Simplified, Manageable, And Responsible Tax Act or the SMART Act
This bill replaces the marginal income tax rates in the Internal Revenue Code with a single rate of 17% on individual taxable income.
The bill redefines "taxable income" to mean the amount by which wages, retirement distributions, and unemployment compensation exceed the standard deduction. It also
The bill revises the tax on corporations to (1) replace it with a tax on every person engaged in a business activity equal to 17% of the business taxable income of such person; and (2) make the person engaged in the business activity liable for the tax, whether or not such person is an individual, a partnership, or a corporation.
The bill imposes on employers a 17% tax on the value of excludable compensation provided during the year to employees.
With respect to pension rules, the bill (1) repeals rules relating to non-discrimination, contribution limits, and restrictions on distributions; and (2) revises rules relating to transfers of excess pension assets.
The bill also repeals
The bill prohibits Congress from considering legislation to make specified changes to tax policy unless Congress waives or suspends the prohibition with a three-fifths vote.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 1145 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
1st Session
S. 1145
To repeal the current Internal Revenue Code and replace it with a flat
tax, thereby guaranteeing economic growth and fairness for all
Americans.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 11, 2019
Mr. Shelby introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To repeal the current Internal Revenue Code and replace it with a flat
tax, thereby guaranteeing economic growth and fairness for all
Americans.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Simplified,
Manageable, And Responsible Tax Act'' or the ``SMART Act''.
(b) Table of Contents.--
Sec. 1. Short title; table of contents.
TITLE I--TAX REDUCTION AND SIMPLIFICATION
Sec. 101. Individual income tax.
Sec. 102. Tax on business activities.
Sec. 103. Simplification of rules relating to qualified retirement
plans.
Sec. 104. Repeal of alternative minimum tax.
Sec. 105. Repeal of credits.
Sec. 106. Repeal of estate and gift taxes and obsolete income tax
provisions.
Sec. 107. Effective date.
TITLE II--SUPERMAJORITY REQUIRED FOR TAX CHANGES
Sec. 201. Supermajority required.
TITLE I--TAX REDUCTION AND SIMPLIFICATION
SEC. 101. INDIVIDUAL INCOME TAX.
(a) In General.--Section 1 of the Internal Revenue Code of 1986 is
amended to read as follows:
``SECTION 1. TAX IMPOSED.
``There is hereby imposed on the taxable income of every individual
a tax equal to 17 percent of the taxable income of such individual for
such taxable year.''.
(b) Taxable Income.--Section 63 of the Internal Revenue Code of
1986 is amended to read as follows:
``SEC. 63. TAXABLE INCOME.
``(a) In General.--For purposes of this subtitle, the term `taxable
income' means the excess of--
``(1) the sum of--
``(A) wages (as defined in section 3121(a) without
regard to paragraph (1) thereof) which are paid in cash
and which are received during the taxable year for
services performed in the United States,
``(B) retirement distributions which are includible
in gross income for such taxable year, plus
``(C) amounts received under any law of the United
States or of any State which is in the nature of
unemployment compensation, over
``(2) the standard deduction.
``(b) Standard Deduction.--
``(1) In general.--For purposes of this subtitle, the term
`standard deduction' means the sum of--
``(A) the basic standard deduction, plus
``(B) the additional standard deduction.
``(2) Basic standard deduction.--For purposes of paragraph
(1), the basic standard deduction is--
``(A) $29,190 in the case of--
``(i) a joint return, or
``(ii) a surviving spouse (as defined in
section 2(a)),
``(B) $18,630 in the case of a head of household
(as defined in section 2(b)), and
``(C) $14,590 in the case of an individual--
``(i) who is not married and who is not a
surviving spouse or head of household, or
``(ii) who is a married individual filing a
separate return.
``(3) Additional standard deduction.--For purposes of
paragraph (1), the additional standard deduction is $6,290 for
each dependent (as defined in section 152) who is described in
section 151(c) for the taxable year and who is not required to
file a return for such taxable year.
