[Congressional Record Volume 155, Number 52 (Thursday, March 26, 2009)]
[Senate]
[Pages S3920-S3924]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS (for himself, Mr. Rockefeller, and Mr. Schumer):
  S. 722. A bill to amend the Internal Revenue Code of 1986 to provide 
for permanent alternative minimum tax relief, middle class tax relief, 
and estate tax relief, and to permanently extend certain expiring 
provisions, and for other purposes; to the Committee on Finance.
  Mr. BAUCUS. Mr. President, there is a storm brewing. This storm is 
not an act of God. It is man-made. It is coming to a head next year.
  The 2001 tax cut law gave much-needed tax relief to families with 
children. It gave much-needed tax relief to families with college 
students. It gave much-needed relief to family-owned businesses.
  I worked on those tax cuts. I believed in them.
  But the provisions in that bill expire on December 31, 2010.
  Since the day that we passed that bill, we have passed others. These 
other bills expanded and enhanced some of the 2001 provisions that help 
America's families.
  Next year, all that we have done disappears. American families are 
left in a state of uncertainty. This uncertainty undermines confidence 
in the Government and the future.
  That is why, today, I am introducing the Taxpayer Certainty and 
Relief Act of 2009.
  This bill would make permanent several expiring provisions that help 
families.

[[Page S3921]]

  This bill would make permanent the tax cuts for the 10 percent, 15 
percent, 25 percent, and 25 percent tax brackets. Without this change, 
taxpayers would experience up to a $5,000 tax increase. This bill would 
make permanent the lower capital gains rates for taxpayers in these 
brackets.
  This bill would makes permanent the marriage penalty relief enacted 
in 2001. This would guaranty that married couples would not be 
penalized when they take their wedding vows.
  This bill would also make permanent the $1,000 child tax credit. It 
would also make permanent the refundable child tax credit, with a 
threshold of $3,000, that was recently passed as part of the American 
Recovery and Reinvestment Act.
  This is important because prior to the 2001 bill, this credit was 
$500 and not refundable.
  This bill would make permanent the expansion of the earned income tax 
credit. As a result, married couples would get more relief and families 
with three or more children would get a larger credit.
  The bill would help working men and women by making permanent the 
changes to the dependent and child care credit. This credit helps cover 
the increased expenses of providing child care during a time when 
everyone is struggling to stay employed and weather this economic 
downturn.
  This bill would also make permanent the increased credit for 
adoption. Giving a child a home and love is expensive. Families that 
adopt children have a lot of expenses. This bill would continue to give 
a $10,000 credit for adoption expenses.
  These provisions recognize the increased cost of raising children. 
Congress values families and wants every family to succeed.
  Another problem that Congress has to tackle every year is the 
Alternative Minimum Tax, or the AMT. This tax creeps up on millions of 
taxpayers every year. Every year, Congress holds this monster at bay, 
making sure no new taxpayers pay this horrible tax.
  As a result, the number of taxpayers paying the AMT remains at just 
over 4 million. Without Congress's action, 26 million people would have 
to pay this tax.
  This bill would permanently fix the AMT. It sets the exemption at 
2009 levels and indexes it for future years. It also allows the AMT 
against the nonrefundable credits.
  Finally, this bill would offer certainty on the estate tax. This is 
something that I have tried to get done over and over again. The 
Finance Committee held several hearings discussing this tax. This bill 
makes permanent current law. This bill would set the exemption at $3.5 
million, or $7 million for married couples. It would also set the tax 
rate at 45 percent.
  We have also made some other needed fixes. This bill would unify the 
gift and estate taxes. This bill would also allow a decedent spouse to 
transfer any unused exemption to the surviving spouse. This is known as 
portability.
  I believe that this bill is just the beginning. I realize there are 
other tax cuts that need to be made permanent. For example, I hope to 
address education issues later this year.
  But today, let us begin to give working families some shelter from 
the coming storm.
  Mr. President, I ask unanimous consent that the text of the 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. 722

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

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Certainty and Relief Act of 2009''.
       (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, etc.

