S 1081 ISCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to impose a flat tax only on individual taxable earned income and business taxable income, and for other purposes.CommentsClose CommentsPermalink

April 10, 2007

Mr. SPECTER introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to impose a flat tax only on individual taxable earned income and business taxable income, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMENDMENT OF 1986 CODE.

(a) Short Title- This Act may be cited as the `Flat Tax Act of 2007'.CommentsClose CommentsPermalink





(b) Table of Contents- The table of contents for this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; table of contents; amendment of 1986 Code.CommentsClose CommentsPermalink





Sec. 2. Flat tax on individual taxable earned income and business taxable income.CommentsClose CommentsPermalink





Sec. 3. Repeal of estate and gift taxes.CommentsClose CommentsPermalink





Sec. 4. Additional repeals.CommentsClose CommentsPermalink





Sec. 5. Effective dates.CommentsClose CommentsPermalink





(c) 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.CommentsClose CommentsPermalink

SEC. 2. FLAT TAX ON INDIVIDUAL TAXABLE EARNED INCOME AND BUSINESS TAXABLE INCOME.

(a) In General- Subchapter A of chapter 1 of subtitle A is amended to read as follows:CommentsClose CommentsPermalink

`Subchapter A--Determination of Tax Liability

`Part I. Tax on Individuals

`Part II. Tax on Business Activities

`PART I--TAX ON INDIVIDUALS

`Sec. 1. Tax imposed.CommentsClose CommentsPermalink





`Sec. 2. Standard deduction.CommentsClose CommentsPermalink





`Sec. 3. Deduction for cash charitable contributions.CommentsClose CommentsPermalink





`Sec. 4. Deduction for home acquisition indebtedness.CommentsClose CommentsPermalink





`Sec. 5. Definitions and special rules.CommentsClose CommentsPermalink





`Sec. 6. Dependent defined.CommentsClose CommentsPermalink





`Sec. 7. Inflation adjustment.CommentsClose CommentsPermalink

`SEC. 1. TAX IMPOSED.

`(a) Imposition of Tax- There is hereby imposed on every individual a tax equal to 20 percent of the taxable earned income of such individual.CommentsClose CommentsPermalink





`(b) Taxable Earned Income- For purposes of this section, the term `taxable earned income' means the excess (if any) of--CommentsClose CommentsPermalink





`(1) the earned income received or accrued during the taxable year, overCommentsClose CommentsPermalink





`(2) the sum of--CommentsClose CommentsPermalink





`(A) the standard deduction,CommentsClose CommentsPermalink





`(B) the deduction for cash charitable contributions, andCommentsClose CommentsPermalink





`(C) the deduction for home acquisition indebtedness, for such taxable year.CommentsClose CommentsPermalink





`(c) Earned Income- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `earned income' means wages, salaries, or professional fees, and other amounts received from sources within the United States as compensation for personal services actually rendered, but does not include that part of compensation derived by the taxpayer for personal services rendered by the taxpayer to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered.CommentsClose CommentsPermalink





`(2) TAXPAYER ENGAGED IN TRADE OR BUSINESS- In the case of a taxpayer engaged in a trade or business in which both personal services and capital are material income-producing factors, under regulations prescribed by the Secretary, a reasonable allowance as compensation for the personal services rendered by the taxpayer, not in excess of 30 percent of the taxpayer's share of the net profits of such trade or business, shall be considered as earned income.CommentsClose CommentsPermalink

`SEC. 2. STANDARD DEDUCTION.

`(a) In General- For purposes of this subtitle, the term `standard deduction' means the sum of--CommentsClose CommentsPermalink





`(1) the basic standard deduction, plusCommentsClose CommentsPermalink





`(2) the additional standard deduction.CommentsClose CommentsPermalink





`(b) Basic Standard Deduction- For purposes of subsection (a), the basic standard deduction is--CommentsClose CommentsPermalink





`(1) 200 percent of the dollar amount in effect under paragraph (3) of the taxable year in the case of--CommentsClose CommentsPermalink





`(A) a joint return, orCommentsClose CommentsPermalink





`(B) a surviving spouse (as defined in section 5(a)),CommentsClose CommentsPermalink





`(2) $18,750 in the case of a head of household (as defined in section 5(b)), orCommentsClose CommentsPermalink





`(3) $12,500 in any other case.CommentsClose CommentsPermalink





`(c) Additional Standard Deduction- For purposes of subsection (a), the additional standard deduction is $6,250 for each dependent (as defined in section 6)--CommentsClose CommentsPermalink





`(1) whose earned income for the calendar year in which the taxable year of the taxpayer begins is less than the basic standard deduction specified in subsection (b)(3), orCommentsClose CommentsPermalink





`(2) who is a child of the taxpayer and who--CommentsClose CommentsPermalink





`(A) has not attained the age of 19 at the close of the calendar year in which the taxable year of the taxpayer begins, orCommentsClose CommentsPermalink





`(B) is a student who has not attained the age of 24 at the close of such calendar year.CommentsClose CommentsPermalink

`SEC. 3. DEDUCTION FOR CASH CHARITABLE CONTRIBUTIONS.

`(a) General Rule- For purposes of this part, there shall be allowed as a deduction any charitable contribution (as defined in subsection (b)) not to exceed $3,125 (50 percent of such amount in the case of a married individual filing a separate return), payment of which is made within the taxable year.CommentsClose CommentsPermalink





`(b) Charitable Contribution Defined- For purposes of this section, the term `charitable contribution' means a contribution or gift of cash or its equivalent to or for the use of the following:CommentsClose CommentsPermalink





`(1) A State, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.CommentsClose CommentsPermalink





`(2) A corporation, trust, or community chest, fund, or foundation--CommentsClose CommentsPermalink





`(A) created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States,CommentsClose CommentsPermalink





`(B) organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals,CommentsClose CommentsPermalink





`(C) no part of the net earnings of which inures to the benefit of any private shareholder or individual, andCommentsClose CommentsPermalink





`(D) which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.CommentsClose CommentsPermalink





A contribution or gift by a corporation to a trust, chest, fund, or foundation shall be deductible by reason of this paragraph only if it is to be used within the United States or any of its possessions exclusively for purposes specified in subparagraph (B). Rules similar to the rules of section 501(j) shall apply for purposes of this paragraph.CommentsClose CommentsPermalink





`(3) A post or organization of war veterans, or an auxiliary unit or society of, or trust or foundation for, any such post or organization--CommentsClose CommentsPermalink





`(A) organized in the United States or any of its possessions, andCommentsClose CommentsPermalink





`(B) no part of the net earnings of which inures to the benefit of any private shareholder or individual.CommentsClose CommentsPermalink





`(4) In the case of a contribution or gift by an individual, a domestic fraternal society, order, or association, operating under the lodge system, but only if such contribution or gift is to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.CommentsClose CommentsPermalink





