S. 26Senate108th Congress (2003-2005)In Committee

A bill to amend the Internal Revenue Code of 1986 to provide that dividend and interest income of individuals not be taxed at rates in excess of the maximum capital gains rate.

Introduced January 7, 2003

Legislative Activity

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2 earlier actions
SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S41)

January 7, 2003

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SenateIntro Referral

Introduced in Senate

January 7, 2003

SenateIntro Referral

Sponsor introductory remarks on measure. (CR S39-40)

January 7, 2003

SenateIntro Referral

Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S41)

January 7, 2003

Floor Debate

24 members

What members said about S. 26 on the floor

10 Republicans14 Democrats
Russell D. Feingold
Sen. Russell D. FeingoldD-WI · Jan 7, 2003

Mr. President, I rise today to join with my colleagues from Maine to introduce legislation to restore fairness to the Medicare program. This package of legislation will reduce regional inequalities…

Daniel K. Inouye
Sen. Daniel K. InouyeD-HI · Jan 7, 2003

Mr. President, today I am introducing a private relief bill on behalf of Donald C. Pence of Stanford, NC, for compensation for the failure of the Department of Veterans Affairs to pay dependency and…

John Conyers, Jr.
Rep. John Conyers, Jr.D-MI-14 · Mar 20, 2003

Mr. Speaker, we gather here for a well-deserved tribute to our troops in the Middle East. Yet just before this, we were debating the President's budget which cruelly cut $25 billion of veterans…

Joseph I. Lieberman
Sen. Joseph I. LiebermanD-CT · Jan 7, 2003

Mr. President, I rise today to introduce a bill on behalf of myself and Senator Daschle to remedy some problems in landmark legislation passed at the end of the last Congress, and signed into law by…

Duncan Hunter
Rep. Duncan HunterR-CA-52 · Mar 20, 2003

Mr. Speaker, I offer a concurrent resolution (H. Con. Res. 104) expressing the support and appreciation of the Nation for the President and the members of the Armed Forces who are participating in…

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Thomas A. Daschle
Sen. Thomas A. DaschleD-SD · Jan 7, 2003

Mr. President, officially, the Congress that ended in December was the 107th Congress. But history will almost surely record it as the September 11th Congress. From the moment the first plane hit the…

Lloyd Doggett
Rep. Lloyd DoggettD-TX-10 · Mar 20, 2003

Mr. Speaker, reserving the right to object, the gentleman from Illinois (Mr. Hastert), the Speaker of the House, has rightly reminded us tonight of the events of 9/11. I think all of us remember the…

Ike Skelton
Rep. Ike SkeltonD-MO-4 · Mar 20, 2003

Mr. Speaker, I yield myself such time as I may consume. This is a solemn moment for this body. We are here this evening representing Americans all across our land, and we are here to say on their…

Susan M. Collins
Sen. Susan M. CollinsR-ME · Jan 7, 2003

Mr. President, I am pleased to join my colleagues from New York and Arizona in introducing the Greater Access to Affordable Pharmaceuticals Act, which will make prescription drugs more affordable by…

Tom DeLay
Rep. Tom DeLayR-TX-22 · Mar 20, 2003

Mr. Speaker, I thank the gentleman from California (Mr. Hunter) and the gentleman from Missouri (Mr. Skelton) for bringing this resolution to the floor. Even though the hour is late, Members are…

Nancy Pelosi
Rep. Nancy PelosiD-CA-8 · Mar 20, 2003

Mr. Speaker, I thank the distinguished ranking member for yielding time and for his distinguished service on the committee and to our country, and I also commend the gentleman from California (Mr.…

Kay Bailey Hutchison
Sen. Kay Bailey HutchisonR-TX · Jan 7, 2003

Mr. President, I am pleased to introduce a package of three bills I hope will be the starting point for a long overdue discussion on reducing taxes on investment income, particularly dividends. The…

Steny H. Hoyer
Rep. Steny H. HoyerD-MD-5 · Mar 20, 2003

Mr. Speaker, will the gentleman yield? Mr. Speaker, I had this and I was not going to use it. I am on the same side as the gentleman. I am in the minority of my party on this issue. But I want to…

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Chuck Grassley
Sen. Chuck GrassleyR-IA · Jan 7, 2003

Mr. President, the goal of the farm bill was to improve the economic condition of America's farmers over the next few years. However one of the many shortcomings of the new law is that it fails to…

