[House Report 108-157]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-157
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PROVIDING FOR CONSIDERATION OF H.R. 8, DEATH TAX REPEAL PERMANENCY ACT
OF 2003
_______
June 17, 2003.--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. 281]
The Committee on Rules, having had under consideration
House Resolution 281, 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 the consideration of H.R. 8,
the Death Tax Repeal Permanency Act of 2003, under a modified
closed rule. The rule provides one hour of debate in the House
equally divided and controlled by the chairman and ranking
minority member of the Committee on Ways and Means.
The rule provides for consideration of the amendment in the
nature of a substitute printed in this report, if offered by
Representative Pomeroy 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 printed in the report.
Finally, the rule provides one motion to recommit with or
without instructions.
Pursuant to clause 3(b) of House rule XIII the results of
each record vote on an amendment or motion to report, together
with the names of those voting for and against, are printed
below:
Rules Committee record vote No. 110
Date: June 17, 2003.
Measure: H.R. 8--Death Tax Repeal Permanency Act of 2003.
Motion by: Mr. McGovern.
Summary of motion: To report an open rule.
Results: Defeated 3 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Reynolds--Nay; Frost--Yea; McGovern--Yea;
Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 111
Date: June 17, 2003.
Measure: H.R. 8--Death Tax Repeal Permanency Act of 2003.
Motion by: Mr. McGovern.
Summary of motion: To make in order and provide the
appropriate waivers for the amendment offered by Representative
Pomeroy which immediately eliminates the estate tax for most
estates. Increases the estate tax exclusion to $3 million,
effective January 1, 2004. Offsets the cost of increasing the
exclusion by freezing existing estate tax rates, eliminating
the ability to claim valuation discounts by holding property
through partnerships, and restoring the prior law phase out of
the benefit of the graduated rates and exclusion. Places limits
on corporate tax shelters and extend customs user fees. Repeals
the carryover basis rules contained in the 2001 tax bill, in
doing so the substitute would continue the favorable current
law step-up in basis rules that eliminate capital gains taxes
on increases in value before death.
Results: Defeated 4 to 7.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay;
Hastings (WA)--Nay; Myrick--Nay; Reynolds--Nay; Frost--Yea;
Slaughter--Yea; McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
SUMMARY OF AMENDMENT MADE IN ORDER
Pomeroy: Amendment in the Nature of a Substitute.
Immediately eliminates the estate tax for most estates.
Increases the estate tax exclusion to $3 million, effective
January 1, 2004. Partially offsets the cost of increasing the
exclusion by freezing existing estate tax rates, eliminating
the ability to claim valuation discounts by holding property
through partnerships, and restoring the prior law phaseout of
the benefit of the graduated rates and exclusion. Repeals the
carryover basis rules contained in the 2001 tax bill, in doing
so the substitute would continue the favorable current law
step-up in basis rules that eliminate capital gains taxes on
increases in value before death.
TEXT OF AMENDMENT MADE IN ORDER
Strike all after the enacting clause and insert the
following:
SECTION 1. RESTORATION OF ESTATE TAX; REPEAL OF CARRYOVER BASIS.
(a) In General.--Subtitles A and E of title V of the Economic
Growth and Tax Relief Reconciliation Act of 2001, and the
amendments made by such subtitles, are hereby repealed; and the
Internal Revenue Code of 1986 shall be applied as if such
subtitles, and amendments, had never been enacted.
(b) Sunset Not To Apply.--
(1) Subsection (a) of section 901 of the Economic
Growth and Tax Relief Reconciliation Act of 2001 is
amended by striking ``this Act'' and all that follows
and inserting ``this Act (other than title V) shall not
apply to taxable, plan, or limitation years beginning
after December 31, 2010.''.
(2) Subsection (b) of such section 901 is amended by
striking ``, estates, gifts, and transfers''.
(c) Conforming Amendments.--Subsections (d) and (e) of
section 511 of the Economic Growth and Tax Relief
Reconciliation Act of 2001, and the amendments made by such
subsections, are hereby repealed; and the Internal Revenue Code
of 1986 shall be applied as if such subsections, and
amendments, had never been enacted.
SEC. 2. MODIFICATIONS TO ESTATE TAX.
(a) Increase in Exclusion Equivalent of Unified Credit to
$3,000,000.--Subsection (c) of section 2010 of the Internal
Revenue Code of 1986 (relating to applicable credit amount) is
amended by striking all that follows ``the applicable exclusion
amount'' and inserting ``. For purposes of the preceding
sentence, the applicable exclusion amount is $3,000,000.''.
(b) Maximum Estate Tax Rate To Remain at 49 Percent;
Restoration of Phaseout of Graduated Rates and Unified
Credit.--
(1) Paragraph (1) of section 2001(c) of such Code is
amended by striking the last 2 items in the table and
inserting the following new item:
``Over $2,000,000.$780,800, plus 49% of the excess over $2,000,000.''.
(2) Paragraph (2) of section 2001(c) of such Code is
amended to read as follows:
``(2) Phaseout of graduated rates and unified
credit.--The tentative tax determined under paragraph
(1) shall be increased by an amount equal to 5 percent
of so much of the amount (with respect to which the
tentative tax is to be computed) as exceeds
$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
$199,200.''
(c) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying, and gifts made,
after December 31, 2003.
SEC. 3. VALUATION RULES FOR CERTAIN TRANSFERS OF NONBUSINESS ASSETS;
LIMITATION ON MINORITY DISCOUNTS.
(a) In General.--Section 2031 of the Internal Revenue Code of
1986 (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.''
(b) Effective Date.--The amendments made by this section
shall apply to transfers after the date of the enactment of
this Act.
Amend the title so as to read: ``A bill to amend the
Internal Revenue Code of 1986 to restore the estate tax, to
limit its applicability to estates of over $3,000,000, and for
other purposes.''