[108th Congress Public Law 27]
[From the U.S. Government Printing Office]
[DOCID: f:publ027.108]
[[Page 751]]
JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003
[[Page 117 STAT. 752]]
Public Law 108-27
108th Congress
An Act
To provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004. <<NOTE: May 28,
2003 - [H.R. 2]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: Jobs and Growth
Tax Relief Reconciliation Act of 2003.>>
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This <<NOTE: 26 USC 1 note.>> Act may be cited as
the ``Jobs and Growth Tax Relief Reconciliation Act of 2003''.
(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.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; references; table of contents.
TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS
Sec. 101. Acceleration of increase in child tax credit.
Sec. 102. Acceleration of 15-percent individual income tax rate bracket
expansion for married taxpayers filing joint returns.
Sec. 103. Acceleration of increase in standard deduction for married
taxpayers filing joint returns.
Sec. 104. Acceleration of 10-percent individual income tax rate bracket
expansion.
Sec. 105. Acceleration of reduction in individual income tax rates.
Sec. 106. Minimum tax relief to individuals.
Sec. 107. Application of EGTRRA sunset to this title.
TITLE II--GROWTH INCENTIVES FOR BUSINESS
Sec. 201. Increase and extension of bonus depreciation.
Sec. 202. Increased expensing for small business.
TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS
Sec. 301. Reduction in capital gains rates for individuals; repeal of 5-
year holding period requirement.
Sec. 302. Dividends of individuals taxed at capital gain rates.
Sec. 303. Sunset of title.
TITLE IV--TEMPORARY STATE FISCAL RELIEF
Sec. 401. Temporary State fiscal relief.
TITLE V--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003
Sec. 501. Time for payment of corporate estimated taxes.
[[Page 117 STAT. 753]]
TITLE I--ACCELERATION OF CERTAIN PREVIOUSLY ENACTED TAX REDUCTIONS
SEC. 101. ACCELERATION OF INCREASE IN CHILD TAX CREDIT.
(a) In General.--The item relating to calendar years 2001 through
2004 in the table contained in paragraph (2) of section 24(a) (relating
to per child amount) <<NOTE: 26 USC 24.>> is amended to read as follows:
``2003 or 2004 $1,000''.
(b) Advance Payment of Portion of Increased Credit in 2003.--
(1) In general.--Subchapter B of chapter 65 (relating to
abatements, credits, and refunds) is amended by inserting after
section 6428 the following new section:
``SEC. 6429. <<NOTE: 26 USC 6429.>> ADVANCE PAYMENT OF PORTION OF
INCREASED CHILD CREDIT FOR 2003.
``(a) In General.--Each taxpayer who was allowed a credit under
section 24 on the return for the taxpayer's first taxable year beginning
in 2002 shall be treated as having made a payment against the tax
imposed by chapter 1 for such taxable year in an amount equal to the
child tax credit refund amount (if any) for such taxable year.
``(b) Child Tax Credit Refund Amount.--For purposes of this section,
the child tax credit refund amount is the amount by which the aggregate
credits allowed under part IV of subchapter A of chapter 1 for such
first taxable year would have been increased if--
``(1) the per child amount under section 24(a)(2) for such
year were $1,000,
``(2) only qualifying children (as defined in section 24(c))
of the taxpayer for such year who had not attained age 17 as of
December 31, 2003, were taken into account, and
``(3) section 24(d)(1)(B)(ii) did not apply.
``(c) Timing of Payments.--In the case of any overpayment
attributable to this section, the Secretary shall, subject to the
provisions of this title, refund or credit such overpayment as rapidly
as possible and, to the extent practicable, before October 1, 2003. No
refund or credit shall be made or allowed under this section after
December 31, 2003.
``(d) Coordination With Child Tax Credit.--
``(1) In general.--The amount of credit which would (but for
this subsection and section 26) be allowed under section 24 for
the taxpayer's first taxable year beginning in 2003 shall be
reduced (but not below zero) by the payments made to the
taxpayer under this section. Any failure to so reduce the credit
shall be treated as arising out of a mathematical or clerical
error and assessed according to section 6213(b)(1).
``(2) Joint returns.--In the case of a payment under this
section with respect to a joint return, half of such payment
shall be treated as having been made to each individual filing
such return.
``(e) No Interest.--No interest shall be allowed on any overpayment
attributable to this section.''.
[[Page 117 STAT. 754]]
(2) Clerical amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end the
following new item:
``Sec. 6429. Advance payment of portion of increased
child credit for 2003.''.
(c) Effective <<NOTE: 26 USC 24 note.>> Dates.--
(1) In general.--Except <<NOTE: Applicability.>> as provided
in paragraph (2), the amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
(2) Subsection (b).--The amendments made by subsection (b)
shall take effect on the date of the enactment of this Act.
SEC. 102. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET
EXPANSION FOR MARRIED TAXPAYERS FILING JOINT RETURNS.
(a) In General.--The table contained in subparagraph (B) of section
1(f )(8) (relating to applicable percentage) <<NOTE: 26 USC 1.>> is
amended by inserting before the item relating to 2005 the following new
item:
``2003 and 2004............................. 200''.
