[House Report 107-39]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-39
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PROVIDING FOR CONSIDERATION OF H.R. 8, DEATH TAX ELIMINATION ACT OF
2001
_______
April 3, 2001.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Reynolds, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 111]
The Committee on Rules, having had under consideration
House Resolution 111, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
summary of provisions of the resolution
The resolution provides for consideration in the House of
H.R. 8, the Death Tax Elimination Act of 2001, under a modified
closed rule. The rule provides one hour of debate equally
divided and controlled by the chairman and ranking minority
member of the Committee on Ways and Means. The rule waives all
points of order against consideration of the bill.
The rule provides that the amendment recommended by the
Committee on Ways and Means now printed in the bill shall be
considered as adopted. The rule further provides for
consideration of the amendment in the nature of a substitute,
printed in this report, if offered by Representative Rangel or
his designee, which shall be considered as read and shall be
separately debatable for one hour equally divided and
controlled by the proponent and an opponent. The rule waives
all points of order against the amendment in the nature of a
substitute. Finally, the rule provides one motion to recommit
with or without instructions.
The waiver of all points of order includes a waiver of
clause 4(a) of rule XIII (requiring a three-day layover of the
committee report) and a waiver of section 303 of the
Congressional Budget Act of 1974 (prohibiting consideration of
legislation, as reported, providing new budget authority,
changes in revenues, or changes in the public debt for a fiscal
year until the budget resolution for that year has been agreed
to).
The waiver of clause 4(a) of rule XIII is needed because
the report was not filed until Tuesday, April 3 and the bill
may be considered by the House as early as Wednesday, April 4.
The waiver of section 303 is necessary because Congress has not
yet completed consideration of a budget resolution for FY 2002
and, according to the Joint Committee on Taxation, the bill
would decrease revenues and increase direct spending in FY
2002.
The waiver of all points of order against consideration of
the minority substitute is necessary for the same general
reason as are necessary for the bill.
summary of amendment made in order
Rangel--Democratic Substitute. increases the current estate
tax exclusion in 2002 from $675,000 to $2 million and doubles
that amount for couples; phases in increases in the exclusion
to $2.5 million ($5 million for married couples) by 2010;
preserves the current law ``step up in basis'' provisions;
repeals the mileage limitations of current law for tax-
benefitted conservation easements so tat all land would be
eligible for the exclusion; repeals the current credit for
inheritance and estate taxes paid to State; and limits the use
of minority discounts to estate tax.
text of amendment made in order under the rule
Am Amendment To Be Offered by Representative Rangel of New York, or a
Designee, Debatable for 60 Minutes
Strike all after the enacting clause and insert the
following:
SECTION 1. 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.
SEC. 2. INCREASE IN EXEMPTION EQUIVALENT OF UNIFIED CREDIT.
(a) In General.--Subsection (c) of section 2010 (relating to
applicable credit amount) is amended by striking the table and
inserting the following new table:
``In the case of estates of decedents The applicable
dying, and gifts made, during: exclusion amount is:
2002.......................................... $2,000,000
2003 and 2004................................. $2,100,000
2005 and 2006................................. $2,200,000
2007 and 2008................................. $2,300,000
2009.......................................... $2,400,000
2010 or thereafter............................ $2,500,000.''
(b) Repeal of Special Benefit for Family-Owned Business
Interests.--
(1) Section 2057 is hereby repealed.
(2) Paragraph (10) of section 2031(c) is amended by
inserting ``(as in effect on the day before the date of
the enactment of this parenthetical)'' before the
period.
(3) The table of sections for part IV of subchapter A
of chapter 11 is amended by striking the item relating
to section 2057.
(c) Correction of Technical Error Affecting Largest
Estates.--Paragraph (2) of section 2001(c) is amended by
striking ``$10,000,000'' and all that follows and inserting
``$10,000,000. The amount of the increase under the preceding
sentence shall not exceed the sum of the applicable credit
amount under section 2010(c) and $359,200.''
