| HR 627 IH
107th CONGRESS
1st Session
H. R. 627
To provide tax and
regulatory relief for farmers and to improve the competitiveness of American
agricultural commodities and products in global markets.
IN THE HOUSE OF REPRESENTATIVES
February 14, 2001
Mr. BOEHNER (for himself, Mr.
COOKSEY, Mr. PENCE, Mr. JOHNSON of Illinois, Mr. OSBORNE, Mr. NETHERCUTT,
Mr. FLETCHER, Mr. LAHOOD, and Mr. HAYES) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addition
to the Committees on Agriculture, Rules, and Government Reform, for a period
to be subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee concerned
A BILL
To provide tax and
regulatory relief for farmers and to improve the competitiveness of American
agricultural commodities and products in global markets.
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 `Rural America Prosperity Act of 2001'.
(b) TABLE OF CONTENTS- The
table of contents of this Act is as follows:
Sec. 1. Short title; table
of contents.
TITLE I--TAX RELIEF FOR FARMERS
Subtitle A--General Tax Provisions
Sec. 101. Deduction for
100 percent of health insurance costs of self-employed individuals.
Sec. 102. Exclusion of gain
from sale of farmland.
Sec. 103. Income averaging
for farmers not to increase alternative minimum tax liability.
Sec. 104. Farm and ranch
risk management accounts.
Subtitle B--Estate and Gift
Tax Relief
Sec. 111. Repeal of estate,
gift, and generation-skipping taxes.
Sec. 112. Termination of
step up in basis at death.
Sec. 113. Carryover basis
at death.
Sec. 114. Additional reductions
of estate and gift tax rates.
Sec. 115. Unified credit
against estate and gift taxes replaced with unified exemption amount.
Sec. 116. Deemed allocation
of GST exemption to lifetime transfers to trusts; retroactive allocations.
Sec. 117. Severing of trusts.
Sec. 118. Modification of
certain valuation rules.
Sec. 119. Relief provisions.
Sec. 120. Expansion of estate
tax rule for conservation easements.
TITLE II--STUDY OF COSTS OF
REGULATIONS ON FARMERS, RANCHERS, AND FORESTERS
Sec. 202. Comptroller General
study of regulations.
Sec. 203. Response of Secretary
of Agriculture.
TITLE III--EXTENSION OF TRADE
AUTHORITIES PROCEDURES FOR RECIPROCAL TRADE AGREEMENTS
Sec. 302. Trade negotiating
objectives.
Sec. 303. Trade agreements
authority.
Sec. 305. Implementation
of trade agreements.
Sec. 306. Treatment of certain
trade agreements.
Sec. 307. Conforming amendments.
TITLE IV--AGRICULTURAL TRADE
FREEDOM
Sec. 403. Agricultural commodities,
livestock, and products exempt from unilateral agricultural sanctions.
Sec. 404. Sale or barter
of food assistance.
TITLE I--TAX RELIEF FOR FARMERS
Subtitle A--General Tax Provisions
SEC. 101. DEDUCTION FOR 100
PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.
(a) IN GENERAL- Paragraph
(1) of section 162(l) of the Internal Revenue Code of 1986 (relating to
special rules for health insurance costs of self-employed individuals)
is amended to read as follows:
`(1) ALLOWANCE OF DEDUCTION-
In the case of an individual who is an employee within the meaning of section
401(c)(1), there shall be allowed as a deduction under this section an
amount equal to 100 percent of the amount paid during the taxable year
for insurance which constitutes medical care for the taxpayer, his spouse,
and dependents.'.
(b) EFFECTIVE DATE- The
amendment made by this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 102. EXCLUSION OF GAIN
FROM SALE OF FARMLAND.
(a) IN GENERAL- Part III
of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating
to items specifically excluded from gross income) is amended by inserting
after section 121 the following:
`SEC. 121A. EXCLUSION OF GAIN
FROM SALE OF QUALIFIED FARM PROPERTY.
`(a) EXCLUSION- In the case
of a natural person, gross income shall not include gain from the sale
or exchange of qualified farm property.
`(1) IN GENERAL- The amount
of gain excluded from gross income under subsection (a) with respect to
any taxable year shall not exceed $500,000 ($250,000 in the case of a married
individual filing a separate return), reduced by the aggregate amount of
gain excluded under subsection (a) for all preceding taxable years.
`(2) SPECIAL RULE FOR JOINT
RETURNS- The amount of the exclusion under subsection (a) on a joint return
for any taxable year shall be allocated equally between the spouses for
purposes of applying the limitation under paragraph (1) for any succeeding
taxable year.
`(c) QUALIFIED FARM PROPERTY-
For purposes of this section--
`(1) IN GENERAL- The term
`qualified farm property' means real property located in the United States
if, during periods aggregating 3 years or more of the 5-year period ending
on the date of the sale or exchange of such real property--
`(A) such real property
was used by the taxpayer or a member of the family of the taxpayer as a
farm for farming purposes, and
`(B) there was material
participation by the taxpayer (or such a member) in the operation of the
farm.
`(2) OTHER DEFINITIONS-
The terms `member of the family', `farm', and `farming purposes' have the
respective meanings given such terms by paragraphs (2), (4), and (5) of
section 2032A(e).
`(3) SPECIAL RULES- Rules
similar to the rules of paragraphs (4) and (5) of section 2032A(b) and
paragraphs (3) and (6) of section 2032A(e) shall apply.
`(d) OTHER RULES- For purposes
of this section, rules similar to the rules of subsection (e) and subsection
(f) of section 121 shall apply.'
(b) CONFORMING AMENDMENT-
The table of sections for part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after the item relating
to section 121 the following:
`Sec. 121A. Exclusion of gain
from sale of qualified farm property.'
(c) EFFECTIVE DATE- The
amendments made by this section shall apply to any sale or exchange after
the date of the enactment of this Act in taxable years ending after such
date.
SEC. 103. INCOME AVERAGING FOR
FARMERS NOT TO INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.
(a) IN GENERAL- Section
55(c) of the Internal Revenue Code of 1986 (defining regular tax) is amended
by redesignating paragraph (2) as paragraph (3) and by inserting after
paragraph (1) the following:
`(2) COORDINATION WITH INCOME
AVERAGING FOR FARMERS- Solely for purposes of this section, section 1301
(relating to averaging of farm income) shall not apply in computing the
regular tax.'
(b) EFFECTIVE DATE- The
amendment made by this section shall apply to taxable years beginning after
December 31, 1997.
SEC. 104. FARM AND RANCH RISK
MANAGEMENT ACCOUNTS.
(a) IN GENERAL- Subpart
C of part II of subchapter E of chapter 1 of the Internal Revenue Code
of 1986 (relating to taxable year for which deductions taken) is amended
by inserting after section 468B the following:
`SEC. 468C. FARM AND RANCH RISK
MANAGEMENT ACCOUNTS.
`(a) DEDUCTION ALLOWED-
In the case of an individual engaged in an eligible farming business, there
shall be allowed as a deduction for any taxable year the amount paid in
cash by the taxpayer during the taxable year to a Farm and Ranch Risk Management
Account (hereinafter referred to as the `FARRM Account').
`(b) LIMITATION- The amount
which a taxpayer may pay into the FARRM Account for any taxable year shall
not exceed 20 percent of so much of the taxable income of the taxpayer
(determined without regard to this section) which is attributable (determined
in the manner applicable under section 1301) to any eligible farming business.
`(c) ELIGIBLE FARMING BUSINESS-
For purposes of this section, the term `eligible farming business' means
any farming business (as defined in section 263A(e)(4)) which is not a
passive activity (within the meaning of section 469(c)) of the taxpayer.
`(d) FARRM ACCOUNT- For
purposes of this section--
`(1) IN GENERAL- The term
`FARRM Account' means a trust created or organized in the United States
for the exclusive benefit of the taxpayer, but only if the written governing
instrument creating the trust meets the following requirements:
`(A) No contribution will
be accepted for any taxable year in excess of the amount allowed as a deduction
under subsection (a) for such year.
`(B) The trustee is a bank
(as defined in section 408(n)) or another person who demonstrates to the
satisfaction of the Secretary that the manner in which such person will
administer the trust will be consistent with the requirements of this section.
`(C) The assets of the trust
consist entirely of cash or of obligations which have adequate stated interest
(as defined in section 1274(c)(2)) and which pay such interest not less
often than annually.
`(D) All income of the trust
is distributed currently to the grantor.
`(E) The assets of the trust
will not be commingled with other property except in a common trust fund
or common investment fund.
`(2) ACCOUNT TAXED AS GRANTOR
TRUST- The grantor of a FARRM Account shall be treated for purposes of
this title as the owner of such Account and shall be subject to tax thereon
in accordance with subpart E of part I of subchapter J of this chapter
(relating to grantors and others treated as substantial owners).