(b) Conforming Amendments.--
(1) Section 1(f)(8)(A) is amended by striking ``2004'' and
inserting ``2002''.
(2) Section 302(c) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 <<NOTE: 26 USC 1 note.>> is amended
by striking ``2004'' and inserting ``2002''.
(c) Effective Date.--The <<NOTE: Applicability. 26 USC 1
note.>> amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
SEC. 103. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR MARRIED
TAXPAYERS FILING JOINT RETURNS.
(a) In General.--The table contained in paragraph (7) of section
63(c) (relating to applicable percentage) is amended by inserting before
the item relating to 2005 the following new item:
``2003 and 2004............................. 200''.
(b) Conforming Amendment.--Section 301(d) of the Economic Growth and
Tax Relief Reconciliation Act of 2001 <<NOTE: 26 USC 1 note.>> is
amended by striking ``2004'' and inserting ``2002''.
(c) Effective Date.--The <<NOTE: Applicability. 26 USC 63
note.>> amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
SEC. 104. ACCELERATION OF 10-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET
EXPANSION.
(a) In General.--Clause (i) of section 1(i)(1)(B) (relating to the
initial bracket amount) is amended by striking ``($12,000 in the case of
taxable years beginning before January 1, 2008)'' and inserting
``($12,000 in the case of taxable years beginning after December 31,
2004, and before January 1, 2008)''.
(b) Inflation Adjustment.--Subparagraph (C) of section 1(i)(1) is
amended to read as follows:
``(C) Inflation adjustment.--In prescribing the
tables under subsection (f) which apply with respect to
taxable years beginning in calendar years after 2000--
``(i) except as provided in clause (ii), the
Secretary shall make no adjustment to the initial
bracket amounts for any taxable year beginning
before January 1, 2009,
[[Page 117 STAT. 755]]
``(ii) there shall be an adjustment under
subsection (f) of such amounts which shall apply
only to taxable years beginning in 2004, and such
adjustment shall be determined under subsection
(f)(3) by substituting `2002' for `1992' in
subparagraph (B) thereof,
``(iii) the cost-of-living adjustment used in
making adjustments to the initial bracket amounts
for any taxable year beginning after December 31,
2008, shall be determined under subsection (f)(3)
by substituting `2007' for `1992' in subparagraph
(B) thereof, and
``(iv) the adjustments under clauses (ii) and
(iii) shall not apply to the amount referred to in
subparagraph (B)(iii).
If any amount after adjustment under the preceding
sentence is not a multiple of $50, such amount shall be
rounded to the next lowest multiple of $50.''.
(c) Effective <<NOTE: 26 USC 1 note.>> Date.--
(1) In general.--The <<NOTE: Applicability.>> amendments
made by this section shall apply to taxable years beginning
after December 31, 2002.
(2) Tables for 2003.--The Secretary of the Treasury shall
modify each table which has been prescribed under section 1(f)
of the Internal Revenue Code of 1986 for taxable years beginning
in 2003 and which relates to the amendment made by subsection
(a) to reflect such amendment.
SEC. 105. ACCELERATION OF REDUCTION IN INDIVIDUAL INCOME TAX RATES.
(a) In General.--The table contained in paragraph (2) of section
1(i) (relating to <<NOTE: 26 USC 1.>> reductions in rates after June 30,
2001) is amended to read as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The corresponding percentages shall be substituted for the following percentages:
``In the case of taxable years -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
beginning during calendar year: 28% 31% 36% 39.6%
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2001............................ 27.5% 30.5% 35.5% 39.1%
2002............................ 27.0% 30.0% 35.0% 38.6%
2003 and thereafter............. 25.0% 28.0% 33.0% 35.0%''.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(b) Effective Date.--The <<NOTE: Applicability. 26 USC 1
note.>> amendment made by this section shall apply to taxable years
beginning after December 31, 2002.
SEC. 106. MINIMUM TAX RELIEF TO INDIVIDUALS.
(a) In General.--
(1) Subparagraph (A) of section 55(d)(1) is amended by
striking ``$49,000 in the case of taxable years beginning in
2001, 2002, 2003, and 2004'' and inserting ``$58,000 in the case
of taxable years beginning in 2003 and 2004''.
(2) Subparagraph (B) of section 55(d)(1) is amended by
striking ``$35,750 in the case of taxable years beginning in
2001, 2002, 2003, and 2004'' and inserting ``$40,250 in the case
of taxable years beginning in 2003 and 2004''.
(b) Effective Date.--The <<NOTE: Applicability. 26 USC 55
note.>> amendments made by subsection (a) shall apply to taxable years
beginning after December 31, 2002.
SEC. 107. <<NOTE: 26 USC 1 note.>> APPLICATION OF EGTRRA SUNSET TO THIS
TITLE.
Each amendment made by this title shall be subject to title IX of
the Economic Growth and Tax Relief Reconciliation Act of
[[Page 117 STAT. 756]]
2001 to the same extent and in the same manner as the provision of such
Act to which such amendment relates.
TITLE II--GROWTH INCENTIVES FOR BUSINESS
SEC. 201. INCREASE AND EXTENSION OF BONUS DEPRECIATION.
