[House Report 106-658]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-658
======================================================================
PROVIDING FOR THE CONSIDERATION OF H.R. 8, THE DEATH TAX ELIMINATION
ACT OF 2000
_______
June 7, 2000.--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. 519]
The Committee on Rules, having had under consideration
House Resolution 519, 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 in the House
of H.R. 8, the Death Tax Elimination Act of 2000, 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 upon adoption of the resolution. 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 between the proponent and an opponent.
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) because the report was not filed until
Tuesday, June 6, and the bill may be considered by the House as
early as Thursday, June 8.
committee votes
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. 107
Date: June 7, 2000.
Measure: H.R. 8, The Death Tax Elimination Act of 2000.
Motion By: Mr. Moakley.
Summary of Motion: To make in order en bloc the amendments
by Representative Sherman and Representative Stenholm which
make implementation of the estate, gift, and the generation-
skipping tax repeal contingent upon certification that Congress
and the President have taken actions to ensure that we are on
the path to eliminate the publicly held debt by 2013 and
protect the integrity of the Social Security and Medicare trust
funds.
Results: Defeated 1 to 8.
Vote by Member: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings--Nay; Sessions--Nay; Reynolds--Nay;
Moakley--Yea; Dreier--Nay.
Rules Committee Record Vote No. 108
Date: June 7, 2000.
Measure: H.R. 8, The Death Tax Elimination Act of 2000.
Motion By: Mr. Moakley.
Summary of Motion: To make in order the amendment by
Representative Doggett which denies gift tax exclusion to
organizations established under section 527 of the Internal
Revenue Code if they fail to meet certain reporting and
disclosure requirements.
Results: Defeated 1 to 8.
Vote by Member: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings--Nay; Sessions--Nay; Reynolds--Nay;
Moakley--Yea; Dreier--Nay.
summary of the amendment made in order under the rule to accompany h.r.
8, the death tax elimination act of 2000
Rangel: Amendment in the nature of a substitute. Provides a
20% across-the-board reduction to estate and gift tax rates;
increases the limit on the small business exclusion from $1.3
million to $2 million; provides that a portion of the exclusion
not used in the estate of the spouse first to die will be
allowed to the estate of the other spouse; and increases
immediately the exemption equivalent of the unified credit
against estate and gift taxes to $1.1 million with a further
increase to $1.2 million in 2006. Offsets include restoring the
phaseout provisions of the unified credit repealed in the
Taxpayer Relief Act of 1997; eliminating the valuation
discounts except as they apply to active business assets; and
repealing the state inheritance and estate tax deductions.
Text of the amendment made in order under the rule:
An 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. SHORT TITLE.
(a) Short Title.--This Act may be cited as the ``Estate Tax
Relief Act of 2000''.
(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.
SEC. 2. 20 PERCENT REDUCTION OF ESTATE TAX RATES.
(a) In General.--Paragraph (1) of section 2001(c) is amended
to read as follows:
``(1) In General.--
``If the amount with respect to which the tentative tax is to be
computed is: The tentative tax is:
Not over $10,000..14.4% of such amount................................
Over $10,000 but n$1,440, plus 16% of the excess of such amount over .
$10,000
Over $20,000 but n$3,040, plus 17.6% of the excess of such amount over
$20,000
Over $40,000 but n$6,560, plus 19.2% of the excess of such amount over
$40,000
Over $60,000 but n$10,400, plus 20.8% of the excess of such amount ...
over $60,000
Over $80,000 but n$14,560, plus 22.4% of the excess of such amount ...
over $80,000
Over $100,000 but $19,040, plus 24% of the excess of such amount over
$100,000
Over $150,000 but $31,040, plus 25.6% of the excess of such amount ...
over $150,000
Over $250,000 but $56,640, plus 27.2% of the excess of such amount ...
over $250,000
Over $500,000 but $124,640, plus 29.6% of the excess of such amount ..
