MINIMUM TAX.

SEC. 301. MINIMUM TAX. (a) In General.— Subsection (a) of section 56 (relating to minimum tax for tax preferences) is amended to read as follows: “(a) General Rule.— In addition to the other taxes imposed by this chapter, there is hereby imposed for each taxable year, with respect to the income, of every person, a tax equal to 15 percent of the amount by which the sum of the items of tax preference exceeds the greater of— “(1) $10,000, or “(2) the, regular tax deduction for the taxable year (as determined under subsection (c)).” (b) Conforming Changes.— (1) Section 56(b) (relating to deferral of tax liability in case of certain net operating losses) is amended— (A) by striking out “$30,000” in paragraph (1)(B) and inserting in lieu thereof “$10,000”, and (B) by striking out “10 percent” in paragraphs (1) and (2) and inserting in lieu thereof “15 percent”. 90 STAT. 1550 (2) Section 56(c) (relating to tax carryovers) is amended to read as follows: “(c) Regular Tax Deduction Defined.— For purposes of this section, the term ‘regular tax deduction’ means an amount equal to one-half of (or in the case of a corporation, an amount equal to) the taxes imposed by this chapter for the taxable year (computed without regard to this part and without regard to the taxes imposed by sections 72(m)(5)(B), 402(e), 408(f), 531, and 541), reduced by the sum of the credits allowable under— “(1) section 33 (relating to foreign tux credit), “(2) section 37 (relating to credit for the elderly), “(3) section 38 (relating to investment credit), “(4) section 40 (relating to expenses of work incentive program), “(5) section 41 (relating to contributions to candidates for public office), “(6) section 42 (relating to general tax credit), “(7) section 44 (relating to purchase of new principal residence), and “(8) section 44A (relating to expenses for household and dependent care services necessary for gainful employment),” (c) Additional Tax preference Items.— (1) Additional preference items.— (A) Section 57(a) (relating to items of tax preference) is amended by striking out paragraph (1) and inserting in lieu thereof the following: “(1) Excess itemized deductions.— An amount equal to the excess itemized deductions for the taxable year (as determined under subsection (b)).” (B) Section 57(a) (relating to items of tax preference) is amended by striking out the matter following paragraph (10) and inserting in lieu thereof the following: “(11) Intangible drilling costs.— The excess of the intangible drilling and development costs described in section 263(c) paid or incurred in connection with oil and gas wells (other than costs incurred in drilling a nonproductive well) allowable under this chapter for the taxable year over the amount which would have been allowable for the taxable year if such costs had been capitalized and straight line recovery of intangibles (as defined in subsection (d)) had been used with respect to such costs. Paragraphs (1), (3), and (11) shall not apply to a corporation.” (C) Section 57(a)(3) (relating to accelerated depreciation on personal property subject to a net lease) is amended to read as follows: “(3) Accelerated depreciation on leased personal property.— With respect to each item of section 1245 property (as defined in section 1245(a)(3)) which is subject to a lease, the amount by which— “(A) the deduction allowable for the taxable year for depreciation or amortization, exceeds “(B) the deduction which would have been allowable for the taxable year had the taxpayer depreciated the property under the straight-line method for each taxable year of its useful life for which the taxpayer has held the property. For purposes of subparagraph (B), useful life shall be determined as if section 167(m)(1) (relating to asset depreciation range) did not include the last sentence thereof.” 90 STAT. 1551 (2) Excess itemized deductions defined.— Section 57(b) is amended to read as follows: “(b) Excess Itemized Deductions.— “(1) In general.— For purposes of paragraph (1) of subsection (a), the amount of the excess itemized deductions for any taxable year is the amount by which the sum of the deductions for the taxable year other than— “(A) deductions allowable in arriving at adjusted gross income, “(B) the standard deduction provided by section 141. “(C) the deduction for personal exemptions provided by section 151, “(D) the deduction for medical, dental, etc., expenses provided by section 213, and “(E) the deduction for casualty losses described in section 165(c)(3), exceeds 60 percent (but does not exceed 100 percent) of the tax-payer’s adjusted gross income for the taxable year. “(2) Special role for trusts and estates.— In the case of a trust or estate, any deduction allowed or allowable for the taxable year— “(A) under section 642(c)(but only to the extent that the amount of the deduction allowable under such section is included in the income of the beneficiary under section 662(a)(1) for the taxable year of the beneficiary with which or within which the taxable year of the trust ends); “(B) under section 642(d), 642(e), 642(f), 651(a), 661(a), or 691; or “(C) for costs paid or incurred in connection with the administration of the trust or estate; shall, for purposes of paragraph (1), be treated as a deduction allowable in arriving at an adjusted gross income.” (3) Straight line recovery of intangibles defined.— Section 57 is amended by adding at the end thereof the following new subsection: “(d) Straight Line Recovery of Intangibles Defined.— For purposes of paragraph (11) of subsection (a)— “(1) In general.— The term ‘straight line recovery of intangibles’, when used with respect to intangible drilling and development costs for any well, means (except in the case of an election under paragraph (2)) ratable amortization of such costs over the 130month period beginning with the month in which production from such well begins. “(2) Election.— If the taxpayer elects, at such time and in such manner as the Secretary may by regulations prescribe, with respect to the intangible drilling and development costs for any well, the term ‘straight line recovery of intangibles’ means any method which would be permitted for purposes of determining cost, depletion with respect to such well and which is selected by the tax payer for purposes of subsection (a)(11).” (4) Special rules for timber.— (A) Preference reduction for timber.