(d) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying, and gifts made,
after December 31, 2001.
SEC. 3. CREDIT FOR STATE DEATH TAXES REPLACED WITH DEDUCTION FOR SUCH
TAXES.
(a) Repeal of Credit.--Section 2011 (relating to credit for
State death taxes) is hereby repealed.
(b) Deduction for State Death Taxes.--Part IV of subchapter A
of chapter 11 is amended by adding at the end the following new
section:
``SEC. 2058. STATE DEATH TAXES.
``(a) Allowance of Deduction.--For purposes of the tax
imposed by section 2001, the value of the taxable estate shall
be determined by deducting from the value of the gross estate
the amount of any estate, inheritance, legacy, or succession
taxes actually paid to any State or the District of Columbia,
in respect of any property included in the gross estate (not
including any such taxes paid with respect to the estate of a
person other than the decedent).
``(b) Period of Limitations.--The deduction allowed by this
section shall include only such taxes as were actually paid and
deduction therefor claimed within 4 years after the filing of
the return required by section 6018, except that--
``(1) If a petition for redetermination of a
deficiency has been filed with the Tax Court within the
time prescribed in section 6213(a), then within such 4-
year period or before the expiration of 60 days after
the decision of the Tax Court becomes final.
``(2) If, under section 6161 or 6166, an extension of
time has been granted for payment of the tax shown on
the return, or of a deficiency, then within such 4-year
period or before the date of the expiration of the
period of the extension.
``(3) If a claim for refund or credit of an
overpayment of tax imposed by this chapter has been
filed within the time prescribed in section 6511, then
within such 4-year period or before the expiration of
60 days from the date of mailing by certified mail or
registered mail by the Secretary to the taxpayer of a
notice of the disallowance of any part of such claim,
or before the expiration of 60 days after a decision by
any court of competent jurisdiction becomes final with
respect to a timely suit instituted upon such claim,
whichever is later.
Refund based on the deduction may (despite the provisions of
sections 6511 and 6512) be made if claim therefor is filed
within the period above provided. Any such refund shall be made
without interest.''
(c) Conforming Amendments.--
(1) Subsection (a) of section 2012 is amended by
striking ``the credit for State death taxes provided by
section 2011 and''.
(2) Subparagraph (A) of section 2013(c)(1) is amended
by striking ``2011,''.
(3) Paragraph (2) of section 2014(b) is amended by
striking ``, 2011,''.
(4) Sections 2015 and 2016 are each amended by
striking ``2011 or''.
(5) Subsection (d) of section 2053 is amended to read
as follows:
``(d) Certain Foreign Death Taxes.--
``(1) In general.--Notwithstanding the provisions of
subsection (c)(1)(B) of this section, for purposes of
the tax imposed by section 2001, the value of the
taxable estate may be determined, if the executor so
elects before the expiration of the period of
limitation for assessment provided in section 6501, by
deducting from the value of the gross estate the amount
(as determined in accordance with regulations
prescribed by the Secretary) of any estate, succession,
legacy, or inheritance tax imposed by and actually paid
to any foreign country, in respect of any property
situated within such foreign country and included in
the gross estate of a citizen or resident of the United
States, upon a transfer by the decedent for public,
charitable, or religious uses described in section
2055. The determination under this paragraph of the
country within which property is situated shall be made
in accordance with the rules applicable under
subchapter B (sec. 2101 and following) in determining
whether property is situated within or without the
United States. Any election under this paragraph shall
be exercised in accordance with regulations prescribed
by the Secretary.
``(2) Condition for allowance of deduction.--No
deduction shall be allowed under paragraph (1) for a
foreign death tax specified therein unless the decrease
in the tax imposed by section 2001 which results from
the deduction provided in paragraph (1) will inure
solely for the benefit of the public, charitable, or
religious transferees described in section 2055 or
section 2106(a)(2). In any case where the tax imposed
by section 2001 is equitably apportioned among all the
transferees of property included in the gross estate,
including those described in sections 2055 and
2106(a)(2) (taking into account any exemptions,
credits, or deductions allowed by this chapter), in
determining such decrease, there shall be disregarded
any decrease in the Federal estate tax which any
transferees other than those described in sections 2055
and 2106(a)(2) are required to pay.