(a) In General.--Section 168(k) (relating to <<NOTE: 26 USC
168.>> special allowance for certain property acquired after September
10, 2001, and before September 11, 2004) is amended by adding at the end
the following new paragraph:
``(4) 50-percent bonus depreciation for certain property.--
``(A) In general.--In the case of 50-percent bonus
depreciation property--
``(i) paragraph
(1)(A) <<NOTE: Applicability.>> shall be applied
by substituting `50 percent' for `30 percent', and
``(ii) except as provided in paragraph (2)(C),
such property shall be treated as qualified
property for purposes of this subsection.
``(B) 50-percent bonus depreciation property.--For
purposes of this subsection, the term `50-percent bonus
depreciation property' means property described in
paragraph (2)(A)(i)--
``(i) the original use of which commences with
the taxpayer after May 5, 2003,
``(ii) which is acquired by the taxpayer after
May 5, 2003, and before January 1, 2005, but only
if no written binding contract for the acquisition
was in effect before May 6, 2003, and
``(iii) which is placed in service by the
taxpayer before January 1, 2005, or, in the case
of property described in paragraph (2)(B) (as
modified by subparagraph (C) of this paragraph),
before January 1, 2006.
``(C) Special rules.--
Rules <<NOTE: Applicability.>> similar to the rules of
subparagraphs (B) and (D) of paragraph (2) shall apply
for purposes of this paragraph; except that references
to September 10, 2001, shall be treated as references to
May 5, 2003.
``(D) Automobiles.--Paragraph
(2)(E) <<NOTE: Applicability.>> shall be applied by
substituting `$7,650' for `$4,600' in the case of 50-
percent bonus depreciation property.
``(E) Election of 30-percent bonus.--If a taxpayer
makes an election under this subparagraph with respect
to any class of property for any taxable year,
subparagraph (A)(i) shall not apply to all property in
such class placed in service during such taxable
year.''.
(b) Extension of Certain Dates for 30-Percent Bonus Depreciation
Property.--
(1) Portion of basis taken into account.--
(A) Subparagraphs (B)(ii) and (D)(i) of section
168(k)(2) are each amended by striking ``September 11,
2004'' each place it appears in the text and inserting
``January 1, 2005''.
[[Page 117 STAT. 757]]
(B) Clause (ii) <<NOTE: 26 USC 168.>> of section
168(k)(2)(B) is amended by striking ``pre-september 11,
2004'' in the heading and inserting ``pre-january 1,
2005''.
(2) Acquisition date.--Clause (iii) of section 168(k)(2)(A)
is amended by striking ``September 11, 2004'' each place it
appears and inserting ``January 1, 2005''.
(3) Election.--Clause (iii) <<NOTE: Applicability.>> of
section 168(k)(2)(C) is amended by adding at the end the
following: ``The preceding sentence shall be applied separately
with respect to property treated as qualified property by
paragraph (4) and other qualified property.''.
(c) Conforming Amendments.--
(1) The subsection heading for section 168(k) is amended by
striking ``September 11, 2004'' and inserting ``January 1,
2005''.
(2) The heading for clause (i) of section 1400L(b)(2)(C) is
amended by striking ``30-percent additional allowance property''
and inserting ``Bonus depreciation property under section
168(k)''.
(d) Effective Date.--The <<NOTE: Applicability. 26 USC 168
note.>> amendments made by this section shall apply to taxable years
ending after May 5, 2003.
SEC. 202. INCREASED EXPENSING FOR SMALL BUSINESS.
(a) In General.--Paragraph (1) of section 179(b) (relating to dollar
limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000 ($100,000 in the case of taxable years
beginning after 2002 and before 2006).''.
(b) Increase in Qualifying Investment at Which Phaseout Begins.--
Paragraph (2) of section 179(b) (relating to reduction in limitation) is
amended by inserting ``($400,000 in the case of taxable years beginning
after 2002 and before 2006)'' after ``$200,000''.
(c) Off-the-Shelf Computer Software.--Paragraph (1) of section
179(d) (defining section 179 property) is amended to read as follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property (to which section 168
applies), or
``(ii) computer software (as defined in
section 197(e)(3)(B)) which is described in
section 197(e)(3)(A)(i), to which section 167
applies, and which is placed in service in a
taxable year beginning after 2002 and before 2006,
``(B) which is section 1245 property (as defined in
section 1245(a)(3)), and
``(C) which is acquired by purchase for use in the
active conduct of a trade or business.
Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating
units.''.
(d) Adjustment of Dollar Limit and Phaseout Threshold for
Inflation.--Subsection (b) of section 179 (relating to limitations) is
amended by adding at the end the following new paragraph:
``(5) Inflation adjustments.--
[[Page 117 STAT. 758]]
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2003 and before 2006,
the $100,000 and $400,000 amounts in paragraphs (1) and
(2) shall each be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year in which the taxable year begins, by
substituting `calendar year 2002' for `calendar
year 1992' in subparagraph (B) thereof.
``(B) Rounding.--
``(i) Dollar limitation.--If the amount in
paragraph (1) as increased under subparagraph (A)
is not a multiple of $1,000, such amount shall be
rounded to the nearest multiple of $1,000.