`(e) INCLUSION OF AMOUNTS
DISTRIBUTED-
`(1) IN GENERAL- Except
as provided in paragraph (2), there shall be includible in the gross income
of the taxpayer for any taxable year--
`(A) any amount distributed
from a FARRM Account of the taxpayer during such taxable year, and
`(B) any deemed distribution
under--
`(i) subsection (f)(1) (relating
to deposits not distributed within 5 years),
`(ii) subsection (f)(2)
(relating to cessation in eligible farming business), and
`(iii) subparagraph (A)
or (B) of subsection (f)(3) (relating to prohibited transactions and pledging
account as security).
`(2) EXCEPTIONS- Paragraph
(1)(A) shall not apply to--
`(A) any distribution to
the extent attributable to income of the Account, and
`(B) the distribution of
any contribution paid during a taxable year to a FARRM Account to the extent
that such contribution exceeds the limitation applicable under subsection
(b) if requirements similar to the requirements of section 408(d)(4) are
met.
For purposes of subparagraph
(A), distributions shall be treated as first attributable to income and
then to other amounts.
`(1) TAX ON DEPOSITS IN
ACCOUNT WHICH ARE NOT DISTRIBUTED WITHIN 5 YEARS-
`(A) IN GENERAL- If, at
the close of any taxable year, there is a nonqualified balance in any FARRM
Account--
`(i) there shall be deemed
distributed from such Account during such taxable year an amount equal
to such balance, and
`(ii) the taxpayer's tax
imposed by this chapter for such taxable year shall be increased by 10
percent of such deemed distribution.
The preceding sentence shall
not apply if an amount equal to such nonqualified balance is distributed
from such Account to the taxpayer
before the due date (including
extensions) for filing the return of tax imposed by this chapter for such
year (or, if earlier, the date the taxpayer files such return for such
year).
`(B) NONQUALIFIED BALANCE-
For purposes of subparagraph (A), the term `nonqualified balance' means
any balance in the Account on the last day of the taxable year which is
attributable to amounts deposited in such Account before the 4th preceding
taxable year.
`(C) ORDERING RULE- For
purposes of this paragraph, distributions from a FARRM Account (other than
distributions of current income) shall be treated as made from deposits
in the order in which such deposits were made, beginning with the earliest
deposits.
`(2) CESSATION IN ELIGIBLE
BUSINESS- At the close of the first disqualification period after a period
for which the taxpayer was engaged in an eligible farming business, there
shall be deemed distributed from the FARRM Account of the taxpayer an amount
equal to the balance in such Account (if any) at the close of such disqualification
period. For purposes of the preceding sentence, the term `disqualification
period' means any period of 2 consecutive taxable years for which the taxpayer
is not engaged in an eligible farming business.
`(3) CERTAIN RULES TO APPLY-
Rules similar to the following rules shall apply for purposes of this section:
`(A) Section 220(f)(8) (relating
to treatment on death).
`(B) Section 408(e)(2) (relating
to loss of exemption of account where individual engages in prohibited
transaction).
`(C) Section 408(e)(4) (relating
to effect of pledging account as security).
`(D) Section 408(g) (relating
to community property laws).
`(E) Section 408(h) (relating
to custodial accounts).
`(4) TIME WHEN PAYMENTS
DEEMED MADE- For purposes of this section, a taxpayer shall be deemed to
have made a payment to a FARRM Account on the last day of a taxable year
if such payment is made on account of such taxable year and is made on
or before the due date (without regard to extensions) for filing the return
of tax for such taxable year.
`(5) INDIVIDUAL- For purposes
of this section, the term `individual' shall not include an estate or trust.
`(6) DEDUCTION NOT ALLOWED
FOR SELF-EMPLOYMENT TAX- The deduction allowable by reason of subsection
(a) shall not be taken into account in determining an individual's net
earnings from self-employment (within the meaning of section 1402(a)) for
purposes of chapter 2.
`(g) REPORTS- The trustee
of a FARRM Account shall make such reports regarding such Account to the
Secretary and to the person for whose benefit the Account is maintained
with respect to contributions, distributions, and such other matters as
the Secretary may require under regulations. The reports required by this
subsection shall be filed at such time and in such manner and furnished
to such persons at such time and in such manner as may be required by such
regulations.'.
(b) TAX ON EXCESS CONTRIBUTIONS-
(1) Subsection (a) of section
4973 of the Internal Revenue Code of 1986 (relating to tax on excess contributions
to certain tax-favored accounts and annuities) is amended by striking `or'
at the end of paragraph (3), by redesignating paragraph (4) as paragraph
(5), and by inserting after paragraph (3) the following:
`(4) a FARRM Account (within
the meaning of section 468C(d)), or'.
(2) Section 4973 of such
Code, is amended by adding at the end the following:
`(g) EXCESS CONTRIBUTIONS
TO FARRM ACCOUNTS- For purposes of this section, in the case of a FARRM
Account (within the meaning of section 468C(d)), the term `excess contributions'
means the amount by which the amount contributed for the taxable year to
the Account exceeds the amount which may be contributed to the Account
under section 468C(b) for such taxable year. For purposes of this subsection,
any contribution which is distributed out of the FARRM Account in a distribution
to which section 468C(e)(2)(B) applies shall be treated as an amount not
contributed.'.
(3) The section heading
for section 4973 of such Code is amended to read as follows:
`SEC. 4973. EXCESS CONTRIBUTIONS
TO CERTAIN ACCOUNTS, ANNUITIES, ETC.'.
(4) The table of sections
for chapter 43 of such Code is amended by striking the item relating to
section 4973 and inserting the following:
`Sec. 4973. Excess contributions
to certain accounts, annuities, etc.'.
(c) TAX ON PROHIBITED TRANSACTIONS-
(1) Subsection (c) of section
4975 of the Internal Revenue Code of 1986 (relating to tax on prohibited
transactions) is amended by adding at the end the following:
`(6) SPECIAL RULE FOR FARRM
ACCOUNTS- A person for whose benefit a FARRM Account (within the meaning
of section 468C(d)) is established shall be exempt from the tax imposed
by this section with respect to any transaction concerning such account
(which would otherwise be taxable under this section) if, with respect
to such transaction, the account ceases to be a FARRM Account by reason
of the application of section 468C(f)(3)(A) to such account.'.
(2) Paragraph (1) of section
4975(e) of such Code is amended by redesignating subparagraphs (E) and
(F) as subparagraphs (F) and (G), respectively, and by inserting after
subparagraph (D) the following:
`(E) a FARRM Account described
in section 468C(d),'.
(d) FAILURE TO PROVIDE REPORTS
ON FARRM ACCOUNTS- Paragraph (2) of section 6693(a) of the Internal Revenue
Code of 1986 (relating to failure to provide
reports on certain tax-favored
accounts or annuities) is amended by redesignating subparagraphs (C) and
(D) as subparagraphs (D) and (E), respectively, and by inserting after
subparagraph (B) the following:
`(C) section 468C(g) (relating
to FARRM Accounts),'.
(e) CLERICAL AMENDMENT-
The table of sections for subpart C of part II of subchapter E of chapter
1 of the Internal Revenue Code of 1986 is amended by inserting after the
item relating to section 468B the following:
`Sec. 468C. Farm and Ranch Risk
Management Accounts.'.
(f) EFFECTIVE DATE- The
amendments made by this section shall apply to taxable years beginning
after December 31, 2000.
Subtitle B--Estate and Gift
Tax Relief
SEC. 111. REPEAL OF ESTATE,
GIFT, AND GENERATION-SKIPPING TAXES.
(a) IN GENERAL- Subtitle
B of the Internal Revenue Code of 1986 is hereby repealed.
(b) EFFECTIVE DATE- The
repeal made by subsection (a) shall apply to the estates of decedents dying,
and gifts and generation-skipping transfers made, after December 31, 2010.
SEC. 112. TERMINATION OF STEP
UP IN BASIS AT DEATH.
(a) TERMINATION OF APPLICATION
OF SECTION 1014- Section 1014 of the Internal Revenue Code of 1986 (relating
to basis of property acquired from a decedent) is amended by adding at
the end the following:
`(f) TERMINATION- In the
case of a decedent dying after December 31, 2010, this section shall not
apply to property for which basis is provided by section 1022.'.
(b) CONFORMING AMENDMENT-
Subsection (a) of section 1016 of the Internal Revenue Code of 1986 (relating
to adjustments to basis) is amended by striking `and' at the end of paragraph
(26), by striking the period at the end of paragraph (27) and inserting
`, and', and by adding at the end the following:
`(28) to the extent provided
in section 1022 (relating to basis for certain property acquired from a
decedent dying after December 31, 2010).'.
SEC. 113. CARRYOVER BASIS AT
DEATH.
(a) GENERAL RULE- Part II
of subchapter O of chapter 1 of the Internal Revenue Code of 1986 (relating
to basis rules of general application) is amended by inserting after section
1021 the following new section:
`SEC. 1022. CARRYOVER BASIS
FOR CERTAIN PROPERTY ACQUIRED FROM A DECEDENT DYING AFTER DECEMBER 31,
2010.
`(a) CARRYOVER BASIS- Except
as otherwise provided in this section, the basis of carryover basis property
in the hands of a person acquiring such property from a decedent shall
be determined under section 1015.
