,,ii #aacth ,,congress #ast ,session ,s4 #agc ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,january #bi1 #bjac ,mr4 ,shelby introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to repeal the current ,internal ,revenue ,code and replace it with a flat tax1 thereby guaranteeing economic growth and fairness for all ,americans4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,simplified1 ,manageable1 ,and ,responsible ,tax ,act or the ,,smart ,act4 7b7 ,table of contents ,sec4 #a4 ,short title2 table of contents4 ,title ,i--,tax reduction and simplification ,sec4 #aja4 ,individual income tax4 ,sec4 #ajb4 ,tax on business activities4 ,sec4 #ajc4 ,simplification of rules relating to qualified retirement plans4 ,sec4 #ajd4 ,repeal of alternative minimum tax4 ,sec4 #aje4 ,repeal of credits4 ,sec4 #ajf4 ,repeal of estate and gift taxes and obsolete income tax provisions4 ,sec4 #ajg4 ,effective date4 ,title ,,ii--,supermajority required for tax changes ,sec4 #bja4 ,supermajority required4 ,i ,tax reduction and simplification #aja4 ,individual income tax 7a7 ,in general ,section #a of the ,internal ,revenue ,code of #aihf is amended to read as follows3 #a4 ,tax imposed ,there is hereby imposed on the taxable income of every individual a tax equal to #ag percent of the taxable income of such individual for such taxable year4 4 7b7 ,taxable income ,section #fc of such ,code is amended to read as follows3 #fc4 ,taxable income 7a7 ,in general ,for purposes of this subtitle1 the term taxable income means the excess of-- 7#a7 the sum of-- 7,a7 wages 7as defined in section #caba7;a7 without regard to paragraph 7#a7 thereof7 which are paid in cash and which are received during the taxable year for services performed in the ,united ,states1 7,b7 retirement distributions which are includible in gross income for such taxable year1 plus 7,c7 amounts received under any law of the ,united ,states or of any ,state which is in the nature of unemployment compensation1 over 7#b7 the standard deduction4 7b7 ,standard deduction 7#a7 ,in general ,for purposes of this subtitle1 the term standard deduction means the sum of-- 7,a7 the basic standard deduction1 plus 7,b7 the additional standard deduction4 7#b7 ,basic standard deduction ,for purposes of paragraph 7#a71 the basic standard deduction is-- 7,a7 #bh1adj in the case of-- 7i7 a joint return1 or 7ii7 a surviving spouse 7as defined in section #b7;a771 7,b7 #ag1igj in the case of a head of household 7as defined in section #b7;b771 and 7,c7 #ad1jgj in the case of an individual-- 7i7 who is not married and who is not a surviving spouse or head of household1 or 7ii7 who is a married individual filing a separate return4 7#c7 ,additional standard deduction ,for purposes of paragraph 7#a71 the additional standard deduction is #f1jgj for each dependent 7as defined in section #aeb7 who is described in section #aea7;c7 for the taxable year and who is not required to file a return for such taxable year4 7c7 ,retirement distributions ,for purposes of subsection 7a71 the term retirement distribution means any distribution from-- 7#a7 a plan described in section #dja7;a7 which includes a trust exempt from tax under section #eja7;a71 7#b7 an annuity plan described in section #djc7;a71 7#c7 an annuity contract described in section #djc7;b71 7#d7 an individual retirement account described in section #djh7;a71 7#e7 an individual retirement annuity described in section #djh7;b71 7#f7 an eligible deferred compensation plan 7as defined in section #deg71 7#g7 a governmental plan 7as defined in section #dad7;d771 or 7#h7 a trust described in section #eja7;c77#ah74 ,such term includes any plan1 contract1 account1 annuity1 or trust which1 at any time1 has been determined by the ,secretary to be such a plan1 contract1 account1 annuity1 or trust4 7d7 ,income of certain children ,for purposes of this subtitle-- 7#a7 an individual's taxable income shall include the taxable income of each dependent child of such individual who has not attained age #ad as of the close of such taxable year1 and 7#b7 such dependent child shall have no liability for tax imposed by section #a with respect to such income and shall not be required to file a return for such taxable year4 7e7 ,inflation adjustment 7#a7 ,in general ,in the case of any taxable year beginning in a calendar year after #bjad1 each dollar amount contained in subsection 7b7 shall be increased by an amount determined by the ,secretary to be equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment for such calendar year4 7#b7 ,cost-of-living adjustment ,for purposes of paragraph 7#a71 the cost-of-living adjustment for any calendar year is the percentage 7if any7 by which-- 7,a7 the ,,cpi for the preceding calendar year1 exceeds 7,b7 the ,,cpi for the calendar year #bjac4 7#c7 ,,cpi for any calendar year ,for purposes of paragraph 7#b71 the ,,cpi for any calendar year is the average of the ,consumer ,price ,index as of the close of the #ab-month period ending on ,august #ca of