S.Amdt. 4615

1. Adds SEC. __. MAXIMUM 35 PERCENT RATE ON TRADE OR BUSINESS INCOME wherever appropriate

   Adds a section

   Inserted: SEC. __. MAXIMUM 35 PERCENT RATE ON TRADE OR BUSINESS INCOME.

   Inserted: (a) In General.--Section 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

   Inserted: "(j) Maximum Rate on Trade or Business Income.--

   Inserted: "(1) In general.--If, for any applicable taxable year, a taxpayer who is an individual (other than an estate or trust) has qualified trade or business income, then, in lieu of the tax imposed on the taxpayer by subsection (a), (b), (c), or (d), there is hereby imposed a tax equal to the lesser of--

   Inserted: "(A) the tax imposed by this section without regard to this subsection, or

   Inserted: "(B) a tax equal to the sum of--

   Inserted: "(i) a tax computed at the rates and in the manner as if this subsection had not been enacted on the greater of--

   Inserted: "(I) taxable income reduced by qualified trade or business income and any net capital gain, or

   Inserted: "(II) the amount of taxable income (reduced by any net capital gain) taxed at a rate below the highest rate of tax imposed by section 11(b) for such taxable year, plus

   Inserted: "(ii) a tax equal to the product of such highest rate of tax and the taxpayer's qualified trade or business income which was not taken into account under clause (i).

   Inserted: "(2) Coordination with rate on net capital gains.--If a taxpayer has qualified small business income for any applicable taxable year and also has a net capital gain for such taxable year--

   Inserted: "(A) this subsection shall not apply, and

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   Inserted: "(B) the tax computed under subsection (h)(1)(A) shall not exceed the amount determined under paragraph (1).

   Inserted: "(3) Qualified trade or business income.--For purposes of this subsection--

   Inserted: "(A) In general.--The term 'qualified trade or business income' means, with respect to any taxable year, an amount equal to the excess (if any) of--

   Inserted: "(i) the aggregate income from the actual conduct of a trade or business which--

   Inserted: "(I) is income from sources within the United States (within the meaning of section 861), and

   Inserted: "(II) is not passive income (as defined in section 904(d)(2)(B)), over

   Inserted: "(ii) the sum of--

   Inserted: "(I) the cost of goods sold that are allocable to such income, and

   Inserted: "(II) other expenses, losses, or deductions that are properly allocable to such income.

   Inserted: "(B) Capital gains and losses disregarded.--Items taken into account in determining net capital gain shall not be taken into account in determining qualified trade or business income.

   Inserted: "(4) Applicable taxable year.--For purposes of this subsection, the term 'applicable taxable year' means any taxable year of the taxpayer with respect to which any rate of tax under the applicable table contained in subsection (a), (b), (c), or (d) exceeds 35 percent.

   Inserted: "(5) Net capital gain.--For purposes of this subsection, the term 'net capital gain' has the meaning given such term by subsection (h).".

   Inserted: (b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2010.

   The amendment doesn't say where this goes; the clerk decides.

   Original wording

   At the appropriate place, insert the following:

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As printed