`(b) CARRYOVER BASIS PROPERTY
DEFINED-
`(1) IN GENERAL- For purposes
of this section, the term `carryover basis property' means any property--
`(A) which is acquired from
or passed from a decedent who died after December 31, 2010, and
`(B) which is not excluded
pursuant to paragraph (2).
The property taken into
account under subparagraph (A) shall be determined under section 1014(b)
without regard to subparagraph (A) of the last sentence of paragraph (9)
thereof.
`(2) CERTAIN PROPERTY NOT
CARRYOVER BASIS PROPERTY- The term `carryover basis property' does not
include--
`(A) any item of gross income
in respect of a decedent described in section 691,
`(B) property of the decedent
to the extent that the aggregate adjusted fair market value of such property
does not exceed $1,300,000, and
`(C) property which was
acquired from the decedent by the surviving spouse of the decedent (and
which would be carryover basis property without regard to this subparagraph)
but only if the value of such property would have been deductible from
the value of the taxable estate of the decedent under section 2056, as
in effect on the day before the date of the enactment of the Rural America
Prosperity Act of 2001.
For purposes of this subsection,
the term `adjusted fair market value' means, with respect to any property,
fair market value reduced by any indebtedness secured by such property.
`(3) LIMITATION ON EXCEPTION
FOR PROPERTY ACQUIRED BY SURVIVING SPOUSE- The adjusted fair market value
of property which is not carryover basis property by reason of paragraph
(2)(C) shall not exceed $3,000,000.
`(4) ALLOCATION OF EXCEPTED
AMOUNTS- The executor shall allocate the limitations under paragraphs (2)(B)
and (3).
`(5) INFLATION ADJUSTMENT
OF EXCEPTED AMOUNTS- In the case of decedents dying in a calendar year
after 2011, the dollar amounts in paragraphs (2)(B) and (3) shall each
be increased by an amount equal to the product of--
`(A) such dollar amount,
and
`(B) the cost-of-living
adjustment determined under section 1(f)(3) for such calendar year, determined
by substituting `2010' for `1992' in subparagraph (B) thereof.
If any increase determined
under the preceding sentence is not a multiple of $10,000, such increase
shall be rounded to the nearest multiple of $10,000.
`(c) REGULATIONS- The Secretary
shall prescribe such regulations as may be necessary to carry out the purposes
of this section.'.
(b) MISCELLANEOUS AMENDMENTS
RELATED TO CARRYOVER BASIS-
(1) CAPITAL GAIN TREATMENT
FOR INHERITED ART WORK OR SIMILAR PROPERTY-
(A) IN GENERAL- Subparagraph
(C) of section 1221(a)(3) of the Internal Revenue
Code of 1986 (defining capital
asset) is amended by inserting `(other than by reason of section 1022)'
after `is determined'.
(B) COORDINATION WITH SECTION
170- Paragraph (1) of section 170(e) of such Code (relating to certain
contributions of ordinary income and capital gain property) is amended
by adding at the end the following: `For purposes of this paragraph, the
determination of whether property is a capital asset shall be made without
regard to the exception contained in section 1221(a)(3)(C) for basis determined
under section 1022.'.
(2) DEFINITION OF EXECUTOR-
Section 7701(a) of such Code (relating to definitions) is amended by adding
at the end the following:
`(47) EXECUTOR- The term
`executor' means the executor or administrator of the decedent, or, if
there is no executor or administrator appointed, qualified, and acting
within the United States, then any person in actual or constructive possession
of any property of the decedent.'.
(3) CLERICAL AMENDMENT-
The table of sections for part II of subchapter O of chapter 1 of such
Code is amended by adding at the end the following new item:
`Sec. 1022. Carryover basis
for certain property acquired from a decedent dying after December 31,
2010.'.
(c) EFFECTIVE DATE- The
amendments made by this section shall apply to estates of decedents dying
after December 31, 2010.
SEC. 114. ADDITIONAL REDUCTIONS
OF ESTATE AND GIFT TAX RATES.
(a) MAXIMUM RATE OF TAX
REDUCED TO 50 PERCENT-
(1) IN GENERAL- The table
contained in section 2001(c)(1) of the Internal Revenue Code of 1986 is
amended by striking the two highest brackets and inserting the following:
`Over $2,500,000
$1,025,800, plus 50% of the
excess over $2,500,000.'.
(2) PHASE-IN OF REDUCED
RATE- Subsection (c) of section 2001 of such Code is amended by adding
at the end the following new paragraph:
`(3) PHASE-IN OF REDUCED
RATE- In the case of decedents dying, and gifts made, during 2002, the
last item in the table contained in paragraph (1) shall be applied by substituting
`53%' for `50%'.'.
(b) REPEAL OF PHASEOUT OF
GRADUATED RATES- Subsection (c) of section 2001 of the Internal Revenue
Code of 1986 is amended by striking paragraph (2) and redesignating paragraph
(3), as added by subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS
OF RATES OF TAX- Subsection (c) of section 2001 of the Internal Revenue
Code of 1986, as so amended, is amended by adding at the end the following
new paragraph:
`(3) PHASEDOWN OF TAX- In
the case of estates of decedents dying, and gifts made, during any calendar
year after 2003 and before 2011--
`(A) IN GENERAL- Except
as provided in subparagraph (C), the tentative tax under this subsection
shall be determined by using a table prescribed by the Secretary (in lieu
of using the table contained in paragraph (1)) which is the same as such
table; except that--
`(i) each of the rates of
tax shall be reduced by the number of percentage points determined under
subparagraph (B), and
`(ii) the amounts setting
forth the tax shall be adjusted to the extent necessary to reflect the
adjustments under clause (i).
`(B) PERCENTAGE POINTS OF
REDUCTION-
--The number of
`For calendar year:
--percentage points is:
--1.0
--2.0
--3.0
--4.0
--5.5
--7.5
--9.5.
`(C) COORDINATION WITH INCOME
TAX RATES- The reductions under subparagraph (A)--
`(i) shall not reduce any
rate under paragraph (1) below the lowest rate in section 1(c), and
`(ii) shall not reduce the
highest rate under paragraph (1) below the highest rate in section 1(c).
`(D) COORDINATION WITH CREDIT
FOR STATE DEATH TAXES- Rules similar to the rules of subparagraph (A) shall
apply to the table contained in section 2011(b) except that the Secretary
shall prescribe percentage point reductions which maintain the proportionate
relationship (as in effect before any reduction under this paragraph) between
the credit under section 2011 and the tax rates under subsection (c).'.
(1) SUBSECTIONS (a) AND
(b)- The amendments made by subsections (a) and (b) shall apply to estates
of decedents dying, and gifts made, after December 31, 2001.
(2) SUBSECTION (c)- The
amendment made by subsection (c) shall apply to estates of decedents dying,
and gifts made, after December 31, 2003.
SEC. 115. UNIFIED CREDIT AGAINST
ESTATE AND GIFT TAXES REPLACED WITH UNIFIED EXEMPTION AMOUNT.
(1) ESTATE TAX- Subsection
(b) of section 2001 of the Internal Revenue Code of 1986 (relating to computation
of tax) is amended to read as follows:
`(1) IN GENERAL- The tax
imposed by this section shall be the amount equal to the excess (if any)
of--
`(A) the tentative tax determined
under paragraph (2), over
`(B) the aggregate amount
of tax which would have been payable under chapter 12 with respect to gifts
made by the decedent after December 31, 1976, if the provisions of subsection
(c) (as in effect at the
decedent's death) had been applicable at the time of such gifts.
`(2) TENTATIVE TAX- For
purposes of paragraph (1), the tentative tax determined under this paragraph
is a tax computed under subsection (c) on the excess of--
`(i) the amount of the taxable
estate, and
`(ii) the amount of the
adjusted taxable gifts, over
`(B) the exemption amount
for the calendar year in which the decedent died.
`(3) EXEMPTION AMOUNT- For
purposes of paragraph (2), the term `exemption amount' means the amount
determined in accordance with the following table:
`In the case of
--The exemption
calendar year:
--amount is:
2002 and 2003
--$700,000
2004
--$850,000
2005
--$950,000
2006 or thereafter
--$1,000,000.
`(4) ADJUSTED TAXABLE GIFTS-
For purposes of paragraph (2), the term `adjusted taxable gifts' means
the total amount of the taxable gifts (within the meaning of section 2503)
made by the decedent after December 31, 1976, other than gifts which are
includible in the gross estate of the decedent.'.
(2) GIFT TAX- Subsection
(a) of section 2502 of such Code (relating to computation of tax) is amended
to read as follows:
`(1) IN GENERAL- The tax
imposed by section 2501 for each calendar year shall be the amount equal
to the excess (if any) of--
`(A) the tentative tax determined
under paragraph (2), over
`(B) the tax paid under
this section for all prior calendar periods.