`(5) A cemetery company owned and operated exclusively for the benefit of its members, or any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, if such company or corporation is not operated for profit and no part of the net earnings of such company or corporation inures to the benefit of any private shareholder or individual.CommentsClose CommentsPermalink





For purposes of this section, the term `charitable contribution' also means an amount treated under subsection (d) as paid for the use of an organization described in paragraph (2), (3), or (4).CommentsClose CommentsPermalink





`(c) Disallowance of Deduction in Certain Cases and Special Rules-CommentsClose CommentsPermalink





`(1) SUBSTANTIATION REQUIREMENT FOR CERTAIN CONTRIBUTIONS-CommentsClose CommentsPermalink





`(A) GENERAL RULE- No deduction shall be allowed under subsection (a) for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements of subparagraph (B).CommentsClose CommentsPermalink





`(B) CONTENT OF ACKNOWLEDGMENT- An acknowledgment meets the requirements of this subparagraph if it includes the following information:CommentsClose CommentsPermalink





`(i) The amount of cash contributed.CommentsClose CommentsPermalink





`(ii) Whether the donee organization provided any goods or services in consideration, in whole or in part, for any contribution described in clause (i).CommentsClose CommentsPermalink





`(iii) A description and good faith estimate of the value of any goods or services referred to in clause (ii) or, if such goods or services consist solely of intangible religious benefits, a statement to that effect.CommentsClose CommentsPermalink





For purposes of this subparagraph, the term `intangible religious benefit' means any intangible religious benefit which is provided by an organization organized exclusively for religious purposes and which generally is not sold in a commercial transaction outside the donative context.CommentsClose CommentsPermalink





`(C) CONTEMPORANEOUS- For purposes of subparagraph (A), an acknowledgment shall be considered to be contemporaneous if the taxpayer obtains the acknowledgment on or before the earlier of--CommentsClose CommentsPermalink





`(i) the date on which the taxpayer files a return for the taxable year in which the contribution was made, orCommentsClose CommentsPermalink





`(ii) the due date (including extensions) for filing such return.CommentsClose CommentsPermalink





`(D) SUBSTANTIATION NOT REQUIRED FOR CONTRIBUTIONS REPORTED BY THE DONEE ORGANIZATION- Subparagraph (A) shall not apply to a contribution if the donee organization files a return, on such form and in accordance with such regulations as the Secretary may prescribe, which includes the information described in subparagraph (B) with respect to the contribution.CommentsClose CommentsPermalink





`(E) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations that may provide that some or all of the requirements of this paragraph do not apply in appropriate cases.CommentsClose CommentsPermalink





`(2) DENIAL OF DEDUCTION WHERE CONTRIBUTION FOR LOBBYING ACTIVITIES- No deduction shall be allowed under this section for a contribution to an organization which conducts activities to which section 11(d)(2)(C)(i) applies on matters of direct financial interest to the donor's trade or business, if a principal purpose of the contribution was to avoid Federal income tax by securing a deduction for such activities under this section which would be disallowed by reason of section 11(d)(2)(C) if the donor had conducted such activities directly. No deduction shall be allowed under section 11(d) for any amount for which a deduction is disallowed under the preceding sentence.CommentsClose CommentsPermalink





`(d) Amounts Paid To Maintain Certain Students as Members of Taxpayer's Household-CommentsClose CommentsPermalink





`(1) IN GENERAL- Subject to the limitations provided by paragraph (2), amounts paid by the taxpayer to maintain an individual (other than a dependent, as defined in section 6, or a relative of the taxpayer) as a member of such taxpayer's household during the period that such individual is--CommentsClose CommentsPermalink





`(A) a member of the taxpayer's household under a written agreement between the taxpayer and an organization described in paragraph (2), (3), or (4) of subsection (b) to implement a program of the organization to provide educational opportunities for pupils or students in private homes, andCommentsClose CommentsPermalink





`(B) a full-time pupil or student in the twelfth or any lower grade at an educational organization located in the United States which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, shall be treated as amounts paid for the use of the organization.CommentsClose CommentsPermalink





`(2) LIMITATIONS-CommentsClose CommentsPermalink





`(A) AMOUNT- Paragraph (1) shall apply to amounts paid within the taxable year only to the extent that such amounts do not exceed $50 multiplied by the number of full calendar months during the taxable year which fall within the period described in paragraph (1). For purposes of the preceding sentence, if 15 or more days of a calendar month fall within such period such month shall be considered as a full calendar month.CommentsClose CommentsPermalink





`(B) COMPENSATION OR REIMBURSEMENT- Paragraph (1) shall not apply to any amount paid by the taxpayer within the taxable year if the taxpayer receives any money or other property as compensation or reimbursement for maintaining the individual in the taxpayer's household during the period described in paragraph (1).CommentsClose CommentsPermalink





`(3) RELATIVE DEFINED- For purposes of paragraph (1), the term `relative of the taxpayer' means an individual who, with respect to the taxpayer, bears any of the relationships described in subparagraphs (A) through (G) of section 6(d)(2).CommentsClose CommentsPermalink





`(4) NO OTHER AMOUNT ALLOWED AS DEDUCTION- No deduction shall be allowed under subsection (a) for any amount paid by a taxpayer to maintain an individual as a member of the taxpayer's household under a program described in paragraph (1)(A) except as provided in this subsection.CommentsClose CommentsPermalink





`(e) Denial of Deduction for Certain Travel Expenses- No deduction shall be allowed under this section for traveling expenses (including amounts expended for meals and lodging) while away from home, whether paid directly or by reimbursement, unless there is no significant element of personal pleasure, recreation, or vacation in such travel.CommentsClose CommentsPermalink





`(f) Disallowance of Deductions in Certain Cases- For disallowance of deductions for contributions to or for the use of Communist controlled organizations, see section 11(a) of the Internal Security Act of 1950 (50 U.S.C. 790).CommentsClose CommentsPermalink





`(g) Treatment of Certain Amounts Paid to or for the Benefit of Institutions of Higher Education-CommentsClose CommentsPermalink





`(1) IN GENERAL- For purposes of this section, 80 percent of any amount described in paragraph (2) shall be treated as a charitable contribution.CommentsClose CommentsPermalink





`(2) AMOUNT DESCRIBED- For purposes of paragraph (1), an amount is described in this paragraph if--CommentsClose CommentsPermalink





`(A) the amount is paid by the taxpayer to or for the benefit of an educational organization--CommentsClose CommentsPermalink





`(i) which is described in subsection (d)(1)(B), andCommentsClose CommentsPermalink





`(ii) which is an institution of higher education (as defined in section 3304(f)), andCommentsClose CommentsPermalink





`(B) such amount would be allowable as a deduction under this section but for the fact that the taxpayer receives (directly or indirectly) as a result of paying such amount the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution.CommentsClose CommentsPermalink