``(ii) Phaseout amount.--If the amount in
paragraph (2) as increased under subparagraph (A)
is not a multiple of $10,000, such amount shall be
rounded to the nearest multiple of $10,000.''.
(e) Revocation of Election.--Paragraph (2) <<NOTE: 26 USC 179.>> of
section 179(c) (relating to election irrevocable) is amended by adding
at the end the following new sentence: ``Any such election or
specification with respect to any taxable year beginning after 2002 and
before 2006 may be revoked by the taxpayer with respect to any property,
and such revocation, once made, shall be irrevocable.''.
(f) Effective Date.--The <<NOTE: Applicability. 26 USC 179
note.>> amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
TITLE III--REDUCTION IN TAXES ON DIVIDENDS AND CAPITAL GAINS
SEC. 301. REDUCTION IN CAPITAL GAINS RATES FOR INDIVIDUALS; REPEAL OF 5-
YEAR HOLDING PERIOD REQUIREMENT.
(a) In General.--
(1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by
striking ``10 percent'' and inserting ``5 percent (0 percent in
the case of taxable years beginning after 2007)''.
(2) The following sections are each amended by striking ``20
percent'' and inserting ``15 percent'':
(A) Section 1(h)(1)(C).
(B) Section 55(b)(3)(C).
(C) Section 1445(e)(1).
(D) The second sentence of section 7518(g)(6)(A).
(E) The second sentence of section 607(h)(6)(A) of
the Merchant <<NOTE: 46 USC app. 1177.>> Marine Act,
1936.
(b) Conforming Amendments.--
(1) Section 1(h) is amended--
(A) by striking paragraphs (2) and (9),
(B) by redesignating paragraphs (3) through (8) as
paragraphs (2) through (7), respectively, and
(C) by redesignating paragraphs (10), (11), and (12)
as paragraphs (8), (9), and (10), respectively.
(2) Paragraph (3) of section 55(b) is amended by striking
``In the case of taxable years beginning after December 31,
2000, rules similar to the rules of section 1(h)(2) shall apply
for purposes of subparagraphs (B) and (C).''.
[[Page 117 STAT. 759]]
(3) Paragraph (7) <<NOTE: 26 USC 57.>> of section 57(a) is
amended--
(A) by striking ``42 percent'' the first place it
appears and inserting ``7 percent'', and
(B) by striking the last sentence.
(c) Transitional Rules <<NOTE: 26 USC 1 note.>> for Taxable Years
Which Include May 6, 2003.--For purposes of applying section 1(h) of the
Internal Revenue Code of 1986 in the case of a taxable year which
includes May 6, 2003--
(1) The amount of tax determined under subparagraph (B) of
section 1(h)(1) of such Code shall be the sum of--
(A) 5 percent of the lesser of--
(i) the net capital gain determined by taking
into account only gain or loss properly taken into
account for the portion of the taxable year on or
after May 6, 2003 (determined without regard to
collectibles gain or loss, gain described in
section 1(h)(6)(A)(i) of such Code, and section
1202 gain), or
(ii) the amount on which a tax is determined
under such subparagraph (without regard to this
subsection),
(B) 8 percent of the lesser of--
(i) the qualified 5-year gain (as defined in
section 1(h)(9) of the Internal Revenue Code of
1986, as in effect on the day before the date of
the enactment of this Act) properly taken into
account for the portion of the taxable year before
May 6, 2003, or
(ii) the excess (if any) of--
(I) the amount on which a tax is
determined under such subparagraph
(without regard to this subsection),
over
(II) the amount on which a tax is
determined under subparagraph (A), plus
(C) 10 percent of the excess (if any) of--
(i) the amount on which a tax is determined
under such subparagraph (without regard to this
subsection), over
(ii) the sum of the amounts on which a tax is
determined under subparagraphs (A) and (B).
(2) The amount of tax determined under subparagraph (C) of
section (1)(h)(1) of such Code shall be the sum of--
(A) 15 percent of the lesser of--
(i) the excess (if any) of the amount of net
capital gain determined under subparagraph (A)(i)
of paragraph (1) of this subsection over the
amount on which a tax is determined under
subparagraph (A) of paragraph (1) of this
subsection, or
(ii) the amount on which a tax is determined
under such subparagraph (C) (without regard to
this subsection), plus
(B) 20 percent of the excess (if any) of--
(i) the amount on which a tax is determined
under such subparagraph (C) (without regard to
this subsection), over
(ii) the amount on which a tax is determined
under subparagraph (A) of this paragraph.
(3) For <<NOTE: Applicability.>> purposes of applying
section 55(b)(3) of such Code, rules similar to the rules of
paragraphs (1) and (2) of this subsection shall apply.
[[Page 117 STAT. 760]]
(4) In applying this subsection with respect to any pass-
thru entity, the determination of when gains and losses are
properly taken into account shall be made at the entity level.
(5) For purposes of applying section 1(h)(11) of such Code,
as added by section 302 of this Act, to this subsection,
dividends which are qualified dividend income shall be treated
as gain properly taken into account for the portion of the
taxable year on or after May 6, 2003.
(6) Terms used in this subsection which are also used in
section 1(h) of such Code shall have the respective meanings
that such terms have in such section.
