H.R.10612 - Tax Reform Act94th Congress (1975-1976)
|Committees:||House - Ways and Means | Senate - Finance|
|Committee Reports:||S.Rept 94-938; S.Rept 94-1236; H.Rept 94-658; H.Rept 94-1515; S.Rept 94-938 Part 2|
|Latest Action:||10/04/1976 Public law 94-455. (All Actions)|
|Roll Call Votes:||There have been 11 roll call votes|
This bill has the status Became Law
Here are the steps for Status of Legislation:
- Passed House
- Passed Senate
- Resolving Differences
- To President
- Became Law
Summary: H.R.10612 — 94th Congress (1975-1976)All Information (Except Text)
(Public law 94-455)
Public Law No: 94-455 (10/04/1976)
Tax Reform Act - =Title I: Short Title and Amendment of 1954 Code= - Provides that this Act may be known as the Tax Reform Act of 1976.
Requires in the case of an individual or an electing small business corporation that construction period interest and taxes are to be capitalized in the year in which they are paid or incurred and amortized over a ten year period.
=Title II: Other Amendments Related to Tax Shelters= - Provides that when residential real estate is sold the gain is fully recaptured as ordinary income to the extent of post 1975 depreciation in excess of straight line depreciation.
Provides that in the case of taxpayers (other than corporations) engaged in: (1) holding, producing, or distributing motion picture films or video tapes; (2) farming; (3) leasing specified (Sec. 1245) property; or (4) exploring for or exploiting oil and gas resources, the loss from such activities shall be allowed only to the extent of the aggregate amount with respect to which the taxpayer is at risk.
Provides that amounts deducted for intangible drilling expenses on productive wells be recaptured upon disposition of such property by treating the amount realized as ordinary income to the extent such amounts exceed amounts allowable as intangible expenses capitalized over the useful life of the well.
Prohibits the addition of any amount to the excess deductions account (EDA) for any taxable year beginning after December 31, 1975.
Requires farming syndicates: (1) to deduct expenses for feed, seed, fertilizer, and other farm supplies only when used or consumed; (2) to capitalize costs of poultry; and (3) to capitalize the costs of planting, cultivating, maintaining and developing a grove, orchard or vineyard.
Requires any corporation, other than a subchapter S corporation or a family corporation, and any partnership in which a corporation is a partner, to use the accrual method of accounting and to capitalize preproductive period expenses.
Requires a cash method taxpayer to deduct prepaid interest over the period of the loan to the extent the interest represents the cost of using the borrowed funds during each period.
Limits the deduction for interest on investment indebtedness to $10,000 per year plus the taxpayers net investment income.
Limits deductions for amounts attributable to the production of a film, sound recording, book, or similar property to those taxable years ending during the period during which the taxpayer reasonably may be expected to receive substantially all of the income he will receive from any such property.
States that if a sports franchise is sold, and in connection with such sale there is a transfer of a player contract, the basis on such contract to the transferee shall not exceed the sum of the adjusted basis of such contract to the transferor plus the gain recognized by the transferor on the transfer.
Provides a presumption that not more than 50 percent of the consideration paid for a sports franchise is allocable to player contracts.
Limits the amount of the additional first-year depreciation that a partnership can pass through to its partners in any taxable year to $2,000.
Requires that fees paid in connection with the organization and syndication of a partnership be capitalized.
Provides that partnership income or losses are to be allocable to a partner only for the portion of the year such partner is a member of a partnership.
Disallows partnership special allocations if such allocation lacks "substantial economic effect".
Restricts the amount of partnership liabilities which may be included in a limited partner's basis in his partnership interest to an amount equal to any further contributions which such limited partner is obligated to make pursuant to the partnership agreement.
=Title III: Minimum Tax and Maximum Tax= - Imposes a minimum tax on individuals of 15 percent of the amount by which the sum of the items of tax preference exceeds the allowable exemption, which is the greater of $10,000 ($5,000 for married persons filing separately) or the tax liability. Sets forth provisions relating to the following preference items: excess itemized deductions, intangible drilling costs, and acceleration on all personal property subject to a lease.