`(2) TENTATIVE TAX- For
purposes of paragraph (1), the tentative tax determined under this paragraph
for a calendar year is a tax computed under section 2001(c) on the excess
of--
`(A) the aggregate sum of
the taxable gifts for such calendar year and for each of the preceding
calendar periods, over
`(B) the exemption amount
under section 2001(b)(3) for such calendar year.'.
(b) REPEAL OF UNIFIED CREDITS-
(1) Section 2010 of the
Internal Revenue Code of 1986 (relating to unified credit against estate
tax) is hereby repealed.
(2) Section 2505 of such
Code (relating to unified credit against gift tax) is hereby repealed.
(c) CONFORMING AMENDMENTS-
(1)(A) Subsection (b) of
section 2011 of the Internal Revenue Code of 1986 is amended--
(i) by striking `adjusted'
in the table; and
(ii) by striking the last
sentence.
(B) Subsection (f) of section
2011 of such Code is amended by striking `, reduced by the amount of the
unified credit provided by section 2010'.
(2) Subsection (a) of section
2012 of such Code is amended by striking `and the unified credit provided
by section 2010'.
(3) Subparagraph (A) of
section 2013(c)(1) of such Code is amended by striking `2010,'.
(4) Paragraph (2) of section
2014(b) of such Code is amended by striking `2010, 2011,' and inserting
`2011'.
(5) Clause (ii) of section
2056A(b)(12)(C) of such Code is amended to read as follows:
`(ii) to treat any reduction
in the tax imposed by paragraph (1)(A) by reason of the credit allowable
under section 2010 (as in effect on the day before the date of the enactment
of the Rural America Prosperity Act of 2001) or the exemption amount allowable
under section 2001(b) with respect to the decedent as a credit under section
2505 (as so in effect) or exemption under section 2521 (as the case may
be) allowable to such surviving spouse for purposes of determining the
amount of the exemption allowable under section 2521 with respect to taxable
gifts made by the surviving spouse during the year in which the spouse
becomes a citizen or any subsequent year,'.
(6) Subsection (a) of section
2057 of such Code is amended by striking paragraphs (2) and (3) and inserting
the following new paragraph:
`(2) MAXIMUM DEDUCTION-
The deduction allowed by this section shall not exceed the excess of $1,300,000
over the exemption amount (as defined in section 2001(b)(3)).'.
(7)(A) Subsection (b) of
section 2101 of such Code is amended to read as follows:
`(1) IN GENERAL- The tax
imposed by this section shall be the amount equal to the excess (if any)
of--
`(A) the tentative tax determined
under paragraph (2), over
`(B) a tentative tax computed
under section 2001(c) on the amount of the adjusted taxable gifts.
`(2) TENTATIVE TAX- For
purposes of paragraph (1), the tentative tax determined under this paragraph
is a tax computed under section 2001(c) on the excess of--
`(i) the amount of the taxable
estate, and
`(ii) the amount of the
adjusted taxable gifts, over
`(B) the exemption amount
for the calendar year in which the decedent died.
`(A) IN GENERAL- The term
`exemption amount' means $60,000.
`(B) RESIDENTS OF POSSESSIONS
OF THE UNITED STATES- In the case of a decedent who is considered to be
a nonresident not a citizen of the United States under section 2209, the
exemption amount under this paragraph shall be the greater of--
`(ii) that proportion of
$175,000 which the value of that part of the decedent's gross estate which
at the time of his death is situated in the United States bears to the
value of his entire gross estate wherever situated.
`(i) COORDINATION WITH TREATIES-
To the extent required under any treaty obligation of the United States,
the exemption amount allowed under this paragraph shall be equal to the
amount which bears the same ratio to the exemption amount under section
2001(b)(3) (for the calendar year in which the decedent died) as the value
of the part of the decedent's gross estate which at the time of his death
is situated in the United States bears to the value of his entire gross
estate wherever situated. For purposes of the preceding sentence, property
shall not be
treated as situated in the United
States if such property is exempt from the tax imposed by this subchapter
under any treaty obligation of the United States.
`(ii) COORDINATION WITH
GIFT TAX EXEMPTION AND UNIFIED CREDIT- If an exemption has been allowed
under section 2521 (or a credit has been allowed under section 2505 as
in effect on the day before the date of the enactment of the Rural America
Prosperity Act of 2001) with respect to any gift made by the decedent,
each dollar amount contained in subparagraph (A) or (B) or the exemption
amount applicable under clause (i) of this subparagraph (whichever applies)
shall be reduced by the exemption so allowed under section 2521 (or, in
the case of such a credit, by the amount of the gift for which the credit
was so allowed).'.
(8) Section 2102 of such
Code is amended by striking subsection (c).
(9)(A) Subsection (a) of
section 2107 of such Code is amended by adding at the end the following
new paragraph:
`(3) LIMITATION ON EXEMPTION
AMOUNT- Subparagraphs (B) and (C) of section 2101(b)(3) shall not apply
in applying section 2101 for purposes of this section.'.
(B) Subsection (c) of section
2107 of such Code is amended--
(i) by striking paragraph
(1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively, and
(ii) by striking the second
sentence of paragraph (2) (as so redesignated).
(10) Paragraph (1) of section
6018(a) of such Code is amended by striking `the applicable exclusion amount
in effect under section 2010(c)' and inserting `the exemption amount under
section 2001(b)(3)'.
(11) Subparagraph (A) of
section 6601(j)(2) of such Code is amended to read as follows:
`(A) the amount of the tentative
tax which would be determined under the rate schedule set forth in section
2001(c) if the amount with respect to which such tentative tax is to be
computed were $1,000,000, or'.
(12) The table of sections
for part II of subchapter A of chapter 11 of such Code is amended by striking
the item relating to section 2010.
(13) The table of sections
for subchapter A of chapter 12 of such Code is amended by striking the
item relating to section 2505.
(d) EFFECTIVE DATE- The
amendments made by this section--
(1) insofar as they relate
to the tax imposed by chapter 11 of the Internal Revenue Code of 1986,
shall apply to estates of decedents dying after December 31, 2001, and
(2) insofar as they relate
to the tax imposed by chapter 12 of such Code, shall apply to gifts made
after December 31, 2001.
SEC. 116. DEEMED ALLOCATION
OF GST EXEMPTION TO LIFETIME TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.
(a) IN GENERAL- Section
2632 of the Internal Revenue Code of 1986 (relating to special rules for
allocation of GST exemption) is amended by redesignating subsection (c)
as subsection (e) and by inserting after subsection (b) the following new
subsections:
`(c) DEEMED ALLOCATION TO
CERTAIN LIFETIME TRANSFERS TO GST TRUSTS-
`(1) IN GENERAL- If any
individual makes an indirect skip during such individual's lifetime, any
unused portion of such individual's GST exemption shall be allocated to
the property transferred to the extent necessary to make the inclusion
ratio for such property zero. If the amount of the indirect skip exceeds
such unused portion, the entire unused portion shall be allocated to the
property transferred.
`(2) UNUSED PORTION- For
purposes of paragraph (1), the unused portion of an individual's GST exemption
is that portion of such exemption which has not previously been--
`(A) allocated by such individual,
`(B) treated as allocated
under subsection (b) with respect to a direct skip occurring during or
before the calendar year in which the indirect skip is made, or
`(C) treated as allocated
under paragraph (1) with respect to a prior indirect skip.
`(A) INDIRECT SKIP- For
purposes of this subsection, the term `indirect skip' means any transfer
of property (other than a direct skip) subject to the tax imposed by chapter
12 made to a GST trust.
`(B) GST TRUST- The term
`GST trust' means a trust that could have a generation-skipping transfer
with respect to the transferor unless--
`(i) the trust instrument
provides that more than 25 percent of the trust corpus must be distributed
to or may be withdrawn by one or more individuals who are non-skip persons--
`(I) before the date that
the individual attains age 46,
`(II) on or before one or
more dates specified in the trust instrument that will occur before the
date that such individual attains age 46, or
`(III) upon the occurrence
of an event that, in accordance with regulations prescribed by the Secretary,
may reasonably be expected to occur before the date that such individual
attains age 46;
`(ii) the trust instrument
provides that more than 25 percent of the trust corpus must be distributed
to or may be withdrawn by one or more individuals who are
non-skip persons and who are
living on the date of death of another person identified in the instrument
(by name or by class) who is more than 10 years older than such individuals;
`(iii) the trust instrument
provides that, if one or more individuals who are non-skip persons die
on or before a date or event described in clause (i) or (ii), more than
25 percent of the trust corpus either must be distributed to the estate
or estates of one or more of such individuals or is subject to a general
power of appointment exercisable by one or more of such individuals;
`(iv) the trust is a trust
any portion of which would be included in the gross estate of a non-skip
person (other than the transferor) if such person died immediately after
the transfer;
`(v) the trust is a charitable
lead annuity trust (within the meaning of section 2642(e)(3)(A)) or a charitable
remainder annuity trust or a charitable remainder unitrust (within the
meaning of section 664(d)); or
`(vi) the trust is a trust
with respect to which a deduction was allowed under section 2522 for the
amount of an interest in the form of the right to receive annual payments
of a fixed percentage of the net fair market value of the trust property
(determined yearly) and which is required to pay principal to a non-skip
person if such person is alive when the yearly payments for which the deduction
was allowed terminate.