(d) Effective <<NOTE: Applicability. 26 USC 1 note.>> Dates.--
(1) In general.--Except as otherwise provided by this
subsection, the amendments made by this section shall apply to
taxable years ending on or after May 6, 2003.
(2) Withholding.--The amendment made by subsection (a)(2)(C)
shall apply to amounts paid after the date of the enactment of
this Act.
(3) Small business stock.--The amendments made by subsection
(b)(3) shall apply to dispositions on or after May 6, 2003.
SEC. 302. DIVIDENDS OF INDIVIDUALS TAXED AT CAPITAL GAIN RATES.
(a) In General.--Section <<NOTE: 26 USC 1.>> 1(h) (relating to
maximum capital gains rate), as amended by section 301, is amended by
adding at the end the following new paragraph:
``(11) Dividends taxed as net capital gain.--
``(A) In general.--For purposes of this subsection,
the term `net capital gain' means net capital gain
(determined without regard to this paragraph) increased
by qualified dividend income.
``(B) Qualified dividend income.--For purposes of
this paragraph--
``(i) In general.--The term `qualified
dividend income' means dividends received during
the taxable year from--
``(I) domestic corporations, and
``(II) qualified foreign
corporations.
``(ii) Certain dividends excluded.--Such term
shall not include--
``(I) any dividend from a
corporation which for the taxable year
of the corporation in which the
distribution is made, or the preceding
taxable year, is a corporation exempt
from tax under section 501 or 521,
``(II) any amount allowed as a
deduction under section 591 (relating to
deduction for dividends paid by mutual
savings banks, etc.), and
``(III) any dividend described in
section 404(k).
``(iii) Coordination with section 246(c).--
Such term shall not include any dividend on any
share of stock--
``(I) with respect to which the
holding period requirements of section
246(c) are not met (determined by
substituting in section 246(c)(1) `60
days' for `45 days' each place it
appears and by substituting `120-day
period' for `90-day period'), or
[[Page 117 STAT. 761]]
``(II) to the extent that the
taxpayer is under an obligation (whether
pursuant to a short sale or otherwise)
to make related payments with respect to
positions in substantially similar or
related property.
``(C) Qualified foreign corporations.--
``(i) In general.--Except as otherwise
provided in this paragraph, the term `qualified
foreign corporation' means any foreign corporation
if--
``(I) such corporation is
incorporated in a possession of the
United States, or
``(II) such corporation is eligible
for benefits of a comprehensive income
tax treaty with the United States which
the Secretary determines is satisfactory
for purposes of this paragraph and which
includes an exchange of information
program.
``(ii) Dividends on stock readily tradable on
united states securities market.--A foreign
corporation not otherwise treated as a qualified
foreign corporation under clause (i) shall be so
treated with respect to any dividend paid by such
corporation if the stock with respect to which
such dividend is paid is readily tradable on an
established securities market in the United
States.
``(iii) Exclusion of dividends of certain
foreign corporations.--Such term shall not include
any foreign corporation which for the taxable year
of the corporation in which the dividend was paid,
or the preceding taxable year, is a foreign
personal holding company (as defined in section
552), a foreign investment company (as defined in
section 1246(b)), or a passive foreign investment
company (as defined in section 1297).
``(iv) Coordination
with <<NOTE: Applicability.>> foreign tax credit
limitation.--Rules similar to the rules of section
904(b)(2)(B) shall apply with respect to the
dividend rate differential under this paragraph.
``(D) Special rules.--
``(i) Amounts taken into account as investment
income.--Qualified dividend income shall not
include any amount which the taxpayer takes into
account as investment income under section
163(d)(4)(B).
``(ii) Extraordinary dividends.--If an
individual receives, with respect to any share of
stock, qualified dividend income from 1 or more
dividends which are extraordinary dividends
(within the meaning of section 1059(c)), any loss
on the sale or exchange of such share shall, to
the extent of such dividends, be treated as long-
term capital loss.
``(iii) Treatment of dividends from regulated
investment companies and real estate investment
trusts.--A dividend received from a regulated
investment company or a real estate investment
trust shall be subject to the limitations
prescribed in sections 854 and 857.''.
[[Page 117 STAT. 762]]
(b) Exclusion of Dividends From Investment Income.--Subparagraph (B)
of <<NOTE: 26 USC 163.>> section 163(d)(4) (defining net investment
income) is amended by adding at the end the following flush sentence:
``Such term shall include qualified dividend income (as
defined in section 1(h)(11)(B)) only to the extent the
taxpayer elects to treat such income as investment
income for purposes of this subsection.''.
(c) Treatment of Dividends From Regulated Investment Companies.--
(1) Subsection (a) of section 854 (relating to dividends
received from regulated investment companies) is amended by
inserting ``section 1(h)(11) (relating to maximum rate of tax on
dividends) and'' after ``For purposes of''.
(2) Paragraph (1) of section 854(b) (relating to other
dividends) is amended by redesignating subparagraph (B) as
subparagraph (C) and by inserting after subparagraph (A) the
following new subparagraph:
``(B) Maximum rate under section 1(h).--
``(i) In general.--
If <<NOTE: Applicability.>> the aggregate
dividends received by a regulated investment
company during any taxable year are less than 95
percent of its gross income, then, in computing
the maximum rate under section 1(h)(11), rules
similar to the rules of subparagraph (A) shall
apply.