over $500,000
Over $750,000 but $198,640, plus 31.2% of the excess of such amount ..
over $750,000
Over $1,000,000 bu$276,640, plus 32.8% of the excess of such amount ..
over $1,000,000
Over $1,250,000 bu$358,640, plus 34.4% of the excess of such amount ..
over $1,250,000
Over $1,500,000 bu$444,640, plus 36% of the excess of such amount over
$1,500,000
Over $2,000,000 bu$624,640, plus 39.2% of the excess of such amount ..
over $2,000,000
Over $2,500,000 bu$820,640, plus 42.4% of the excess of such amount ..
over $2,500,000
Over $3,000,000...$1,032,640, plus 44% of the excess of such amount ..
over $3,000,000''.
(b) Restoration of Phaseout of Unified Credit.--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--
``(A) the applicable credit amount under
section 2010(c), and
``(B) the excess of the amount equal to 44
percent of $3,000,000 over the amount of the
tentative tax under paragraph (1) on
$3,000,000.''
(c) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying, and gifts made,
after December 31, 2000.
SEC. 3. INCREASE IN EXEMPTION EQUIVALENT OF UNIFIED CREDIT.
(a) In General.--The table contained in section 2010(c)
(relating to applicable credit amount) is amended to read as
follows:
``In the case of estates of decedents The applicable
dying, and gifts made, during: exclusion amount is:
2000.......................................... $ 675,000
2001, 2002, 2003, 2004, and 2005.............. $1,100,000
2006 or thereafter............................ $1,200,000.''.
(b) Effective Date.--The amendment made by this section shall
apply to estates of decedents dying, and gifts made, after
December 31, 2000.
SEC. 4. INCREASE IN ESTATE TAX BENEFIT FOR FAMILY-OWNED BUSINESS
INTERESTS.
(a) Transfer to Credit Provisions.--Section 2057 (relating to
family-owned business interests) is hereby moved to part II of
subchapter A of chapter 11 of such Code, inserted after section
2010, and redesignated as section 2010A.
(b) Increase in Credit; Surviving Spouse Allowed Unused
Credit of Decedent.--Subsection (a) of section 2010A, as
redesignated by subsection (a) of this section, is amended to
read as follows:
``(a) Increase in United Credit.--For purposes of determining
the unified credit under section 2010 in the case of an estate
of a decedent to which this section applies--
``(1) In general.--The applicable exclusion amount
under section 2010(c) shall be increased (but not in
excess of $2,000,000) by the adjusted value of the
qualified family-owned business interests of the
decedent which are described in subsection (b)(2) and
for which no deduction is allowed under section 2056.
``(2) Treatment of unused limitation of predeceased
spouse.--In the case of a decedent--
``(A) having no surviving spouse, but
``(B) who was the surviving spouse of a
decedent--
``(i) who died after December 31,
2000, and
``(ii) whose estate met the
requirements of subsection (b)(1) other
than subparagraph (B) thereof,
there shall be substituted for `$2,000,000' in
paragraph (1) an amount equal to the excess of
$4,000,000 over the exclusion equivalent of the credit
allowed under section 2010 (as increased by this
section) to the estate of the decedent referred to in
subparagraph (B). For purposes of the preceding
sentence, the exclusion equivalent of the credit is
the amount on which a tentative tax under section 2001(c)
equal to such credit would be imposed.''
(c) Conforming Amendments.--
(1) The table of sections for part IV of subchapter A
of chapter 11 of such Code is amended by striking the
item relating to section 2057.
(2) Paragraph (10) of section 2031(c) of such Code is
amended by striking ``section 2057(e)(3)'' and
inserting ``section 2010A(e)(3)''.
(3) The table of sections for part II of subchapter A
of chapter 11 of such Code is amended by inserting
after the item relating to section 2010 the following
new item:
``Sec. 2010A. Family-owned business interests.''.
(d) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after December 31,
2000.