such calendar year4 7#d7 ,consumer ,price ,index ,for purposes of paragraph 7#c71 the term ,consumer ,price ,index means the last ,consumer ,price ,index for all-urban consumers published by the ,department of ,labor4 ,for purposes of the preceding sentence1 the revision of the ,consumer ,price ,index which is most consistent with the ,consumer ,price ,index for calendar year #aihf shall be used4 7#e7 ,rounding ,if any increase determined under paragraph 7#a7 is not a multiple of #aj1 such increase shall be rounded to the next highest multiple of #aj4 7f7 ,marital status ,for purposes of this section1 marital status shall be determined under section #ggjc4 4 #ajb4 ,tax on business activities 7a7 ,in general ,section #aa of the ,internal ,revenue ,code of #aihf 7relating to tax imposed on corporations7 is amended to read as follows3 #aa4 ,tax imposed on business activities 7a7 ,tax imposed ,there is hereby imposed on every person engaged in a business activity a tax equal to #ag percent of the business taxable income of such person4 7b7 ,liability for tax ,the tax imposed by this section shall be paid by the person engaged in the business activity1 whether such person is an individual1 partnership1 corporation1 or otherwise4 7c7 ,business taxable income ,for purposes of this section-- 7#a7 ,in general ,the term business taxable income means gross active income reduced by the deductions specified in subsection 7d74 7#b7 ,gross active income 7,a7 ,in general ,for purposes of paragraph 7#a71 the term gross active income means gross receipts from-- 7i7 the sale or exchange of property or services in the ,united ,states by any person in connection with a business activity1 and 7ii7 the export of property or services from the ,united ,states in connection with a business activity4 7,b7 ,exchanges ,for purposes of this section1 the amount treated as gross receipts from the exchange of property or services is the fair market value of the property or services received1 plus any money received4 7,c7 ,coordination with special rules for financial services1 etc ,except as provided in subsection 7e7-- 7i7 the term property does not include money or any financial instrument1 and 7ii7 the term services does not include financial services4 7#c7 ,exemption from tax for activities of governmental entities and tax-exempt organizations ,for purposes of this section1 the term business activity does not include any activity of a governmental entity or of any other organization which is exempt from tax under this chapter4 7d7 ,deductions 7#a7 ,in general ,the deductions specified in this subsection are-- 7,a7 the cost of business inputs for the business activity1 7,b7 wages 7as defined in section #caba7;a7 without regard to paragraph 7#a7 thereof7 which are paid in cash for services performed in the ,united ,states as an employee1 and 7,c7 retirement contributions to or under any plan or arrangement which makes retirement distributions 7as defined in section #fc7;c77 for the benefit of such employees to the extent such contributions are allowed as a deduction under section #djd4 7#b7 ,business inputs 7,a7 ,in general ,for purposes of paragraph 7#a71 the term cost of business inputs means-- 7i7 the amount paid for property sold or used in connection with a business activity1 7ii7 the amount paid for services 7other than for the services of employees1 including fringe benefits paid by reason of such services7 in connection with a business activity1 and 7iii7 any excise tax1 sales tax1 customs duty1 or other separately stated levy imposed by a ,federal1 ,state1 or local government on the purchase of property or services which are for use in connection with a business activity4 ,such term shall not include any tax imposed by chapter #b or #ba4 7,b7 ,exceptions ,such term shall not include-- 7i7 items described in subparagraphs 7,b7 and 7,c7 of paragraph 7#a71 and 7ii7 items for personal use not in connection with any business activity4 7,c7 ,exchanges ,for purposes of this section1 the amount treated as paid in connection with the exchange of property or services is the fair market value of the property or services exchanged1 plus any money paid4 7e7 ,special rules for financial intermediation service activities ,in the case of the business activity of providing financial intermediation services1 the taxable income from such activity shall be equal to the value of the intermediation services provided in such activity4 7f7 ,exception for services performed as employee ,for purposes of this section1 the term business activity does not include the performance of services by an employee for the employee's employer4 7g7 ,carryover of credit-,equivalent of excess deductions 7#a7 ,in general ,if the aggregate deductions for any taxable year exceed the gross active income for such taxable year1 the credit-equivalent of such excess shall be allowed as a credit against the tax imposed by this section for the following taxable year4 7#b7 ,credit-equivalent of excess deductions ,for purposes of paragraph 7#a71 the credit-equivalent of the excess described in paragraph 7#a7 for any taxable year is an amount equal to-- 7,a7 the sum of-- 7i7 such excess1 plus 7ii7 the product of such excess and the #c-month ,treasury rate for the last month of such taxable year1 multiplied by 7,b7 the rate of the tax imposed by subsection 7a7 for such taxable year4 7#c7 ,carryover of unused credit ,if the credit allowable for any taxable year by reason of this subsection exceeds the tax imposed by this section for such year1 then 7in lieu of treating such excess as an overpayment7 the sum of-- 7,a7 such excess1 plus 7,b7 the product of such excess and the #c-month ,treasury rate for the last month of such taxable year1 shall be allowed as a credit against the tax imposed by this section for the following taxable year4 7#d7 #c-month ,treasury rate ,for purposes of this subsection1 the #c-month ,treasury rate is the rate determined by the ,secretary based on the average market yield 7during any #a-month period selected by the ,secretary and ending in the calendar month in which the determination is made7 on outstanding marketable obligations of the ,united ,states with remaining periods to maturity of #c months or less4 4 7b7 ,tax on tax-,exempt entities providing noncash compensation to employees ,section #digg of such ,code is amended to read as follows3 #digg4 ,tax on noncash compensation provided to employees not engaged in business activity 7a7 ,imposition of tax ,there is hereby imposed a tax equal to #ag percent of the value of excludable compensation provided during the calendar year by an employer for the benefit of employees to whom this section applies4 7b7 ,liability for tax ,the tax imposed by this section shall be paid by the employer4 7c7 ,excludable compensation ,for purposes of subsection 7a71 the term excludable compensation means any remuneration for services performed as an employee other than-- 7#a7 wages 7as defined in section #caba7;a7 without regard to paragraph 7#a7 thereof7 which are paid in cash1 7#b7 remuneration for services performed outside the ,united ,states1 and 7#c7 retirement contributions to or under any plan or arrangement which makes retirement distributions 7as defined in section #fc7;c774 7d7 ,employees to whom section applies ,this section shall apply to an employee who is employed in any activity by-- 7#a7 any organization which is exempt from taxation under this chapter1 or 7#b7 any agency or instrumentality of the ,united ,states1 any ,state or political subdivision of a ,state1 or the ,district of ,columbia4 4 #ajc4 ,simplification of rules relating to qualified retirement plans 7a7 ,in general ,the following provisions of the ,internal ,revenue ,code of #aihf are hereby repealed3 7#a7 ,nondiscrimination rules 7,a7 ,paragraphs 7#d7 and 7#e7 of section #dja7;a7 7relating to nondiscrimination requirements74 7,b7 ,sections #dja7;a77#aj77;,b7 and #daf 7relating to top heavy plans74 7,c7 ,section #dja7;a77#ag7 7relating to compensation limit74 7,d7 ,sections #dja7;a77#bf7 and #daj7;b7 7relating to minimum participation and coverage requirements74 7,e7 ,paragraphs 7#c71 7#h71 7#aa71 and 7#ab7 of sections #dja7k71 and section #digi1 7relating to actual deferral percentage74 7,f7 ,section #dja7l7 7relating to permitted disparity in plan contributions or benefits74 7,g7 ,section #dja7m7 7relating to nondiscrimination test for matching contributions and employee contributions74 7,h7 ,paragraphs 7#a77;,d7 and 7#ab7 of section #djc7;b7 7relating to nondiscrimination requirements74 7,i7 ,paragraph 7#c7 of section #djh7k7 and paragraph 7#f7 7other than subparagraph 7,a77i77 of such section 7relating to simplified employee pensions74 7#b7 ,contribution limits 7,a7 ,sections #dja7;a77#af71 #djc7;b7 7#b7 and 7#c71 and #dae 7relating to limitations on benefits and contributions under qualified plans74 7,b7 ,sections #dja7;a77#cj7 and #djb7;g7 7relating to limitation on exclusion for elective deferrals74 7,c7 ,paragraphs 7#c7 and 7#g7 of section #djd7;a7 7relating to percentage of compensation limits74 7,d7 ,section #djd7l7 7relating to limit on includible compensation74 7#c7 ,restrictions on distributions 7,a7 ,section #gb7t7 7relating to #aj-percent additional tax on early distributions from qualified retirement plans74 7,b7 ,sections #dja7;a77#i71 #djc7;b77#aj71 and #digd 7relating to minimum distribution rules74 7,c7 ,section #djb7;e77#d7 7relating to net unrealized appreciation74 7#d7 ,special requirements for plan benefitting self-employed individuals ,subsections 7a77#aj77;,a7 and 7d7 of section #dja4 7#e7 ,prohibition of tax-exempt organizations and governments from having qualified cash or deferred arrangements ,section #dja7k77#d77;,b74 7b7 ,employer reversions of excess pension assets permitted subject only to income inclusion 7#a7 ,repeal of tax on employer reversions ,section #dihj of such ,code is hereby repealed4 7#b7 ,employer reversions permitted without plan termination ,section #dbj