``(ii) Gross income.--For purposes of clause
(i), in the case of 1 or more sales or other
dispositions of stock or securities, the term
`gross income' includes only the excess of--
``(I) the net short-term capital
gain from such sales or dispositions,
over
``(II) the net long-term capital
loss from such sales or dispositions.
``(iii) Dividends from real estate investment
trusts.--For purposes of clause (i)--
``(I) paragraph (3)(B)(ii) shall not
apply, and
``(II) in the case of a distribution
from a trust described in such
paragraph, the amount of such
distribution which is a dividend shall
be subject to the limitations under
section 857(c).
``(iv) Dividends from qualified foreign
corporations.--For purposes of clause (i),
dividends received from qualified foreign
corporations (as defined in section 1(h)(11))
shall also be taken into account in computing
aggregate dividends received.''.
(3) Subparagraph (C) of section 854(b)(1), as redesignated
by paragraph (2), is amended by striking ``subparagraph (A)''
and inserting ``subparagraph (A) or (B)''.
(4) Paragraph (2) of section 854(b) is amended by inserting
``the maximum rate under section 1(h)(11) and'' after ``for
purposes of''.
(5) Subsection (b) of section 854 is amended by adding at
the end the following new paragraph:
``(5) Coordination with section 1(h)(11).--For purposes of
paragraph (1)(B), an amount shall be treated as a dividend only
if the amount is qualified dividend income (within the meaning
of section 1(h)(11)(B)).''.
[[Page 117 STAT. 763]]
(d) Treatment of Dividends Received From Real Estate Investment
Trusts.--Section 857(c) (relating <<NOTE: 26 USC 857.>> to restrictions
applicable to dividends received from real estate investment trusts) is
amended to read as follows:
``(c) Restrictions Applicable to Dividends Received From Real Estate
Investment Trusts.--
``(1) Section 243.--For purposes of section 243 (relating to
deductions for dividends received by corporations), a dividend
received from a real estate investment trust which meets the
requirements of this part shall not be considered a dividend.
``(2) Section 1(h)(11).--For purposes of section 1(h)(11)
(relating to maximum rate of tax on dividends)--
``(A) <<NOTE: Applicability.>> rules similar to the
rules of subparagraphs (B) and (C) of section 854(b)(1)
shall apply to dividends received from a real estate
investment trust which meets the requirements of this
part, and
``(B) for purposes of such rules, such a trust shall
be treated as receiving qualified dividend income during
any taxable year in an amount equal to the sum of--
``(i) the excess of real estate investment
trust taxable income computed under section
857(b)(2) for the preceding taxable year over the
tax payable by the trust under section 857(b)(1)
for such preceding taxable year, and
``(ii) the excess of the income subject to tax
by reason of the application of the regulations
under section 337(d) for the preceding taxable
year over the tax payable by the trust on such
income for such preceding taxable year.''.
(e) Conforming Amendments.--
(1) Paragraph (3) of section 1(h), as redesignated by
section 301, is amended to read as follows:
``(3) Adjusted net capital gain.--For purposes of this
subsection, the term `adjusted net capital gain' means the sum
of--
``(A) net capital gain (determined without regard to
paragraph (11)) reduced (but not below zero) by the sum
of--
``(i) unrecaptured section 1250 gain, and
``(ii) 28-percent rate gain, plus
``(B) qualified dividend income (as defined in
paragraph (11)).''.
(2) Subsection (f) of section 301 is amended adding at the
end the following new paragraph:
``(4) For taxation of dividends received by individuals at
capital gain rates, see section 1(h)(11).''.
(3) Paragraph (1) of section 306(a) is amended by adding at
the end the following new subparagraph:
``(D) Treatment as dividend.--For purposes of
section 1(h)(11) and such other provisions as the
Secretary may specify, any amount treated as ordinary
income under this paragraph shall be treated as a
dividend received from the corporation.''.
(4)(A) Subpart C of part II of subchapter C of chapter 1
(relating to collapsible <<NOTE: 26 USC 341.>> corporations) is
repealed.
(B)(i) Section 338(h) is amended by striking paragraph (14).
[[Page 117 STAT. 764]]
(ii) Sections 467(c)(5)(C), 1255(b)(2), and
1257(d) <<NOTE: 26 USC 467, 1255, 1257.>> are each amended by
striking ``, 341(e)(12),''.
(iii) The table of subparts for part II of subchapter C of
chapter 1 is amended by striking the item related to subpart C.
(5) Section 531 is amended by striking ``equal to'' and all
that follows and inserting ``equal to 15 percent of the
accumulated taxable income.''.
(6) Section 541 is amended by striking ``equal to'' and all
that follows and inserting ``equal to 15 percent of the
undistributed personal holding company income.''.
(7) Section 584(c) is amended by adding at the end the
following new flush sentence:
``The proportionate share of each participant in the amount of dividends
received by the common trust fund and to which section 1(h)(11) applies
shall be considered for purposes of such paragraph as having been
received by such participant.''.