For purposes of this subparagraph,
the value of transferred property shall not be considered to be includible
in the gross estate of a non-skip person or subject to a right of withdrawal
by reason of such person holding a right to withdraw so much of such property
as does not exceed the amount referred to in section 2503(b) with respect
to any transferor, and it shall be assumed that powers of appointment held
by non-skip persons will not be exercised.
`(4) AUTOMATIC ALLOCATIONS
TO CERTAIN GST TRUSTS- For purposes of this subsection, an
indirect skip to which section
2642(f) applies shall be deemed to have been made only at the close of
the estate tax inclusion period. The fair market value of such transfer
shall be the fair market value of the trust property at the close of the
estate tax inclusion period.
`(5) APPLICABILITY AND EFFECT-
`(A) IN GENERAL- An individual--
`(i) may elect to have this
subsection not apply to--
`(I) an indirect skip, or
`(II) any or all transfers
made by such individual to a particular trust, and
`(ii) may elect to treat
any trust as a GST trust for purposes of this subsection with respect to
any or all transfers made by such individual to such trust.
`(i) ELECTIONS WITH RESPECT
TO INDIRECT SKIPS- An election under subparagraph (A)(i)(I) shall be deemed
to be timely if filed on a timely filed gift tax return for the calendar
year in which the transfer was made or deemed to have been made pursuant
to paragraph (4) or on such later date or dates as may be prescribed by
the Secretary.
`(ii) OTHER ELECTIONS- An
election under clause (i)(II) or (ii) of subparagraph (A) may be made on
a timely filed gift tax return for the calendar year for which the election
is to become effective.
`(d) RETROACTIVE ALLOCATIONS-
`(A) a non-skip person has
an interest or a future interest in a trust to which any transfer has been
made,
`(i) is a lineal descendant
of a grandparent of the transferor or of a grandparent of the transferor's
spouse or former spouse, and
`(ii) is assigned to a generation
below the generation assignment of the transferor, and
`(C) such person predeceases
the transferor,
then the transferor may
make an allocation of any of such transferor's unused GST exemption to
any previous transfer or transfers to the trust on a chronological basis.
`(2) SPECIAL RULES- If the
allocation under paragraph (1) by the transferor is made on a gift tax
return filed on or before the date prescribed by section 6075(b) for gifts
made within the calendar year within which the non-skip person's death
occurred--
`(A) the value of such transfer
or transfers for purposes of section 2642(a) shall be determined as if
such allocation had been made on a timely filed gift tax return for each
calendar year within which each transfer was made,
`(B) such allocation shall
be effective immediately before such death, and
`(C) the amount of the transferor's
unused GST exemption available to be allocated shall be determined immediately
before such death.
`(3) FUTURE INTEREST- For
purposes of this subsection, a person has a future interest in a trust
if the trust may permit income or corpus to be paid to such person on a
date or dates in the future.'.
(b) CONFORMING AMENDMENT-
Paragraph (2) of section 2632(b) of the Internal Revenue Code of 1986 is
amended by striking `with respect
to a direct skip' and inserting `or subsection (c)(1)'.
(1) DEEMED ALLOCATION- Section
2632(c) of the Internal Revenue Code of 1986 (as added by subsection (a)),
and the amendment made by subsection (b), shall apply to transfers subject
to chapter 11 or 12 made after December 31, 2000, and to estate tax inclusion
periods ending after December 31, 2000.
(2) RETROACTIVE ALLOCATIONS-
Section 2632(d) of the Internal Revenue Code of 1986 (as added by subsection
(a)) shall apply to deaths of non-skip persons occurring after December
31, 2000.
SEC. 117. SEVERING OF TRUSTS.
(a) IN GENERAL- Subsection
(a) of section 2642 of the Internal Revenue Code of 1986 (relating to inclusion
ratio) is amended by adding at the end the following new paragraph:
`(A) IN GENERAL- If a trust
is severed in a qualified severance, the trusts resulting from such severance
shall be treated as separate trusts thereafter for purposes of this chapter.
`(B) QUALIFIED SEVERANCE-
For purposes of subparagraph (A)--
`(i) IN GENERAL- The term
`qualified severance' means the division of a single trust and the creation
(by any means available under the governing instrument or under local law)
of two or more trusts if--
`(I) the single trust was
divided on a fractional basis, and
`(II) the terms of the new
trusts, in the aggregate, provide for the same succession of interests
of beneficiaries as are provided in the original trust.
`(ii) TRUSTS WITH INCLUSION
RATIO GREATER THAN ZERO- If a trust has an inclusion ratio of greater than
zero and less than 1, a severance is a qualified severance only if the
single trust is divided into two trusts, one of which receives a fractional
share of the total value of all trust assets equal to the applicable fraction
of the single trust immediately before the severance. In such case, the
trust receiving such fractional share shall have an inclusion ratio of
zero and the other trust shall have an inclusion ratio of 1.
`(iii) REGULATIONS- The
term `qualified severance' includes any other severance permitted under
regulations prescribed by the Secretary.
`(C) TIMING AND MANNER OF
SEVERANCES- A severance pursuant to this paragraph may be made at any time.
The Secretary shall prescribe by forms or regulations the manner in which
the qualified severance shall be reported to the Secretary.'.
(b) EFFECTIVE DATE- The
amendment made by this section shall apply to severances after December
31, 2000.
SEC. 118. MODIFICATION OF CERTAIN
VALUATION RULES.
(a) GIFTS FOR WHICH GIFT
TAX RETURN FILED OR DEEMED ALLOCATION MADE- Paragraph (1) of section 2642(b)
of the Internal Revenue Code of 1986 (relating to valuation rules, etc.)
is amended to read as follows:
`(1) GIFTS FOR WHICH GIFT
TAX RETURN FILED OR DEEMED ALLOCATION MADE- If the allocation of the GST
exemption to any transfers of property is made on a gift tax return filed
on or before the date prescribed by section 6075(b) for such
transfer or is deemed to be
made under section 2632 (b)(1) or (c)(1)--
`(A) the value of such property
for purposes of subsection (a) shall be its value as finally determined
for purposes of chapter 12 (within the meaning of section 2001(f)(2)),
or, in the case of an allocation deemed to have been made at the close
of an estate tax inclusion period, its value at the time of the close of
the estate tax inclusion period, and
`(B) such allocation shall
be effective on and after the date of such transfer, or, in the case of
an allocation deemed to have been made at the close of an estate tax inclusion
period, on and after the close of such estate tax inclusion period.'.
(b) TRANSFERS AT DEATH-
Subparagraph (A) of section 2642(b)(2) of the Internal Revenue Code of
1986 is amended to read as follows:
`(A) TRANSFERS AT DEATH-
If property is transferred as a result of the death of the transferor,
the value of such property for purposes of subsection (a) shall be its
value as finally determined for purposes of chapter 11; except that, if
the requirements prescribed by the Secretary respecting allocation of post-death
changes in value are not met, the value of such property shall be determined
as of the time of the distribution concerned.'.
(c) EFFECTIVE DATE- The
amendments made by this section shall apply to transfers subject to chapter
11 or 12 of the Internal Revenue Code of 1986 made after December 31, 2000.
SEC. 119. RELIEF PROVISIONS.
(a) IN GENERAL- Section
2642 of the Internal Revenue Code of 1986 is amended by adding at the end
the following new subsection:
`(1) RELIEF FROM LATE ELECTIONS-
`(A) IN GENERAL- The Secretary
shall by regulation prescribe such circumstances and procedures under which
extensions of time will be granted to make--
`(i) an allocation of GST
exemption described in paragraph (1) or (2) of subsection (b), and
`(ii) an election under
subsection (b)(3) or (c)(5) of section 2632.
Such regulations shall include
procedures for requesting comparable relief with respect to
transfers made before the date
of the enactment of this paragraph.
`(B) BASIS FOR DETERMINATIONS-
In determining whether to grant relief under this paragraph, the Secretary
shall take into account all relevant circumstances, including evidence
of intent contained in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant. For purposes of determining
whether to grant relief under this paragraph, the time for making the allocation
(or election) shall be treated as if not expressly prescribed by statute.
`(2) SUBSTANTIAL COMPLIANCE-
An allocation of GST exemption under section 2632 that demonstrates an
intent to have the lowest possible inclusion ratio with respect to a transfer
or a trust shall be deemed to be an allocation of so much of the transferor's
unused GST exemption as produces the lowest possible inclusion ratio. In
determining whether there has been substantial compliance, all relevant
circumstances shall be taken into account, including evidence of intent
contained in the trust instrument or instrument of transfer and such other
factors as the Secretary deems relevant.'.
(1) RELIEF FROM LATE ELECTIONS-
Section 2642(g)(1) of the Internal Revenue Code of 1986 (as added by subsection
(a)) shall apply to requests pending on, or filed after, December 31, 2000.