``(c) Retirement Distributions.--For purposes of subsection (a),
the term `retirement distribution' means any distribution from--
``(1) a plan described in section 401(a) which includes a
trust exempt from tax under section 501(a),
``(2) an annuity plan described in section 403(a),
``(3) an annuity contract described in section 403(b),
``(4) an individual retirement account described in section
408(a),
``(5) an individual retirement annuity described in section
408(b),
``(6) an eligible deferred compensation plan (as defined in
section 457),
``(7) a governmental plan (as defined in section 414(d)),
or
``(8) a trust described in section 501(c)(18).
Such term includes any plan, contract, account, annuity, or trust
which, at any time, has been determined by the Secretary to be such a
plan, contract, account, annuity, or trust.
``(d) Income of Certain Children.--For purposes of this subtitle--
``(1) an individual's taxable income shall include the
taxable income of each dependent child of such individual who
has not attained age 14 as of the close of such taxable year,
and
``(2) such dependent child shall have no liability for tax
imposed by section 1 with respect to such income and shall not
be required to file a return for such taxable year.
``(e) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning in a calendar year after 2020, each dollar amount
contained in subsection (b) shall be increased by an amount
determined by the Secretary to be equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment for such
calendar year.
``(2) Cost-of-living adjustment.--For purposes of paragraph
(1), the cost-of-living adjustment for any calendar year is the
percentage (if any) by which--
``(A) the CPI for the preceding calendar year,
exceeds
``(B) the CPI for the calendar year 2019.
``(3) CPI for any calendar year.--For purposes of paragraph
(2), the CPI for any calendar year is the average of the
Consumer Price Index as of the close of the 12-month period
ending on August 31 of such calendar year.
``(4) Consumer price index.--For purposes of paragraph (3),
the term `Consumer Price Index' means the last Consumer Price
Index for all-urban consumers published by the Department of
Labor. For purposes of the preceding sentence, the revision of
the Consumer Price Index which is most consistent with the
Consumer Price Index for calendar year 1986 shall be used.
``(5) Rounding.--If any increase determined under paragraph
(1) is not a multiple of $10, such increase shall be rounded to
the next highest multiple of $10.
``(f) Marital Status.--For purposes of this section, marital status
shall be determined under section 7703.''.
SEC. 102. TAX ON BUSINESS ACTIVITIES.
(a) In General.--Section 11 of the Internal Revenue Code of 1986
(relating to tax imposed on corporations) is amended to read as
follows:
``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.
``(a) Tax Imposed.--There is hereby imposed on every person engaged
in a business activity a tax equal to 17 percent of the business
taxable income of such person.
``(b) Liability for Tax.--The tax imposed by this section shall be
paid by the person engaged in the business activity, whether such
person is an individual, partnership, corporation, or otherwise.
``(c) Business Taxable Income.--For purposes of this section--
``(1) In general.--The term `business taxable income' means
gross active income reduced by the deductions specified in
subsection (d).
``(2) Gross active income.--
``(A) In general.--For purposes of paragraph (1),
the term `gross active income' means gross receipts
from--
``(i) the sale or exchange of property or
services in the United States by any person in
connection with a business activity, and
``(ii) the export of property or services
from the United States in connection with a
business activity.
``(B) Exchanges.--For purposes of this section, the
amount treated as gross receipts from the exchange of
property or services is the fair market value of the
property or services received, plus any money received.
``(C) Coordination with special rules for financial
services, etc.--Except as provided in subsection (e)--
``(i) the term `property' does not include
money or any financial instrument, and
``(ii) the term `services' does not include
financial services.
``(3) Exemption from tax for activities of governmental
entities and tax-exempt organizations.--For purposes of this
section, the term `business activity' does not include any
activity of a governmental entity or of any other organization
which is exempt from tax under this chapter.
