To amend the Internal Revenue Code of 1986 to repeal the alternative minimum tax.

March 9, 2005

Mr. ENGLISH of Pennsylvania (for himself, Mr. MCCRERY, Mr. HULSHOF, Mr. CULBERSON, Mr. SIMMONS, Mr. MCCAUL of Texas, Mr. SHAW, Mr. GILLMOR, Mr. KING of New York, Mr. FOSSELLA, Mr. HOSTETTLER, Mr. BAKER, Mr. PAUL, Mr. BEAUPREZ, Mr. NORWOOD, Ms. HART, Mr. SENSENBRENNER, and Mr. SAM JOHNSON of Texas) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to repeal the alternative minimum tax.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

(a) Short Title- This Act may be cited as the `Alternative Minimum Tax Repeal Act of 2005'.

(b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

SEC. 2. ALTERNATIVE MINIMUM TAX.

(a) In General- Part VI of subchapter A of chapter 1 (relating to alternative minimum tax) is hereby repealed.

(b) Use of Credit for Prior Year Minimum Tax Liability- Subsection (c) of section 53 is amended to read as follows:

`(c) Limitations- The credit allowable under subsection (a) for any taxable year shall not exceed 90 percent of the regular tax liability of the taxpayer for such taxable year reduced by the sum of the credits allowable under subparts A, B, D, E, and F of this part.'.

(c) Conforming Amendments-

(1) Subparagraph (B) of section 1(g)(7) (relating to election to claim certain unearned income of child on parent's return) is amended--

(A) by inserting `and' at the end of clause (i),

(B) by striking `and' at the end of clause (ii) and inserting a period, and

(C) by striking clause (iii).

(2) Subsection (d) of section 2 (relating to taxes imposed on nonresident aliens) is amended by striking `sections 1 and 55' and inserting `section 1'.

(3) Subsection (a) of section 5 (relating to cross references relating to tax on individuals) is amended by striking paragraph (4).

(4) Subsection (d) of section 11 (relating to taxes imposed on foreign corporations) is amended by striking `the taxes imposed by subsection (a) and section 55' and inserting `the tax imposed by subsection (a)'.

(5) Section 12 (relating to cross references relating to tax on corporations) is amended by striking paragraph (7).

(6) Subsection (b)(4) of section 23 (relating to adoption expenses) is amended by striking `plus the tax imposed by section 55'.

(7) Subsection (b)(3) of section 24 (relating to child tax credit) is amended by striking `plus the tax imposed by section 55'.

(8) Section 25(g)(1) (relating to limitation based on amount of tax) is amended by striking `plus the tax imposed by section 55'.

(9) Section 26 (relating to limitation based on tax liability; definition of tax liability) is amended--

(A) by amending subsection (a) to read as follows:

`(a) Limitation Based on Amount of Tax- The aggregate amount of credits allowed by this subpart (other than sections 23, 24, and 25B) for the taxable year shall not exceed the taxpayer's regular tax liability for the taxable year.',

(B) in subsection (b)(2), by striking subparagraph (A) and by redesignating subparagraphs (B) through (S) as subparagraphs (A) through (R), respectively, and

(C) by striking subsection (c).

(10) Paragraph (6) of section 29(b) (relating to credit for producing fuel from a nonconventional source) is amended striking `the excess' and all that follows and inserting `the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and section 27.'

(11) Paragraph (3) of section 30(b) (relating to credit for qualified electric vehicles) is amended by striking `the excess' and all that follows and inserting `the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27 and 29.'

(12) Subsection (c) of section 38 (relating to general business credit) is amended--

(A) by amending paragraph (1) to read as follows:

`(1) IN GENERAL- The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of--

`(A) the taxpayer's net regular tax liability, over

`(B) 25 percent of so much of the taxpayer's net regular tax liability as exceeds $25,000.

For purposes of the preceding sentence, the term `net regular tax liability' means the regular tax liability reduced by the sum of the credits allowable under subparts A and B of this part.',

(B) in paragraph (2)(A)(ii) by striking `credit--' and all that follows and inserting `credit, the limitation under paragraph (1) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the empowerment zone employment credit or the New York Liberty Zone business employee credit).',

(C) in paragraph (3)(A)(ii) by striking `credit--' and all that follows and inserting `credit, the limitation under paragraph (1) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the New York Liberty Zone business employee credit).',

(D) in paragraph (4)(A)(ii) by striking `credits--' and all that follows and inserting `credits, the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the specified credits).'.

(13) Section 40(g)(6)(B)(iii)(II) is amended by striking ` or for purposes of section 55'.

(14) Paragraph (4) of section 45A(d) (relating to Indian employment credit) is amended by striking `for purposes' and all that follows and inserting `for purposes of determining the amount of any credit allowable under this chapter.'.

(15) Subparagraph (B) of section 45D(g)(4) (relating to new markets tax credit) is amended by striking `or for purposes of section 55'.

(16) Subparagraph (B) of section 45F(d)(4) (relating to employer-provided child care credit) is amended by striking `or for purposes of section 55'.