           TITLE I--PERMANENT ALTERNATIVE MINIMUM TAX RELIEF

Sec. 101. Exemption amounts made permanent.
Sec. 102. Exemption amounts indexed for inflation.
Sec. 103. Alternative minimum tax relief for nonrefundable credits.

              TITLE II--PERMANENT MIDDLE CLASS TAX RELIEF

Sec. 201. Permanent reduction in tax rates for lower-income and middle-
              income individuals.
Sec. 202. Permanent reduction in rates on capital gains for lower-
              income and middle-income taxpayers.
Sec. 203. Modifications to child tax credit.
Sec. 204. Repeal of sunset on marriage penalty relief.
Sec. 205. Repeal of sunset on expansion of dependent care credit.
Sec. 206. Repeal of sunset on expansion of adoption credit and adoption 
              assistance programs.
Sec. 207. Expansion of earned income tax credit.

                 TITLE III--PERMANENT ESTATE TAX RELIEF

Sec. 301. Permanent extension of estate tax as in effect in 2009.
Sec. 302. Unified credit increased by unused unified credit of deceased 
              spouse.

           TITLE I--PERMANENT ALTERNATIVE MINIMUM TAX RELIEF

     SEC. 101. EXEMPTION AMOUNTS MADE PERMANENT.

       (a) In General.--Paragraph (1) of section 55(d) is 
     amended--
       (1) by striking ``$45,000 ($70,950 in the case of taxable 
     years beginning in 2009)'' in subparagraph (A) and inserting 
     ``$70,950 in the case of'',
       (2) by striking ``$33,750 ($46,700 in the case of taxable 
     years beginning in 2009)'' in subparagraph (B) and inserting 
     ``$46,700 in the case of an individual who'', and
       (3) by striking ``paragraph (1)(A)'' in subparagraph (C) 
     and inserting ``subparagraph (A)''.
       (b) Repeal of EGTRRA Sunset.--Title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 (relating to 
     sunset of provisions of such Act) shall not apply to section 
     701 of such Act (relating to increase in alternative minimum 
     tax exemption).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2009.

     SEC. 102. EXEMPTION AMOUNTS INDEXED FOR INFLATION.

       (a) In General.--Subsection (d) of section 55 is amended by 
     adding at the end the following new paragraph:
       ``(4) Inflation adjustment.--
       ``(A) In general.--In the case of any taxable year 
     beginning in a calendar year after 2009, each of the dollar 
     amounts contained in subsection (b)(1)(A)(i) and paragraphs 
     (1)(A), (1)(B), (1)(D), (3)(A), and (3)(B) of this subsection 
     shall 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, determined by substituting `calendar year 2008' 
     for `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding.--Any increase determined under subparagraph 
     (A) shall be rounded to the nearest multiple of $100.''.
       (b) Conforming Amendments.--
       (1) Clause (iii) of section 55(b)(1)(A) is amended by 
     striking ``by substituting'' and all that follows through 
     ``appears.'' and inserting ``by substituting 50 percent of 
     the dollar amount otherwise applicable under subclause (I) 
     and subclause (II) thereof''.
       (2) Paragraph (3) of section 55(d) is amended--
       (A) by striking ``or (2)'' in subparagraph (A),
       (B) by striking ``and'' at the end of subparagraph (B), and
       (C) by striking subparagraph (C) and inserting the 
     following new subparagraphs:
       ``(C) 50 percent of the dollar amount applicable under 
     subparagraph (A) in the case of a taxpayer described in 
     subparagraph (C) or (D) of paragraph (1), and
       ``(D) $150,000 in the case of a taxpayer described in 
     paragraph (2).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2009.

     SEC. 103. ALTERNATIVE MINIMUM TAX RELIEF FOR NONREFUNDABLE 
                   CREDITS.