If any portion of a payment is for the purchase of such tickets, such portion and the remaining portion (if any) of such payment shall be treated as separate amounts for purposes of this subsection.CommentsClose CommentsPermalink





`(h) Other Cross References-CommentsClose CommentsPermalink





`(1) For treatment of certain organizations providing child care, see section 501(k).CommentsClose CommentsPermalink





`(2) For charitable contributions of partners, see section 702.CommentsClose CommentsPermalink





`(3) For treatment of gifts for benefit of or use in connection with the Naval Academy as gifts to or for the use of the United States, see section 6973 of title 10, United States Code.CommentsClose CommentsPermalink





`(4) For treatment of gifts accepted by the Secretary of State, the Director of the International Communication Agency, or the Director of the United States International Development Cooperation Agency, as gifts to or for the use of the United States, see section 25 of the State Department Basic Authorities Act of 1956.CommentsClose CommentsPermalink





`(5) For treatment of gifts of money accepted by the Attorney General for credit to the `Commissary Funds, Federal Prisons' as gifts to or for the use of the United States, see section 4043 of title 18, United States Code.CommentsClose CommentsPermalink





`(6) For charitable contributions to or for the use of Indian tribal governments (or subdivisions of such governments), see section 7871.CommentsClose CommentsPermalink

`SEC. 4. DEDUCTION FOR HOME ACQUISITION INDEBTEDNESS.

`(a) General Rule- For purposes of this part, there shall be allowed as a deduction all qualified residence interest paid or accrued within the taxable year.CommentsClose CommentsPermalink





`(b) Qualified Residence Interest Defined- The term `qualified residence interest' means any interest which is paid or accrued during the taxable year on acquisition indebtedness with respect to any qualified residence of the taxpayer. For purposes of the preceding sentence, the determination of whether any property is a qualified residence of the taxpayer shall be made as of the time the interest is accrued.CommentsClose CommentsPermalink





`(c) Acquisition Indebtedness-CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `acquisition indebtedness' means any indebtedness which--CommentsClose CommentsPermalink





`(A) is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, andCommentsClose CommentsPermalink





`(B) is secured by such residence.CommentsClose CommentsPermalink





Such term also includes any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.CommentsClose CommentsPermalink





`(2) DOLLAR LIMITATION- The aggregate amount treated as acquisition indebtedness for any period shall not exceed $125,000 (50 percent of such amount in the case of a married individual filing a separate return).CommentsClose CommentsPermalink





`(d) Treatment of Indebtedness Incurred on or Before October 13, 1987-CommentsClose CommentsPermalink





`(1) IN GENERAL- In the case of any pre-October 13, 1987, indebtedness--CommentsClose CommentsPermalink





`(A) such indebtedness shall be treated as acquisition indebtedness, andCommentsClose CommentsPermalink





`(B) the limitation of subsection (c)(2) shall not apply.CommentsClose CommentsPermalink





`(2) REDUCTION IN LIMITATION- The limitation of subsection (c)(2) shall be reduced (but not below zero) by the aggregate amount of outstanding pre-October 13, 1987, indebtedness.CommentsClose CommentsPermalink





`(3) PRE-OCTOBER 13, 1987, INDEBTEDNESS- The term `pre-October 13, 1987, indebtedness' means--CommentsClose CommentsPermalink





`(A) any indebtedness which was incurred on or before October 13, 1987, and which was secured by a qualified residence on October 13, 1987, and at all times thereafter before the interest is paid or accrued, orCommentsClose CommentsPermalink





`(B) any indebtedness which is secured by the qualified residence and was incurred after October 13, 1987, to refinance indebtedness described in subparagraph (A) (or refinanced indebtedness meeting the requirements of this subparagraph) to the extent (immediately after the refinancing) the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness (immediately before the refinancing).CommentsClose CommentsPermalink





`(4) LIMITATION ON PERIOD OF REFINANCING- Subparagraph (B) of paragraph (3) shall not apply to any indebtedness after--CommentsClose CommentsPermalink





`(A) the expiration of the term of the indebtedness described in paragraph (3)(A), orCommentsClose CommentsPermalink





`(B) if the principal of the indebtedness described in paragraph (3)(A) is not amortized over its term, the expiration of the term of the first refinancing of such indebtedness (or if earlier, the date which is 30 years after the date of such first refinancing).CommentsClose CommentsPermalink





`(e) Other Definitions and Special Rules- For purposes of this section--CommentsClose CommentsPermalink





`(1) QUALIFIED RESIDENCE- For purposes of this subsection--CommentsClose CommentsPermalink





`(A) IN GENERAL- Except as provided in subparagraph (C), the term `qualified residence' means the principal residence of the taxpayer.CommentsClose CommentsPermalink





`(B) MARRIED INDIVIDUALS FILING SEPARATE RETURNS- If a married couple does not file a joint return for the taxable year--CommentsClose CommentsPermalink





`(i) such couple shall be treated as 1 taxpayer for purposes of subparagraph (A), andCommentsClose CommentsPermalink





`(ii) each individual shall be entitled to take into account 1/2 of the principal residence unless both individuals consent in writing to 1 individual taking into account the principal residence.CommentsClose CommentsPermalink





`(C) PRE-OCTOBER 13, 1987, INDEBTEDNESS- In the case of any pre-October 13, 1987, indebtedness, the term `qualified residence' has the meaning given that term in section 163(h)(4), as in effect on the day before the date of enactment of this subparagraph.CommentsClose CommentsPermalink





`(2) SPECIAL RULE FOR COOPERATIVE HOUSING CORPORATIONS- Any indebtedness secured by stock held by the taxpayer as a tenant-stockholder in a cooperative housing corporation shall be treated as secured by the house or apartment which the taxpayer is entitled to occupy as such a tenant-stockholder. If stock described in the preceding sentence may not be used to secure indebtedness, indebtedness shall be treated as so secured if the taxpayer establishes to the satisfaction of the Secretary that such indebtedness was incurred to acquire such stock.CommentsClose CommentsPermalink





`(3) UNENFORCEABLE SECURITY INTERESTS- Indebtedness shall not fail to be treated as secured by any property solely because, under any applicable State or local homestead or other debtor protection law in effect on August 16, 1986, the security interest is ineffective or the enforceability of the security interest is restricted.CommentsClose CommentsPermalink





`(4) SPECIAL RULES FOR ESTATES AND TRUSTS- For purposes of determining whether any interest paid or accrued by an estate or trust is qualified residence interest, any residence held by such estate or trust shall be treated as a qualified residence of such estate or trust if such estate or trust establishes that such residence is a qualified residence of a beneficiary who has a present interest in such estate or trust or an interest in the residuary of such estate or trust.CommentsClose CommentsPermalink

`SEC. 5. DEFINITIONS AND SPECIAL RULES.

