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Text of the Economic Growth Act of 2008

This bill was introduced on January 23, 2008, in a previous session of Congress, but was not enacted. The text of the bill below is as of Jan 23, 2008 (Introduced).

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I

110th CONGRESS

2d Session

H. R. 5109

IN THE HOUSE OF REPRESENTATIVES

January 23, 2008

(for himself, Mr. Jordan of Ohio, Mr. Akin, Mrs. Blackburn, Mr. Campbell of California, Mr. Cantor, Mr. Culberson, Mr. David Davis of Tennessee, Mr. Feeney, Mr. Flake, Mr. Franks of Arizona, Mr. Gingrey, Mr. Gohmert, Mr. Hensarling, Mr. Herger, Mr. Mack, Mr. McCaul of Texas, Mr. McHenry, Mr. Paul, Mr. Pence, Mr. Ryan of Wisconsin, Mrs. Bachmann, Mr. Bartlett of Maryland, Mr. Bilbray, Mr. Burton of Indiana, Mr. Cannon, Mr. Carter, Mrs. Cubin, Mr. Doolittle, Ms. Fallin, Ms. Foxx, Mr. Goodlatte, Mr. Hunter, Mr. Issa, Mr. Sam Johnson of Texas, Mr. Kline of Minnesota, Mr. Lamborn, Mr. Manzullo, Mr. Marchant, Mrs. Musgrave, Mr. Pitts, Mr. Price of Georgia, Mrs. McMorris Rodgers, Mr. Roskam, Mr. Sessions, Mr. Shadegg, Mr. Souder, Mr. Thornberry, Mr. Walberg, and Mr. Wilson of South Carolina) 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 provide for permanent tax incentives for economic growth.

1.

Short title

This Act may be cited as the Economic Growth Act of 2008.

2.

Repeal of certain limitations on the expensing of section 179 property

(a)

In general

Section 179 of the Internal Revenue Code of 1986 is amended by striking subsection (b) and by redesignating subsections (c) and (d) as subsections (b) and (c), respectively.

(b)

Expensing of section 1250 property

Subparagraph (B) of section 179(d)(1) of such Code is amended by inserting or section 1250 property (as defined in section 1250(c)) after section 1245 property (as defined in section 1245(a)(3)).

(c)

Conforming amendments

(1)

Subsection (c) of section 179 of such Code, as redesignated by subsection (a), is amended by striking paragraphs (6) and (8), and by redesignating paragraphs (7), (9), and (10) as paragraphs (6), (7), and (8), respectively.

(2)

Paragraph (6) of section 179 of such Code, as redesignated by paragraph (1) and subsection (a), is amended by striking paragraphs (2) and (6) and inserting paragraph (2).

(3)

Sections 42(d)(2)(B)(i), 1397D(d)(1), 1400B(b)(4)(A)(i) and 1400F(b)(4)(A)(i) of such Code are each amended by striking section 179(d)(2) and inserting section 179(c)(2).

(4)

Subclause (I) of section 42(d)(2)(D)(iii) of such Code is amended—

(A)

by striking section 179(d) and inserting section 179(c), and

(B)

by striking section 179(d)(7) and inserting section 179(c)(6).

(5)
(A)

Subpart B of part III of subchapter U of chapter 1 of such Code is hereby repealed.

(B)

The table of subparts for such part III is amended by striking the item relating to subpart B.

(6)
(A)

Part III of subchapter X of chapter 1 of such Code is amended by striking section 1400J.

(B)

The table of sections for such part is amended by striking the item relating to section 1400J.

(C)

Paragraph (3) of section 1400E(b) of such Code is amended by striking sections 1400F and 1400J and inserting section 1400F.

(7)

Clause (iv) of section 1400L(b)(2)(A) of such Code is amended by striking section 179(d) and inserting section 179(c).

(8)

Section 1400L of such Code is amended by striking subsection (f).

(d)

Effective date

The amendments made by this section shall apply to property placed in service in taxable years beginning after December 31, 2007.

3.

Reduction in corporate marginal income tax rates

(a)

General rule

Paragraph (1) of section 11(b) of the Internal Revenue Code of 1986 is amended—

(1)

by inserting and at the end of subparagraph (A),

(2)

by striking but does not exceed $75,000, in subparagraph (B) and inserting a period,

(3)

by striking subparagraphs (C) and (D), and

(4)

by striking the last 2 sentences.