(17) Subparagraph (B) of section 45H(g)(3) (relating to credit for production of low sulfur diesel fuel) is amended by striking `or for purposes of section 55'.

(18) Subsection (d) of section 53 (relating to credit for prior year minimum tax liability) is amended to read as follows:

`(d) Definitions- For purposes of this section--

`(1) NET MINIMUM TAX- The term `net minimum tax' means the tax imposed by section 55.

`(2) CREDIT NOT ALLOWED FOR EXCLUSION PREFERENCES-

`(A) ADJUSTED NET MINIMUM TAX- Except as provided in subparagraph (C), the adjusted net minimum tax for any taxable year is--

`(i) the amount of the net minimum tax for such taxable year, reduced by

`(ii) the amount which would be the net minimum tax for such taxable year if the only adjustments and items of tax preference taken into account were those specified in subparagraph (B) and if section 59(a)(2) did not apply.

`(B) SPECIFIED ITEMS- The following are specified in this subparagraph--

`(i) the adjustments provided for in subsection (b)(1) of section 56, and

`(ii) the items of tax preference described in paragraphs (1), (5) and (7) of section 57(a).

`(C) CREDIT ALLOWABLE FOR EXCLUSION PREFERENCES OF CORPORATIONS- In the case of a corporation, the adjusted net minimum tax for any taxable year is the amount of the net minimum tax for such year.

`(3) TREATMENT OF REFERENCES- For purposes of this subsection, references to sections 55, 56, 57, and 59 shall be treated as references to such sections as in effect on the day before the date of the enactment of the Alternative Minimum Tax Repeal Act of 2005.'.

(19) Subsection (b) of section 59A (relating to environmental tax) is amended by adding at the end the following:

`For purposes of this subsection, references to sections 55 and 56 shall be treated as references to such sections as in effect on the day before the date of the enactment of the Alternative Minimum Tax Repeal Act of 2005.'.

(20)(A) Paragraph (2) of section 148(b) (relating to higher yield investments) is amended by adding at the end the following new flush sentence:

`Such term shall not include any tax-exempt bond.'

(B) Paragraph (3) of section 148(b) is hereby repealed.

(21) Subparagraph (B) of section 149(g)(3) (relating to hedge bonds) is amended--

(A) in the heading, by striking `bonds not subject to minimum tax- ' and inserting `bonds- ', and

(B) by striking all that follows `invested in bonds' and inserting `the interest on which is not includible in gross income under section 103.'

(22) Subsection (j) of section 168 (relating to accelerated cost recovery system) is amended by striking paragraph (3).

(23) Paragraph (2) of section 168(k) (relating to special allowance for certain property acquired after September 10, 2001, and before January 1, 2005) is amended by striking subparagraph (G).

(24) Section 173 (relating to circulation expenditures) is amended by striking `(a) General Rule- ' and by striking subsection (b).

(25) Subsection (f) of section 174 (relating to research and experimental expenditures) is amended to read as follows:

`(f) Cross Reference- For adjustments to basis of property for amounts allowed as deductions as deferred expenses under subsection (b), see section 1016(a)(14).'.

(26) Section 199(d) (relating to income attributable to domestic production activities) is amended by striking paragraph (6) and redesignating paragraph (7) as paragraph (6).

(27) Subsection (c) of section 263 (relating to capital expenditures) is amended by striking `59(e) or'.

(28) Subsection (c) of section 263A (relating to capitalization and inclusion in inventory costs of certain expenses) is amended by striking paragraph (6).

(29) Section 382(l) (relating to limitation on net operating loss carryforwards and certain built-in losses following ownership change) is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph (7).

(30) Section 443 (relating to returns for a period of less than 12 months) is amended by striking subsection (d) and by redesignating subsection (e) as subsection (d).

(31) Section 616 (relating to development expenditures) is amended by striking subsection (e).

(32) Section 617 (relating to deduction and recapture of certain mining exploration expenditures) is amended by striking subsection (i).

(33) Subsection (c) of section 641 (relating to imposition of tax) is amended--

(A) in paragraph (2) by striking subparagraph (B) and redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and

(B) in paragraph (3), by striking `paragraph (2)(C)' and inserting `paragraph (2)(B)'.

(34) Subsections (b) and (c) of section 666 (relating to accumulation distribution allocated to preceding years) are each amended by striking `(other than the tax imposed by section 55)'.

(35)(A) Subsection (a) of section 772 (relating to simplified flow-through) is amended by striking paragraph (5) and redesignating paragraphs (6), (7), (8), (9), (10), and (11) as paragraphs (5), (6), (7), (8), (9), and (10), respectively.

(B) Subsection (c) of section 772 is amended--

(i) in paragraph (2), by striking `paragraphs (3)(A) and (5)(A)' and inserting `paragraph (3)(A)',

(ii) by striking paragraph (5), and

(iii) by redesignating paragraph (6) as paragraph (5), and in that paragraph by striking `paragraph (6) of subsection (a)' and inserting `paragraph (5) of subsection (a)'.