       (a) In General.--Subsection (a) of section 26 is amended to 
     read as follows:
       ``(a) Limitation Based on Amount of Tax.--The aggregate 
     amount of credits allowed by this subpart for the taxable 
     year shall not exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year reduced by the foreign tax credit allowable under 
     section 27(a), and
       ``(2) the tax imposed by section 55(a) for the taxable 
     year.''.
       (b) Conforming Amendments.--
       (1) Adoption credit.--
       (A) Section 23(b) is amended by striking paragraph (4).
       (B) Section 23(c) is amended by striking paragraphs (1) and 
     (2) and inserting the following:
       ``(1) In general.--If the credit allowable under subsection 
     (a) for any taxable year exceeds the limitation imposed by 
     section 26(a) for such taxable year reduced by the sum of the 
     credits allowable under this subpart (other than this section 
     and sections 25D and 1400C), such excess shall be carried to 
     the succeeding taxable year and added to the

[[Page S3922]]

     credit allowable under subsection (a) for such taxable 
     year.''.
       (C) Section 23(c) is amended by redesignating paragraph (3) 
     as paragraph (2).
       (2) Child tax credit.--
       (A) Section 24(b) is amended by striking paragraph (3).
       (B) Section 24(d)(1) is amended--
       (i) by striking ``section 26(a)(2) or subsection (b)(3), as 
     the case may be,'' each place it appears in subparagraphs (A) 
     and (B) and inserting ``section 26(a)'', and
       (ii) by striking ``section 26(a)(2) or subsection (b)(3), 
     as the case may be'' in the second last sentence and 
     inserting ``section 26(a)''.
       (3) Credit for interest on certain home mortgages.--Section 
     25(e)(1)(C) is amended to read as follows:
       ``(C) Applicable tax limit.--For purposes of this 
     paragraph, the term `applicable tax limit' means the 
     limitation imposed by section 26(a) for the taxable year 
     reduced by the sum of the credits allowable under this 
     subpart (other than this section and sections 23, 25D, and 
     1400C).''.
       (4) Savers' credit.--Section 25B is amended by striking 
     subsection (g).
       (5) Residential energy efficient property.--Section 25D(c) 
     is amended to read as follows:
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under this subpart (other than this 
     section), such excess shall be carried to the succeeding 
     taxable year and added to the credit allowable under 
     subsection (a) for such succeeding taxable year.''.
       (6) Certain plug-in electric vehicles.--Section 30(c)(2) is 
     amended to read as follows:
       ``(2) Personal credit.--For purposes of this title, the 
     credit allowed under subsection (a) for any taxable year 
     (determined after application of paragraph (1)) shall be 
     treated as a credit allowable under subpart A for such 
     taxable year.''.
       (7) Alternative motor vehicle credit.--Section 30B(g)(2) is 
     amended to read as follows:
       ``(2) Personal credit.--For purposes of this title, the 
     credit allowed under subsection (a) for any taxable year 
     (determined after application of paragraph (1)) shall be 
     treated as a credit allowable under subpart A for such 
     taxable year.''.
       (8) New qualified plug-in electric vehicle credit.--Section 
     30D(c)(2) is amended to read as follows:
       ``(2) Personal credit.--For purposes of this title, the 
     credit allowed under subsection (a) for any taxable year 
     (determined after application of paragraph (1)) shall be 
     treated as a credit allowable under subpart A for such 
     taxable year.''.
       (9) Cross references.--Section 55(c)(3) is amended by 
     striking ``26(a), 30C(d)(2),'' and inserting ``30C(d)(2)''.
       (10) Foreign tax credit.--Section 904 is amended by 
     striking subsection (i) and by redesignating subsections (j) 
     , (k), and (l) as subsections (i), (j), and (k), 
     respectively.
       (11) First-time home buyer credit for the district of 
     columbia.--Section 1400C(d) is amended to read as follows:
       ``(d) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under subpart A of part IV of 
     subchapter A (other than this section and section 25D), such 
     excess shall be carried to the succeeding taxable year and 
     added to the credit allowable under subsection (a) for such 
     taxable year.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2009.

              TITLE II--PERMANENT MIDDLE CLASS TAX RELIEF

     SEC. 201. PERMANENT REDUCTION IN TAX RATES FOR LOWER-INCOME 
                   AND MIDDLE-INCOME INDIVIDUALS.

