H.R. 6262 – Reading Mode

1.

Short title; etc

(a)

Short title

This Act may be cited as the Middle Class and Small Business Tax Relief Act of 2012.

(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.

(c)

Table of contents

The table of contents of this Act is as follows:

Sec. 1. Short title; etc.

Sec. 2. Permanent extension of certain 2001 tax relief for middle-class families, small businesses, and family farms.

Sec. 3. Permanent extension of 2003 tax relief for middle-class families, small businesses, and family farms.

Sec. 4. Temporary extension of 2009 tax relief.

Sec. 5. Temporary extension of estate tax relief.

Sec. 6. Temporary extension of increased alternative minimum tax exemption amount.

Sec. 7. Temporary extension of alternative minimum tax relief for nonrefundable personal credits.

2.

Permanent extension of certain 2001 tax relief for middle-class families, small businesses, and family farms

(a)

In general

Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended—

(1)

by striking this Act shall not apply— and all that follows through in the case of title V, in subsection (a) and inserting title V shall not apply, and

(2)

by striking years, in subsection (b).

(b)

Application to certain high-Income taxpayers

(1)

Income tax rates

(A)

Treatment of 25- and 28-percent rate brackets

Paragraph (2) of section 1(i) is amended to read as follows:

(2)

25- and 28-percent rate brackets

The tables under subsections (a), (b), (c), (d), and (e) shall be applied—

(A)

by substituting 25% for 28% each place it appears (before the application of subparagraph (B)), and

(B)

by substituting 28% for 31% each place it appears.

.

(B)

33- and 35-percent rate brackets

Subsection (i) of section 1 is amended by redesignating paragraph (3) as paragraph (6) and by inserting after paragraph (2) the following new paragraph:

(3)

Applicable amounts in the fourth rate bracket

(A)

In general

In the case of a taxpayer whose applicable amount for the taxable year is in the fourth rate bracket—

(i)

the rate of tax under subsections (a), (b), (c), and (d) on a taxpayer's taxable income in the fourth rate bracket shall be 33 percent to the extent such income does not exceed an amount equal to the excess of—

(I)

the applicable amount, over

(II)

the dollar amount at which such bracket begins, and

(ii)

the 36 percent rate of tax under such subsections shall apply only to the taxpayer's taxable income in such bracket in excess of the amount to which clause (i) applies.

(iii)

Fourth rate bracket

For purposes of this paragraph, the term fourth rate bracket means the bracket which would (determined without regard to this paragraph) be the 36-percent rate bracket.

(4)

Applicable amounts in the highest rate bracket

(A)

In general

In the case of a taxpayer whose applicable amount for the taxable year is in the highest rate bracket—

(i)

the tables under subsections (a), (b), (c), and (d) shall be applied by substituting 33% for 36% each place it appears,

(ii)

the rate of tax under subsections (a), (b), (c), and (d) on a taxpayer's taxable income in the highest rate bracket shall be 35 percent to the extent such income does not exceed an amount equal to the excess of—

(I)

the applicable amount, over

(II)

the dollar amount at which such bracket begins, and

(iii)

the 39.6 percent rate of tax under such subsections shall apply only to the taxpayer's taxable income in such bracket in excess of the amount to which clause (i) applies.

(B)

Highest rate bracket

For purposes of this paragraph, the term highest rate bracket means the bracket which would (determined without regard to this paragraph) be the 39.6-percent rate bracket.

(5)

Applicable amount

For purposes of this subsection—

(A)

In general

The term applicable amount means the excess of—

(i)

the applicable threshold, over

(ii)

the sum of the following amounts in effect for the taxable year:

(I)

the basic standard deduction (within the meaning of section 63(c)(2)), and

(II)

the exemption amount (within the meaning of section 151(d)(1)) (or, in the case of subsection (a), 2 such exemption amounts).