(2) SUBSTANTIAL COMPLIANCE-
Section 2642(g)(2) of such Code (as so added) shall apply to transfers
subject to chapter 11 or 12 of the Internal Revenue Code of 1986 made after
December 31, 2000. No implication is intended with respect to the availability
of relief from late elections or the application of a rule of substantial
compliance on or before such date.
SEC. 120. EXPANSION OF ESTATE
TAX RULE FOR CONSERVATION EASEMENTS.
(a) WHERE LAND IS LOCATED-
(1) IN GENERAL- Clause (i)
of section 2031(c)(8)(A) of the Internal Revenue Code of 1986 (defining
land subject to a conservation easement) is amended--
(A) by striking `25 miles'
both places it appears and inserting `50 miles'; and
(B) striking `10 miles'
and inserting `25 miles'.
(2) EFFECTIVE DATE- The
amendments made by this subsection shall apply to estates of decedents
dying after December 31, 2000.
(b) CLARIFICATION OF DATE
FOR DETERMINING VALUE OF LAND AND EASEMENT-
(1) IN GENERAL- Section
2031(c)(2) of the Internal Revenue Code of 1986 (defining applicable percentage)
is amended by adding at the end the following new sentence: `The values
taken into account under the preceding sentence shall be such values as
of the date of the contribution referred to in paragraph (8)(B).'.
(2) EFFECTIVE DATE- The
amendment made by this subsection shall apply to estates of decedents dying
after December 31, 1997.
TITLE II--STUDY OF COSTS OF
REGULATIONS ON FARMERS, RANCHERS, AND FORESTERS
SEC. 201. DEFINITIONS.
(A) IN GENERAL- The term
`regulation' means the whole or a part of an agency statement of general
or particular applicability and future effect designed to implement, interpret,
or prescribe law or policy.
(B) EXCLUSION- The term
`regulation' does not include--
(i) the approval or prescription,
on a case-by-case or consolidated case basis, for the future of rates,
wages, corporations, or financial structures or reorganizations thereof,
prices, facilities, appliances, services or allowances therefor, or of
valuations, costs, or accounting, or practices bearing on activities described
in this clause; or
(ii) the granting of an
application for a license, registration, or similar authority, granting
or recognizing an exemption, granting a variance or petition for relief
from a regulatory requirement, or other action relieving a restriction
or taking any action necessary to permit new or improved applications of
technology.
(2) LICENSE- The term `license'
means the whole or part of an agency permit, certificate, approval, registration,
charter, membership, statutory exemption, or other form of permission.
SEC. 202. COMPTROLLER GENERAL
STUDY OF REGULATIONS.
(a) DATA REVIEW AND COLLECTION-
The Comptroller General of the United States shall--
(1) conduct a review of
existing Federal and non-Federal studies and data regarding the cost to
farmers, ranchers, and foresters of complying with existing or proposed
Federal regulations directly affecting farmers, ranchers, and foresters;
and
(2) as necessary, obtain
and analyze new data concerning the costs to farmers, ranchers, and foresters
of complying with Federal regulations proposed as of June 30, 2000, directly
affecting farmers, ranchers, and foresters.
(b) USE OF DATA- Using the
studies and data reviewed and collected under subsection (a), the Comptroller
General shall--
(1) assess the overall costs
to farmers, ranchers, and foresters of complying with existing and proposed
Federal regulations directly affecting farmers, ranchers, and foresters;
and
(2) identify and recommend
reasonable alternatives to those regulations that will achieve the objectives
of the regulations at less cost to farmers, ranchers, and foresters.
(c) SUBMISSION OF RESULTS-
Not later than June 30, 2001, the Comptroller General shall submit to the
Secretary of Agriculture, the Committee on Agriculture, Nutrition, and
Forestry of the Senate, and the Committee on Agriculture of the House of
Representatives the results of the assessment conducted under subsection
(b)(1) and the recommendations prepared under subsection (b)(2).
SEC. 203. RESPONSE OF SECRETARY
OF AGRICULTURE.
Not later than September
30, 2001, the Secretary of Agriculture shall submit to the Committee on
Agriculture, Nutrition, and Forestry of the Senate, and the Committee on
Agriculture of the House of Representatives a report responding to the
recommendations of the Comptroller General under section 202 regarding
reasonable alternatives that could achieve the objectives of Federal regulations
at less cost to farmers, ranchers, and foresters.
TITLE III--EXTENSION OF TRADE
AUTHORITIES PROCEDURES FOR RECIPROCAL TRADE AGREEMENTS
SEC. 301. SHORT TITLE.
This title may be cited
as the `Reciprocal Trade Agreement Authorities Act of 2001'.
SEC. 302. TRADE NEGOTIATING
OBJECTIVES.
(a) OVERALL TRADE NEGOTIATING
OBJECTIVES- The overall trade negotiating objectives of the United States
for agreements subject to the provisions of section 303 are--
(1) to obtain more open,
equitable, and reciprocal market access;
(2) to obtain the reduction
or elimination of barriers and distortions that are directly related to
trade and that decrease market opportunities for United States exports
or otherwise distort United States trade;
(3) to further strengthen
the system of international trading disciplines and procedures, including
dispute settlement; and
(4) to foster economic growth,
raise living standards, and promote full employment in the United States
and to enhance the global economy.
(b) PRINCIPAL TRADE NEGOTIATING
OBJECTIVES-
(1) TRADE BARRIERS AND DISTORTIONS-
The principal negotiating objectives of the United States regarding trade
barriers and other trade distortions are--
(A) to expand competitive
market opportunities for United States exports and to obtain fairer and
more open conditions of trade by reducing or eliminating tariff and nontariff
barriers and policies and practices of foreign governments directly related
to trade that decrease market opportunities for United States exports or
otherwise distort United States trade; and
(B) to obtain reciprocal
tariff and nontariff barrier elimination agreements, with particular attention
to those tariff categories covered in section 111(b) of the Uruguay Round
Agreements Act (19 U.S.C. 3521(b)).
(2) TRADE IN SERVICES- The
principal negotiating objective of the United States regarding trade in
services is to reduce or eliminate barriers to international trade in services,
including regulatory and other barriers that deny national treatment or
unreasonably restrict the establishment or operations of service suppliers.
(3) FOREIGN INVESTMENT-
The principal negotiating objective of the United States regarding foreign
investment is to reduce or eliminate artificial or trade-distorting barriers
to trade-related foreign investment by--
(A) reducing or eliminating
exceptions to the principle of national treatment;
(B) freeing the transfer
of funds relating to investments;
(C) reducing or eliminating
performance requirements and other unreasonable barriers to the establishment
and operation of investments;
(D) seeking to establish
standards for expropriation and compensation for expropriation, consistent
with United States legal principles and practice; and
(E) providing meaningful
procedures for resolving investment disputes.
(4) INTELLECTUAL PROPERTY-
The principal negotiating objectives of the United States regarding trade-related
intellectual property are--
(A) to further promote adequate
and effective protection of intellectual property rights, including through--
(i)(I) ensuring accelerated
and full implementation of the Agreement on Trade-Related Aspects of Intellectual
Property Rights referred to in section 101(d)(15) of the Uruguay Round
Agreements Act (19 U.S.C. 3511(d)(15)), particularly with respect to United
States industries whose products are subject to the lengthiest transition
periods for full compliance by developing countries with that Agreement,
and
(II) ensuring that the provisions
of any multilateral or bilateral trade agreement entered into by the United
States provide protection at least as strong as the protection afforded
by chapter 17 of the North American Free Trade Agreement and the annexes
thereto;
(ii) providing strong protection
for new and emerging technologies and new methods of transmitting and distributing
products embodying intellectual property;
(iii) preventing or eliminating
discrimination with respect to matters affecting the availability, acquisition,
scope, maintenance, use, and enforcement of intellectual property rights;
and
(iv) providing strong enforcement
of intellectual property rights, including through accessible, expeditious,
and effective civil, administrative, and criminal enforcement mechanisms;
and
(B) to secure fair, equitable,
and nondiscriminatory market access opportunities for United States persons
that rely upon intellectual property protection.
(5) TRANSPARENCY- The principal
negotiating objective of the United States with respect to transparency
is to obtain broader application of the principle of transparency through--
(A) increased and more timely
public access to information regarding trade issues and the activities
of international trade institutions; and
(B) increased openness of
dispute settlement proceedings, including under the World Trade Organization.