(b)

Personal service corporations

Paragraph (2) of section 11(b) of such Code is amended by striking 35 percent and inserting 25 percent.

(c)

Conforming amendments

Paragraphs (1) and (2) of section 1445(e) of such Code are each amended by striking 35 percent and inserting 25 percent.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007, except that the amendments made by subsection (c) shall take effect on the date of the enactment of this Act.

4.

Indexing of certain assets for purposes of determining gain or loss

(a)

In General

Part II of subchapter O of chapter 1 (relating to basis rules of general application) is amended by redesignating section 1023 as section 1024 and by inserting after section 1022 the following new section:

1023.

Indexing of certain assets for purposes of determining gain or loss

(a)

General rule

(1)

Indexed basis substituted for adjusted basis

Solely for purposes of determining gain or loss on the sale or other disposition by a taxpayer (other than a corporation) of an indexed asset which has been held for more than 3 years, the indexed basis of the asset shall be substituted for its adjusted basis.

(2)

Exception for depreciation, etc

The deductions for depreciation, depletion, and amortization shall be determined without regard to the application of paragraph (1) to the taxpayer or any other person.

(3)

Written documentation requirement

Paragraph (1) shall apply only with respect to indexed assets for which the taxpayer has written documentation of the original purchase price paid or incurred by the taxpayer to acquire such asset.

(b)

Indexed asset

(1)

In general

For purposes of this section, the term indexed asset means—

(A)

common stock in a C corporation (other than a foreign corporation), or

(B)

tangible property,

which is a capital asset or property used in the trade or business (as defined in section 1231(b)).
(2)

Stock in certain foreign corporations included

For purposes of this section—

(A)

In general

The term indexed asset includes common stock in a foreign corporation which is regularly traded on an established securities market.

(B)

Exception

Subparagraph (A) shall not apply to—

(i)

stock of a foreign investment company,

(ii)

stock in a passive foreign investment company (as defined in section 1296),

(iii)

stock in a foreign corporation held by a United States person who meets the requirements of section 1248(a)(2), and

(iv)

stock in a foreign personal holding company.

(C)

Treatment of American depository receipts

An American depository receipt for common stock in a foreign corporation shall be treated as common stock in such corporation.

(c)

Indexed basis

For purposes of this section—

(1)

General rule

The indexed basis for any asset is—

(A)

the adjusted basis of the asset, increased by

(B)

the applicable inflation adjustment.

(2)

Applicable inflation adjustment

The applicable inflation adjustment for any asset is an amount equal to—

(A)

the adjusted basis of the asset, multiplied by

(B)

the percentage (if any) by which—

(i)

the gross domestic product deflator for the last calendar quarter ending before the asset is disposed of, exceeds

(ii)

the gross domestic product deflator for the last calendar quarter ending before the asset was acquired by the taxpayer.

The percentage under subparagraph (B) shall be rounded to the nearest 1/10 of 1 percentage point.
(3)

Gross domestic product deflator

The gross domestic product deflator for any calendar quarter is the implicit price deflator for the gross domestic product for such quarter (as shown in the last revision thereof released by the Secretary of Commerce before the close of the following calendar quarter).

(d)

Suspension of holding period where diminished risk of loss; treatment of short sales

(1)

In general

If the taxpayer (or a related person) enters into any transaction which substantially reduces the risk of loss from holding any asset, such asset shall not be treated as an indexed asset for the period of such reduced risk.

(2)

Short sales

(A)

In general

In the case of a short sale of an indexed asset with a short sale period in excess of 3 years, for purposes of this title, the amount realized shall be an amount equal to the amount realized (determined without regard to this paragraph) increased by the applicable inflation adjustment. In applying subsection (c)(2) for purposes of the preceding sentence, the date on which the property is sold short shall be treated as the date of acquisition and the closing date for the sale shall be treated as the date of disposition.

(B)

Short sale period

For purposes of subparagraph (A), the short sale period begins on the day that the property is sold and ends on the closing date for the sale.

(e)

Treatment of regulated investment companies and real estate investment trusts

(1)

Adjustments at entity level

(A)

In general

Except as otherwise provided in this paragraph, the adjustment under subsection (a) shall be allowed to any qualified investment entity (including for purposes of determining the earnings and profits of such entity).