Sets a maximum tax rate of 50 percent where the taxpayer has personal service income.
=Title IV: Extensions of Individual Income Tax Reductions= - Extends the individual income tax credits authorized by the Revenue Reduction Act of 1975. Sets the standard deduction low income allowance at $2,100 in the case of joint returns, $1,700 in the case of single persons; and sets the percentage standard deduction at 16 percent of the adjusted gross income, up to $2,800 in the case of joint returns and $2,400 in the case of single persons. Sets the earned income credit at ten percent of earned income up to $4,000.
=Title V: Tax Simplification in the Individual Income Tax= - Imposes a tax on individuals with incomes under $20,000 according to tables to be prepared, which follow current tax rates. Requires individuals using such tables to subtract from their adjusted gross income the amount of their personal exemptions and itemized or standard deductions.
Allows the alimony deduction to be taken as a deduction from gross income rather than as a deduction from adjusted gross income.
Prescribes a tax credit for individuals over 65.
Allows a tax credit of 20 percent of the employment-related expenses arising for household and dependent care services.
Revises the sick pay exclusion to provide a maximum annual exclusion of $5200 for taxpayers under age 65 who are permanently and totally disabled. Reduces the exclusion on a dollar for dollar basis by the taxpayer's income in excess of $15,000. Provides that members of the armed services who enlist after September 24, 1975 will be allowed to exclude military disability payments from their gross income only if the payments are directly related to "combat injuries". Defines "combat injuries" for purposes of such exclusion.
Increases the maximum deduction for premove househunting and temporary living expenses at the new job location from $1,000 to $1,500, and increases from $2,500 to $3,000 the maximum deduction for qualified expenses for the sale, purchase, or lease of a residence.
Requires the Joint Committee on Internal Revenue Taxation to make a full study regarding simplification and indexing of the tax laws.
=Title VI: Business Related Individual Income Tax Provisions= - Prohibits a taxpayer from deducting any expenses attributable to the use of his home for business purposes except with respect to such portion of the home that is used exclusively on a regular basis as: (1) the taxpayer's principal place of business; (2) a place of business which is used for patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of business; or (3) the place of the taxpayer's trade or business, but which is a separate structure not attached to the dwelling unit.
Allows deductions for expenses incurred in attending not more than two conventions, educational seminars, or similar meetings outside the United States, its possessions, and the Trust Territory of the Pacific.
Provides that stock options for employees granted after May 20, 1976, whether or not qualified under the Internal Revenue Code, will be governed by the existing tax treatment of nonqualified stock options.
Provides that the tax home of a State legislator for purposes of the deduction for trade or business expended in connection therewith, is the place of residence of the legislator within the district which he represents. Specifies a dollar limitation on amounts allowable as such a deduction.
=Title VII: Accumulation Trusts= - Determines the tax attributable to the accumulation distribution from trusts by averaging the distribution over a number of years equal to the number of years over which the income was earned by the trust. Disallows any refunds or credits to trust beneficiaries or trusts as a result of any accumulation distributions. Provides that the "throwback rule" is not to apply to accumulation distributions while the beneficiary was a minor. Provides that a distribution made or required to be made by a trust to a beneficiary in a year which does not exceed the income of the trust for the year is not to be treated as an accumulation distribution for that year.
Repeals the existing capital gain "throwback rule" (treats such gain as if the transferor had realized the gain and then transferred the net proceeds from the sale after tax to the trust corpus). Excludes "includible gain" from the taxable income of the trust.
=Title VIII: Capital Formation= - Extends four years, until 1980, the increase from $50,000 to $100,000 the limit on the credit investments in qualified used property.
Extends the ten percent credit for four years, through December 31, 1980.
Requires after December 31, 1975, that a first-in-first-out treatment be used with respect to investment credit carry forwards and carrybacks.