— Section 57(a)(9) is amended by adding at the end thereof the following new subparagraph: “(C) Preference reduction for timber.— In the case of a corporation, the amount of the tax preference under sub-90 STAT. 1552paragraph (B) shall be reduced (but not below zero) by the sum of— “(i) one-third of the corporation’s timber preference income (as defined in subsection (e)), plus “(ii) $20,000, but in no event shall this reduction exceed the amount of timber preference income.” (B) Regular tax deduction adjustments for timber.— Section 56 is amended by adding at the end thereof the following new subsections: “(d) Regular Tax Deduction Adjustment for Timber.— In the case of a corporation, the regular tax deduction (as determined under subsection (c)) shall be reduced by an amount equal to the lesser of— “(1) one-third of the amount determined under subsection (c) without regard to this subsection, or “(2) the preference reduction for timber determined under section 57(a)(9)(C). “(e) Tax Carryover for Timber.— “(1) In general.— In the case of a corporation, if for any taxable year, including a taxable yea r beginning before January 1, 1976— “(A) the taxes imposed by this chapter (computed without regard to this part and without regard to the tax imposed by section 531) which, under regulations prescribed by the Secretary, are attributable to income from timber, reduced by the sum of the credits allowable under— “(i) section 33 (relating to foreign tax credit), “(ii) section 38 (relating Io investment credit), and “(iii) section 40 (relating to expenses of work incentive programs), exceed “(B) the items of tax preference (as determined under section 57), then the excess of the taxes described in subparagraph (A) over the items of tax preference shall be a tax carryover to each of the 7 taxable years following such year. The entire amount of the excess shall be carried to the first of such 7 taxable years, and then to each of the other such taxable years to the extent that such excess is not used to reduce the amount subject to tax under subsection (a) for a prior taxable year to which such excess may be carried. “(2) Limitation.— The amount of any carryover under paragraph (1) which may be deducted in a taxable year shall be limited to— “(A) the excess of— “(i) the amount of timber preference income for the taxable year (as defined in section 57(e)), over “(ii) the amount determined under section 57 (a)(9)(C) for the taxable year, “(B) reduced by the excess of— “(i) the regular tax deduction for the taxable year (as determined under subsection (c) without regard to this subsection), over “(ii) the amount determined under subsection (d) for the taxable year.” (C) Timber preference income defined.— Section 57 is amended by adding at the end thereof the following new subsection: 90 STAT. 1553 “(e) Timber Preference Income Defined.— For purposes of this part, the term ‘timber preference income’ means the sum of— “(1) the gains referred to in section 631(a) and section 631(b), “(2) long-term capital gains on timber, and “(3) gains on the sale of timber included in paragraph 1231 .(b)(1), multiplied by the fraction determined in paragraph 57(a)(9)(B).” (d) Amendments of Section 58.— Section 58 (relating to rules for application of part) is amended— (1) by striking out subsection (a) and inserting in lieu thereof the following: “(a) Married Individuals Filing Separate Returns.— In the case of a married individual who files a separate return for the taxable year, section 56 shall be applied by substituting $5,000 for $10,000 each place it appears.”, (2) by striking out “$30,000” each place it appears in subsections (b) and (c)(2) and inserting in lieu thereof “$10,000”, and (3) by adding at the end thereof the following new subsections: “(h) Regulations To Include Tax Benefit Rule.— The Secretary shall prescribe regulations under which items of tax preference shall be properly adjusted where the tax treatment giving rise to such items will not result in the reduction of the taxpayer’s tax under this subtitle for any taxable years. “(i) Corporation Defined.— Except as provided in subsection (d)(2), for purposes of this part, the term ‘corporation’ does not include an electing small business corporation (as defined in section 1371(b)) or a personal holding company (as defined in section 542).” (e) Conforming Amendment.— Subsection (d) of section 443 (relating to adjustment in exclusion for computing minimum tax for tax preferences) is amended by striking out “$30,000” and inserting in lieu thereof “$10,000”. (f) Section 21 Not To Apply.— For purposes of section 21 of the Internal Revenue Code of 1954, the amendments made by this section shall not be treated as a change in a rate of tax. (g) Effective Date.— (1) In general.— Except as provided by paragraph (4), the amendments made by this section shall apply to items of tax preference for taxable years beginning after December 31, 1975. (2) Tax carryover.—Except as provided in paragraph (4) and in section 56(e) of the. Internal Revenue Code of 1954, the amount of any tax carryover under section 56(c) of such Code from a taxable year beginning before January 1, 1976, shall not be allowed as a tax carryover for any taxable year beginning after December 31, 1975. (3) Special rule for taxable year 1976 in the case of a corporation.— Notwithstanding any provision of the Internal Revenue Code of 1954 to the contrary, in the ease of a corporation which is not an electing small business corporation or a personal holding company the tax imposed by section 56 of such Code for taxable years beginning in 1976, is an amount equal to the sum of— (A) the amount of the tax which would have been imposed for such taxable year under such section as such section was in effect on the day before-the date of the enactment of the Tax Reform Act of 1976, and (B) one-half of the amount by which the amount of the tax which would be imposed for such taxable year under such 90 STAT. 1554section as amended by the Tax Reform Act of 1970 (but for this paragraph) exceeds the amount determined under subparagraph (A). (4) Certain financial institutions.— In the case of a taxpayer which is a financial institution to which section 585 or 593 of the Internal Revenue Code of 1954 applies, the amendments made by this section shall apply only to taxable years beginning after December 31, 1977, and paragraph (2) shall be applied by substituting “January 1, 1978” for “January 1, 1976” and by substituting “December 31, 1977” for “December 31, 1975”.