(C) Subsection (d) of section 772 is amended--

(i) by striking paragraph (3) and redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, and

(ii) in subparagraph (A) of paragraph (3), as so redesignated, by striking `subsection (a)(11)' and inserting `subsection (a)(10)'.

(36) Paragraph (2) of section 815(c) (relating to distributions to shareholders from pre-1984 policyholders surplus account) is amended by striking the last sentence.

(37) Section 847 (relating to special estimated tax payments) is amended--

(A) in paragraph (9), by striking the last sentence;

(B) in paragraph (10), by inserting `and' at the end of subparagraph (A), by striking subparagraph (B), and by redesignating subparagraph (C) as subparagraph (B).

(38) Section 848 (relating to capitalization of certain policy acquisition expenses) is amended by striking subsection (i) and by redesignating subsection (j) as subsection (i).

(39) Subsection (a) of section 860E (relating to treatment of income in excess of daily accruals on residual interests) is amended by striking paragraph (4).

(40) Section 860J (relating to non-FASIT losses not to offset certain FASIT inclusions) is amended by striking subsection (c) and redesignating subsection (d) as subsection (c).

(41) Paragraph (1) of section 871(b) (relating to tax on nonresident alien individuals) is amended by striking `or 55'.

(42) Subsection (b) of section 877 (relating to expatriation to avoid tax) is amended by striking `or 55'.

(43) Paragraph (1) of section 882(a) (relating to tax on income of foreign corporations connected with United States business) is amended by striking `55,'.

(44) Subsection (a) of section 897 (relating to disposition of investment in United States real property) is amended to read as follows:

`(a) Treatment as Effectively Connected With United States Trade or Business- For purposes of this title, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest shall be taken into account--

`(1) in the case of a nonresident alien individual, under section 871(b)(1), or

`(2) in the case of a foreign corporation, under section 882(a)(1),

as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business.'.

(45) Subsection (k) of section 904 (relating to limitation on credit) is amended to read as follows:

`(k) Cross Reference- For increase of limitation under subsection (a) for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a United States shareholder with respect to a controlled foreign corporation, see section 960(b).'.

(46) Paragraph (1) of section 962(a) (relating to election by individuals to be subject to tax at corporate rates) is amended--

(A) by striking `sections 1 and 55' and inserting `section 1', and

(B) by striking `sections 11 and 55' and inserting `section 11'.

(47) Paragraph (1) of section 965(e) (relating to temporary dividends received deduction) is amended by striking `determining--' and all that follows and inserting `determining the amount of any credit allowable under this chapter.'.

(48) Paragraph (20) of section 1016(a) (relating to adjustments to basis) is amended by inserting `, as in effect on the day before the date of the enactment of the Alternative Minimum Tax Repeal Act of 2005' after `preferences)'.

(49) Paragraph (4) of section 1260(b) (relating to gains from constructive ownership transactions) is amended by striking `for purposes' and all that follows and inserting `for purposes of determining the amount of any credit allowable under this chapter.'

(50) Paragraph (1) of section 1397E(c) (relating to credit to holders of qualified zone academy bonds) is amended by striking `plus the tax imposed by section 55'.

(51) Subsection (f) of section 1400I (relating to commercial revitalization deduction) is amended by striking paragraph (4).

(52) Paragraph (2) of section 1400L(b) (relating to tax benefits for New York Liberty Zone) is amended by striking subparagraph (E).

(53) Subsection (a) of section 1561 (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) is amended by striking the last sentence.

(54) Subparagraph (B) of section 6015(d)(2) (relating to relief from joint and several liability on joint return) is amended by striking `or 55'.

(55) Subparagraph (A) of section 6425(c)(1) (defining income tax liability) is amended--

(A) by inserting `plus' at the end of clause (i), and

(B) by striking clause (ii) and redesignating clause (iii) as clause (ii).

(56) Section 6654(d)(2) (relating to failure by individual to pay estimated income tax) is amended--

(A) in clause (i) of subparagraph (B), by striking `, alternative minimum taxable income,', and

(B) in clause (i) of subparagraph (C), by striking `, alternative minimum taxable income,'.

(57) Subparagraph (A) of section 6655(g)(1) (relating to failure by corporation to pay estimated income tax) is amended--

(A) by striking clause (ii), and

(B) by redesignating clauses (iii) and (iv) as clauses (ii) and (iii), respectively.

(58) Subparagraph (C) of section 6662(e)(3) (relating to imposition of accuracy-related penalty) is amended by inserting `, as in effect on the day before the date of the enactment of the Alternative Minimum Tax Repeal Act of 2005' after `55(c)'.

(59) Paragraph (3) of section 7874(e) (relating to rules relating to expatriated entities and their foreign parents) is amended to read as follows:

`(3) COORDINATION WITH SECTION 172- Rules similar to the rules of section 860E(a)(3) shall apply for purposes of subsection (a). '.

(d) Clerical Amendment- The table of parts for subchapter A of chapter 1 is amended by striking the item relating to part VI.

(e) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

END