`(a) Definition of Surviving Spouse-CommentsClose CommentsPermalink





`(1) IN GENERAL- For purposes of this part, the term `surviving spouse' means a taxpayer--CommentsClose CommentsPermalink





`(A) whose spouse died during either of the taxpayer's 2 taxable years immediately preceding the taxable year, andCommentsClose CommentsPermalink





`(B) who maintains as the taxpayer's home a household which constitutes for the taxable year the principal place of abode (as a member of such household) of a dependent--CommentsClose CommentsPermalink





`(i) who (within the meaning of section 6, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) is a son, stepson, daughter, or stepdaughter of the taxpayer, andCommentsClose CommentsPermalink





`(ii) with respect to whom the taxpayer is entitled to a deduction for the taxable year under section 2.CommentsClose CommentsPermalink





For purposes of this paragraph, an individual shall be considered as maintaining a household only if over one-half of the cost of maintaining the household during the taxable year is furnished by such individual.CommentsClose CommentsPermalink





`(2) LIMITATIONS- Notwithstanding paragraph (1), for purposes of this part a taxpayer shall not be considered to be a surviving spouse--CommentsClose CommentsPermalink





`(A) if the taxpayer has remarried at any time before the close of the taxable year, orCommentsClose CommentsPermalink





`(B) unless, for the taxpayer's taxable year during which the taxpayer's spouse died, a joint return could have been made under the provisions of section 6013 (without regard to subsection (a)(3) thereof).CommentsClose CommentsPermalink





`(3) SPECIAL RULE WHERE DECEASED SPOUSE WAS IN MISSING STATUS- If an individual was in a missing status (within the meaning of section 6013(f)(3)) as a result of service in a combat zone and if such individual remains in such status until the date referred to in subparagraph (A) or (B), then, for purposes of paragraph (1)(A), the date on which such individual dies shall be treated as the earlier of the date determined under subparagraph (A) or the date determined under subparagraph (B):CommentsClose CommentsPermalink





`(A) The date on which the determination is made under section 556 of title 37 of the United States Code or under section 5566 of title 5 of such Code (whichever is applicable) that such individual died while in such missing status.CommentsClose CommentsPermalink





`(B) Except in the case of the combat zone designated for purposes of the Vietnam conflict, the date which is 2 years after the date designated as the date of termination of combatant activities in that zone.CommentsClose CommentsPermalink





`(b) Definition of Head of Household-CommentsClose CommentsPermalink





`(1) IN GENERAL- For purposes of this part, an individual shall be considered a head of a household if, and only if, such individual is not married at the close of such individual's taxable year, is not a surviving spouse (as defined in subsection (a)), and either--CommentsClose CommentsPermalink





`(A) maintains as such individual's home a household which constitutes for more than one-half of such taxable year the principal place of abode, as a member of such household, of--CommentsClose CommentsPermalink





`(i) a qualifying child of the individual (as defined in section 6(c), determined without regard to section 6(e)), but not if such child--CommentsClose CommentsPermalink





`(I) is married at the close of the taxpayer's taxable year, andCommentsClose CommentsPermalink





`(II) is not a dependent of such individual by reason of section 6(b)(2) or 6(b)(3), or both, orCommentsClose CommentsPermalink





`(ii) any other person who is a dependent of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such person under section 2, orCommentsClose CommentsPermalink





`(B) maintains a household which constitutes for such taxable year the principal place of abode of the father or mother of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such father or mother under section 2.CommentsClose CommentsPermalink





For purposes of this paragraph, an individual shall be considered as maintaining a household only if over one-half of the cost of maintaining the household during the taxable year is furnished by such individual.CommentsClose CommentsPermalink





`(2) DETERMINATION OF STATUS- For purposes of this subsection--CommentsClose CommentsPermalink





`(A) an individual who is legally separated from such individual's spouse under a decree of divorce or of separate maintenance shall not be considered as married,CommentsClose CommentsPermalink





`(B) a taxpayer shall be considered as not married at the close of such taxpayer's taxable year if at any time during the taxable year such taxpayer's spouse is a nonresident alien, andCommentsClose CommentsPermalink





`(C) a taxpayer shall be considered as married at the close of such taxpayer's taxable year if such taxpayer's spouse (other than a spouse described in subparagraph (B)) died during the taxable year.CommentsClose CommentsPermalink





`(3) LIMITATIONS- Notwithstanding paragraph (1), for purposes of this part, a taxpayer shall not be considered to be a head of a household--CommentsClose CommentsPermalink





`(A) if at any time during the taxable year the taxpayer is a nonresident alien, orCommentsClose CommentsPermalink





`(B) by reason of an individual who would not be a dependent for the taxable year but for--CommentsClose CommentsPermalink





`(i) subparagraph (H) of section 6(d)(2), orCommentsClose CommentsPermalink





`(ii) paragraph (3) of section 6(d).CommentsClose CommentsPermalink





`(c) Certain Married Individuals Living Apart- For purposes of this part, an individual shall be treated as not married at the close of the taxable year if such individual is so treated under the provisions of section 7703(b).CommentsClose CommentsPermalink

`SEC. 6. DEPENDENT DEFINED.

`(a) In General- For purposes of this subtitle, the term `dependent' means--CommentsClose CommentsPermalink





`(1) a qualifying child, orCommentsClose CommentsPermalink





`(2) a qualifying relative.CommentsClose CommentsPermalink





`(b) Exceptions- For purposes of this section--CommentsClose CommentsPermalink





`(1) DEPENDENTS INELIGIBLE- If an individual is a dependent of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall be treated as having no dependents for any taxable year of such individual beginning in such calendar year.CommentsClose CommentsPermalink





`(2) MARRIED DEPENDENTS- An individual shall not be treated as a dependent of a taxpayer under subsection (a) if such individual has made a joint return with the individual's spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.CommentsClose CommentsPermalink





`(3) CITIZENS OR NATIONALS OF OTHER COUNTRIES-CommentsClose CommentsPermalink





`(A) IN GENERAL- The term `dependent' does not include an individual who is not a citizen or national of the United States unless such individual is a resident of the United States or a country contiguous to the United States.CommentsClose CommentsPermalink





`(B) EXCEPTION FOR ADOPTED CHILD- Subparagraph (A) shall not exclude any child of a taxpayer (within the meaning of subsection (f)(1)(B)) from the definition of `dependent' if--CommentsClose CommentsPermalink





`(i) for the taxable year of the taxpayer, the child has the same principal place of abode as the taxpayer and is a member of the taxpayer's household, andCommentsClose CommentsPermalink





`(ii) the taxpayer is a citizen or national of the United States.CommentsClose CommentsPermalink





`(c) Qualifying Child- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `qualifying child' means, with respect to any taxpayer for any taxable year, an individual--CommentsClose CommentsPermalink





`(A) who bears a relationship to the taxpayer described in paragraph (2),CommentsClose CommentsPermalink