       (a) In General.--Paragraph (2) of section 1(i) is amended 
     to read as follows:
       ``(2) Reduction in rates.--The tables under subsections 
     (a), (b), (c), (d), and (e) shall be applied--
       ``(A) in the case of taxable years beginning after 2008--
       ``(i) by substituting `25%' for `28%' each place it appears 
     (before the application of clause (ii)), and
       ``(ii) by substituting `28%' for `31%' each place it 
     appears, and
       ``(B) in the case of taxable years beginning in 2009 and 
     2010--
       ``(i) by substituting `33%' for `36%' each place it 
     appears, and
       ``(ii) by substituting `35%' for `39.6%' each place it 
     appears.''.
       (b) Repeal of EGTRRA Sunset.--Title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 (relating to 
     sunset of provisions of such Act) shall not apply to section 
     101 of such Act (relating to reduction in income tax rates 
     for individuals).
       (c) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

     SEC. 202. PERMANENT REDUCTION IN RATES ON CAPITAL GAINS FOR 
                   LOWER-INCOME AND MIDDLE-INCOME TAXPAYERS.

       (a) In General.--
       (1) Regular tax.--Section 1(h)(1) is amended by 
     redesignating subparagraphs (D) and (E) as subparagraphs (E) 
     and (F), respectively, and by striking subparagraph (C) and 
     inserting the following:
       ``(C) 15 percent of the lesser of--
       ``(i) so much of the adjusted net capital gain (or, if 
     less, taxable income) as exceeds the amount on which a tax is 
     determined under subparagraph (B), or
       ``(ii) the excess (if any) of--

       ``(I) amount of taxable income which would (without regard 
     to this paragraph) be taxed at a rate below the second 
     highest tax rate, over
       ``(II) the greater of the amounts determined under clauses 
     (i) and (ii) of subparagraph (B);

       ``(D) 20 percent of the adjusted net capital gain (or, if 
     less, taxable income) in excess of the sum of the amounts on 
     which tax is determined under subparagraphs (B) and (C);''.
       (2) Minimum tax.--Section 55(b)(3) is amended by 
     redesignating subparagraph (D) as subparagraphs (E) and by 
     striking subparagraph (C) and inserting the following:
       ``(C) 15 percent of the lesser of--
       ``(i) so much of the adjusted net capital gain (or, if 
     less, taxable excess) as exceeds the amount on which tax is 
     determined under subparagraph (B), or
       ``(ii) the excess described in section 1(h)(1)(C)(ii), plus
       ``(D) 20 percent of the adjusted net capital gain (or, if 
     less, taxable excess) in excess of the sum of the amounts on 
     which tax is determined under subparagraphs (B) and (C), 
     plus''.
       (3) Conforming amendments.--
       (A) The following sections are each amended by striking 
     ``15 percent'' and inserting ``20 percent'':
       (i) Section 1445(e)(1).
       (ii) The second sentence of section 7518(g)(6)(A).
       (iii) Section 53511(f)(2) of title 46, United States Code.
       (B) Section 1(h)(1)(B) is amended by striking ``5 percent 
     (0 percent in the case of taxable years beginning after 
     2007)'' and inserting ``0 percent''.
       (C) Section 55(b)(3)(B) is amended by striking ``5 percent 
     (0 percent in the case of taxable years beginning after 
     2007)'' and inserting ``0 percent''.
       (D) Section 1445(e)(6) is amended by striking ``15 percent 
     (20 percent in the case of taxable years beginning after 
     December 31, 2010)'' and inserting ``20 percent''.
       (b) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2010.
       (2) Withholding.--The amendment made by subsection 
     (a)(3)(A)(i) shall apply to amounts paid on or after January 
     1, 2011.
       (c) Repeal of JGTRRA Sunset.--Section 303 of the Jobs and 
     Growth Tax Relief Reconciliation Act of 2003 is repealed.

     SEC. 203. MODIFICATIONS TO CHILD TAX CREDIT.

       (a) Repeal of EGTRRA Sunset.--Title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 (relating to 
     sunset of provisions of such Act) shall not apply to sections 
     201 (relating to modifications to child tax credit) and 203 
     (relating to refunds disregarded in the administration of 
     federal programs and federally assisted programs) of such 
     Act.
       (b) Modification of Threshold Amount.--
       (1) In general.--Clause (i) of section 24(d)(1)(B) is 
     amended by striking ``$10,000'' and inserting ``$3,000''.
       (2) Repeal of inflation adjustment to earned income base.--
     Subsection (d) of section 24 (relating to portion of credit 
     refundable) is amended by striking paragraph (3).
       (3) Conforming amendment.--Section 24(d) is amended by 
     striking paragraph (4).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2010.