(8) Paragraph (5) of section 702(a) is amended to read as
follows:
``(5) dividends with respect to which section 1(h)(11) or
part VIII of subchapter B applies,''.
(f) Effective <<NOTE: Applicability. 26 USC 1 note.>> Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Regulated investment companies and real estate
investment trusts.--In the case of a regulated investment
company or a real estate investment trust, the amendments made
by this section shall apply to taxable years ending after
December 31, 2002; except that dividends received by such a
company or trust on or before such date shall not be treated as
qualified dividend income (as defined in section 1(h)(11)(B) of
the Internal Revenue Code of 1986, as added by this Act).
SEC. 303. <<NOTE: 26 USC 1 note.>> SUNSET OF TITLE.
All provisions of, and amendments made by, this title shall not
apply to taxable years beginning after December 31, 2008, and the
Internal Revenue Code of 1986 shall be applied and administered to such
years as if such provisions and amendments had never been enacted.
TITLE IV--TEMPORARY STATE FISCAL RELIEF
SEC. 401. <<NOTE: 42 USC 1396d note.>> TEMPORARY STATE FISCAL RELIEF.
(a) $10,000,000,000 for a Temporary Increase of the Medicaid FMAP.--
(1) Permitting maintenance of fiscal year 2002 fmap for last
2 calendar quarters of fiscal year 2003.--Subject to paragraph
(5), if the FMAP determined without regard to this subsection
for a State for fiscal year 2003 is less than the FMAP as so
determined for fiscal year 2002, the FMAP for the State for
fiscal year 2002 shall be substituted for the State's FMAP for
the third and fourth calendar quarters of fiscal year 2003,
before the application of this subsection.
[[Page 117 STAT. 765]]
(2) Permitting maintenance of fiscal year 2003 fmap for
first 3 quarters of fiscal year 2004.--Subject to paragraph (5),
if the FMAP determined without regard to this subsection for a
State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP for
the first, second, and third calendar quarters of fiscal year
2004, before the application of this subsection.
(3) General 2.95 percentage points increase for last 2
calendar quarters of fiscal year 2003 and first 3 calendar
quarters of fiscal year 2004.--Subject to paragraphs (5), (6),
and (7), for each State for the third and fourth calendar
quarters of fiscal year 2003 and for the first, second, and
third calendar quarters of fiscal year 2004, the FMAP (taking
into account the application of paragraphs (1) and (2)) shall be
increased by 2.95 percentage points.
(4) Increase in cap on medicaid payments to territories.--
Subject to paragraphs (6) and (7), with respect to the third and
fourth calendar quarters of fiscal year 2003 and the first,
second, and third calendar quarters of fiscal year 2004, the
amounts otherwise determined for Puerto Rico, the Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa
under subsections (f) and (g) of section 1108 of the Social
Security Act (42 U.S.C. 1308) shall each be increased by an
amount equal to 5.90 percent of such amounts.
(5) Scope of application.--The increases in the FMAP for a
State under this subsection shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(A) disproportionate share hospital payments
described in section 1923 of such Act (42 U.S.C. 1396r-
4);
(B) payments under title IV or XXI of such Act (42
U.S.C. 601 et seq. and 1397aa et seq.); or
(C) any payments under XIX of such Act that are
based on the enhanced FMAP described in section 2105(b)
of such Act (42 U.S.C. 1397ee(b)).
(6) State eligibility.--
(A) In general.--Subject to subparagraph (B), a
State is eligible for an increase in its FMAP under
paragraph (3) or an increase in a cap amount under
paragraph (4) only if the eligibility under its State
plan under title XIX of the Social Security Act
(including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or
waiver) as in effect on September 2, 2003.
(B) State reinstatement of eligibility permitted.--A
State that has restricted eligibility under its State
plan under title XIX of the Social Security Act
(including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)) after September 2,
2003, is eligible for an increase in its FMAP under
paragraph (3) or an increase in a cap amount under
paragraph (4) in the first calendar quarter (and
subsequent calendar quarters) in which the State has
reinstated eligibility that is no more restrictive than
the eligibility under such plan (or waiver) as in effect
on September 2, 2003.
[[Page 117 STAT. 766]]
(C) Rule of construction.--Nothing in subparagraph
(A) or (B) shall be construed as affecting a State's
flexibility with respect to benefits offered under the
State medicaid program under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.) (including any
waiver under such title or under section 1115 of such
Act (42 U.S.C. 1315)).
(7) Requirement for certain states.--In the case of a State
that requires political subdivisions within the State to
contribute toward the non-Federal share of expenditures under
the State medicaid plan required under section 1902(a)(2) of the
Social Security Act (42 U.S.C. 1396a(a)(2)), the State shall not
require that such political subdivisions pay a greater
percentage of the non-Federal share of such expenditures for the
third and fourth calendar quarters of fiscal year 2003 and the
first, second and third calendar quarters of fiscal year 2004,
than the percentage that was required by the State under such
plan on April 1, 2003, prior to application of this subsection.