`(B) who has the same principal place of abode as the taxpayer for more than one-half of such taxable year,CommentsClose CommentsPermalink





`(C) who meets the age requirements of paragraph (3), andCommentsClose CommentsPermalink





`(D) who has not provided over one-half of such individual's own support for the calendar year in which the taxable year of the taxpayer begins.CommentsClose CommentsPermalink





`(2) RELATIONSHIP- For purposes of paragraph (1)(A), an individual bears a relationship to the taxpayer described in this paragraph if such individual is--CommentsClose CommentsPermalink





`(A) a child of the taxpayer or a descendant of such a child, orCommentsClose CommentsPermalink





`(B) a brother, sister, stepbrother, or stepsister of the taxpayer or a descendant of any such relative.CommentsClose CommentsPermalink





`(3) AGE REQUIREMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of paragraph (1)(C), an individual meets the requirements of this paragraph if such individual--CommentsClose CommentsPermalink





`(i) has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins, orCommentsClose CommentsPermalink





`(ii) is a student who has not attained the age of 24 as of the close of such calendar year.CommentsClose CommentsPermalink





`(B) SPECIAL RULE FOR DISABLED- In the case of an individual who is permanently and totally disabled at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.CommentsClose CommentsPermalink





`(4) SPECIAL RULE RELATING TO 2 OR MORE CLAIMING QUALIFYING CHILD-CommentsClose CommentsPermalink





`(A) IN GENERAL- Except as provided in subparagraph (B), if (but for this paragraph) an individual may be and is claimed as a qualifying child by 2 or more taxpayers for a taxable year beginning in the same calendar year, such individual shall be treated as the qualifying child of the taxpayer who is--CommentsClose CommentsPermalink





`(i) a parent of the individual, orCommentsClose CommentsPermalink





`(ii) if clause (i) does not apply, the taxpayer with the highest adjusted gross income for such taxable year.CommentsClose CommentsPermalink





`(B) MORE THAN 1 PARENT CLAIMING QUALIFYING CHILD- If the parents claiming any qualifying child do not file a joint return together, such child shall be treated as the qualifying child of--CommentsClose CommentsPermalink





`(i) the parent with whom the child resided for the longest period of time during the taxable year, orCommentsClose CommentsPermalink





`(ii) if the child resides with both parents for the same amount of time during such taxable year, the parent with the highest adjusted gross income.CommentsClose CommentsPermalink





`(d) Qualifying Relative- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `qualifying relative' means, with respect to any taxpayer for any taxable year, an individual--CommentsClose CommentsPermalink





`(A) who bears a relationship to the taxpayer described in paragraph (2),CommentsClose CommentsPermalink





`(B) with respect to whom the taxpayer provides over one-half of the individual's support for the calendar year in which such taxable year begins, andCommentsClose CommentsPermalink





`(C) who is not a qualifying child of such taxpayer or of any other taxpayer for any taxable year beginning in the calendar year in which such taxable year begins.CommentsClose CommentsPermalink





`(2) RELATIONSHIP- For purposes of paragraph (1)(A), an individual bears a relationship to the taxpayer described in this paragraph if the individual is any of the following with respect to the taxpayer:CommentsClose CommentsPermalink





`(A) A child or a descendant of a child.CommentsClose CommentsPermalink





`(B) A brother, sister, stepbrother, or stepsister.CommentsClose CommentsPermalink





`(C) The father or mother, or an ancestor of either.CommentsClose CommentsPermalink





`(D) A stepfather or stepmother.CommentsClose CommentsPermalink





`(E) A son or daughter of a brother or sister of the taxpayer.CommentsClose CommentsPermalink





`(F) A brother or sister of the father or mother of the taxpayer.CommentsClose CommentsPermalink





`(G) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.CommentsClose CommentsPermalink





`(H) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household.CommentsClose CommentsPermalink





`(3) SPECIAL RULE RELATING TO MULTIPLE SUPPORT AGREEMENTS- For purposes of paragraph (1)(C), over one-half of the support of an individual for a calendar year shall be treated as received from the taxpayer if--CommentsClose CommentsPermalink





`(A) no one person contributed over one-half of such support,CommentsClose CommentsPermalink





`(B) over one-half of such support was received from 2 or more persons each of whom, but for the fact that any such person alone did not contribute over one-half of such support, would have been entitled to claim such individual as a dependent for a taxable year beginning in such calendar year,CommentsClose CommentsPermalink





`(C) the taxpayer contributed over 10 percent of such support, andCommentsClose CommentsPermalink





`(D) each person described in subparagraph (B) (other than the taxpayer) who contributed over 10 percent of such support files a written declaration (in such manner and form as the Secretary may by regulations prescribe) that such person will not claim such individual as a dependent for any taxable year beginning in such calendar year.CommentsClose CommentsPermalink





`(4) SPECIAL RULE RELATING TO INCOME OF HANDICAPPED DEPENDENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of paragraph (1)(B), the gross income of an individual who is permanently and totally disabled at any time during the taxable year shall not include income attributable to services performed by the individual at a sheltered workshop if--CommentsClose CommentsPermalink





`(i) the availability of medical care at such workshop is the principal reason for the individual's presence there, andCommentsClose CommentsPermalink





`(ii) the income arises solely from activities at such workshop which are incident to such medical care.CommentsClose CommentsPermalink





`(B) SHELTERED WORKSHOP DEFINED- For purposes of subparagraph (A), the term `sheltered workshop' means a school--CommentsClose CommentsPermalink





`(i) which provides special instruction or training designed to alleviate the disability of the individual, andCommentsClose CommentsPermalink





`(ii) which is operated by an organization described in section 501(c)(3) and exempt from tax under section 501(a), or by a State, a possession of the United States, any political subdivision of any of the foregoing, the United States, or the District of Columbia.CommentsClose CommentsPermalink





`(5) SPECIAL RULES FOR SUPPORT- For purposes of this subsection--CommentsClose CommentsPermalink





`(A) payments to a spouse which are includible in the gross income of such spouse shall not be treated as a payment by the payor spouse for the support of any dependent, andCommentsClose CommentsPermalink





`(B) in the case of the remarriage of a parent, support of a child received from the parent's spouse shall be treated as received from the parent.CommentsClose CommentsPermalink





`(e) Special Rule for Divorced Parents-CommentsClose CommentsPermalink





`(1) IN GENERAL- Notwithstanding subsection (c)(1)(B), (c)(4), or (d)(1)(C), if--CommentsClose CommentsPermalink





`(A) a child receives over one-half of the child's support during the calendar year from the child's parents--CommentsClose CommentsPermalink





`(i) who are divorced or legally separated under a decree of divorce or separate maintenance,CommentsClose CommentsPermalink





`(ii) who are separated under a written separation agreement, orCommentsClose CommentsPermalink