Allows an additional investment tax credit of one percent for qualified investments made before January 1, 1981, where the additional amount is contributed to an employee stock ownership plan (ESOP).
Allows taxpayers two-thirds of a full investment tax credit for all films regardless of the actual useful life of a particular film, or permits them to elect to have such credit determined on a film-by-film basis. Establishes the credit base for films as including the costs allocable to production in the United States. Entitles taxpayers to such credit for movie films who have ownership interests in the film. Sets forth rules for such credit for films placed in service before 1975.
Provides for an investment credit of one-half the regular credit on the tax deferred amounts withdrawn from the capital construction fund which are used to purchase qualified vessels.
Allows business taxpayers who are presently allowed a three year net operating loss carryback to elect to convert their carryback period into three additional carryover years. Provides two additional carryover years for business taxpayers in general.
Provides with respect to the taxable or tax-free acquisition of a loss company that the required continuity of ownership by the former owners of a loss company is increased to 40 percent.
Reduces the allowable loss carryover by 3 1/2 percentage points for each percentage point less than 40 which the owners of the loss company get or retain. Reduces such carryover by 1 1/2 percentage points for each percentage point decrease below 20.
Revises the terms "eligible vessel" and "qualified vessel" for purposes of the Merchant Marine Act of 1936.
=Title IX: Small Business Provisions= - Extends indefinitely the surtax exemption to $50,000 and the reduction in the normal tax rate on the first $25,000 of corporate income to 20 percent.
=Title X: Changes in the Treatment of Foreign Income= - Provides that any individual entitled to the earned income exclusion for income earned abroad is not allowed a foreign tax credit with respect to foreign taxes allocable to the amounts that are excluded from gross income under the earned income exclusion. Provides that any additional income derived by individuals beyond the income eligible for the earned income exclusion is subject to taxation at the higher rate brackets which would apply if the excluded earned income were not excluded.
Allows a citizen or a resident married to a nonresident alien to file a joint return provided that an election is made by both individuals to be taxed on their total income (from whatever country). Makes specified community property laws inapplicable for income tax purposes where such election is not made.
Provides that any United States person transferring property to a foreign trust which has a United States beneficiary shall be treated as the owner of the portion of the trust attributable to the property transferred by the United States person. Prescribes the conditions under which a trust shall be treated as having a United States beneficiary.
Establishes an interest charge, in cases where the income of a foreign trust is not taxed to the grantor under the grantor trust rules, which shall be based on the length of time during which that tax was deferred because of the trust's accumulation of income. Disregards the character of capital gains for purposes of taxing accumulation distributions to the beneficiary.
Imposes an excise tax of 35 percent of the amount of the unrecognized appreciation of all property transferred to foreign entities. Authorizes a taxpayer to elect to recognize gain on such transfer in lieu of paying the excise tax.
Adds two exceptions to the types of United States property the investment in which by a controlled foreign corporation results in taxation to its United States shareholders: stock or debt of a domestic corporation if such shareholders of the controlled foreign corporation own less than 25 percent of the total combined voting stock of such domestic corporation, and movable oil and gas exploration and development property for use on the continental shelf.
Repeals the exclusion from dividend treatment for sales or exchanges of stock in less-developed country corporations.
Exempts specified insurance company income from the definition of foreign personal holding company income.
Excludes specified categories of shipping income from the base company shipping tax rules.
Requires computation of the limitation of the amount of foreign tax which can be used to reduce United States tax under the overall limitation, instead of the present per-country limitation.
Requires that in cases where a loss from foreign operations reduces the tax on United States source income, the tax benefit derived from the deduction of these losses should be recaptured by the United States when the company subsequently derives income from abroad. Provides for the recapture of a loss where property which was used in a trade or business, and which is used predominantly outside the United States, is disposed of prior to the time the loss has been recaptured under the rules provided in this title.
Treats the dividends from less-developed country corporations the same, for tax purposes, as dividends from other foreign corporations.
Changes the treatment of income from the sale of capital assets for purposes of computing the limitation on the foreign tax credit.
