To amend the Internal Revenue Code of 1986 to modify the maximum capital gains tax rate, to provide a partial exclusion for interest received by individuals, to provide inflation adjustments for certain tax benefits, and for other purposes.

SA 5421. Mr. GRASSLEY (for himself and Mr. Young) proposed an
amendment to amendment SA 5194 proposed by Mr. Schumer to the bill H.R.
5376, to provide for reconciliation pursuant to title II of S. Con.
Res. 14; as follows:

At the end of title I, insert the following:

Subtitle _--Middle-class Inflation Relief

SEC. 10_01. MODIFICATION OF CAPITAL GAIN RATES.

(a) Expansion of Zero Percent Rate.--
(1) In general.--Section 1(h) of the Internal Revenue Code
of 1986 is amended by adding at the end the following new
paragraph:
``(12) Special rule for taxable years beginning in 2023.--
``(A) In general.--In the case of any taxable year
beginning after 2022 and before 2024, paragraph (1)(B)(i)
shall be applied by substituting `below the maximum zero rate
amount' for `which would (without regard to this paragraph)
be taxed at a rate below 25 percent'.
``(B) Maximum zero rate amount.--The maximum zero rate
amount shall be--
``(i) in the case of a joint return or surviving spouse,
$165,000,
``(ii) in the case of any other individual (other than an
estate or trust), an amount equal to \1/2\ of the amount in
effect for the taxable year under clause (i), and
``(iii) in the case of an estate or trust, $2,600.
``(C) Inflation adjustment.--In the case of any taxable
year beginning after 2022, each of the dollar amounts in
subparagraph (B) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
subsection (f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2017'
for `calendar year 2016' in subparagraph (A)(ii) thereof.
If any increase under this subparagraph is not a multiple of
$50, such increase shall be rounded to the next lowest
multiple of $50.''.
(2) Conforming amendment.--Paragraph (5) of section 1(j) of
such Code is amended by adding at the end the following new
subparagraph:
``(D) Special rule for certain taxable years.--In the case
of any taxable year beginning after 2022 and before 2024,
subparagraph (A) shall be applied without regard to clause
(i) thereof.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2022.

SEC. 10_02. PARTIAL EXCLUSION OF CERTAIN INTEREST RECEIVED BY
INDIVIDUALS.

(a) In General.--Part III of subchapter B of chapter 1 of
the Internal Revenue Code of 1986 (relating to amounts
specifically excluded from gross income) is amended by
inserting after section 115 the following new section:

``SEC. 116. PARTIAL EXCLUSION OF CERTAIN INTEREST RECEIVED BY
INDIVIDUALS.

``(a) Exclusion From Gross Income.--Gross income does not
include the sum of the amounts received during the taxable
year by an individual as qualified interest.
``(b) Limitations.--The aggregate amount excluded under
subsection (a) for any taxable year shall not exceed $300
($600 in the case of a joint return).
``(c) Qualified Interest.--For purposes of this section--
``(1) In general.--The term `qualified interest' means any
interest other than interest excluded from gross income under
any other provision of this chapter.
``(2) Special rules for dividends received from certain
money market mutual funds.--
``(A) In general.--The term `qualified interest' shall
include qualified interest-related dividends.
``(i) In general.--Except as provided in clause (ii), a
qualified interest-related dividend is any dividend or part
thereof (other than a capital gain dividend or exempt
interest dividend)--

[[Page S4340]]

``(I) paid by a regulated investment company regulated as a
money market fund under section 270.2a-7 of title 17, Code of
Federal Regulations, and
``(II) reported by the company as a qualified interest-
related dividend in written statements furnished to its
shareholders.

``(ii) Excess reported amounts.--If the aggregate reported
amount with respect to the company for any taxable year
exceeds the applicable qualified interest of the company for
such taxable year, a qualified interest-related dividend is
the excess of--

``(I) the reported qualified interest-related dividend
amount, over
``(II) the excess reported amount which is allocable to
such reported qualified interest-related dividend amount.