(6) RECIPROCAL TRADE IN
AGRICULTURE- The principal negotiating objective of the United States with
respect to agriculture is to obtain competitive opportunities for United
States exports in foreign markets substantially equivalent to the competitive
opportunities afforded foreign exports in United States markets and to
achieve fairer and more open conditions of trade in bulk and value-added
commodities by--
(A) reducing or eliminating,
by a date certain, tariffs or other charges that decrease market opportunities
for United States exports--
(i) giving priority to those
products that are subject to significantly higher tariffs or subsidy regimes
of major producing countries; and
(ii) providing reasonable
adjustment periods for United States import-sensitive products, in close
consultation with the Congress on such products before initiating tariff
reduction negotiations;
(B) reducing or eliminating
subsidies that decrease market opportunities for United States exports
or unfairly distort agriculture markets to the detriment of the United
States;
(C) developing, strengthening,
and clarifying rules and effective dispute settlement mechanisms to eliminate
practices that unfairly decrease United States market access opportunities
or distort agricultural markets to the detriment of the United States,
including--
(i) unfair or trade-distorting
activities of export state trading enterprises and other administrative
mechanisms, with emphasis on requiring price transparency in the operation
of export state trading enterprises and such other mechanisms;
(ii) unjustified trade restrictions
or commercial requirements affecting new technologies, including biotechnology;
(iii) unjustified sanitary
or phytosanitary restrictions, including those not based on scientific
principles in contravention of the Uruguay Round Agreements;
(iv) other unjustified technical
barriers to trade; and
(v) restrictive rules in
the administration of tariff rate quotas;
(D) improving import relief
mechanisms to recognize the unique characteristics of perishable agriculture;
(E) taking into account
whether a party to the negotiations has failed to adhere to the provisions
of already existing trade agreements with the United States or has circumvented
obligations under those agreements;
(F) taking into account
whether a product is subject to market distortions by reason of a failure
of a major producing country to adhere to the provisions of already existing
trade agreements with the United States or by the circumvention by that
country of its obligations under those agreements; and
(G) otherwise ensuring that
countries that accede to the World Trade Organization have made meaningful
market liberalization commitments in agriculture.
(7) LABOR, THE ENVIRONMENT,
AND OTHER MATTERS- The principal negotiating objective of the United States
regarding labor, the environment, and other matters is to address the following
aspects of foreign government policies and practices regarding labor, the
environment, and other matters that are directly related to trade:
(A) To ensure that foreign
labor, environmental, health, or safety policies and practices do not arbitrarily
or unjustifiably discriminate or serve as disguised barriers to trade.
(B) To ensure that foreign
governments do not derogate from or waive existing domestic environmental,
health, safety, or labor measures, including measures that deter exploitative
child labor, as an encouragement to gain competitive advantage in international
trade or investment. Nothing in this subparagraph is intended to address
changes to a country's laws that are consistent with sound macroeconomic
development.
(8) WTO EXTENDED NEGOTIATIONS-
The principal negotiating objectives of the United States regarding trade
in financial services are those set forth in section 135(a) of the Uruguay
Round Agreements Act (19 U.S.C. 3555(a)), regarding trade in civil aircraft
are those set forth in section 135(c) of that Act, and regarding rules
of origin are the conclusion of an agreement described in section 132 of
that Act (19 U.S.C. 3552).
(c) INTERNATIONAL ECONOMIC
POLICY OBJECTIVES-
(1) IN GENERAL- The President
should take into account the relationship between trade agreements and
other important priorities of the United States and seek to ensure that
the trade agreements entered into by the United States complement and reinforce
other policy goals. The United States priorities in this area include--
(A) seeking to ensure that
trade and environmental policies are mutually supportive;
(B) seeking to protect and
preserve the environment and enhance the international means for doing
so, while optimizing the use of the world's resources;
(C) promoting respect for
worker rights and the rights of children and an understanding of the relationship
between trade and worker rights, particularly by working with the International
Labor Organization to encourage the observance and enforcement of core
labor standards, including the prohibition on exploitative child labor;
and
(D) supplementing and strengthening
standards for protection of intellectual property under conventions administered
by international organizations other than the World Trade Organization,
expanding these conventions to cover new and emerging technologies, and
eliminating discrimination and unreasonable exceptions or preconditions
to such protection.
(2) APPLICABILITY OF TRADE
AUTHORITIES PROCEDURES- Nothing in this subsection shall be construed to
authorize the use of the trade authorities procedures described in section
303 to modify United States law.
(d) GUIDANCE FOR NEGOTIATORS-
(1) DOMESTIC OBJECTIVES-
In pursuing the negotiating objectives described in subsection (b), the
negotiators on behalf of the United States shall take into account United
States domestic objectives, including the protection of health and safety,
essential security, environmental, consumer, and employment opportunity
interests, and the law and regulations related thereto.
(2) CONSULTATIONS WITH CONGRESSIONAL
ADVISERS AND ENFORCEMENT OF THE TRADE LAWS- In the course of negotiations
conducted under this title, the United States Trade Representative shall--
(A) consult closely and
on a timely basis with, and keep fully apprised of the negotiations, the
congressional advisers on trade policy and negotiations appointed under
section 161 of the Trade Act of 1974; and
(B) preserve the ability
of the United States to enforce rigorously its trade laws, including the
antidumping and countervailing duty laws, and avoid agreements which lessen
the effectiveness of domestic and international disciplines on unfair trade,
especially dumping and subsidies, in order to ensure that United States
workers, agricultural producers, and firms can compete fully on fair terms
and enjoy the benefits of reciprocal trade concessions.
(e) ADHERENCE TO OBLIGATIONS
UNDER URUGUAY ROUND AGREEMENTS- In determining whether to enter into negotiations
with a particular country, the President shall take into account the extent
to which that country has implemented, or has accelerated the implementation
of, its obligations under the Uruguay Round Agreements.
SEC. 303. TRADE AGREEMENTS AUTHORITY.
(a) AGREEMENTS REGARDING
TARIFF BARRIERS-
(1) IN GENERAL- Whenever
the President determines that one or more existing duties or other import
restrictions of any foreign country or the United States are unduly burdening
and restricting the foreign trade of the United States and that the purposes,
policies, and objectives of this title will be promoted thereby, the President--
(A) may enter into trade
agreements with foreign countries before--
(ii) October 1, 2007, if
trade authorities procedures are extended under subsection (c), and
(B) may, subject to paragraphs
(2) and (3), proclaim--
(i) such modification or
continuance of any existing duty,
(ii) such continuance of
existing duty-free or excise treatment, or
(iii) such additional duties,
as the President determines
to be required or appropriate to carry out any such trade agreement. The
President shall notify the Congress of the President's intention to enter
into an agreement under this subsection.
(2) LIMITATIONS- No proclamation
may be made under paragraph (1) that--
(A) reduces any rate of
duty (other than a rate of duty that does not exceed 5 percent ad valorem
on the date of the enactment of this Act) to a rate of duty which is less
than 50 percent of the rate of such duty that applies on such date of enactment;
(B) reduces the rate of
duty on an article to take effect on a date that is more than 10 years
after the first reduction that is proclaimed to carry out a trade agreement
with respect to such article; or
(C) increases any rate of
duty above the rate that applied on January 1, 2001.
(3) AGGREGATE REDUCTION;
EXEMPTION FROM STAGING-
(A) AGGREGATE REDUCTION-
Except as provided in subparagraph (B), the aggregate reduction in the
rate of duty on any article which is in effect on any day pursuant to a
trade agreement entered into under paragraph (1) shall not exceed the aggregate
reduction which would have been in effect on such day if--
(i) a reduction of 3 percent
ad valorem or a reduction of one-tenth of the total reduction, whichever
is greater, had taken effect on the effective date of the first reduction
proclaimed under paragraph (1) to carry out such agreement with respect
to such article; and
(ii) a reduction equal to
the amount applicable under clause (i) had taken effect at 1-year intervals
after the effective date of such first reduction.
(B) EXEMPTION FROM STAGING-
No staging is required under subparagraph (A) with respect to a duty reduction
that is proclaimed under paragraph (1) for an article of a kind that is
not produced in the United States. The United States International Trade
Commission shall advise the President of the identity of articles that
may be exempted from staging under this subparagraph.
(4) ROUNDING- If the President
determines that such action will simplify the computation of reductions
under paragraph (3), the President may round an annual reduction by an
amount equal to the lesser of--
(A) the difference between
the reduction without regard to this paragraph and the next lower whole
number; or
(B) one-half of 1 percent
ad valorem.
(5) OTHER LIMITATIONS- A
rate of duty reduction that may not be proclaimed by reason of paragraph
(2) may take effect only if a provision authorizing such reduction is included
within an implementing bill provided for under section 305 and that bill
is enacted into law.
(6) OTHER TARIFF MODIFICATIONS-
Notwithstanding paragraphs (1)(B) and (2) through (5), and subject to the
consultation and layover requirements of section 115 of the Uruguay Round
Agreements Act, the President may proclaim the modification of any duty
or staged rate reduction of any duty set forth in Schedule XX, as defined
in section 2(5) of that Act, if the United States agrees to such modification
or staged rate reduction in a negotiation for the reciprocal elimination
or harmonization of duties under the auspices of the World Trade Organization
or as part of an interim agreement leading to the formation of a regional
free-trade area.
(7) AUTHORITY UNDER URUGUAY
ROUND AGREEMENTS ACT NOT AFFECTED- Nothing in this subsection shall limit
the authority provided to the President under section 111(b) of the Uruguay
Round Agreements Act (19 U.S.C. 3521(b)).
