMT crisis, but it will 
provide certainty for 2007 to hard working families who will be 
impacted by the AMT just because of where they live and the number of 
children they have, and it will addresses the AMT in a revenue neutral 
manner for 2007 as well.
  We all agree that the AMT should not be impacting families with 
incomes below $100,000. My bill fixes the AMT for 2007 in a timely and 
fiscally responsible manner and gives Congress time to work in a 
bipartisan manner to find a fiscally responsible permanent solution to 
the AMT.
  I ask unanimous consent that the text of this bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 102

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

     SECTION 1. EXTENSION AND INCREASE IN MINIMUM TAX RELIEF TO 
                   INDIVIDUALS.

       (a) In General.--Section 55(d)(1) of the Internal Revenue 
     Code of 1986 is amended--
       (1) by striking ``$62,550 in the case of taxable years 
     beginning in 2006'' in subparagraph (A) and inserting 
     ``$67,100 in the case of taxable years beginning in 2007'', 
     and
       (2) by striking ``$42,500 in the case of taxable years 
     beginning in 2006'' in subparagraph (B) and inserting 
     ``$44,800 in the case of taxable years beginning in 2007''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

     SEC. 2. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST 
                   REGULAR AND ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Paragraph (2) of section 26(a) of the 
     Internal Revenue Code of 1986 is amended--
       (1) by striking ``2006'' in the heading thereof and 
     inserting ``2007'', and
       (2) by striking ``or 2006'' and inserting ``2006, or 
     2007''.
       (b) Conforming Provisions.--
       (1) Section 30B(g) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(3) Special rule for 2007.--For purposes of any taxable 
     year beginning during 2007, the credit allowed under 
     subsection (a) (after

[[Page S111]]

     the application of paragraph (1)) shall not exceed the excess 
     of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under subpart A and 
     this subpart (other than this section and section 30C).''.
       (2) Section 30C(d) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(3) Special rule for 2007.--For purposes of any taxable 
     year beginning during 2007, the credit allowed under 
     subsection (a) (after the application of paragraph (1)) shall 
     not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under subpart A and 
     this subpart (other than this section).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

     SEC. 3. REPEAL OF EXTENSION OF LOWER RATES FOR CAPITAL GAINS 
                   AND DIVIDENDS.

       The amendment made by section 102 of the Tax Increase 
     Prevention and Reconciliation Act of 2005 is repealed and the 
     Internal Revenue Code of 1986 shall be applied as if such 
     amendment had never been enacted.
                                 ______