``(3) Effect on credit for foreign death taxes of
deduction under this subsection.--
``(A) Election.--An election under this
subsection shall be deemed a waiver of the
right to claim a credit, against the Federal
estate tax, under a death tax convention with
any foreign country for any tax or portion
thereof in respect of which a deduction is
taken under this subsection.
``(B) Cross reference.--
``See section 2014(f) for the effect of a deduction taken
under this paragraph on the credit for foreign death taxes.''
(6) Subparagraph (A) of section 2056A(b)(10) is
amended--
(A) by striking ``2011,'', and
(B) by inserting ``2058,'' after ``2056,''.
(7)(A) Subsection (a) of section 2102 is amended to
read as follows:
``(a) In General.--The tax imposed by section 2101 shall be
credited with the amounts determined in accordance with
sections 2012 and 2013 (relating to gift tax and tax on prior
transfers).''
(B) Section 2102 is amended by striking subsection
(b) and by redesignating subsection (c) as subsection
(b).
(C) Section 2102(b)(5) (as redesignated by
subparagraph (B)) and section 2107(c)(3) are each
amended by striking ``2011 to 2013, inclusive,'' and
inserting ``2012 and 2013''.
(8) Subsection (a) of section 2106 is amended by
adding at the end the following new paragraph:
``(4) State death taxes.--The amount which bears the
same ratio to the State death taxes as the value of the
property, as determined for purposes of this chapter,
upon which State death taxes were paid and which is
included in the gross estate under section 2103 bears
to the value of the total gross estate under section
2103. For purposes of this paragraph, the term `State
death taxes' means the taxes described in section
2011(a).''
(9) Section 2201 is amended--
(A) by striking ``as defined in section
2011(d)'', and
(B) by adding at the end the following new
flush sentence:
``For purposes of this section, the additional estate tax is
the difference between the tax imposed by section 2001 or 2101
and the amount equal to 125 percent of the maximum credit
provided by section 2011(b), as in effect before its repeal by
the Tax Reduction Act of 2001.''
(10) Paragraph (2) of section 6511(i) is amended by
striking ``2011(c), 2014(b),'' and inserting
``2014(b)''.
(11) Subsection (c) of section 6612 is amended by
striking ``section 2011(c) (relating to refunds due to
credit for State taxes),''.
(12) The table of sections for part II of subchapter
A of chapter 11 is amended by striking the item
relating to section 2011.
(13) The table of sections for part IV of subchapter
A of chapter 11 is amended by adding at the end the
following new item:
``Sec. 2058. State death taxes.''
(d) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after December 31,
2001.
SEC. 4. VALUATION RULES FOR CERTAIN TRANSFERS OF NONBUSINESS ASSETS;
LIMITATION ON MINORITY DISCOUNTS.
(a) In General.--Section 2031 (relating to definition of
gross estate) is amended by redesignating subsection (d) as
subsection (f) and by inserting after subsection (c) the
following new subsections:
``(d) Valuation Rules for Certain Transfers of Nonbusiness
Assets.--For purposes of this chapter and chapter 12--
``(1) In general.--In the case of the transfer of any
interest in an entity other than an interest which is
actively traded (within the meaning of section 1092)--
``(A) the value of any nonbusiness assets
held by the entity shall be determined as if
the transferor had transferred such assets
directly to the transferee (and no valuation
discount shall be allowed with respect to such
nonbusiness assets), and
``(B) the nonbusiness assets shall not be
taken into account in determining the value of
the interest in the entity.