(B)

Exception for corporate shareholders

Under regulations—

(i)

in the case of a distribution by a qualified investment entity (directly or indirectly) to a corporation—

(I)

the determination of whether such distribution is a dividend shall be made without regard to this section, and

(II)

the amount treated as gain by reason of the receipt of any capital gain dividend shall be increased by the percentage by which the entity’s net capital gain for the taxable year (determined without regard to this section) exceeds the entity’s net capital gain for such year determined with regard to this section, and

(ii)

there shall be other appropriate adjustments (including deemed distributions) so as to ensure that the benefits of this section are not allowed (directly or indirectly) to corporate shareholders of qualified investment entities.

For purposes of the preceding sentence, any amount includible in gross income under section 852(b)(3)(D) shall be treated as a capital gain dividend and an S corporation shall not be treated as a corporation.
(C)

Exception for qualification purposes

This section shall not apply for purposes of sections 851(b) and 856(c).

(D)

Exception for certain taxes imposed at entity level

(i)

Tax on failure to distribute entire gain

If any amount is subject to tax under section 852(b)(3)(A) for any taxable year, the amount on which tax is imposed under such section shall be increased by the percentage determined under subparagraph (B)(i)(II). A similar rule shall apply in the case of any amount subject to tax under paragraph (2) or (3) of section 857(b) to the extent attributable to the excess of the net capital gain over the deduction for dividends paid determined with reference to capital gain dividends only. The first sentence of this clause shall not apply to so much of the amount subject to tax under section 852(b)(3)(A) as is designated by the company under section 852(b)(3)(D).

(ii)

Other taxes

This section shall not apply for purposes of determining the amount of any tax imposed by paragraph (4), (5), or (6) of section 857(b).

(2)

Adjustments to interests held in entity

(A)

Regulated investment companies

Stock in a regulated investment company (within the meaning of section 851) shall be an indexed asset for any calendar quarter in the same ratio as—

(i)

the average of the fair market values of the indexed assets held by such company at the close of each month during such quarter, bears to

(ii)

the average of the fair market values of all assets held by such company at the close of each such month.

(B)

Real estate investment trusts

Stock in a real estate investment trust (within the meaning of section 856) shall be an indexed asset for any calendar quarter in the same ratio as—

(i)

the fair market value of the indexed assets held by such trust at the close of such quarter, bears to

(ii)

the fair market value of all assets held by such trust at the close of such quarter.

(C)

Ratio of 80 percent or more

If the ratio for any calendar quarter determined under subparagraph (A) or (B) would (but for this subparagraph) be 80 percent or more, such ratio for such quarter shall be 100 percent.

(D)

Ratio of 20 percent or less

If the ratio for any calendar quarter determined under subparagraph (A) or (B) would (but for this subparagraph) be 20 percent or less, such ratio for such quarter shall be zero.

(E)

Look-thru of partnerships

For purposes of this paragraph, a qualified investment entity which holds a partnership interest shall be treated (in lieu of holding a partnership interest) as holding its proportionate share of the assets held by the partnership.

(3)

Treatment of return of capital distributions

Except as otherwise provided by the Secretary, a distribution with respect to stock in a qualified investment entity which is not a dividend and which results in a reduction in the adjusted basis of such stock shall be treated as allocable to stock acquired by the taxpayer in the order in which such stock was acquired.

(4)

Qualified investment entity

For purposes of this subsection, the term qualified investment entity means—

(A)

a regulated investment company (within the meaning of section 851), and

(B)

a real estate investment trust (within the meaning of section 856).

(f)

Other pass-thru entities

(1)

Partnerships

(A)

In general

In the case of a partnership, the adjustment made under subsection (a) at the partnership level shall be passed through to the partners.

(B)

Special rule in the case of section 754 elections

In the case of a transfer of an interest in a partnership with respect to which the election provided in section 754 is in effect—

(i)

the adjustment under section 743(b)(1) shall, with respect to the transferor partner, be treated as a sale of the partnership assets for purposes of applying this section, and

(ii)

with respect to the transferee partner, the partnership’s holding period for purposes of this section in such assets shall be treated as beginning on the date of such adjustment.

(2)

S corporations

In the case of an S corporation, the adjustment made under subsection (a) at the corporate level shall be passed through to the shareholders. This section shall not apply for purposes of determining the amount of any tax imposed by section 1374 or 1375.

(3)

Common trust funds

In the case of a common trust fund, the adjustment made under subsection (a) at the trust level shall be passed through to the participants.