SEC. 5. 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 Estate Tax Relief Act of 2000.''
(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,
2000.
SEC. 6. 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 subtitle--
``(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
thetransferor 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
subtitle, in the case of the transfer of an interest in an
entity, no reduction in the amount which would otherwise be
determined to be the value of such interest shall be allowed by
reason of the fact that the interest does not represent control
of such entity if the transferor and members of the family (as
defined in section 2032A(e)(2)) of the transferor 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. 7. TAX ON GIFTS AND BEQUESTS RECEIVED BY UNITED STATES CITIZENS
AND RESIDENTS FROM EXPATRIATES.
(a) In General.--Subtitle B (relating to estate and gift
taxes) is amended by inserting after chapter 13 the following
new chapter:
``CHAPTER 13A--GIFTS AND BEQUESTS FROM EXPATRIATES
``Sec. 2681. Imposition of tax.
``SEC. 2681. IMPOSITION OF TAX.
``(a) In General.--If, during any calendar year, any United
States citizen or resident receives any covered gift or
bequest, there is hereby imposed a tax equal to the product
of--
``(1) the highest rate of tax specified in the table
contained in section 2001(c) as in effect on the date
of such receipt, and
``(2) the value of such covered gift or bequest.
``(b) Tax To Be Paid by Recipient.--The tax imposed by
subsection (a) on any covered gift or bequest shall be paid by
the person receiving such gift or bequest.
``(c) Exception for Certain Gifts.--Subsection (a) shall
apply only to the extent that the covered gifts and bequests
received during the calendar year exceed $10,000.
``(d) Tax Reduced By Foreign Gift or Estate Tax.--The tax
imposed by subsection (a) on any covered gift or bequest shall
be reduced by the amount of any gift or estate tax paid to a
foreign country with respect to such covered gift or bequest.
``(e) Covered Gift or Bequest.--
``(1) In general.--For purposes of this chapter, the
term `covered gift or bequest' means--
``(A) any property acquired by gift directly
or indirectly from an individual who, at the
time of such acquisition, was an expatriate,
and
``(B) any property acquired by bequest,
devise, or inheritance directly or indirectly
from an individual who, at the time of death,
was an expatriate.
``(2) Exceptions for transfers otherwise subject to
estate or gift tax.--Such term shall not include--
``(A) any property shown on a timely filed
return of tax imposed by chapter 12 which is a
taxable gift by the expatriate, and
``(B) any property shown on a timely filed
return of tax imposed by chapter 11 of the
estate of the expatriate.
``(3) Transfers in trust.--
``(A) In general.--Any covered gift or
bequest which is made in trust shall be treated
as made to the beneficiaries of such trust in
proportion to their respective interests in
such trust.
``(B) Determination of beneficiaries'
interest in trust.--For purposes of
subparagraph (A), a beneficiary's interest in a
trust shall be based upon all relevant facts
and circumstances, including the terms of the
trust instrument and any letter of wishes or
similar document, historical patterns of trust
distributions, and the existence of and
functions performed by a trust protector or any
similar advisor.
``(f) Expatriate.--For purposes of this section, the term
`expatriate' means--
``(1) any United States citizen who relinquishes his
citizenship, and
``(2) any long-term resident of the United States
who--
``(A) ceases to be a lawful permanent
resident of the United States (within the
meaning of section 7701(b)(6)), or
``(B) commences to be treated as a resident
of a foreign country under the provisions of a
tax treaty between the United States and the
foreign country and who does not waive the
benefits of such treaty applicable to residents
of the foreign country.''
(b) Clerical Amendment.--The table of chapters for subtitle B
of such Code is amended by inserting after the item relating to
chapter 13 the following new item:
``Chapter 13A. Gifts and bequests from expatriates.''.
(c) Effective Date.--The amendments made by this section
shall apply to covered gifts and bequests (as defined in
section 2681 of such Code, as added by this section) received
on or after May 25, 2000.