`(iii) who live apart at all times during the last 6 months of the calendar year, andCommentsClose CommentsPermalink





`(B) such child is in the custody of 1 or both of the child's parents for more than one-half of the calendar year, such child shall be treated as being the qualifying child or qualifying relative of the noncustodial parent for a calendar year if the requirements described in paragraph (2) or (3) are met.CommentsClose CommentsPermalink





`(2) EXCEPTION WHERE CUSTODIAL PARENT RELEASES CLAIM TO EXEMPTION FOR THE YEAR- For purposes of paragraph (1), the requirements described in this paragraph are met with respect to any calendar year if--CommentsClose CommentsPermalink





`(A) the custodial parent signs a written declaration (in such manner and form as the Secretary may by regulations prescribe) that such custodial parent will not claim such child as a dependent for any taxable year beginning in such calendar year, andCommentsClose CommentsPermalink





`(B) the noncustodial parent attaches such written declaration to the noncustodial parent's return for the taxable year beginning during such calendar year.CommentsClose CommentsPermalink





`(3) EXCEPTION FOR CERTAIN PRE-1985 INSTRUMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of paragraph (1), the requirements described in this paragraph are met with respect to any calendar year if--CommentsClose CommentsPermalink





`(i) a qualified pre-1985 instrument between the parents applicable to the taxable year beginning in such calendar year provides that the noncustodial parent shall be entitled to any deduction allowable under section 151 for such child, andCommentsClose CommentsPermalink





`(ii) the noncustodial parent provides at least $600 for the support of such child during such calendar year.CommentsClose CommentsPermalink





For purposes of this subparagraph, amounts expended for the support of a child or children shall be treated as received from the noncustodial parent to the extent that such parent provided amounts for such support.CommentsClose CommentsPermalink





`(B) QUALIFIED PRE-1985 INSTRUMENT- For purposes of this paragraph, the term `qualified pre-1985 instrument' means any decree of divorce or separate maintenance or written agreement--CommentsClose CommentsPermalink





`(i) which is executed before January 1, 1985,CommentsClose CommentsPermalink





`(ii) which on such date contains the provision described in subparagraph (A)(i), andCommentsClose CommentsPermalink





`(iii) which is not modified on or after such date in a modification which expressly provides that this paragraph shall not apply to such decree or agreement.CommentsClose CommentsPermalink





`(4) CUSTODIAL PARENT AND NONCUSTODIAL PARENT- For purposes of this subsection--CommentsClose CommentsPermalink





`(A) CUSTODIAL PARENT- The term `custodial parent' means the parent having custody for the greater portion of the calendar year.CommentsClose CommentsPermalink





`(B) NONCUSTODIAL PARENT- The term `noncustodial parent' means the parent who is not the custodial parent.CommentsClose CommentsPermalink





`(5) EXCEPTION FOR MULTIPLE-SUPPORT AGREEMENTS- This subsection shall not apply in any case where over one-half of the support of the child is treated as having been received from a taxpayer under the provision of subsection (d)(3).CommentsClose CommentsPermalink





`(6) SPECIAL RULE FOR SUPPORT RECEIVED FROM NEW SPOUSE OF PARENT- For purposes of this subsection, in the case of the remarriage of a parent, support of a child received from the parent's spouse shall be treated as received from the parent.CommentsClose CommentsPermalink





`(f) Other Definitions and Rules- For purposes of this section--CommentsClose CommentsPermalink





`(1) CHILD DEFINED-CommentsClose CommentsPermalink





`(A) IN GENERAL- The term `child' means an individual who is--CommentsClose CommentsPermalink





`(i) a son, daughter, stepson, or stepdaughter of the taxpayer, orCommentsClose CommentsPermalink





`(ii) an eligible foster child of the taxpayer.CommentsClose CommentsPermalink





`(B) ADOPTED CHILD- In determining whether any of the relationships specified in subparagraph (A)(i) or paragraph (4) exists, a legally adopted individual of the taxpayer, or an individual who is lawfully placed with the taxpayer for legal adoption by the taxpayer, shall be treated as a child of such individual by blood.CommentsClose CommentsPermalink





`(C) ELIGIBLE FOSTER CHILD- For purposes of subparagraph (A)(ii), the term `eligible foster child' means an individual who is placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.CommentsClose CommentsPermalink





`(2) STUDENT DEFINED- The term `student' means an individual who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins--CommentsClose CommentsPermalink





`(A) is a full-time student at an educational organization described in section 3(d)(1)(B), orCommentsClose CommentsPermalink





`(B) is pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization described in section 3(d)(1)(B) or of a State or political subdivision of a State.CommentsClose CommentsPermalink





`(3) DETERMINATION OF HOUSEHOLD STATUS- An individual shall not be treated as a member of the taxpayer's household if at any time during the taxable year of the taxpayer the relationship between such individual and the taxpayer is in violation of local law.CommentsClose CommentsPermalink





`(4) BROTHER AND SISTER- The terms `brother' and `sister' include a brother or sister by the half blood.CommentsClose CommentsPermalink





`(5) SPECIAL SUPPORT TEST IN CASE OF STUDENTS- For purposes of subsections (c)(1)(D) and (d)(1)(C), in the case of an individual who is--CommentsClose CommentsPermalink





`(A) a child of the taxpayer, andCommentsClose CommentsPermalink





`(B) a student, amounts received as scholarships for study at an educational organization described in section 3(d)(1)(B) shall not be taken into account.CommentsClose CommentsPermalink





`(6) TREATMENT OF MISSING CHILDREN-CommentsClose CommentsPermalink





`(A) IN GENERAL- Solely for the purposes referred to in subparagraph (B), a child of the taxpayer--CommentsClose CommentsPermalink





`(i) who is presumed by law enforcement authorities to have been kidnaped by someone who is not a member of the family of such child or the taxpayer, andCommentsClose CommentsPermalink





`(ii) who had, for the taxable year in which the kidnaping occurred, the same principal place of abode as the taxpayer for more than one-half of the portion of such year before the date of the kidnaping, shall be treated as meeting the requirement of subsection (c)(1)(B) with respect to a taxpayer for all taxable years ending during the period that the child is kidnaped.CommentsClose CommentsPermalink





`(B) PURPOSES- Subparagraph (A) shall apply solely for purposes of determining--CommentsClose CommentsPermalink





`(i) the deduction under section 2(c), andCommentsClose CommentsPermalink





`(ii) whether an individual is a surviving spouse or a head of a household (as such terms are defined in section 5).CommentsClose CommentsPermalink





`(C) COMPARABLE TREATMENT OF CERTAIN QUALIFYING RELATIVES- For purposes of this section, a child of the taxpayer--CommentsClose CommentsPermalink





`(i) who is presumed by law enforcement authorities to have been kidnaped by someone who is not a member of the family of such child or the taxpayer, andCommentsClose CommentsPermalink





`(ii) who was (without regard to this paragraph) a qualifying relative of the taxpayer for the portion of the taxable year before the date of the kidnaping, shall be treated as a qualifying relative of the taxpayer for all taxable years ending during the period that the child is kidnaped.CommentsClose CommentsPermalink





`(D) TERMINATION OF TREATMENT- Subparagraphs (A) and (C) shall cease to apply as of the first taxable year of the taxpayer beginning after the calendar year in which there is a determination that the child is dead (or, if earlier, in which the child would have attained age 18).CommentsClose CommentsPermalink

`SEC. 7. INFLATION ADJUSTMENT.