``(d) Deductions.--
``(1) In general.--The deductions specified in this
subsection are--
``(A) the cost of business inputs for the business
activity,
``(B) wages (as defined in section 3121(a) without
regard to paragraph (1) thereof) which are paid in cash
for services performed in the United States as an
employee, and
``(C) retirement contributions to or under any plan
or arrangement which makes retirement distributions (as
defined in section 63(c)) for the benefit of such
employees to the extent such contributions are allowed
as a deduction under section 404.
``(2) Business inputs.--
``(A) In general.--For purposes of paragraph (1),
the term `cost of business inputs' means--
``(i) the amount paid for property sold or
used in connection with a business activity,
``(ii) the amount paid for services (other
than for the services of employees, including
fringe benefits paid by reason of such
services) in connection with a business
activity, and
``(iii) any excise tax, sales tax, customs
duty, or other separately stated levy imposed
by a Federal, State, or local government on the
purchase of property or services which are for
use in connection with a business activity.
Such term shall not include any tax imposed by chapter
2 or 21.
``(B) Exceptions.--Such term shall not include--
``(i) items described in subparagraphs (B)
and (C) of paragraph (1), and
``(ii) items for personal use not in
connection with any business activity.
``(C) Exchanges.--For purposes of this section, the
amount treated as paid in connection with the exchange
of property or services is the fair market value of the
property or services exchanged, plus any money paid.
``(e) Special Rules for Financial Intermediation Service
Activities.--In the case of the business activity of providing
financial intermediation services, the taxable income from such
activity shall be equal to the value of the intermediation services
provided in such activity.
``(f) Exception for Services Performed as Employee.--For purposes
of this section, the term `business activity' does not include the
performance of services by an employee for the employee's employer.
``(g) Carryover of Credit-Equivalent of Excess Deductions.--
``(1) In general.--If the aggregate deductions for any
taxable year exceed the gross active income for such taxable
year, the credit-equivalent of such excess shall be allowed as
a credit against the tax imposed by this section for the
following taxable year.
``(2) Credit-equivalent of excess deductions.--For purposes
of paragraph (1), the credit-equivalent of the excess described
in paragraph (1) for any taxable year is an amount equal to--
``(A) the sum of--
``(i) such excess, plus
``(ii) the product of such excess and the
3-month Treasury rate for the last month of
such taxable year, multiplied by
``(B) the rate of the tax imposed by subsection (a)
for such taxable year.
``(3) Carryover of unused credit.--If the credit allowable
for any taxable year by reason of this subsection exceeds the
tax imposed by this section for such year, then (in lieu of
treating such excess as an overpayment) the sum of--
``(A) such excess, plus
``(B) the product of such excess and the 3-month
Treasury rate for the last month of such taxable year,
shall be allowed as a credit against the tax imposed by
this section for the following taxable year.
``(4) 3-month treasury rate.--For purposes of this
subsection, the 3-month Treasury rate is the rate determined by
the Secretary based on the average market yield (during any 1-
month period selected by the Secretary and ending in the
calendar month in which the determination is made) on
outstanding marketable obligations of the United States with
remaining periods to maturity of 3 months or less.''.
(b) Tax on Noncash Compensation Provided to Employees Not Engaged
in Business Activity.--Section 4977 of the Internal Revenue Code of
1986 is amended to read as follows:
``SEC. 4977. TAX ON NONCASH COMPENSATION PROVIDED TO EMPLOYEES NOT
ENGAGED IN BUSINESS ACTIVITY.
``(a) Imposition of Tax.--There is hereby imposed a tax equal to 17
percent of the value of excludable compensation provided during the
calendar year by an employer for the benefit of employees to whom this
section applies.
``(b) Liability for Tax.--The tax imposed by this section shall be
paid by the employer.