``(iii) Allocation of excess reported amount.--

``(I) In general.--Except as provided in subclause (II),
the excess reported amount (if any) which is allocable to the
reported qualified interest-related dividend amount is that
portion of the excess reported amount which bears the same
ratio to the excess reported amount as the reported qualified
interest-related dividend amount bears to the aggregate
reported amount.
``(II) Special rule for noncalendar year taxpayers.--In the
case of any taxable year which does not begin and end in the
same calendar year, if the post-December reported amount
equals or exceeds the excess reported amount for such taxable
year, subclause (I) shall be applied by substituting `post-
December reported amount' for `aggregate reported amount' and
no excess reported amount shall be allocated to any dividend
paid on or before December 31 of such taxable year.

``(iv) Definitions.--For purposes of this subparagraph--

``(I) Reported qualified interest-related dividend
amount.--The term `reported qualified interest-related
dividend amount' means the amount reported to its
shareholders under clause (i) as a qualified interest-related
dividend.
``(II) Excess reported amount.--The term `excess reported
amount' means the excess of the aggregate reported amount
over the applicable qualified interest of the company for the
taxable year.
``(III) Aggregate reported amount.--The term `aggregate
reported amount' means the aggregate amount of dividends
reported by the company under clause (i) as qualified
interest-related dividends for the taxable year (including
qualified interest-related dividends paid after the close of
the taxable year described in section 855).
``(IV) Post-december reported amount.--The term `post-
December reported amount' means the aggregate reported amount
determined by taking into account only dividends paid after
December 31 of the taxable year.
``(V) Applicable qualified interest.--The term `applicable
qualified interest' means interest described in paragraph
(1).

``(d) Nonresident Aliens Ineligible for Exclusion.--
Subsection (a) shall not apply to any nonresident alien
individual.
``(e) Regulations.--The Secretary may prescribe such
regulations as are appropriate (including regulations
requiring reporting) to apply this section in the case of
interest received--
``(1) from partnerships and S corporations, and
``(2) from a trade or business of the taxpayer.
``(f) Termination.--This section shall not apply to any
taxable year beginning after December 31, 2024.''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 265(a) of such Code is amended
by inserting before the period at the end the following: ``,
or to purchase or carry obligations or shares, or to make
deposits, to the extent the interest thereon is excludable
from gross income under section 116''.
(2) Subsection (c) of section 584 of such Code is amended
by adding at the end the following: ``The proportionate share
of each participant in the amount of qualified interest (as
defined in section 116) received by the common trust fund
shall be considered for purposes of such section as having
been received by such participant.''.
(3) Subsection (a) of section 643 of such Code is amended
by redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new paragraph:
``(7) Qualified interest.--There shall be included the
amount of any qualified interest (as defined in section 116)
excluded from gross income pursuant to section 116 (reduced
by amounts which would be deductible in respect of
disbursements allocable to such income but for the provisions
of section 265).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2022.

SEC. 10_03. INFLATION ADJUSTMENT FOR CERTAIN TAX BENEFITS.