Mitch McConnell
Sen. Mitch McConnellR-KY · Jan 7, 2003

Mr. President, I rise today to introduce legislation to add Kentucky to the list of States that are permitted to offer ``divided retirement'' plans under the Social Security Act. Last year, I was…

Mac Collins
Rep. Mac CollinsR-GA-8 · Mar 20, 2003

Mr. Speaker, I thank the gentleman for yielding me time. Mr. Speaker, I congratulate the gentleman from California (Chairman Hunter) and the gentleman from Missouri (Mr. Skelton) for bringing this…

Ron Wyden
Sen. Ron WydenD-OR · Jan 7, 2003

Mr. President, predictions that the Internet Tax Freedom Act would topple Western Civilization have not come to pass. Since the moratorium on taxation of out-of-State, online sales was first enacted…

Michael C. Burgess
Rep. Michael C. BurgessR-TX-26 · Mar 20, 2003

Mr. Speaker, I thank the gentleman for yielding me the time. I rise this morning to honor the men and women of our armed services by supporting the support the troops resolution. I believe the time…

Joe Baca
Rep. Joe BacaD-CA-43 · Mar 20, 2003

Mr. Speaker, as a veteran I stand behind our troops, and I ask everyone to get together in the form of solidarity. Mr. Speaker, several months ago, when we voted on the President's Iraq resolution,…

Dennis J. Kucinich
Rep. Dennis J. KucinichD-OH-10 · Mar 20, 2003

Mr. Speaker, I reserve the right to object. Mr. Speaker, I would say to the gentleman from California (Mr. Hunter), we are all patriots and we all want to support the troops, including our colleague.…

Eni F. H. Faleomavaega
Rep. Eni F. H. FaleomavaegaD-AS · Mar 20, 2003

Mr. Speaker, I thank the gentleman from California (Mr. Hunter), the chairman of the Committee on Armed Services, and the gentleman from Missouri (Mr. Skelton), the ranking member, for bringing this…

Carolyn C. Kilpatrick
Rep. Carolyn C. KilpatrickD-MI-13 · Mar 20, 2003

Mr. Speaker, I stand in strong support of our troops and our families. Mr. Speaker, at this moment my prayers and thoughts are with the service men and women who are braving the fierceness of battle…

Marilyn N. Musgrave
Rep. Marilyn N. MusgraveR-CO-4 · Mar 20, 2003

Mr. Speaker, I thank the gentleman for yielding time to me. Mr. Speaker, as I sat last night in front of the TV, I could not take my eyes off of the images that I was seeing because, as a mother, I…

Wayne T. Gilchrest
Rep. Wayne T. GilchrestR-MD-1 · Mar 20, 2003

Mr. Speaker, I thank the gentleman for yielding me this time, and I thank him and the gentleman from Missouri (Mr. Skelton), my good friend, the two of them, for bringing this resolution to the…

Bill Text

Latest available legislative text

Reading Mode
Latest
Introduced in SenateIssued January 7, 2003
        [Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 26 Introduced in Senate (IS)]

108th CONGRESS
1st Session
S. 26

To amend the Internal Revenue Code of 1986 to provide that dividend and
interest income of individuals not be taxed at rates in excess of the
maximum capital gains rate.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

January 7, 2003

Mrs. Hutchison introduced the following bill; which was read twice and
referred to the Committee on Finance

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to provide that dividend and
interest income of individuals not be taxed at rates in excess of the
maximum capital gains rate.

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

SECTION 1. DIVIDENDS AND INTEREST OF INDIVIDUALS TAXED AT CAPITAL GAIN
RATES.