``(c) Excludable Compensation.--For purposes of subsection (a), the
term `excludable compensation' means any remuneration for services
performed as an employee other than--
``(1) wages (as defined in section 3121(a) without regard
to paragraph (1) thereof) which are paid in cash,
``(2) remuneration for services performed outside the
United States, and
``(3) retirement contributions to or under any plan or
arrangement which makes retirement distributions (as defined in
section 63(c)).
``(d) Employees to Whom Section Applies.--This section shall apply
to an employee who is employed in any activity by--
``(1) any organization which is exempt from taxation under
this chapter, or
``(2) any agency or instrumentality of the United States,
any State or political subdivision of a State, or the District
of Columbia.''.
SEC. 103. SIMPLIFICATION OF RULES RELATING TO QUALIFIED RETIREMENT
PLANS.
(a) In General.--The following provisions of the Internal Revenue
Code of 1986 are hereby repealed:
(1) Nondiscrimination rules.--
(A) Paragraphs (4) and (5) of section 401(a)
(relating to nondiscrimination requirements).
(B) Sections 401(a)(10)(B) and 416 (relating to top
heavy plans).
(C) Section 401(a)(17) (relating to compensation
limit).
(D) Paragraphs (3), (6), and (26) of section
401(a), and section 410(b) (relating to minimum
participation and coverage requirements).
(E) Paragraphs (3), (8), (11), (12), and (13) of
section 401(k), and section 4979 (relating to actual
deferral percentage).
(F) Section 401(l) (relating to permitted disparity
in plan contributions or benefits).
(G) Section 401(m) (relating to nondiscrimination
test for matching contributions and employee
contributions).
(H) Paragraphs (1)(D) and (12) of section 403(b)
(relating to nondiscrimination requirements).
(I) Paragraphs (3) and (6) (other than subparagraph
(A)(i) thereof) of section 408(k) (relating to
simplified employee pensions).
(2) Contribution limits.--
(A) Sections 401(a)(16), 402(h)(2), 403(b) (3) and
(4), and 415 (relating to limitations on benefits and
contributions under qualified plans).
(B) Sections 401(a)(30), 402(g), and 403(b)(1)(E)
(relating to limitation on exclusion for elective
deferrals).
(C) Paragraphs (3) and (7) of section 404(a)
(relating to percentage of compensation limits).
(D) Section 404(l) (relating to limit on includible
compensation).
(3) Restrictions on distributions.--
(A) Section 72(t) (relating to 10 percent
additional tax on early distributions from qualified
retirement plans).
(B) Sections 401(a)(9), 403(b)(10), and 4974
(relating to minimum distribution rules).
(C) Section 402(e)(4) (relating to net unrealized
appreciation).
(4) Special requirements for plan benefitting self-employed
individuals.--Subsections (a)(10)(A) and (d) of section 401.
(5) Prohibition of tax-exempt organizations and governments
from having qualified cash or deferred arrangements.--Section
401(k)(4)(B).
(b) Employer Reversions of Excess Pension Assets Permitted Subject
Only to Income Inclusion.--
(1) Repeal of tax on employer reversions.--Section 4980 of
the Internal Revenue Code of 1986 is hereby repealed.
(2) Employer reversions permitted without plan
termination.--Section 420 of such Code is amended to read as
follows:
``SEC. 420. TRANSFERS OF EXCESS PENSION ASSETS.
``(a) In General.--If there is a qualified transfer of any excess
pension assets of a defined benefit plan (other than a multiemployer
plan) to an employer--
``(1) a trust which is part of such plan shall not be
treated as failing to meet the requirements of section 401(a)
or any other provision of law solely by reason of such transfer
(or any other action authorized under this section), and
``(2) such transfer shall not be treated as a prohibited
transaction for purposes of section 4975.
The gross income of the employer shall include the amount of any
qualified transfer made during the taxable year.
``(b) Qualified Transfer.--For purposes of this section--
``(1) In general.--The term `qualified transfer' means a
transfer--
``(A) of excess pension assets of a defined benefit
plan to the employer, and
``(B) with respect to which the vesting
requirements of subsection (c) are met in connection
with the plan.