(B)

Applicable threshold

The term applicable threshold means, in the case of any taxpayer for any taxable year, the sum of—

(i)

the base amount, plus

(ii)

the small business and family farm income of such taxpayer for such taxable year.

(C)

Base amount

The term base amount means—

(i)

$250,000 in the case of subsection (a),

(ii)

$200,000 in the case of subsections (b) and (c), and

(iii)

1/2 the amount applicable under clause (i) (after adjustment, if any, under subparagraph (G)) in the case of subsection (d).

(D)

Small business and family farm income

(i)

In general

The term small business and family farm income means, with respect to any taxpayer for any taxable year, the gross income of the taxpayer for such taxable year which is attributable to—

(I)

any small trade or business of the taxpayer (other than the trade or business of being an employee), or

(II)

any dividends, distributions, or interest received from any small business.

(ii)

Deductions taken into account

The amount of gross income taken into account under clause (i) shall be reduced by the amount of any deductions properly allocable thereto.

(iii)

Small business

The term small business means any corporation or partnership which employed an average of less than 500 employees on business days during the taxable year. A trade or business shall be treated as a small trade or business if such trade or business would be a small business if such trade or business was a corporation. For purposes of this clause, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single entity.

(E)

Inflation adjustment

For purposes of this paragraph, with respect to taxable years beginning in calendar years after 2012, each of the dollar amounts under clauses (i) and (ii) of subparagraph (C) shall be adjusted in the same manner as under paragraph (1)(C), except that subsection (f)(3)(B) shall be applied by substituting 2011 for 1992.

.

(2)

Phaseout of personal exemptions and itemized deductions

(A)

Overall limitation on itemized deductions

Section 68 is amended—

(i)

by striking the applicable amount the first place it appears in subsection (a) and inserting the applicable threshold in effect under section 1(i)(3),

(ii)

by striking the applicable amount in subsection (a)(1) and inserting such applicable threshold,

(iii)

by striking subsection (b) and redesignating subsections (c), (d), and (e) as subsections (b), (c), and (d), respectively, and

(iv)

by striking subsections (f) and (g).

(B)

Phaseout of deductions for personal exemptions

(i)

In general

Paragraph (3) of section 151(d) is amended—

(I)

by striking the threshold amount in subparagraphs (A) and (B) and inserting the applicable threshold in effect under section 1(i)(3),

(II)

by striking subparagraph (C) and redesignating subparagraph (D) as subparagraph (C), and

(III)

by striking subparagraphs (E) and (F).

(ii)

Conforming amendments

Paragraph (4) of section 151(d) is amended—

(I)

by striking subparagraph (B),

(II)

by redesignating clauses (i) and (ii) of subparagraph (A) as subparagraphs (A) and (B), respectively, and by indenting such subparagraphs (as so redesignated) accordingly, and

(III)

by striking all that precedes in a calendar year after 1989, and inserting the following:

(4)

Inflation adjustment

In the case of any taxable year beginning

.

(c)

Effective date

Except as otherwise provided, the amendments made by this section shall apply to taxable years beginning after December 31, 2012.

3.

Permanent extension of 2003 tax relief for middle-class families, small businesses, and family farms

(a)

Permanent extension

(1)

In general

Section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 is hereby repealed.

(2)

Effective date

The repeal made by this subsection shall take effect as if included in the enactment of the Jobs and Growth Tax Relief Reconciliation Act of 2003.

(b)

20-Percent capital gains rate for certain high-Income individuals

(1)

In general

Paragraph (1) of section 1(h) is amended by striking subparagraph (C), by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F) and by inserting after subparagraph (B) the following new subparagraphs:

(C)

15 percent of the lesser of—

(i)

so much of the adjusted net capital gain (or, if less, taxable income) as exceeds the amount on which a tax is determined under subparagraph (B), or

(ii)

the excess (if any) of—

(I)

the amount of taxable income which would (without regard to this paragraph) be taxed at a rate below 36 percent (39.6 percent in the case of a taxpayer whose applicable amount (as defined in subsection (i)(3)) is above the dollar amount at which the highest rate bracket (as defined in such subsection) begins), over

(II)

the sum of the amounts on which a tax is determined under subparagraphs (A) and (B),

(D)

20 percent of the adjusted net capital gain (or, if less, taxable income) in excess of the sum of the amounts on which tax is determined under subparagraphs (B) and (C),

.