     SEC. 204. REPEAL OF SUNSET ON MARRIAGE PENALTY RELIEF.

       Title IX of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 (relating to sunset of provisions 
     of such Act) shall not apply to sections 301, 302, and 303(a) 
     of such Act (relating to marriage penalty relief).

     SEC. 205. REPEAL OF SUNSET ON EXPANSION OF DEPENDENT CARE 
                   CREDIT.

       Title IX of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 (relating to sunset of provisions 
     of such Act) shall not apply to section 204 of such Act 
     (relating to dependent care credit).

     SEC. 206. REPEAL OF SUNSET ON EXPANSION OF ADOPTION CREDIT 
                   AND ADOPTION ASSISTANCE PROGRAMS.

       Title IX of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 (relating to sunset of provisions 
     of such Act) shall not apply to section 202 of such Act 
     (relating to expansion of adoption credit and adoption 
     assistance programs).

     SEC. 207. EXPANSION OF EARNED INCOME TAX CREDIT.

       (a) Repeal of EGTRRA Sunset.--Title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 (relating to 
     sunset of provisions of such Act) shall not apply to 
     subsections (b) through (h) of section 303 of such Act 
     (relating to earned income tax credit).
       (b) Increase in Credit Percentage for Families With 3 or 
     More Children.--Paragraph (1) of section 32(b) is amended by 
     striking subparagraphs (B) and (C) and inserting the 
     following new subparagraph:
       ``(B) Increased credit percentage for families with 3 or 
     more qualifying children.--In the case of an eligible 
     individual with 3 or more qualifying children, the table in 
     subparagraph (A) shall be applied by substituting `45' for 
     `40' in the second column thereof.''.

[[Page S3923]]

       (c) Joint Returns.--
       (1) In general.--Subparagraph (B) of section 32(b)(2) is 
     amended by striking ``increased by'' and all that follows and 
     inserting ``increased by $5,000.''
       (2) Inflation adjustments.--Clause (ii) of section 
     32(j)(1)(B) is amended--
       (A) by striking ``$3,000'' and inserting ``$5,000'', and
       (B) by striking ``calendar year 2007'' and inserting 
     ``calendar year 2008''.
       (d) Conforming Amendment.--Section 32(b) is amended by 
     striking paragraph (3).
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2009.

                 TITLE III--PERMANENT ESTATE TAX RELIEF

     SEC. 301. PERMANENT EXTENSION OF ESTATE TAX AS IN EFFECT IN 
                   2009.

