Amends Internal Revenue Code provisions concerning the exclusion of gain from certain small business stock to, among other things: (1) increase from 50 to 75 percent the amount of gain excluded from the sale certain small business stock; (2) reduce from five to three years the holding period applicable to such a sale; (3) make such exclusion available to corporations; and (4) make the stock of larger businesses eligible.
Doubles the annual limitation on incentive stock options.
[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4685 Introduced in House (IH)]
105th CONGRESS
2d Session
H. R. 4685
To amend the Internal Revenue Code of 1986 to expand the exclusion for
qualified small business stock, to increase the annual limit with
respect to incentive stock options, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 2, 1998
Ms. Dunn introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to expand the exclusion for
qualified small business stock, to increase the annual limit with
respect to incentive stock options, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. INCREASED EXCLUSION AND OTHER MODIFICATIONS APPLICABLE TO
QUALIFIED SMALL BUSINESS STOCK.
(a) Increased Exclusion.--
(1) In general.--Subsection (a) of section 1202 of the
Internal Revenue Code of 1986 (50-percent exclusion for gain
from certain small business stock) is amended--
(A) by striking ``50 percent'' and inserting ``75
percent'', and
(B) by striking ``50-Percent'' in the heading and
inserting ``75-Percent''.
(2) Conforming amendments.--
(A) Paragraph (8) of section 1(h) of such Code is
amended to read as follows:
``(8) Section 1202 gain.--For purposes of this subsection,
the term `section 1202 gain' means an amount equal to 25
percent of the gain which would be excluded from gross income
under section 1202(a) without regard to the 75 percent
limitation in such section.''
(B) The heading for section 1202 of such Code is
amended by striking ``50-percent'' and inserting ``75-
percent''.
(C) The table of sections for part I of subchapter
P of chapter 1 of such Code is amended by striking
``50-percent'' in the item relating to section 1202 and
inserting ``75-percent''.
(b) Reduction in Holding Period.--
(1) In general.--Subsection (a) of section 1202 of such
Code is amended by striking ``5 years'' and inserting ``3
years''.
(2) Conforming amendment.--Subsections (g)(2)(A) and
(j)(1)(A) of section 1202 of such Code are each amended by
striking ``5 years'' and inserting ``3 years''.
(c) Exclusion Available to Corporations.--
(1) In general.--Subsection (a) of section 1202 of such
Code is amended by striking ``other than a corporation''.
(2) Technical amendment.--Subsection (c) of section 1202 of
such Code is amended by adding at the end the following new
paragraph:
``(4) Stock held among members of controlled group not
eligible.--Stock of a member of a parent-subsidiary controlled
group (as defined in subsection (d)(3)) shall not be treated as
qualified small business stock while held by another member of
such group.''
(d) Repeal of Minimum Tax Preference.--
(1) In general.--Subsection (a) of section 57 of such Code
(relating to items of tax preference) is amended by striking
paragraph (7).
(2) Technical amendment.--Subclause (II) of section
53(d)(1)(B)(ii) of such Code is amended by striking ``, (5),
and (7)'' and inserting ``and (5)''.
(e) Stock of Larger Businesses Eligible for Exclusion.--
(1) In general.--Paragraph (1) of section 1202(d) of such
Code (defining qualified small business) is amended by striking
``$50,000,000'' each place it appears and inserting
``$300,000,000''.
(2) Inflation adjustment.--Section 1202(d) of such Code is
amended by adding at the end the following:
``(4) Inflation adjustment of asset limitation.--In the
case of stock issued in any calendar year after 1999, the
$300,000,000 amount contained 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
`calendar year 1998' for `calendar year 1992' in
subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a
multiple of $10,000, such amount shall be rounded to the
nearest multiple of $10,000.''
(f) Repeal of Per-Issuer Limitation.--Section 1202 of such Code is
amended by striking subsection (b).
(g) Other Modifications.--
(1) Repeal of working capital limitation.--Section
1202(e)(6) of such Code (relating to working capital) is
amended--
(A) in subparagraph (B), by striking ``2 years''
and inserting ``5 years''; and
(B) by striking the last sentence.
(2) Exception from redemption rules where business
purpose.--Section 1202(c)(3) of such Code (relating to certain
purchases by corporation of its own stock) is amended by adding
at the end the following:
``(D) Waiver where business purpose.--A purchase of
stock by the issuing corporation shall be disregarded
for purposes of subparagraph (B) if the issuing
corporation establishes that there was a business
purpose for such purchase and one of the principal
purposes of the purchase was not to avoid the
limitations of this section.''
(h) Qualified Trade or Business.--Section 1202(e)(3) of such Code
(defining qualified trade or business) is amended by inserting ``and''
at the end of subparagraph (C), by striking ``, and'' at the end of
subparagraph (D) and inserting a period, and by striking subparagraph
(E).
(i) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section apply to stock issued after the
date of enactment of this Act.
(2) Special rule.--The amendments made by subsections (a),
(c), (e), (f), and (g)(1) apply to stock issued after August
10, 1993.
SEC. 2. INCREASED EXCLUSION FOR INCENTIVE STOCK OPTIONS; EXCEPTION FROM
ALTERNATIVE MINIMUM TAX.
(a) Increased Exclusion.--Subsection (d) of section 422 of the
Internal Revenue Code of 1986 (relating to $100,000 per year
limitation) is amended by striking ``$100,000'' each place it appears
and inserting ``$200,000''.
(b) Exception From Alternative Minimum Tax.--Subsection (b) of
section 56 of such Code is amended by striking paragraph (3).
(c) Effective Date.--The amendments made by this section shall
apply to options exercised in calendar years beginning after the date
of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E1892)
Referred to the House Committee on Ways and Means.
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