(2)

Minimum tax

Paragraph (3) of section 55(b) is amended by striking subparagraph (C), by redesignating subparagraph (D) as subparagraph (E), and by inserting after subparagraph (B) the following new subparagraphs:

(C)

15 percent of the lesser of—

(i)

so much of the adjusted net capital gain (or, if less, taxable excess) as exceeds the amount on which tax is determined under subparagraph (B), or

(ii)

the excess described in section 1(h)(1)(C)(ii), plus

(D)

20 percent of the adjusted net capital gain (or, if less, taxable excess) in excess of the sum of the amounts on which tax is determined under subparagraphs (B) and (C), plus

.

(c)

Conforming amendments

(1)

The following provisions are each amended by striking 15 percent and inserting 20 percent:

(A)

Section 531.

(B)

Section 541.

(C)

Section 1445(e)(1).

(D)

The second sentence of section 7518(g)(6)(A).

(E)

Section 53511(f)(2) of title 46, United States Code.

(2)

Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by striking 5 percent (0 percent in the case of taxable years beginning after 2007) and inserting 0 percent.

(3)

Section 1445(e)(6) is amended by striking 15 percent (20 percent in the case of taxable years beginning after December 31, 2010) and inserting 20 percent.

(d)

Effective dates

(1)

In general

Except as otherwise provided, the amendments made by subsections (b) and (c) shall apply to taxable years beginning after December 31, 2012.

(2)

Withholding

The amendments made by paragraphs (1)(C) and (3) of subsection (c) shall apply to amounts paid on or after January 1, 2013.

4.

Temporary extension of 2009 tax relief

(a)

American Opportunity Tax Credit

(1)

In general

Section 25A(i) is amended by striking or 2012 and inserting 2012, or 2013.

(2)

Treatment of possessions

Section 1004(c)(1) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended by striking and 2012 each place it appears and inserting 2012, and 2013.

(b)

Child tax credit

Section 24(d)(4) is amended—

(1)

by striking and 2012 in the heading and inserting 2012, and 2013, and

(2)

by striking or 2012 and inserting 2012, or 2013.

(c)

Earned income tax credit

Section 32(b)(3) is amended—

(1)

by striking and 2012 in the heading and inserting 2012, and 2013, and

(2)

by striking or 2012 and inserting 2012, or 2013.

(d)

Temporary extension of rule disregarding refunds in the administration of Federal programs and Federally assisted programs

Subsection (b) of section 6409 is amended by striking December 31, 2012 and inserting December 31, 2013.

(e)

Effective dates

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

5.

Temporary extension of estate tax relief

(a)

In general

Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001, as amended by this Act, is amended by striking December 31, 2012 and inserting December 31, 2013.

(b)

Effective date

The amendment made by this section shall take effect as if included in the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001.

6.

Temporary extension of increased alternative minimum tax exemption amount

(a)

In general

Paragraph (1) of section 55(d) is amended—

(1)

by striking $72,450 and all that follows through 2011 in subparagraph (A) and inserting $78,750 in the case of taxable years beginning in 2012, and

(2)

by striking $47,450 and all that follows through 2011 in subparagraph (B) and inserting $50,600 in the case of taxable years beginning in 2012.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2011.

7.

Temporary extension of alternative minimum tax relief for nonrefundable personal credits

(a)

In general

Paragraph (2) of section 26(a) is amended—

(1)

by striking or 2011 and inserting 2011, or 2012, and

(2)

by striking 2011 in the heading thereof and inserting 2012.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2011.