(a) Child Tax Credit.--
(1) In general.--Subsection (h) of section 24 of such Code
is amended by adding at the end the following new paragraph:
``(8) Adjustment for inflation.--
``(A) In general.--In the case of a taxable year beginning
after 2021 and before 2023, the $2,000 amount in paragraph
(2) and each of the dollar amounts in paragraph (3) shall 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, determined by substituting `2020' for `2016' in
subparagraph (A)(ii) thereof.
``(B) Rounding.--If any increase under subparagraph (A)--
``(i) is not a multiple of $100, in the case of the amount
in paragraph (2), such increase shall be rounded to the next
lowest multiple of $100, or
``(ii) is not a multiple of $1,000, in the case of the
amounts in paragraph (3), such increase shall be rounded to
the next lowest multiple of $1,000.''.
(2) Partial credit for certain other dependents.--Paragraph
(4) of section 24(h) of such Code is amended by adding at the
end the following new subparagraph:
``(D) Adjustment for inflation.--In the case of a taxable
year beginning after 2021 and before 2023, the $500 amount in
subparagraph (A) shall 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, determined by substituting `2020' for `2016' in
subparagraph (A)(ii) thereof.
If any increase under this paragraph is not a multiple of
$50, such increase shall be rounded to the next lowest
multiple of $50.''.
(b) Credit for Household and Dependent Care Services.--
Subsection (e) of section 21 of the Internal Revenue Code of
1986 is amended by adding at the end the following new
paragraph:
``(11) Adjustments for inflation.--
``(A) In general.--In the case of a taxable year beginning
after 2021 and before 2023, the $15,000 amount in subsection
(a)(2) and the $3,000 and $6,000 amounts in subsection (c)
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, determined by substituting `2020' for `2016' in
subparagraph (A)(ii) thereof.
``(B) Rounding.--If any increase under subparagraph (A)--
``(i) is not a multiple of $100, in the case of the amounts
in subsection (c), such increase shall be rounded to the next
lowest multiple of $100, or
``(ii) is not a multiple of $1,000, in the case of the
amount in subsection (a)(2), such increase shall be rounded
to the next lowest multiple of $1,000.''.
(c) American Opportunity and Lifetime Learning Credits.--
(1) American opportunity tax credit.--Subsection (b) of
section 25A of the Internal Revenue Code of 1986 is amended
by adding at the end the following new paragraph:
``(5) Adjustment for inflation.--In the case of a taxable
year beginning after 2021 and before 2023, the $2,000 and
$4,000 amounts in paragraph (1) shall each be increased by an
amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2020' for `2016' in
subparagraph (A)(ii) thereof.
If any increase under this paragraph is not a multiple of
$100, such increase shall be rounded to the next lowest
multiple of $100.''.
(2) Lifetime learning credit.--Subsection (c) of section
25A of the Internal Revenue Code of 1986 is amended by adding
at the end the following new paragraph:
``(3) Adjustment for inflation.--In the case of a taxable
year beginning after 2021 and before 2023, the $10,000 amount
in paragraph (1) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2020' for `2016' in
subparagraph (A)(ii) thereof.
If any increase under this paragraph is not a multiple of
$100, such increase shall be rounded to the next lowest
multiple of $100.''.
(3) Limitations based on modified adjusted gross income.--
Subsection (d) of section 25A of the Internal Revenue Code of
1986 is amended by adding at the end the following new
paragraph:
``(3) Adjustment for inflation.--In the case of a taxable
year beginning after 2021 and before 2023, each of the dollar
amounts in paragraph (1) shall be increased by an amount
equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2020' for `2016' in
subparagraph (A)(ii) thereof.
If any increase under this paragraph is not a multiple of
$1,000, such increase shall be rounded to the next lowest
multiple of $1,000.''.
(d) Deduction for Interest on Education Loans.--
(1) In general.--Subsection (f) of section 221 of the
Internal Revenue Code of 1986 is amended to read as follows:
``(f) Adjustments for Inflation.--
``(1) Limitation.--In the case of a taxable year beginning
after 2021 and before 2023, the $2,500 amount in subsection
(b)(1) and the $15,000 and $30,000 amounts in subsection
(b)(2)(B)(ii) shall each be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar

[[Page S4341]]

year in which the taxable year begins, determined by
substituting `2020' for `2016' in subparagraph (A)(ii)
thereof, and
``(2) Income thresholds.--In the case of a taxable year
beginning after 2002, the $50,000 and $100,000 amounts in
subsection (b)(2)(B)(i)(II) shall each be increased by an
amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2001' for `2016' in
subparagraph (A)(ii) thereof.
``(3) Rounding.--If any increase under this subsection--
``(A) is not a multiple of $100, in the case of the amount
in subsection (b)(1), such increase shall be rounded to the
next lowest multiple of $100, or
``(B) is not a multiple of $1,000, in the case of the
amounts in subsection (b)(2)(B)(ii) and (b)(2)(B)(i)(II),
such increase shall be rounded to the next lowest multiple of
$1,000.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2021.

SEC. 10_04. EXTENSION OF LIMITATION ON DEDUCTION FOR STATE
AND LOCAL, ETC., TAXES.

(a) In General.--Section 164(b)(6) of the Internal Revenue
Code of 1986 is amended--
(1) by striking ``January 1, 2026'' and inserting ``January
1, 2027'', and
(2) by striking ``2025'' in the heading thereof and
inserting ``2026''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2022.

SEC. 10_05. REDUCTION IN ADDITIONAL INTERNAL REVENUE SERVICE
ENFORCEMENT FUNDING.

Section 10301(a)(1)(A)(i)(II) of this Act is amended by
striking ``$45,637,400,000'' and inserting
``$25,637,400,000''.
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