       (a) Restoration of Unified Credit Against Gift Tax.--
     Paragraph (1) of section 2505(a) (relating to general rule 
     for unified credit against gift tax), after the application 
     of subsection (g), is amended by striking ``(determined as if 
     the applicable exclusion amount were $1,000,000)''.
       (b) Exclusion Equivalent of Unified Credit Equal to 
     $3,500,000.--Subsection (c) of section 2010 (relating to 
     unified credit against estate tax) is amended to read as 
     follows:
       ``(c) Applicable Credit Amount.--
       ``(1) In general.--For purposes of this section, the 
     applicable credit amount is the amount of the tentative tax 
     which would be determined under section 2001(c) if the amount 
     with respect to which such tentative tax is to be computed 
     were equal to the applicable exclusion amount.
       ``(2) Applicable exclusion amount.--
       ``(A) In general.--For purposes of this subsection, the 
     applicable exclusion amount is $3,500,000.
       ``(B) Inflation adjustment.--In the case of any decedent 
     dying in a calendar year after 2010, the dollar amount in 
     subparagraph (A) shall 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 such calendar year by substituting 
     `calendar year 2009' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $10,000, such amount shall be rounded to the 
     nearest multiple of $10,000.''.
       (c) Maximum Estate Tax Rate Equal to 45 Percent.--
       (1) In general.--Subsection (c) of section 2001 (relating 
     to imposition and rate of tax) is amended--
       (A) by striking ``but not over $2,000,000'' in the table 
     contained in paragraph (1),
       (B) by striking the last 2 items in such table,
       (C) by striking ``(1) in general.--'', and
       (D) by striking paragraph (2).
       (2) Conforming amendment.--Paragraphs (1) and (2) of 
     section 2102(b) are amended to read as follows:
       ``(1) In general.--A credit in an amount that would be 
     determined under section 2010 as the applicable credit amount 
     if the applicable exclusion amount were $60,000 shall be 
     allowed against the tax imposed by section 2101.
       ``(2) Residents of possessions of the united states.--In 
     the case of a decedent who is considered to be a `nonresident 
     not a citizen of the United States' under section 2209, the 
     credit allowed under this subsection shall not be less than 
     the proportion of the amount that would be determined under 
     section 2010 as the applicable credit amount if the 
     applicable exclusion amount were $175,000 which the value of 
     that part of the decedent's gross estate which at the time of 
     the decedent's death is situated in the United States bears 
     to the value of the decedent's entire gross estate, wherever 
     situated.''.
       (d) Modifications of Estate and Gift Taxes to Reflect 
     Differences in Unified Credit Resulting From Different Tax 
     Rates.--
       (1) Estate tax.--
       (A) In general.--Section 2001(b)(2) (relating to 
     computation of tax) is amended by striking ``if the 
     provisions of subsection (c) (as in effect at the decedent's 
     death)'' and inserting ``if the modifications described in 
     subsection (g)''.
       (B) Modifications.--Section 2001 is amended by adding at 
     the end the following new subsection:
       ``(g) Modifications to Gift Tax Payable to Reflect 
     Different Tax Rates.--For purposes of applying subsection 
     (b)(2) with respect to 1 or more gifts, the rates of tax 
     under subsection (c) in effect at the decedent's death shall, 
     in lieu of the rates of tax in effect at the time of such 
     gifts, be used both to compute--
       ``(1) the tax imposed by chapter 12 with respect to such 
     gifts, and
       ``(2) the credit allowed against such tax under section 
     2505, including in computing--
       ``(A) the applicable credit amount under section 
     2505(a)(1), and
       ``(B) the sum of the amounts allowed as a credit for all 
     preceding periods under section 2505(a)(2).

     For purposes of paragraph (2)(A), the applicable credit 
     amount for any calendar year before 1998 is the amount which 
     would be determined under section 2010(c) if the applicable 
     exclusion amount were the dollar amount under section 
     6018(a)(1) for such year.''.
       (2) Gift tax.--Section 2505(a) (relating to unified credit 
     against gift tax) is amended by adding at the end the 
     following new flush sentence:

     ``For purposes of applying paragraph (2) for any calendar 
     year, the rates of tax in effect under section 2502(a)(2) for 
     such calendar year shall, in lieu of the rates of tax in 
     effect for preceding calendar periods, be used in determining 
     the amounts allowable as a credit under this section for all 
     preceding calendar periods.''.
       (e) Increase in Aggregate Reduction in Fair Market Value 
     Allowed Under Special Use Valuation.--Section 2032A(a) 
     (relating to value based on use under which property 
     qualifies) is amended--
       (1) by striking ``$750,000'' in paragraph (2) and inserting 
     ``$3,500,000,
       (2) by striking ``1998'' in paragraph (3) and inserting 
     ``2010'',
       (3) by striking ``$750,000'' in paragraph (3) and inserting 
     ``$3,500,000'', and
       (4) by striking ``1997'' in paragraph (3) and inserting 
     ``2009''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying, generation-
     skipping transfers, and gifts made, after December 31, 2009.
       (g) Additional Modifications to Estate Tax.--
       (1) In general.--The following provisions of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001, and the 
     amendments made by such provisions, are hereby repealed:
       (A) Subtitles A and E of title V.
       (B) Subsection (d), and so much of subsection (f)(3) as 
     relates to subsection (d), of section 511.
       (C) Paragraph (2) of subsection (b), and paragraph (2) of 
     subsection (e), of section 521.
     The Internal Revenue Code of 1986 shall be applied as if such 
     provisions and amendments had never been enacted.
       (2) Sunset not to apply to title v of egtrra.--Section 901 
     of the Economic Growth and Tax Relief Reconciliation Act of 
     2001 shall not apply to title V of such Act.
       (3) Repeal of deadwood.--
       (A) Sections 2011, 2057, and 2604 are hereby repealed.
       (B) The table of sections for part II of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2011.
       (C) The table of sections for part IV of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2057.
       (D) The table of sections for subchapter A of chapter 13 is 
     amended by striking the item relating to section 2604.