``(2) Only 1 transfer per year.--No more than 1 transfer
with respect to any plan during a taxable year may be treated
as a qualified transfer for purposes of this section.
``(c) Vesting Requirements of Plans Transferring Assets.--The
vesting requirements of this subsection are met if the plan provides
that the accrued pension benefits of any participant or beneficiary
under the plan become nonforfeitable in the same manner which would be
required if the plan had terminated immediately before the qualified
transfer (or in the case of a participant who separated during the 1-
year period ending on the date of the transfer, immediately before such
separation).
``(d) Definition and Special Rule.--For purposes of this section--
``(1) Excess pension assets.--The term `excess pension
assets' means the excess (if any) of--
``(A) the lesser of--
``(i) the fair market value of the plan's
assets (reduced by the prefunding balance and
funding standard carryover balance determined
under section 430(f)), or
``(ii) the value of plan assets as
determined under section 430(g)(3) after
reduction under section 430(f), over
``(B) 125 percent of the sum of the funding target
and the target normal cost determined under section 430
for such plan year.
``(2) Coordination with sections 430 and 433.--In the case
of a qualified transfer--
``(A) any assets so transferred shall not, for
purposes of this section and sections 430 and 433, be
treated as assets in the plan, and
``(B) in the case of a CSEC plan, the plan shall be
treated as having a net experience loss under section
433(b)(2)(B)(iv) in an amount equal to the amount of
such transfer and for which amortization charges begin
for the first plan year after the plan year in which
such transfer occurs, except that such section shall be
applied to such amount by substituting `10 plan years'
for `5 plan years'.''.
SEC. 104. REPEAL OF ALTERNATIVE MINIMUM TAX.
Part VI of subchapter A of chapter 1 of the Internal Revenue Code
of 1986 is hereby repealed.
SEC. 105. REPEAL OF CREDITS.
Part IV of subchapter A of chapter 1 of the Internal Revenue Code
of 1986 is hereby repealed.
SEC. 106. REPEAL OF ESTATE AND GIFT TAXES AND OBSOLETE INCOME TAX
PROVISIONS.
(a) Repeal of Estate and Gift Taxes.--
(1) In general.--Subtitle B of the Internal Revenue Code of
1986 is hereby repealed.
(2) Effective date.--The repeal made by paragraph (1) shall
apply to the estates of decedents dying, and gifts and
generation-skipping transfers made, after December 31, 2017.
(b) Repeal of Obsolete Income Tax Provisions.--
(1) In general.--Except as provided in paragraph (2),
chapter 1 of the Internal Revenue Code of 1986 is hereby
repealed.
(2) Exceptions.--Paragraph (1) shall not apply to--
(A) sections 1, 11, and 63 of such Code, as amended
by this Act,
(B) those provisions of chapter 1 of such Code
which are necessary for determining whether or not--
(i) retirement distributions are includible
in the gross income of employees, or
(ii) an organization is exempt from tax
under such chapter, and
(C) subchapter D of such chapter 1 (relating to
deferred compensation).
SEC. 107. EFFECTIVE DATE.
Except as otherwise provided in this title, the amendments made by
this title shall apply to taxable years beginning after December 31,
2017.
TITLE II--SUPERMAJORITY REQUIRED FOR TAX CHANGES
SEC. 201. SUPERMAJORITY REQUIRED.
(a) In General.--It shall not be in order in the House of
Representatives or the Senate to consider any bill, joint resolution,
amendment thereto, or conference report thereon that includes any
provision that--
(1) increases any Federal income tax rate,
(2) creates any additional Federal income tax rate,
(3) reduces the standard deduction, or
(4) provides any exclusion, deduction, credit, or other
benefit which results in a reduction in Federal revenues.
(b) Waiver or Suspension.--This section may be waived or suspended
in the House of Representatives or the Senate only by the affirmative
vote of three-fifths of the Members, duly chosen and sworn.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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