HR 5126

110th CONGRESS
2d Session

H. R. 5126

To amend the Internal Revenue Code of 1986 to reduce individual income taxes by creating a new 5 percent rate of tax and to increase section 179 expensing for small businesses.

IN THE HOUSE OF REPRESENTATIVES

January 23, 2008

Mr. KNOLLENBERG introduced the following bill; which was referred to the Committee on Ways and Means

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A BILL

To amend the Internal Revenue Code of 1986 to reduce individual income taxes by creating a new 5 percent rate of tax and to increase section 179 expensing for small businesses.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the `Family Security and Small Business Stimulus Act of 2008'.

SEC. 2. INDIVIDUAL INCOME TAX RATE REDUCTION AFTER 2007.

(a) Rate Reduction-

(1) IN GENERAL- Subparagraph (A) of section 1(i)(1) of the Internal Revenue Code of 1986 (relating to tax imposed on individuals) is amended to read as follows:

`(A) IN GENERAL- In the case of taxable years beginning after December 31, 2007--

`(i) the rate of tax under subsections (a), (b), (c), and (d) on taxable income not over the initial bracket amount shall be 5 percent, and

`(ii) the 15 percent rate of tax shall apply only to taxable income over the initial bracket amount but not over the maximum dollar amount for the 15-percent rate bracket.'.

(2) CONFORMING AMENDMENTS-

(A) The heading for paragraph (1) of section 1(i) of such Code is amended by striking `10-percent' and inserting `5-percent'.

(B) Subparagraph (D) of section 1(i)(1) of such Code is amended to read as follows:

`(D) COORDINATION WITH ACCELERATION OF 5 PERCENT RATE BRACKET BENEFIT FOR 2008- This paragraph shall not apply to any taxable year to which section 6428 applies.'.

(3) 5-percent BRACKET MADE PERMANMENT- Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to paragraph (1) of section 1(i) of the Internal Revenue Code of 1986, as amended by this subsection.

(b) Advance Payment of 5 Percent Rate Bracket- Section 6428 of such Code is amended to read as follows:

`SEC. 6428. ACCELERATION OF 5 PERCENT INCOME TAX RATE BRACKET BENEFIT FOR 2008.

`(a) In General- In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by chapter 1 for the taxpayer's first taxable year beginning in 2008 an amount equal to 5 percent of so much of the taxpayer's taxable income as does not exceed the initial bracket amount (as defined in section 1(i)(1)(B)).

`(b) Credit Treated as Nonrefundable Personal Credit- For purposes of this title, the credit allowed under this section shall be treated as a credit allowable under subpart A of part IV of subchapter A of chapter 1.

`(c) Eligible Individual- For purposes of this section, the term `eligible individual' means any individual other than--

`(1) any estate or trust,

`(2) any nonresident alien individual, and

`(3) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins.

`(d) Coordination With Advance Refunds of Credit-

`(1) IN GENERAL- The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (e). 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 refund or credit made or allowed under subsection (e) with respect to a joint return, half of such refund or credit shall be treated as having been made or allowed to each individual filing such return.

`(e) Advance Refunds of Credit Based on Prior Year Data-

`(1) IN GENERAL- Each individual who was an eligible individual for such individual's first taxable year beginning in 2006 shall be treated as having made a payment against the tax imposed by chapter 1 for such first taxable year in an amount equal to the advance refund amount for such taxable year.

`(2) ADVANCE REFUND AMOUNT- For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such first taxable year if--

`(A) this section (other than subsections (b) and (d) and this subsection) had applied to such taxable year, and

`(B) the credit for such taxable year were not allowed to exceed the excess (if any) of--

`(i) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(ii) the sum of the credits allowable under part IV of subchapter A of chapter 1 (other than the credits allowable under subpart C thereof, relating to refundable credits).

`(3) TIMING OF PAYMENTS- In the case of any overpayment attributable to this subsection, 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 the date which is 30 days after the date of the enactment of this section. No refund or credit shall be made or allowed under this subsection after December 31, 2008.

`(4) NO INTEREST- No interest shall be allowed on any overpayment attributable to this subsection.'.

(c) Technical Amendment- The item relating to section 6428 in the table of sections for subchapter B of chapter 65 of such Code is amended to read as follows:

`Sec. 6428. Acceleration of 5 percent income tax rate bracket benefit for 2008.'.

(d) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

SEC. 3. INCREASE IN EXPENSING FOR SMALL BUSINESSES.

(a) $125,000 Limit Made Permanent; Temporary Increase to $375,000- Paragraph (1) of section 179(b) of the Internal Revenue Code of 1986 (relating to election to expense certain depreciable business assets) is amended by striking `$25,000 ($125,000 in the case of taxable years beginning after 2006 and before 2011)' and inserting `$125,000 ($375,000 in the case of taxable years beginning after 2007 and before 2010)'.

(b) Conforming Amendment- Subparagraph (A) of section 179(b)(5) of such Code is amended--

(1) by striking `and before 2011', and

(2) by adding at the end the following flush sentence:

`The preceding sentence shall not apply to the $500,000 amount for taxable years beginning after December 31, 2010.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

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