     SEC. 302. UNIFIED CREDIT INCREASED BY UNUSED UNIFIED CREDIT 
                   OF DECEASED SPOUSE.

       (a) In General.--Section 2010(c), as amended by section 
     301(b), is amended by striking paragraph (2) and inserting 
     the following new paragraphs:
       ``(2) Applicable exclusion amount.--For purposes of this 
     subsection, the applicable exclusion amount is the sum of--
       ``(A) the basic exclusion amount, and
       ``(B) in the case of a surviving spouse, the aggregate 
     deceased spousal unused exclusion amount.
       ``(3) Basic exclusion amount.--
       ``(A) In general.--For purposes of this subsection, the 
     basic exclusion amount is $3,500,000.
       ``(B) Inflation adjustment.--In the case of any decedent 
     dying in a calendar year after 2010, the dollar amount in 
     subparagraph (A) shall 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 such calendar year by substituting 
     `calendar year 2009' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $10,000, such amount shall be rounded to the 
     nearest multiple of $10,000.
       ``(4) Aggregate deceased spousal unused exclusion amount.--
     For purposes of this subsection, the term `aggregate deceased 
     spousal unused exclusion amount' means the lesser of--
       ``(A) the basic exclusion amount, or
       ``(B) the sum of the deceased spousal unused exclusion 
     amounts computed with respect to each deceased spouse of the 
     surviving spouse.
       ``(5) Deceased spousal unused exclusion amount.--For 
     purposes of this subsection, the term `deceased spousal 
     unused exclusion amount' means, with respect to the surviving 
     spouse of any deceased spouse dying after December 31, 2009, 
     the excess (if any) of--
       ``(A) the basic exclusion amount of the deceased spouse, 
     over
       ``(B) the amount with respect to which the tentative tax is 
     determined under section 2001(b)(1) on the estate of such 
     deceased spouse.
       ``(6) Special rules.--
       ``(A) Election required.--A deceased spousal unused 
     exclusion amount may not be taken into account by a surviving 
     spouse under paragraph (5) unless the executor of the estate 
     of the deceased spouse files an estate tax return on which 
     such amount is computed and makes an election on such return 
     that such amount may be so taken into account. Such election, 
     once made, shall be irrevocable. No election may be made 
     under this subparagraph if such return is filed after the 
     time prescribed by law (including extensions) for filing such 
     return.
       ``(B) Examination of prior returns after expiration of 
     period of limitations with

[[Page S3924]]

     respect to deceased spousal unused exclusion amount.--
     Notwithstanding any period of limitation in section 6501, 
     after the time has expired under section 6501 within which a 
     tax may be assessed under chapter 11 or 12 with respect to a 
     deceased spousal unused exclusion amount, the Secretary may 
     examine a return of the deceased spouse to make 
     determinations with respect to such amount for purposes of 
     carrying out this subsection.
       ``(7) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this subsection.''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 2505(a), as amended by section 
     301(a), is amended to read as follows:
       ``(1) the applicable credit amount in effect under section 
     2010(c) which would apply if the donor died as of the end of 
     the calendar year, reduced by''.
       (2) Section 2631(c) is amended by striking ``the applicable 
     exclusion amount'' and inserting ``the basic exclusion 
     amount''.
       (3) Section 6018(a)(1) is amended by striking ``applicable 
     exclusion amount'' and inserting ``basic exclusion amount''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying, generation-
     skipping transfers, and gifts made, after December 31, 2009.
                                 ______