(a) In General.--Section 1(h) of the Internal Revenue Code of 1986
(relating to maximum capital gains rate) is amended by adding at the
end the following new paragraph:
``(13) Dividends and interest 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 and qualified
interest income.
``(B) Qualified dividend income.--For purposes of
this paragraph--
``(i) In general.--The term `qualified
dividend income' means dividends received from
domestic corporations during the taxable year.
``(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) Minimum holding period.--Such term
shall not include any dividend on any share of
stock with respect to which the holding period
requirements of section 246(c) are not met.
``(C) Qualified interest income.--For purposes of
this paragraph, the term `qualified interest income'
means--
``(i) interest on deposits with a bank (as
defined in section 581),
``(ii) amounts (whether or not designated
as interest) paid, in respect of deposits,
investment certificates, or withdrawable or
repurchasable shares, by--
``(I) a mutual savings bank,
cooperative bank, domestic building and
loan association, industrial loan
association or bank, or credit union,
or
``(II) any other savings or thrift
institution which is chartered and
supervised under Federal or State law,
the deposits or accounts in which are insured
under Federal or State law or which are
protected and guaranteed under State law,
``(iii) interest on--
``(I) evidences of indebtedness
(including bonds, debentures, notes,
and certificates) issued by a domestic
corporation in registered form, and
``(II) to the extent provided in
regulations prescribed by the
Secretary, other evidences of
indebtedness issued by a domestic
corporation of a type offered by
corporations to the public,
``(iv) interest on obligations of the
United States, a State, or a political
subdivision of a State (not excluded from gross
income of the taxpayer under any other
provision of law), and
``(v) interest attributable to
participation shares in a trust established and
maintained by a corporation established
pursuant to Federal law.
``(D) Special rules.--
``(i) Amounts taken into account as
investment income.--Qualified dividend income
and qualified interest income shall not include
any amount which the taxpayer takes into
account as investment income under section
163(d)(4)(B).
``(ii) Nonresident aliens.--In the case of
a nonresident alien individual, subparagraph
(A) shall apply only--
``(I) in determining the tax
imposed for the taxable year pursuant
to section 871(b) and only in respect
of amounts which are effectively
connected with the conduct of a trade
or business within the United States,
and
``(II) in determining the tax
imposed for the taxable year pursuant
to section 877.
``(iii) Treatment of dividends from
regulated investment companies and real estate
investment trusts.--

``For treatment of dividends from
regulated investment companies and real estate investment trusts, see
sections 854 and 857.''
(b) Exclusion of Dividends and Interest From Investment Income.--
Subparagraph (B) of section 163(d)(4) of the Internal Revenue Code of
1986 (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)(13)(B)) or qualified interest
income (as defined in section 1(h)(13)(C)) 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 of the Internal Revenue
Code of 1986 (relating to dividends received from regulated
investment companies) is amended by inserting ``section
1(h)(13) (relating to maximum rate of tax on dividends and
interest) and'' after ``For purposes of''.
(2) Paragraph (1) of section 854(b) of such Code (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 the sum of the
aggregate dividends received, and the aggregate
interest described in section 1(h)(13)(C)
received, by a regulated investment company
during any taxable year is less than 95 percent
of its gross income, then, in computing the
maximum rate under section 1(h)(13), 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.''
(3) Subparagraph (C) of section 854(b)(1) of such Code, as
redesignated by paragraph (2), is amended by striking
``subparagraph (A)'' and inserting ``subparagraph (A) or (B)''.
(4) Paragraph (2) of section 854(b) of such Code is amended
by inserting ``the maximum rate under section 1(h)(13) and''
after ``for purposes of''.
(d) Treatment of Dividends Received From Real Estate Investment
Trusts.--Section 857(c) of the Internal Revenue Code of 1986 (relating
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) In general.--For purposes of section 1(h)(13)
(relating to maximum rate of tax on dividends and interest) and
section 243 (relating to deductions 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) Treatment as interest.--
``(A) In general.--For purposes of section
1(h)(13), in the case of a dividend (other than a
capital gain dividend, as defined in subsection
(b)(3)(C)) received from a real estate investment trust
which meets the requirements of this part for the
taxable year in which it paid--
``(i) such dividend shall be treated as
interest if the aggregate interest received by
the real estate investment trust for the
taxable year equals or exceeds 75 percent of
its gross income, or
``(ii) if clause (i) does not apply, the
portion of such dividend which bears the same
ratio to the amount of such dividend as the
aggregate interest received bears to gross
income shall be treated as interest.
``(B) Adjustments to gross income and aggregate
interest received.--For purposes of subparagraph (B)--
``(i) gross income does not include the net
capital gain,
``(ii) gross income and aggregate interest
received shall each be reduced by so much of
the deduction allowable by section 163 for the
taxable year (other than for interest on
mortgages on real property owned by the real
estate investment trust) as does not exceed
aggregate interest received by the taxable
year, and
``(iii) gross income shall be reduced by
the sum of the taxes imposed by paragraphs (4),
(5), and (6) of section 857(b).
``(C) Aggregate interest received.--For purposes of
this subsection, aggregate interest received shall be
computed by taking into account only interest which is
described in section 1(13)(C).
``(D) Notice to shareholders.--The amount of any
distribution by a real estate investment trust which
may be taken into account as interest for purposes of
section 1(h)(13) shall not exceed the amount so
designated by the trust in a written notice to its
shareholders mailed not later than 45 days after the
close of its taxable year.''
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
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