< Back to H.R. 2 (108th Congress, 2003–2004)

Text of the Jobs and Growth Tax Relief Reconciliation Act of 2003

This bill was enacted after being signed by the President on May 28, 2003. The text of the bill below is as of May 9, 2003 (Passed the House (Engrossed)).

This is not the latest text of this bill.

Source: GPO

1st Session

                                H. R. 2

_______________________________________________________________________

                                 AN ACT

To provide for reconciliation pursuant to section 201 of the concurrent 
             resolution on the budget for fiscal year 2004.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
108th CONGRESS
  1st Session
                                 H. R. 2

_______________________________________________________________________

                                 AN ACT


 
To provide for reconciliation pursuant to section 201 of the concurrent 
             resolution on the budget for fiscal year 2004.

    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 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 years                                                                                                              The corresponding percentages shall be substituted for  the following percentages:
                          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 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 10709147) 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,
                                    ``(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.

            Passed the House of Representatives May 9, 2003.

            Attest:

                                                                 Clerk.