Provides that the limitation on foreign taxes on extraction income allowable as a credit is reduced for taxable years ending after 1976, to 48 percent of that income on an overall basis. Provides permanent carryover rules for excess extraction taxes. Allows a foreign tax credit on foreign oil and gas extraction income for individuals equal to the average U.S. effective rate on that income.
Provides that the foreign tax credit is applicable with respect to foreign taxes paid by a third-tier foreign corporation whose undistributed income is taxed to the shareholder.
Changes the source rule applicable to insurance underwriting income.
Makes permanent the provisions that stipulate that interest on amounts held as deposits by a banking institution or held by an insurance company are not treated as income from sources within the United States if received by a nonresident alien individual or foreign corporation.
Establishes rules relating to: transfers of property from the United States; and other transfers (including transfers into the United States and those which are exclusively foreign). Provides that in cases of an actual controversy involving a determination or a failure to make a determination by the Secretary as to whether a transfer plan has as one of its principal purposes the avoidance of income taxes, the taxpayer may litigate the determination in the Tax Court.
Provides that if a domestic corporation which meets the stock ownership requirements with respect to a foreign corporation distributes, sells, or exchanges the stock of a foreign corporation in a specified transaction under this Act, then, the domestic corporation is to include in gross income as a dividend an amount equal to the excess of the fair market value of the stock of the foreign corporation over its basis to the extent of specified earnings and profits.
States that where a mutual life insurance company makes an election with respect to a contiguous country life insurance branch, there is excluded from each item involved in the determination of life insurance company taxable income the items separately accounted for in a separate contiguous country branch account which the mutual life insurance company is required to establish and maintain. Disallows any foreign tax credit with respect to income excluded from life insurance company taxable income by reason of it being accounted for in a contiguous country life insurance branch. Permits a domestic stock life insurance company which has a contiguous country life insurance branch to elect to transfer the assets of that branch to a foreign corporation without the approval of the Commissioner of the Internal Revenue Service and without imposition of the excise tax. Provides for taxation of the net gain on such a transfer.
Establishes a tax credit for specified income of corporations operating a trade or business in a possession of the United States, in lieu of the ordinary foreign tax credit. Provides that if a corporation is eligible for such credit, any actual taxes paid to a foreign country or a possession with respect to the gross income taken into account for the credit are not treated as a creditable tax, and no deduction is allowed with respect to such tax. Permits a dividends-received deduction for dividends received from corporations eligible for such tax credit.
Phases out the 14-percent tax rate reduction for Western Hemisphere trade corporations over a four year period.
Phases out the special tax treatment for China Trade Act corporations and their shareholders over a three year period.
Provides that a taxpayer who participates in or cooperates with an international boycott may not elect to credit against taxes any income, war profits, or excess profits taxes paid or accrued to any country which requires participation in an international boycott as a condition of doing business within that country.
Eliminates deferral of the income tax for shareholders of controlled foreign corporations with respect to specified income derived from operations in or related to any country which requires participation in such a boycott, and with respect to income derived as a result of making such illegal payments. States that Domestic International Sales Corporations benefits are not allowed with respect to international boycott income and illegal-payments income.
Subjects to current taxation as a deemed dividend an amount equal to the amount of any bribe paid by a foreign subsidiary or a DISC of a U.S. company.
=Title XI: Amendments Affecting DISC= - Establishes an incremental computation of DISC (Domestic International Sales Corporation) benefits by adding a new category of deemed distributions from a DISC to its shareholders, which is the adjusted taxable income for the current taxable year which is attributable to adjusted base period export gross receipts. Provides that if one or more members of a contolled group of corporations qualify as a DISC in the current or base period years, the amount deemed distributed as taxable income attributable to adjusted base period export gross receipts to the common shareholder is to be determined by aggregating the taxable income, current export gross receipts, and base period gross receipts of the commonly owned DISCs. Requires that a person owning the underlying trade or business after its separation from the DISC be treated as having, in any DISC in which the owner of the trade or business has an interest, an amount of additional export gross receipts for base period years. Provides that if a person has an interest in more than one DISC, amounts equal to that shareholder's pro rata portion of the base period gross export receipts of DISCs owned during the base period are to be included in base period export gross receipts of DISCs currently owned by such shareholder. Exempts DISCs with adjusted taxable income of $100,000 or less from the incremental rules.