`(a) In General- In the case of any taxable year beginning in a calendar year after 2008, each dollar amount contained in sections 2(b), 2(c), 3(a), and 4(c)(2) shall be increased by an amount equal to--CommentsClose CommentsPermalink





`(1) such dollar amount, multiplied byCommentsClose CommentsPermalink





`(2) the cost-of-living adjustment for the calendar year in which the taxable year begins.CommentsClose CommentsPermalink





`(b) Cost-of-Living Adjustment- For purposes of subsection (a), the cost-of-living adjustment for any calendar year is the percentage (if any) by which--CommentsClose CommentsPermalink





`(1) the CPI for the preceding calendar year, exceedsCommentsClose CommentsPermalink





`(2) the CPI for calendar year 2007.CommentsClose CommentsPermalink





`(c) CPI for Any Calendar Year- For purposes of subsection (b), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.CommentsClose CommentsPermalink





`(d) Consumer Price Index- For purposes of subsection (c), the term `Consumer Price Index' means the last Consumer Price Index for all-urban consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.CommentsClose CommentsPermalink





`(e) Rounding- If any increase determined under subsection (a) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.CommentsClose CommentsPermalink

`PART II--TAX ON BUSINESS ACTIVITIES

`Sec. 11. Tax imposed on business activities.CommentsClose CommentsPermalink

`SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.

`(a) Tax Imposed- There is hereby imposed on every person engaged in a business activity located in the United States a tax equal to 20 percent of the business taxable income of such person.CommentsClose CommentsPermalink





`(b) Liability for Tax- The tax imposed by this section shall be paid by the person engaged in the business activity, whether such person is an individual, partnership, corporation, or otherwise.CommentsClose CommentsPermalink





`(c) Business Taxable Income-CommentsClose CommentsPermalink





`(1) IN GENERAL- For purposes of this section, the term `business taxable income' means gross active income reduced by the deductions specified in subsection (d).CommentsClose CommentsPermalink





`(2) GROSS ACTIVE INCOME- For purposes of paragraph (1), the term `gross active income' means gross income other than investment income.CommentsClose CommentsPermalink





`(d) Deductions-CommentsClose CommentsPermalink





`(1) IN GENERAL- The deductions specified in this subsection are--CommentsClose CommentsPermalink





`(A) the cost of business inputs for the business activity,CommentsClose CommentsPermalink





`(B) the compensation (including contributions to qualified retirement plans but not including other fringe benefits) paid for employees performing services in such activity, andCommentsClose CommentsPermalink





`(C) the cost of personal and real property used in such activity.CommentsClose CommentsPermalink





`(2) BUSINESS INPUTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of paragraph (1)(A), the term `cost of business inputs' means--CommentsClose CommentsPermalink





`(i) the actual cost of goods, services, and materials, whether or not resold during the taxable year, andCommentsClose CommentsPermalink





`(ii) the actual cost, if reasonable, of travel and entertainment expenses for business purposes.CommentsClose CommentsPermalink





`(B) PURCHASES OF GOODS AND SERVICES EXCLUDED- Such term shall not include purchases of goods and services provided to employees or owners.CommentsClose CommentsPermalink





`(C) CERTAIN LOBBYING AND POLITICAL EXPENDITURES EXCLUDED-CommentsClose CommentsPermalink





`(i) IN GENERAL- Such term shall not include any amount paid or incurred in connection with--CommentsClose CommentsPermalink





`(I) influencing legislation,CommentsClose CommentsPermalink





`(II) participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for public office,CommentsClose CommentsPermalink





`(III) any attempt to influence the general public, or segments thereof, with respect to elections, legislative matters, or referendums, orCommentsClose CommentsPermalink





`(IV) any direct communication with a covered executive branch official in an attempt to influence the official actions or positions of such official.CommentsClose CommentsPermalink





`(ii) EXCEPTION FOR LOCAL LEGISLATION- In the case of any legislation of any local council or similar governing body--CommentsClose CommentsPermalink





`(I) clause (i)(I) shall not apply, andCommentsClose CommentsPermalink





`(II) such term shall include all ordinary and necessary expenses (including, but not limited to, traveling expenses described in subparagraph (A)(iii) and the cost of preparing testimony) paid or incurred during the taxable year in carrying on any trade or business--CommentsClose CommentsPermalink

`(aa) in direct connection with appearances before, submission of statements to, or sending communications to the committees, or individual members, of such council or body with respect to legislation or proposed legislation of direct interest to the taxpayer, orCommentsClose CommentsPermalink

`(bb) in direct connection with communication of information between the taxpayer and an organization of which the taxpayer is a member with respect to any such legislation or proposed legislation which is of direct interest to the taxpayer and to such organization, and that portion of the dues so paid or incurred with respect to any organization of which the taxpayer is a member which is attributable to the expenses of the activities carried on by such organization.CommentsClose CommentsPermalink

`(iii) APPLICATION TO DUES OF TAX-EXEMPT ORGANIZATIONS- Such term shall include the portion of dues or other similar amounts paid by the taxpayer to an organization which is exempt from tax under this subtitle which the organization notifies the taxpayer under section 6033(e)(1)(A)(ii) is allocable to expenditures to which clause (i) applies.CommentsClose CommentsPermalink





`(iv) INFLUENCING LEGISLATION- For purposes of this subparagraph--CommentsClose CommentsPermalink





`(I) IN GENERAL- The term `influencing legislation' means any attempt to influence any legislation through communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of legislation.CommentsClose CommentsPermalink





`(II) LEGISLATION- The term `legislation' has the meaning given that term in section 4911(e)(2).CommentsClose CommentsPermalink





`(v) OTHER SPECIAL RULES-CommentsClose CommentsPermalink





`(I) EXCEPTION FOR CERTAIN TAXPAYERS- In the case of any taxpayer engaged in the trade or business of conducting activities described in clause (i), clause (i) shall not apply to expenditures of the taxpayer in conducting such activities directly on behalf of another person (but shall apply to payments by such other person to the taxpayer for conducting such activities).CommentsClose CommentsPermalink