``(2) Nonbusiness assets.--For purposes of this
subsection--
``(A) In general.--The term `nonbusiness
asset' means any asset which is not used in the
active conduct of 1 or more trades or
businesses.
``(B) Exception for certain passive assets.--
Except as provided in subparagraph (C), a
passive asset shall not be treated for purposes
of subparagraph (A) as used in the active
conduct of a trade or business unless--
``(i) the asset is property described
in paragraph (1) or (4) of section
1221(a) or is a hedge with respect to
such property, or
``(ii) the asset is real property
used in the active conduct of 1 or more
real property trades or businesses
(within the meaning of section
469(c)(7)(C)) in which the transferor
materially participates and with
respect to which the transferor meets
the requirements of section
469(c)(7)(B)(ii).
For purposes of clause (ii), material
participation shall be determined under the
rules of section 469(h), except that section
469(h)(3) shall be applied without regard to
the limitation to farming activity.
``(C) Exception for working capital.--Any
asset (including a passive asset) which is held
as a part of the reasonably required working
capital needs of a trade or business shall be
treated as used in the active conduct of a
trade or business.
``(3) Passive asset.--For purposes of this
subsection, the term `passive asset' means any--
``(A) cash or cash equivalents,
``(B) except to the extent provided by the
Secretary, stock in a corporation or any other
equity, profits, or capital interest in any
entity,
``(C) evidence of indebtedness, option,
forward or futures contract, notional principal
contract, or derivative,
``(D) asset described in clause (iii), (iv),
or (v) of section 351(e)(1)(B),
``(E) annuity,
``(F) real property used in 1 or more real
property trades or businesses (as defined in
section 469(c)(7)(C)),
``(G) asset (other than a patent, trademark,
or copyright) which produces royalty income,
``(H) commodity,
``(I) collectible (within the meaning of
section 401(m)), or
``(J) any other asset specified in
regulations prescribed by the Secretary.
``(4) Look-thru rules.--
``(A) In general.--If a nonbusiness asset of
an entity consists of a 10-percent interest in
any other entity, this subsection shall be
applied by disregarding the 10-percent interest
and by treating the entity as holding directly
its ratable share of the assets of the other
entity. This subparagraph shall be applied
successively to any 10-percent interest of such
other entity in any other entity.
``(B) 10-percent interest.--The term `10-
percent interest' means--
``(i) in the case of an interest in a
corporation, ownership of at least 10
percent (by vote or value) of the stock
in such corporation,
``(ii) in the case of an interest in
a partnership, ownership of at least 10
percent of the capital or profits
interest in the partnership, and
``(iii) in any other case, ownership
of at least 10 percent of the
beneficial interests in the entity.
``(5) Coordination with subsection (b).--Subsection
(b) shall apply after the application of this
subsection.
``(e) Limitation on Minority Discounts.--For purposes of this
chapter and chapter 12, in the case of the transfer of any
interest in an entity other than an interest which is actively
traded (within the meaning of section 1092), no discount shall
be allowed by reason of the fact that the transferee does not
have control of such entity if the transferee and members of
the family (as defined in section 2032A(e)(2)) of the
transferee have control of such entity.''
(c) Effective Date.--The amendments made by this section
shall apply to transfers after the date of the enactment of
this Act.
SEC. 5. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASEMENTS.
(a) Repeal of Location Requirement.--Subparagraph (A) of
section 2031(c)(8) (defining land subject to a conservation
easement) is amended by striking clause (i) and redesignating
clauses (ii) and (iii) as clauses (i) and (ii), respectively.
(b) Clarification of Date for Determining Value of Land and
Easement.--Section 2031(c)(2) (defining applicable percentage)
is amended by adding at the end the following new sentence:
``The values taken into account under the preceding sentence
shall be such values as of the date of the contribution
referred to in paragraph (8)(B).''.
(c) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after December 31,
2000.
Amend the title so as to read: ``A bill to amend the Internal
Revenue Code of 1986 to provide estate tax relief.''.