=Title XII: Administrative Provisions= - Makes the text of any written determination by the IRS or any background file document relating to such determination open to public inspection, provided names and other identifying details and commercial or financial information are deleted. Requires disclosure of persons making inquiry with respect to such written determinations. Requires the Secretary to prescribe regulations establishing administrative remedies with respect to requests for additional disclosure of written determinations or background file documents and requests to restrain disclosure. Provides that whenever the Secretary fails to make deletions required in accordance with this title or fails to follow the procedures established in this title, the recipient of the written determination or any person therein identified shall have as an exclusive civil remedy an action against the Secretary in the Court of Claims.
Makes tax returns and return information confidential, and provides that, except as permitted by this title, no officer or employee of the United States, any State, or any other person shall disclose any return or return information in connection with his duties under this title.
Permits disclosure of returns and returns information to such persons as the taxpayer may indicate, to State tax officials in specified cases in connection with administration of State tax laws, members of a partnership, shareholders holding one percent of the outstanding stock, heirs and estate administrators, trustees, specified Congressional committees (provided identifying information is removed if such committees are not in executive session), the President upon his personal request, the Executive Office of the President and agency heads for consideration of appointments (provided such information is limited to specified items), tax return inspectors of the Department of the Treasury, the Department of Justice for preparation of proceedings or for investigations and to Federal or State judicial or administrative proceedings under specified conditions, specified agencies for statistical purposes, to specified agencies for tax administration purposes, and to specified agencies for specified purposes other than tax administration. Sets forth required procedures for such disclosures of returns and return information, including records of such disclosures and measures for safeguarding returns and return information.
Authorizes persons whose tax returns or return information is disclosed in violation of this Act to bring a civil action for damages and costs of the action. Establishes criminal penalties of up to $5,000 and five year's imprisonment or both for wrongful disclosures of such items.
Establishes fines for income tax preparers (as defined in this Act) who understate the tax liability of a taxpayer. Requires such preparers to furnish a copy of the tax return to the taxpayer and retain a copy themselves for three years. Sets forth additional penalties applicable to acts of such preparers. Provides injunctive relief against specified acts of such preparers.
Expedites the judicial and administative review of jeopardy and termination assessments, and provides that during such review the seized property may not be sold.
Provides that IRS summonses to persons whose business consists of making or keeping of records of the business transactions or affairs of other persons, and which summonses require the production of such records, shall contain directions for staying compliance with the summons and sufficient information for the record keeper to ascertain what records are sought, including the identity of persons involved. Requires that notice of such a summons be sent to such persons. Permits the IRS to send a John Doe summons upon satisfying the court that specified conditions exist.
Eliminates the prohibition against agreements with States and the District of Columbia for withholding State income taxes from members of the Armed Services. Permits agreements with States to withhold State income taxes from Federal employees where such withholding is voluntary.
Requires the withholding of Federal income tax from gambling winnings at a 20 percent rate. Exempts from such requirement winnings from slot machines, keno and bingo, or State conducted lotteries on winnings of $5,000 or less.
Provides that boat crewmen, under specified circumstances, shall be treated as self-employed for purposes of income tax withholding, the self-employment tax, the Federal Insurance Contributions Act, and the Social Security Act.
Deletes the requirement that the winners of State-conducted lotteries be determined on the basis of the results of a horse race, and exempts the operation of vending machines for State-conducted lotteries from the special occupational tax.
Exempts from a levy on an individual's assets for the recovery of unpaid taxes up to $50 per week plus $15 per week for each dependent from the amount either payable to or received by such individual as wages or salary for personal services or as income derived from other sources.
