Economic Growth and Tax Relief Reconciliation Act of 2001/Title I

SEC. 101. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

 * (a) In General.—Section 1 (relating to tax imposed) is amended by adding at the end the following new subsection:


 * ``(i) Rate Reductions After 2000.—
 * ``(1) 10-percent rate bracket.—
 * ``(A) In general.—In the case of taxable years beginning after December 31, 2000—
 * ``(i) the rate of tax under subsections (a), (b), (c), and (d) on taxable income not over the initial bracket amount shall be 10 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.
 * ``(B) Initial bracket amount.—For purposes of this paragraph, the initial bracket amount is—
 * ``(i) $14,000 ($12,000 in the case of taxable years beginning before January 1, 2008) in the case of subsection (a),
 * ``(ii) $10,000 in the case of subsection (b), and
 * ``(iii) \1/2\ the amount applicable under clause (i) (after adjustment, if any, under subparagraph (C)) in the case of subsections (c) and (d).
 * ``(C) Inflation adjustment.—In prescribing the tables under subsection (f) which apply with respect to taxable years beginning in calendar years after 2000—
 * ``(i) the Secretary shall make no adjustment to the initial bracket amount for any taxable year beginning before January 1, 2009,
 * ``(ii) the cost-of-living adjustment used in making adjustments to the initial bracket amount for any taxable year beginning after December 31, 2008, shall be determined under subsection (f)(3) by substituting `2007' for `1992' in subparagraph (B) thereof, and
 * ``(iii) such adjustment shall not apply to the amount referred to in subparagraph (B)(iii).
 * ``If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.
 * ``(D) Coordination with acceleration of 10 percent rate bracket benefit for 2001.—This paragraph shall not apply to any taxable year to which section 6428 applies.
 * ``(2) Reductions in rates after june 30, 2001.—In the case of taxable years beginning in a calendar year after 2000, the corresponding percentage specified for such calendar year in the following table shall be substituted for the otherwise applicable tax rate in the tables under subsections (a), (b), (c), (d), and (e).

The corresponding percentages ``In the case of       shall be substituted for  the taxable years           following percentages: beginning during   --- calendar year:       28%      31%      36%     39.6%

2001..................  27.5%    30.5%    35.5%    39.1%              2002 and 2003......... 27.0%   30.0%    35.0%    38.6%              2004 and 2005......... 26.0%   29.0%    34.0%    37.6%              2006 and thereafter... 25.0%   28.0%    33.0%    35.0% ---


 * ``(3) Adjustment of tables.—The Secretary shall adjust the tables prescribed under subsection (f) to carry out this subsection. ''.


 * (b) Acceleration of 10 Percent Rate Bracket Benefit for 2001.—
 * (1) In general.—Subchapter B of chapter 65 (relating to abatements, credits, and refunds) is amended by adding at the end the following new section:


 * ``SEC. 6428. ACCELERATION OF 10 PERCENT INCOME TAX RATE BRACKET BENEFIT FOR 2001.


 * ``(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 2001 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) Limitation Based on Amount of Tax.—The credit allowed by subsection (a) shall not exceed the excess (if any) of—
 * ``(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
 * ``(2) 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).
 * ``(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) Special Rules.—
 * ``(1) Coordination with advance refunds of credit.—
 * ``(A) 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).
 * ``(B) 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.
 * ``(2) Coordination with estimated tax.—The credit under this section shall be treated for purposes of section 6654(f) in the same manner as a credit under subpart A of part IV of subchapter A of chapter 1.
 * ``(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 2000 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 this section (other than subsection (d) and this subsection) had applied to such taxable year.
 * ``(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 October 1, 2001. No refund or credit shall be made or allowed under this subsection after December 31, 2001.
 * ``(4) No interest.—No interest shall be allowed on any overpayment attributable to this subsection. ''.
 * (2) Clerical amendment.—The table of sections for subchapter B of chapter 65 is amended by adding at the end the following new item:
 * ``Sec. 6428. Acceleration of 10 percent income tax rate bracket benefit for 2001. ''.