`(II) DE MINIMIS EXCEPTION-CommentsClose CommentsPermalink

`(aa) IN GENERAL- Clause (i) shall not apply to any in-house expenditures for any taxable year if such expenditures do not exceed $2,000. In determining whether a taxpayer exceeds the $2,000 limit, there shall not be taken into account overhead costs otherwise allocable to activities described in subclauses (I) and (IV) of clause (i).CommentsClose CommentsPermalink

`(bb) IN-HOUSE EXPENDITURES- For purposes of provision (aa), the term `in-house expenditures' means expenditures described in subclauses (I) and (IV) of clause (i) other than payments by the taxpayer to a person engaged in the trade or business of conducting activities described in clause (i) for the conduct of such activities on behalf of the taxpayer, or dues or other similar amounts paid or incurred by the taxpayer which are allocable to activities described in clause (i).CommentsClose CommentsPermalink

`(III) EXPENSES INCURRED IN CONNECTION WITH LOBBYING AND POLITICAL ACTIVITIES- Any amount paid or incurred for research for, or preparation, planning, or coordination of, any activity described in clause (i) shall be treated as paid or incurred in connection with such activity.CommentsClose CommentsPermalink





`(vi) COVERED EXECUTIVE BRANCH OFFICIAL- For purposes of this subparagraph, the term `covered executive branch official' means--CommentsClose CommentsPermalink





`(I) the President,CommentsClose CommentsPermalink





`(II) the Vice President,CommentsClose CommentsPermalink





`(III) any officer or employee of the White House Office of the Executive Office of the President, and the 2 most senior level officers of each of the other agencies in such Executive Office, andCommentsClose CommentsPermalink





`(IV) any individual serving in a position in level I of the Executive Schedule under section 5312 of title 5, United States Code, any other individual designated by the President as having Cabinet level status, and any immediate deputy of such an individual.CommentsClose CommentsPermalink





`(vii) SPECIAL RULE FOR INDIAN TRIBAL GOVERNMENTS- For purposes of this subparagraph, an Indian tribal government shall be treated in the same manner as a local council or similar governing body.CommentsClose CommentsPermalink





`(viii) CROSS REFERENCE-CommentsClose CommentsPermalink





`For reporting requirements and alternative taxes related to this subsection, see section 6033(e).CommentsClose CommentsPermalink





`(e) Carryover of Excess Deductions-CommentsClose CommentsPermalink





`(1) IN GENERAL- If the aggregate deductions for any taxable year exceed the gross active income for such taxable year, the amount of the deductions specified in subsection (d) for the succeeding taxable year (determined without regard to this subsection) shall be increased by the sum of--CommentsClose CommentsPermalink





`(A) such excess, plusCommentsClose CommentsPermalink





`(B) the product of such excess and the 3-month Treasury rate for the last month of such taxable year.CommentsClose CommentsPermalink





`(2) 3-month TREASURY RATE- For purposes of paragraph (1), the 3-month Treasury rate is the rate determined by the Secretary based on the average market yield (during any 1-month period selected by the Secretary and ending in the calendar month in which the determination is made) on outstanding marketable obligations of the United States with remaining periods to maturity of 3 months or less.'CommentsClose CommentsPermalink





(b) Conforming Repeals and Redesignations-CommentsClose CommentsPermalink





(1) REPEALS- The following subchapters of chapter 1 of subtitle A and the items relating to such subchapters in the table of subchapters for such chapter 1 are repealed:CommentsClose CommentsPermalink





(A) Subchapter B (relating to computation of taxable income).CommentsClose CommentsPermalink





(B) Subchapter C (relating to corporate distributions and adjustments).CommentsClose CommentsPermalink





(C) Subchapter D (relating to deferred compensation, etc.).CommentsClose CommentsPermalink





(D) Subchapter G (relating to corporations used to avoid income tax on shareholders).CommentsClose CommentsPermalink





(E) Subchapter H (relating to banking institutions).CommentsClose CommentsPermalink





(F) Subchapter I (relating to natural resources).CommentsClose CommentsPermalink





(G) Subchapter J (relating to estates, trusts, beneficiaries, and decedents).CommentsClose CommentsPermalink





(H) Subchapter L (relating to insurance companies).CommentsClose CommentsPermalink





(I) Subchapter M (relating to regulated investment companies and real estate investment trusts).CommentsClose CommentsPermalink





(J) Subchapter N (relating to tax based on income from sources within or without the United States).CommentsClose CommentsPermalink





(K) Subchapter O (relating to gain or loss on disposition of property).CommentsClose CommentsPermalink





(L) Subchapter P (relating to capital gains and losses).CommentsClose CommentsPermalink





(M) Subchapter Q (relating to readjustment of tax between years and special limitations).CommentsClose CommentsPermalink





(N) Subchapter S (relating to tax treatment of S corporations and their shareholders).CommentsClose CommentsPermalink





(O) Subchapter T (relating to cooperatives and their patrons).CommentsClose CommentsPermalink





(P) Subchapter U (relating to designation and treatment of empowerment zones, enterprise communities, and rural development investment areas).CommentsClose CommentsPermalink





(Q) Subchapter V (relating to title 11 cases).CommentsClose CommentsPermalink





(R) Subchapter W (relating to District of Columbia Enterprise Zone).CommentsClose CommentsPermalink





(2) REDESIGNATIONS- The following subchapters of chapter 1 of subtitle A and the items relating to such subchapters in the table of subchapters for such chapter 1 are redesignated:CommentsClose CommentsPermalink





(A) Subchapter E (relating to accounting periods and methods of accounting) as subchapter B.CommentsClose CommentsPermalink





(B) Subchapter F (relating to exempt organizations) as subchapter C.CommentsClose CommentsPermalink





(C) Subchapter K (relating to partners and partnerships) as subchapter D.CommentsClose CommentsPermalink

SEC. 3. REPEAL OF ESTATE AND GIFT TAXES.

Subtitle B (relating to estate, gift, and generation-skipping taxes) and the item relating to such subtitle in the table of subtitles is repealed.CommentsClose CommentsPermalink

SEC. 4. ADDITIONAL REPEALS.

Subtitles H (relating to financing of presidential election campaigns) and J (relating to coal industry health benefits) and the items relating to such subtitles in the table of subtitles are repealed.CommentsClose CommentsPermalink

SEC. 5. EFFECTIVE DATES.

(a) In General- Except as provided in subsection (b), the amendments made by this Act apply to taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink





(b) Repeal of Estate and Gift Taxes- The repeal made by section 3 applies to estates of decedents dying, and transfers made, after December 31, 2007.CommentsClose CommentsPermalink





(c) Technical and Conforming Changes- The Secretary of the Treasury or the Secretary's delegate shall, as soon as practicable but in any event not later than 90 days after the date of enactment of this Act, submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a draft of any technical and conforming changes in the Internal Revenue Code of 1986 which are necessary to reflect throughout such Code the changes in the substantive provisions of law made by this Act.CommentsClose CommentsPermalink