Changes the jurisdictional amount on refund cases for the Joint Committee on Taxation to $200,000 (now $100,000), and permits the Committee to randomly obtain tax returns and return information for purposes of oversight of the IRS. Authorizes the IRS to abate any portion of interest owed by a taxpayer as a result of a mathematical error on returns prepared by the IRS.
=Title XIII: Tax Exempt Organizations= - Permits a private foundation to sell, exchange, or otherwise dispose of property to a disqualified person if, at the time of the disposition, the foundation is leasing substantially all of that property under a lease subject to the 1979 lease transitional rule, and the foundation receives in return an amount which equals or exceeds the fair market value of the property.
Permits a foundation to treat as a current charitable expenditure under temporary modified set-aside rules, an amount set aside to be paid out over the next five years.
Reduces the mandatory annual payout percentage applicable to private foundations to five percent and eliminates the authority of the Department of the Treasury to change such rate from year to year.
Extends to December 31, 1977, the date by which the governing instrument of a charitable remainder trust created after July 31, 1969, must be amended in order to qualify as a charitable remainder annuity or unitrust or pooled income fund for purposes of the estate tax deduction.
Prescribes an exemption from the unrelated business income tax for income to exempt organizations from fairs, expositions, conventions, and trade shows.
Authorizes the United States Tax Court, the United States Court of Claims or the United States district court for the District of Columbia to render declaratory judgments with respect to determinations by the Secretary of the Treasury as to the qualification, initial or continuing, of an organization as a tax-exempt organization.
=Title XIV: Capital Gains= - Extends the capital loss carryover period for regulated investment companies from five to eight years.
Raises the amount of ordinary income against which capital losses may be offset to $2,000 in 1977, and to $3,000 in 1978 and subsequent years.
=Title XV: Pension and Insurance Taxation= - Permits an eligible individual a maximum retirement savings deduction of up to $1,750 a year or 15 percent of his compensation includible in gross income, whichever is less, for his contributions to an individual retirement account (IRA).
Provides that the deduction is allowed for contributions to separate IRA's for each spouse or to an IRA which has one subaccount for the husband and another for the wife. Limits the contributions for each spouse to $875.
Allows a self-employed individual to set aside up to $750 of self-employment income in an H.R. 10 plan without regard to the usual 15 or 25 percent limitation.
Allows a member of the Armed Forces Reserves or National Guard to qualify for an IRA deduction for a year if he has ten or fewer days of active duty during the year.
Permits an investment in stock of a closed-end investment company to qualify for treatment as a tax-sheltered annuity.
Provides that a segregated asset account of a life insurance company can be used as an investment medium for assets of a qualified pension, profit sharing, or annuity plan even though the account is held as a reserve under a contract which does not require the holder of the account to provide for the payment of annuities. Allows life insurance companies and other mutual insurance companies to file consolidated returns with other companies after 1981. Requires such companies to have been affiliated for the five years preceding the filing of such consolidated return.
=Title XVI: Real Estate Investment Trusts= - Provides that where, as a result of an IRS audit of a real estate investment trust (REIT), an adjustment is to be made increasing the amount of dividends that the REIT must pay, in order to distribute the required 90 percent of income (increased to 95 percent beginning in 1980), then the REIT may pay a deficiency dividend to its shareholders and receive a deduction for such distribution, and not be subject to tax on such distribution or forego its tax status. States that an adjustment which will allow use of such deficiency dividend procedure is to include an increase in the excess of the net long-term capital gains over the sum of the net short-term capital loss and the deduction for capital gain dividends paid. Makes such deficiency dividend deduction available only if the entire amount of the adjustment was not due to a fraud with intent to evade tax or to willful failure to file a return on time. Makes the amount of such deficiency dividend taxable to the shareholder for the taxable year in which the distribution is made.