(b) AGREEMENTS REGARDING
TARIFF AND NONTARIFF BARRIERS-
(1) IN GENERAL- (A) Whenever
the President determines that--
(i) one or more existing
duties or any other import restriction of any foreign country or the United
States or any other barrier to, or other distortion of, international trade
unduly burdens or restricts the foreign trade of the United States or adversely
affects the United States economy, or
(ii) the imposition of any
such barrier or distortion is likely to result in such a burden, restriction,
or effect,
and that the purposes, policies,
and objectives of this title will be promoted thereby, the President may
enter into a trade agreement described in subparagraph (B) during the period
described in subparagraph (C).
(B) The President may enter
into a trade agreement under subparagraph (A) with foreign countries providing
for--
(i) the reduction or elimination
of a duty, restriction, barrier, or other distortion described in subparagraph
(A), or
(ii) the prohibition of,
or limitation on the imposition of, such barrier or other distortion.
(C) The President may enter
into a trade agreement under this paragraph before--
(ii) October 1, 2007, if
trade authorities procedures are extended under subsection (c).
(2) CONDITIONS- A trade
agreement may be entered into under this subsection only if such agreement
makes progress in meeting the applicable objectives described in section
302 and the President satisfies the conditions set forth in section 304.
(3) BILLS QUALIFYING FOR
TRADE AUTHORITIES PROCEDURES- The provisions of section 151 of the Trade
Act of 1974 (in this title referred to as `trade authorities procedures')
apply to a bill of either House of Congress consisting only of--
(A) a provision approving
a trade agreement entered into under this subsection and approving the
statement of administrative action, if any, proposed to implement such
trade agreement,
(B) provisions directly
related to the principal trade negotiating objectives set forth in section
302(b) achieved in such trade agreement, if those provisions are necessary
for the operation or implementation of United States rights or obligations
under such trade agreement,
(C) provisions that define
and clarify, or provisions that are related to, the operation or effect
of the provisions of the trade agreement,
(D) provisions to provide
adjustment assistance to workers and firms adversely affected by trade,
and
(E) provisions necessary
for purposes of complying with section 252 of the Balanced Budget and Emergency
Deficit Control Act of 1985 in implementing the trade agreement,
to the same extent as such
section 151 applies to implementing bills under that section. A bill to
which this subparagraph applies shall hereafter in this title be referred
to as an `implementing bill'.
(c) EXTENSION DISAPPROVAL
PROCESS FOR CONGRESSIONAL TRADE AUTHORITIES PROCEDURES-
(1) IN GENERAL- Except as
provided in section 305(b)--
(A) the trade authorities
procedures apply to implementing bills submitted with respect to trade
agreements entered into under subsection (b) before October 1, 2003; and
(B) the trade authorities
procedures shall be extended to implementing bills submitted with respect
to trade agreements entered into under subsection (b) after September 30,
2003, and before October 1, 2007, if (and only if)--
(i) the President requests
such extension under paragraph (2); and
(ii) neither House of the
Congress adopts an extension disapproval resolution under paragraph (5)
before October 1, 2003.
(2) REPORT TO CONGRESS BY
THE PRESIDENT- If the President is of the opinion that the trade authorities
procedures should be extended to implementing bills described in paragraph
(1)(B), the President shall submit to the Congress, not later than July
1, 2003, a written report that contains a request for such extension, together
with--
(A) a description of all
trade agreements that have been negotiated under subsection (b) and the
anticipated schedule for submitting such agreements to the Congress for
approval;
(B) a description of the
progress that has been made in negotiations to achieve the purposes, policies,
and objectives of this title, and a statement that such progress justifies
the continuation of negotiations; and
(C) a statement of the reasons
why the extension is needed to complete the negotiations.
(3) REPORT TO CONGRESS BY
THE ADVISORY COMMITTEE- The President shall promptly inform the Advisory
Committee for Trade Policy and Negotiations established under section 135
of the Trade Act of 1974 (19 U.S.C. 2155) of the President's decision to
submit a report to the Congress under paragraph (2). The Advisory Committee
shall submit to the Congress as soon as practicable, but not later than
August 1, 2003, a written report that contains--
(A) its views regarding
the progress that has been made in negotiations to achieve the purposes,
policies, and objectives of this title; and
(B) a statement of its views,
and the reasons therefor, regarding whether the extension requested under
paragraph (2) should be approved or disapproved.
(4) REPORTS MAY BE CLASSIFIED-
The reports submitted to the Congress under paragraphs (2) and (3), or
any portion of such reports, may be classified to the extent the President
determines appropriate.
(5) EXTENSION DISAPPROVAL
RESOLUTIONS- (A) For purposes of paragraph (1), the term `extension disapproval
resolution' means a resolution of either House of the Congress, the sole
matter after the resolving clause of which is as follows: `That the XX
disapproves the request of the President for the extension, under section
303(c)(1)(B)(i) of the Reciprocal Trade Agreement Authorities Act of 2001,
of the provisions of section 151 of the Trade Act of 1974 to any implementing
bill submitted with respect to any trade agreement entered into under section
303(b) of the Reciprocal Trade Agreement Authorities Act of 2001 after
September 30, 2003.', with the blank space being filled with the name of
the resolving House of the Congress.
(B) Extension disapproval
resolutions--
(i) may be introduced in
either House of the Congress by any member of such House; and
(ii) shall be referred,
in the House of Representatives, to the Committee on Ways and Means and,
in addition, to the Committee on Rules.
(C) The provisions of sections
152(d) and (e) of the Trade Act of 1974 (19 U.S.C. 2192(d) and (e)) (relating
to the floor consideration of certain resolutions in the House and Senate)
apply to extension disapproval resolutions.
(D) It is not in order for--
(i) the Senate to consider
any extension disapproval resolution not
reported by the Committee on
Finance;
(ii) the House of Representatives
to consider any extension disapproval resolution not reported by the Committee
on Ways and Means and, in addition, by the Committee on Rules; or
(iii) either House of the
Congress to consider an extension disapproval resolution after September
30, 2003.
SEC. 304. CONSULTATIONS.
(a) NOTICE AND CONSULTATION
BEFORE NEGOTIATION-
(1) IN GENERAL- The President,
with respect to any agreement that is subject to the provisions of section
303(b), shall--
(A) provide, at least 90
calendar days before initiating negotiations, written notice to the Congress
of the President's intention to enter into the negotiations and set forth
therein the date the President intends to initiate such negotiations, the
specific United States objectives for the negotiations, and whether the
President intends to seek an agreement, or changes to an existing agreement;
and
(B) before and after submission
of the notice, consult regarding the negotiations with the Committee on
Finance of the Senate and the
Committee on Ways and Means
of the House of Representatives and such other committees of the House
and Senate as the President deems appropriate.
(2) CONSULTATIONS REGARDING
NEGOTIATIONS ON CERTAIN OBJECTIVES-
(A) CONSULTATION- In addition
to the requirements set forth in paragraph (1), before initiating negotiations
with respect to a trade agreement subject to section 303(b) where the subject
matter of such negotiations is directly related to the principal trade
negotiating objectives set forth in section 302(b)(1) or section 302(b)(7),
the President shall consult with the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the Senate and
with the appropriate advisory groups established under section 135 of the
Trade Act of 1974 with respect to such negotiations.
(B) SCOPE- The consultations
described in subparagraph (A) shall concern the manner in which the negotiation
will address the objective of reducing or eliminating a specific tariff
or nontariff barrier or foreign government policy or practice directly
related to trade that decreases market opportunities for United States
exports or otherwise distorts United States trade.
(3) NEGOTIATIONS REGARDING
AGRICULTURE- Before initiating negotiations the subject matter of which
is directly related to the subject matter under section 302(b)(6)(A) with
any country, the President shall assess whether United States tariffs on
agriculture products that were bound under the Uruguay Round Agreements
are lower than the tariffs bound by that country. In addition, the President
shall consider whether the tariff levels bound and applied throughout the
world with respect to imports from the United States are higher than United
States tariffs and whether the negotiation provides an opportunity to address
any such disparity. The President shall consult with the Committee on Ways
and Means and the Committee on Agriculture of the House of Representatives
and the Committee on Finance and the Committee on Agriculture, Nutrition,
and Forestry of the Senate concerning the results of the assessment, whether
it is appropriate for the United States to agree to further tariff reductions
based on the conclusions reached in the assessment, and how all applicable
negotiating objectives will be met.
(b) CONSULTATION WITH CONGRESS
BEFORE AGREEMENTS ENTERED INTO-
(1) CONSULTATION- Before
entering into any trade agreement under section 303(b), the President shall
consult with--
(A) the Committee on Ways
and Means of the House of Representatives and the Committee on Finance
of the Senate; and
(B) each other committee
of the House and the Senate, and each joint committee of the Congress,
which has jurisdiction over legislation involving subject matters which
would be affected by the trade agreement.
(2) SCOPE- The consultation
described in paragraph (1) shall include consultation with respect to--
(A) the nature of the agreement;
(B) how and to what extent
the agreement will achieve the applicable purposes, policies, and objectives
of this title; and
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