(4)

Indexing adjustment disregarded in determining loss on sale of interest in entity

Notwithstanding the preceding provisions of this subsection, for purposes of determining the amount of any loss on a sale or exchange of an interest in a partnership, S corporation, or common trust fund, the adjustment made under subsection (a) shall not be taken into account in determining the adjusted basis of such interest.

(g)

Dispositions between related persons

(1)

In general

This section shall not apply to any sale or other disposition of property between related persons except to the extent that the basis of such property in the hands of the transferee is a substituted basis.

(2)

Related persons defined

For purposes of this section, the term related persons means—

(A)

persons bearing a relationship set forth in section 267(b), and

(B)

persons treated as single employer under subsection (b) or (c) of section 414.

(h)

Transfers To increase indexing adjustment

If any person transfers cash, debt, or any other property to another person and the principal purpose of such transfer is to secure or increase an adjustment under subsection (a), the Secretary may disallow part or all of such adjustment or increase.

(i)

Special rules

For purposes of this section—

(1)

Treatment of improvements, etc

If there is an addition to the adjusted basis of any tangible property or of any stock in a corporation during the taxable year by reason of an improvement to such property or a contribution to capital of such corporation—

(A)

such addition shall never be taken into account under subsection (c)(1)(A) if the aggregate amount thereof during the taxable year with respect to such property or stock is less than $1,000, and

(B)

such addition shall be treated as a separate asset acquired at the close of such taxable year if the aggregate amount thereof during the taxable year with respect to such property or stock is $1,000 or more.

A rule similar to the rule of the preceding sentence shall apply to any other portion of an asset to the extent that separate treatment of such portion is appropriate to carry out the purposes of this section.
(2)

Assets which are not indexed assets throughout holding period

The applicable inflation adjustment shall be appropriately reduced for periods during which the asset was not an indexed asset.

(3)

Treatment of certain distributions

A distribution with respect to stock in a corporation which is not a dividend shall be treated as a disposition.

(4)

Section cannot increase ordinary loss

To the extent that (but for this paragraph) this section would create or increase a net ordinary loss to which section 1231(a)(2) applies or an ordinary loss to which any other provision of this title applies, such provision shall not apply. The taxpayer shall be treated as having a long-term capital loss in an amount equal to the amount of the ordinary loss to which the preceding sentence applies.

(5)

Acquisition date where there has been prior application of subsection (a)(1) with respect to the taxpayer

If there has been a prior application of subsection (a)(1) to an asset while such asset was held by the taxpayer, the date of acquisition of such asset by the taxpayer shall be treated as not earlier than the date of the most recent such prior application.

(j)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

(k)

Termination

For purposes of this section, the term indexed asset shall not include any asset acquired after December 31, 2008.

.

(b)

Clerical amendment

The table of sections for part II of subchapter O of chapter 1 is amended by striking the item relating to section 1023 and by inserting after the item relating to section 1022 the following new item:

Sec. 1022. Indexing of certain assets for purposes of determining gain or loss.

Sec. 1023. Cross references.

.

(c)

Effective date

The amendments made by this section shall apply to sales and other dispositions of indexed assets after the date of the enactment of this Act, in taxable years ending after such date.

5.

Reduced capital gains rate for corporations

(a)

In general

Section 1201 of the Internal Revenue Code of 1986 is amended by striking 35 percent both places it appears and inserting 15 percent.

(b)

Alternative minimum tax

Section 55(b) of such Code is amended by adding at the end the following new paragraph:

(4)

Maximum rate of tax on net capital gain of corporations

The amount determined under paragraph (1)(B)(i) shall not exceed the sum of—

(A)

the amount determined under such paragraph computed at the rates and in the same manner as if this paragraph had not been enacted on the taxable excess reduced by the net capital gain, plus

(B)

the amount determined under section 1201.

.

(c)

Technical amendments

(1)

Section 1445(e)(1) of such Code is amended by striking 35 percent (or, to the extent provided in regulations, 15 percent) and inserting 15 percent.

(2)

Section 1445(e)(2) of such Code is amended by striking 35 percent and inserting 15 percent.

(3)

Section 7518(g)(6)(A) of such Code is amended by striking (34 percent in the case of a corporation).

(4)

Section 607(h)(6)(A) of the Merchant Marine Act, 1936 is amended by striking (34 percent in the case of a corporation).

(d)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2007.

(2)

Withholding

The amendment made by subsection (c)(2) shall apply to amounts paid after the date of the enactment of this Act.