 * (c) Conforming Amendments.—
 * (1) Subparagraph (B) of section 1(g)(7) is amended by striking ``15 percent  in clause (ii)(II) and inserting ``10 percent. .
 * (2) Section 1(h) is amended—
 * (A) by striking ``28 percent  both places it appears in paragraphs (1)(A)(ii)(I) and (1)(B)(i) and inserting ``25 percent , and
 * (B) by striking paragraph (13).
 * (3) Section 15 is amended by adding at the end the following new subsection:


 * ``(f) Rate Reductions Enacted by Economic Growth and Tax Relief Reconciliation Act of 2001.—This section shall not apply to any change in rates under subsection (i) of section 1 (relating to rate reductions after 2000). ''.
 * (4) Section 531 is amended by striking ``equal to  and all that follows and inserting ``equal to the product of the highest rate of tax under section 1(c) and the accumulated taxable income. .
 * (5) Section 541 is amended by striking ``equal to  and all that follows and inserting ``equal to the product of the highest rate of tax under section 1(c) and the undistributed personal holding company income. .
 * (6) Section 3402(p)(1)(B) is amended by striking ``7, 15, 28, or 31 percent  and inserting ``7 percent, any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c), .
 * (7) Section 3402(p)(2) is amended by striking ``15 percent  and inserting ``10 percent .
 * (8) Section 3402(q)(1) is amended by striking ``equal to 28 percent of such payment  and inserting ``equal to the product of the third lowest rate of tax applicable under section 1(c) and such payment .
 * (9) Section 3402(r)(3) is amended by striking ``31 percent  and inserting ``the fourth lowest rate of tax applicable under section 1(c) .
 * (10) Section 3406(a)(1) is amended by striking ``equal to 31 percent of such payment  and inserting ``equal to the product of the fourth lowest rate of tax applicable under section 1(c) and such payment .
 * (11) Section 13273 of the Revenue Reconciliation Act of 1993 is amended by striking ``28 percent  and inserting ``the third lowest rate of tax applicable under section 1(c) of the Internal Revenue Code of 1986 .


 * (d) Effective Dates.—
 * (1) In general.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2000.
 * (2) Amendments to withholding provisions.—The amendments made by paragraphs (6), (7), (8), (9), (10), and (11) of subsection (c) shall apply to amounts paid after the 60th day after the date of the enactment of this Act. References to income brackets and rates of tax in such paragraphs shall be applied without regard to section 1(i)(1)(D) of the Internal Revenue Code of 1986.

SEC. 102. REPEAL OF PHASEOUT OF PERSONAL EXEMPTIONS.

 * (a) In General.—
 * Paragraph (3) of section 151(d) (relating to exemption amount) is amended by adding at the end the following new subparagraphs:


 * ``(E) Reduction of phaseout.—
 * ``(i) In general.—In the case of taxable years beginning after December 31, 2005, and before January 1, 2010, the reduction under subparagraph (A) shall be equal to the applicable fraction of the amount which would (but for this subparagraph) be the amount of such reduction.
 * ``(ii) Applicable fraction.—For purposes of clause (i), the applicable fraction shall be determined in accordance with the following table:


 * ``For taxable years beginning                  The applicable
 * in calendar year—                         fraction is—
 * 2006 and 2007............................... 2/3
 * 2008 and 2009............................... 1/3.


 * ``(F) Termination.—This paragraph shall not apply to any taxable year beginning after December 31, 2009. ''.


 * (b) Effective Date.—
 * The amendment made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 103. PHASEOUT OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.

 * (a) In General.—
 * Section 68 is amended by adding at the end the following new subsections:


 * ``(f) Phaseout of Limitation.—
 * ``(1) In general.—In the case of taxable years beginning after December 31, 2005, and before January 1, 2010, the reduction under subsection (a) shall be equal to the applicable fraction of the amount which would (but for this subsection) be the amount of such reduction.
 * ``(2) Applicable fraction.—For purposes of paragraph (1), the applicable fraction shall be determined in accordance with the following table:


 * ``For taxable years beginning                  The applicable
 * in calendar year—                         fraction is—
 * 2006 and 2007............................... 2/3
 * 2008 and 2009............................... 1/3.
 * ``(g) Termination.—This section shall not apply to any taxable year beginning after December 31, 2009. ''.


 * (b) Effective Date.—
 * The amendment made by this section shall apply to taxable years beginning after December 31, 2005.