(8) Definitions.--In this subsection:
(A) FMAP.--The term ``FMAP'' means the Federal
medical assistance percentage, as defined in section
1905(b) of the Social Security Act (42 U.S.C. 1396d(b)).
(B) State.--The term ``State'' has the meaning given
such term for purposes of title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.).
(9) Repeal.--Effective <<NOTE: Effective date.>> as of
October 1, 2004, this subsection is repealed.
(b) $10,000,000,000 to Assist States in Providing Government
Services.--The Social Security Act (42 U.S.C. 301 et seq.) is amended by
inserting after title V the following:
``TITLE VI--TEMPORARY STATE FISCAL RELIEF
``SEC. 601. <<NOTE: 42 USC 801.>> TEMPORARY STATE FISCAL RELIEF.
``(a) Appropriation.--There is authorized to be appropriated and is
appropriated for making payments to States under this section,
$5,000,000,000 for each of fiscal years 2003 and 2004.
``(b) <<NOTE: Deadlines.>> Payments.--
``(1) Fiscal year 2003.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, not later than the later of the date that is 45
days after the date of enactment of this Act or the date that a
State provides the certification required by subsection (e) for
fiscal year 2003, pay each State the amount determined for the
State for fiscal year 2003 under subsection (c).
``(2) Fiscal year 2004.--From the amount appropriated under
subsection (a) for fiscal year 2004, the Secretary of the
Treasury shall, not later than the later of October 1, 2003, or
the date that a State provides the certification required by
subsection (e) for fiscal year 2004, pay each State the amount
determined for the State for fiscal year 2004 under subsection
(c).
``(c) Payments Based on Population.--
``(1) In general.--Subject to paragraph (2), the amount
appropriated under subsection (a) for each of fiscal years 2003
[[Page 117 STAT. 767]]
and 2004 shall be used to pay each State an amount equal to the
relative population proportion amount described in paragraph (3)
for such fiscal year.
``(2) Minimum payment.--
``(A) In general.--No State shall receive a payment
under this section for a fiscal year that is less than--
``(i) in the case of 1 of the 50 States or the
District of Columbia, \1/2\ of 1 percent of the
amount appropriated for such fiscal year under
subsection (a); and
``(ii) in the case of the Commonwealth of
Puerto Rico, the United States Virgin Islands,
Guam, the Commonwealth of the Northern Mariana
Islands, or American Samoa, \1/10\ of 1 percent of
the amount appropriated for such fiscal year under
subsection (a).
``(B) Pro rata adjustments.--The Secretary of the
Treasury shall adjust on a pro rata basis the amount of
the payments to States determined under this section
without regard to this subparagraph to the extent
necessary to comply with the requirements of
subparagraph (A).
``(3) Relative population proportion amount.--The relative
population proportion amount described in this paragraph is the
product of--
``(A) the amount described in subsection (a) for a
fiscal year; and
``(B) the relative State population proportion (as
defined in paragraph (4)).
``(4) Relative state population proportion defined.--For
purposes of paragraph (3)(B), the term `relative State
population proportion' means, with respect to a State, the
amount equal to the quotient of--
``(A) the population of the State (as reported in
the most recent decennial census); and
``(B) the total population of all States (as
reported in the most recent decennial census).
``(d) Use of Payment.--
``(1) In general.--Subject to paragraph (2), a State shall
use the funds provided under a payment made under this section
for a fiscal year to--
``(A) provide essential government services; or
``(B) cover the costs to the State of complying with
any Federal intergovernmental mandate (as defined in
section 421(5) of the Congressional Budget Act of 1974)
to the extent that the mandate applies to the State, and
the Federal Government has not provided funds to cover
the costs.
``(2) Limitation.--A State may only use funds provided under
a payment made under this section for types of expenditures
permitted under the most recently approved budget for the State.
``(e) Certification.--In order to receive a payment under this
section for a fiscal year, the State shall provide the Secretary of the
Treasury with a certification that the State's proposed uses of the
funds are consistent with subsection (d).
``(f) Definition of State.--In this section, the term `State' means
the 50 States, the District of Columbia, the Commonwealth of Puerto
Rico, the United States Virgin Islands, Guam, the
[[Page 117 STAT. 768]]
Commonwealth of the Northern Mariana Islands, and American Samoa.
``(g) Repeal.--Effective <<NOTE: Effective date.>> as of October 1,
2004, this title is repealed.''.
TITLE V--CORPORATE ESTIMATED TAX PAYMENTS FOR 2003
SEC. 501. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.
Notwithstanding section 6655 of the Internal Revenue Code of 1986,
25 percent of the amount of any required installment of corporate
estimated tax which is otherwise due in September 2003 shall not be due
until October 1, 2003.
Approved May 28, 2003.
LEGISLATIVE HISTORY--H.R. 2 (S. 2) (S. 1054):
---------------------------------------------------------------------------
HOUSE REPORTS: Nos. 108-94 (Comm. on Ways and Means) and 108-126
(Comm. of Conference).
CONGRESSIONAL RECORD, Vol. 149 (2003):
May 9, considered and passed House.
May 14, 15, considered and passed Senate, amended, in lieu
of S. 1054.
May 22, House agreed to conference report.
May 23, Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 39 (2003):
May 28, Presidential remarks.
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