Capital Investment Act of 1989 - Amends the Internal Revenue Code to reduce from 34 percent to 20 percent the alternative tax rate on capital gains realized by a corporation. Excludes collectibles from capital gains calculations.
Revises the method of calculating the deduction for capital gains of noncorporate taxpayers, allowing a deduction equal to: (1) 100 percent for assets held five years or longer; (2) 60 percent for assets held for between three and five years; and (3) 40 percent for assets held for between one and three years.
HR 1029 IH 101st CONGRESS 1st Session H. R. 1029 To amend the Internal Revenue Code of 1986 to restore a capital gains tax differential. IN THE HOUSE OF REPRESENTATIVES February 21, 1989 Mr. MORRISON of Washington (for himself and Mr. AUCOIN) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to restore a capital gains tax differential. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the `Capital Investment Act of 1989'. SEC. 2. ALTERNATIVE TAX FOR CORPORATIONS. Subsection (a) of section 1201 of the Internal Revenue Code of 1986 (relating to alternative tax for corporations) is amended-- (1) by striking `and any rate of tax imposed by section 11, 511, or 831(a) or (b) (whichever is applicable) exceeds 34 percent (determined without regard to the last sentence of section 11(b)(1)), then, in lieu of any such tax' and inserting `then, in lieu of the taxes imposed by sections 11, 511, and 831(a) and (b)', (2) by striking `34 percent' in paragraph (2) and inserting `20 percent', and (3) by adding at the end thereof the following new sentence: `The amount taken into account as the net capital gain under this subsection shall not exceed the amount of the net capital gain determined by not taking into account any gain or loss from the sale or exchange of a collectible (as defined in section 408(m)(2)).' SEC. 3. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS. Part I of subchapter P of chapter 1 of the Internal Revenue Code of 1986 (relating to treatment of capital gains) is amended by adding after section 1201 the following new section: `SEC. 1202. DEDUCTION FOR CAPITAL GAINS. `(a) DEDUCTION ALLOWED- If for any taxable year a taxpayer other than a corporation has a net capital gain, there shall be allowed as a deduction from gross income an amount equal to the sum of-- `(1) 100 percent of the lesser of-- `(A) the net capital gain, or `(B) the qualified 5-year net capital gain, `(2) 60 percent of the lesser of-- `(A) the net capital gain, reduced by the qualified 5-year net capital gain, or `(B) the qualified 3-year net capital gain, plus `(3) 40 percent of the excess (if any) of-- `(A) the net capital gain, over `(B) the sum of the qualified 5-year net capital gain and the qualified 3-year net capital gain. `(b) QUALIFIED 5-YEAR AND 3-YEAR NET CAPITAL GAIN- For purposes of subsection (a)-- `(1) QUALIFIED 5-YEAR NET CAPITAL GAIN- The term `qualified 5-year net capital gain' means the amount of net capital gain determined for any taxable year by taking into account capital assets of the taxpayer with a holding period of at least 5 years at the time of the sale or exchange. `(2) QUALIFIED 3-YEAR NET CAPITAL GAIN- The term `qualified 3-year net capital gain' means the amount of net capital gain determined for any taxable year by taking into account capital assets of the taxpayer with a holding period of at least 3 years but less than 5 years at the time of the sale or exchange. `(3) SPECIAL RULE FOR COLLECTIBLES- The amount taken into account as the net capital gain, qualified 5-year net capital gain, or qualified 3-year net capital gain (as the case may be) shall not exceed the amount of such gain determined by not taking into account any gain or loss from the sale or exchange of a collectible (as defined in section 408(m)(2)). `(c) ESTATE AND TRUSTS- In the case of an estate or trust, the deduction shall be computed by excluding the portion (if any) of the gains for the taxable year from sales or exchanges of capital assets which, under sections 652 and 662 (relating to inclusions of amounts in gross income of beneficiaries of trusts), is includable by the income beneficiaries as gain derived from the sale or exchange of capital assets.' SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS. (a) DEDUCTION ALLOWABLE IN COMPUTING ADJUSTED GROSS INCOME- Subsection (a) of section 62 of such Code is amended by inserting after paragraph (13) the following new paragraph: `(14) LONG-TERM CAPITAL GAINS- The deduction allowed by section 1202.' (b) OTHER AMENDMENTS- (1) Section 1 of such Code is amended by striking subsection (j). (2) Paragraph (1) of section 170(e) of such Code is amended-- (A) by striking `the amount of gain' in the material following subparagraph (B)(ii) and inserting `the applicable percentage (20/34 in the case of a corporation) of the amount of gain', and (B) by adding at the end thereof the following new sentences: `For purposes of this paragraph, the term `applicable percentage' means 100 percent minus the percentage described in paragraph (1), (2), or (3) of section 1202(a), whichever is applicable. In the case of a contribution of a collectible (as defined in section 408(m)(2)), subparagraph (B) shall be applied as if it did not contain `the applicable percentage (20/34 in the case of a corporation)'.' (3)(A) Paragraph (2) of section 172(d) of such Code is amended to read as follows: `(2) CAPITAL GAINS AND LOSSES OF TAXPAYERS OTHER THAN CORPORATIONS- In the case of a taxpayer other than a corporation-- `(A) the amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includible on account of gains from sales or exchanges of capital assets, and `(B) the deduction under section 1202 shall not be allowed.' (B) Subparagraph (B) of section 172(d)(4) of such Code is amended by striking `paragraphs (1) and (3)' and inserting `paragraphs (1), (2)(B), and (3)'. (4) Paragraph (4) of section 642(c) of such Code is amended to read as follows: `(4) ADJUSTMENTS- To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain from the sale or exchange of capital assets held for more than 1 year, proper adjustment shall be made for any deduction allowable to the estate or trust under section 1202 (relating to deduction for excess of capital gains over capital losses). In the case of a trust, the deduction allowed by this subsection shall be subject to section 681 (relating to unrelated business income).' (5) Paragraph (3) of section 643(a) of such Code is amended by adding at the end thereof the following new sentence: `The deduction under section 1202 (relating to deduction of excess of capital gains over capital losses) shall not be taken into account.' (6) Paragraph (4) of section 691(c) of such Code is amended by striking `sections 1(j), 1201, and 1211' and inserting `sections 1201, 1202, and 1211'. (7) The second sentence of section 871(a)(2) of such Code is amended by inserting `such gains and losses shall be determined without regard to section 1202 (relating to deduction for capital gains) and' after `except that'. (8) Paragraph (1) of section 1402(i) of such Code is amended by inserting `, and the deduction provided by section 1202 shall not apply' before the period at the end thereof. (9) Paragraphs (1) and (2) of section 1445(e) of such Code are each amended by striking `34 percent' and inserting `20 percent'. (10) Clause (iii) of section 852(b)(3)(D) of such Code is amended by striking `66 percent' and inserting `80 percent'. (11)(A) The second sentence of section 7518(g)(6)(A) of such Code is amended-- (i) by striking `during a taxable year to which section 1(j) or 1201(a) applies', and (ii) by striking `28 percent (34 percent' and inserting `16.8 percent (20 percent'. (B) The second sentence of section 607(h)(6)(A) of the Merchant Marine Act, 1936 is amended-- (i) by striking `during a taxable year to which section 1(j) or 1201(a) of such Code applies', and (ii) by striking `28 percent (34 percent' and inserting `16.8 percent (20 percent'. SEC. 5. EFFECTIVE DATE. The amendments made by this Act shall apply to taxable years beginning after December 31, 1989.
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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