of such ,code is amended to read as follows3 #dbj4 ,transfers of excess pension assets 7a7 ,in general ,if there is a qualified transfer of any excess pension assets of a defined benefit plan 7other than a multiemployer plan7 to an employer-- 7#a7 a trust which is part of such plan shall not be treated as failing to meet the requirements of section #dja7;a7 or any other provision of law solely by reason of such transfer 7or any other action authorized under this section71 and 7#b7 such transfer shall not be treated as a prohibited transaction for purposes of section #dige4 ,the gross income of the employer shall include the amount of any qualified transfer made during the taxable year4 7b7 ,qualified transfer ,for purposes of this section-- 7#a7 ,in general ,the term qualified transfer means a transfer-- 7,a7 of excess pension assets of a defined benefit plan to the employer1 and 7,b7 with respect to which the vesting requirements of subsection 7c7 are met in connection with the plan4 7#b7 ,only #a transfer per year ,no more than #a transfer with respect to any plan during a taxable year may be treated as a qualified transfer for purposes of this section4 7c7 ,vesting requirements of plans transferring assets ,the vesting requirements of this subsection are met if the plan provides that the accrued pension benefits of any participant or beneficiary under the plan become nonforfeitable in the same manner which would be required if the plan had terminated immediately before the qualified transfer 7or in the case of a participant who separated during the #a-year period ending on the date of the transfer1 immediately before such separation74 7d7 ,definition and special rule ,for purposes of this section-- 7#a7 ,excess pension assets ,the term excess pension assets means the excess 7if any7 of-- 7,a7 the amount determined under section #dab7;c77#g77;,a77ii71 over 7,b7 the greater of-- 7i7 the amount determined under section #dab7;c77#g77;,a77i71 or 7ii7 #abe percent of current liability 7as defined in section #dab7;c77#g77;,b774 ,the determination under this paragraph shall be made as of the most recent valuation date of the plan preceding the qualified transfer4 7#b7 ,coordination with section #dab ,in the case of a qualified transfer-- 7,a7 any assets transferred in a plan year on or before the valuation date for such year 7and any income allocable thereto7 shall1 for purposes of section #dab1 be treated as assets in the plan as of the valuation date for such year1 and 7,b7 the plan shall be treated as having a net experience loss under section #dab7;b77#b77;,b77iv7 in an amount equal to the amount of such transfer and for which amortization charges begin for the first plan year after the plan year in which such transfer occurs1 except that such section shall be applied to such amount by substituting #aj plan years for #e plan years4 4 #ajd4 ,repeal of alternative minimum tax ,part ,,vi of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is hereby repealed4 #aje4 ,repeal of credits ,part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is hereby repealed4 #ajf4 ,repeal of estate and gift taxes and obsolete income tax provisions 7a7 ,repeal of estate and gift taxes 7#a7 ,in general ,subtitle ,b of the ,internal ,revenue ,code of #aihf is hereby repealed4 7#b7 ,effective date ,the repeal made by paragraph 7#a7 shall apply to the estates of decedents dying1 and gifts and generation-skipping transfers made1 after ,december #ca1 #bjac4 7b7 ,repeal of obsolete income tax provisions 7#a7 ,in general ,except as provided in paragraph 7#b71 chapter #a of the ,internal ,revenue ,code of #aihf is hereby repealed4 7#b7 ,exceptions ,paragraph 7#a7 shall not apply to-- 7,a7 sections #a1 #aa1 and #fc of such ,code1 as amended by this ,act1 7,b7 those provisions of chapter #a of such ,code which are necessary for determining whether or not-- 7i7 retirement distributions are includible in the gross income of employees1 or 7ii7 an organization is exempt from tax under such chapter1 and 7,c7 subchapter ,d of such chapter #a 7relating to deferred compensation74 #ajg4 ,effective date ,except as otherwise provided in this title1 the amendments made by this title shall apply to taxable years beginning after ,december #ca1 #bjac4 ,,ii ,supermajority required for tax changes #bja4 ,supermajority required 7a7 ,in general ,it shall not be in order in the ,house of ,representatives or the ,senate to consider any bill1 joint resolution1 amendment thereto1 or conference report thereon that includes any provision that-- 7#a7 increases any ,federal income tax rate1 7#b7 creates any additional ,federal income tax rate1 7#c7 reduces the standard deduction1 or 7#d7 provides any exclusion1 deduction1 credit1 or other benefit which results in a reduction in ,federal revenues4 7b7 ,waiver or suspension ,this section may be waived or suspended in the ,house of ,representatives or the ,senate only by the affirmative vote of three-fifths of the ,members1 duly chosen and sworn4