Establishes an excise tax on late distributions of income, but exempts a REIT from such excise tax by distributing 75 percent of its real estate investment trust taxable income by the close of its taxable year. Eliminates the prohibition against a REIT holding property primarily for sale to customers in the ordinary course of its trade or business, and in lieu thereof designates the sale or disposition of specified property a prohibited transaction and taxes the net income therefrom at a rate of 100 percent.
Provides that where the REIT fails to distribute 90 percent of income and 75 percent within its taxable year, it will not be disqualified if it sets forth the nature and amount of its gross income qualifying for such requirements and the failure to meet such requirements is due to reasonable cause and not willful neglect. Provides that where a disqualification would otherwise apply, in lieu thereof a 100-percent tax is imposed on the net income attributable to the greater of the amount by which the REIT failed the 90-percent or 75-percent requirement.
Provides that amounts received by a REIT as charges: (1) for services customarily furnished or rendered in connection with the rental of real property; (2) for rents attributable to personal property leased in connection with the lease of real property; (3) for commitment fees; and (4) for options to purchase real property, will be treated as rents from real property for purposes of the 75-percent and 90-percent income source tests.
Permits a net operating loss carryover in computing real estate investment trust taxable income for eight taxable years after the year in which the loss was incurred. Allows ordinary losses to offset the undistributed excess of net long-term capital gains over net short-term capital losses.
=Title XVII: Railroad and Airline Provisions= - Allows railroads to deduct the full cost of an improved type of replacement railroad tie. Permits a railroad to take an investment credit up to 100 percent of its tax liability for taxable years 1976 and 1977. Reduces such percentage to 50 percent by 1983. Extends provisions which allow the amortization of grading and tunnel bores to those placed in service before January 1, 1969.
=Title XVIII: United States International Trade Commission= - International Trade Commision Act - Amends the Tariff Act of 1930 with respect to the voting procedures of the Commission in import relief cases. Increases the size of the Commission from six to seven Commissioners.
Authorizes appropriations to the Commission for fiscal years 1977 and 1978.
Directs the Commission to continue through 1980 its present practice of publishing statistics with respect to the production and the trade in synthetic organic chemicals.
=Title XIX: Repeal and Revision of Obsolete, Rarely Used, Etc., Provisions of Internal Revenue Code of 1954= - Repeals and revises obsolete and rarely used provisions of the Internal Revenue Code of 1954, including provisions relating to: the determination of tax liability, computation of taxable income, corporate distributions and adjustments, deferred compensation, accounting periods and methods, corporations used to avoid tax liability to shareholders, banking institutions, natural resources, estates and trusts, partners and partnerships, insurance companies, regualted investment companies and real estate investment trusts, taxes on income from sources within or without the United States, gain or loss on disposition of property, capital gains, readjustment of tax between years and special limitations, election of small businesses as to taxable income, cooperatives and their patrons, tax on self-employment income, withholding of tax on nonresident aliens and foreign corporations, recovery of excessive profits on government contracts, consolidated returns, estate tax, gift tax, the Federal Unemployment Tax Act, collection of income tax at source on wages, retailers excise taxes, manufacturers excise taxes, facilities and services, documentary stamp taxes, import taxes, regulatory taxes, occupational taxes, interest equalization tax, private foundations, qualified pernsion plans, gallonage taxes (on distilled spirits, wines, and beer), qualification requirements for distilled spirits plants, operation of distilled spirits plants, bonded and tax paid wine premises, penalties and seizures relating to liquors, cigars and cigarettes, information and returns, time and place for paying tax, assessment, collection, abatements and credits and refunds, limitations, interest, additions to tax, jeopardy and bankruptcy, licensing and registration, bonds, crimes and forfeitures, judicial proceedings, definitions, and the Joint Committee on Internal Revenue Taxation.
Amends provisions of the Code with limited current application, and effects repeals and savings provisions thereto.
United States Cotton Futures Act - Repeals provisions of the Code imposing prohibitory taxes upon cotton futures contracts.
=Title XX: Estate and Gift Taxes= - Amends the Internal Revenue Code to provide a single unified rate schedule for estate and gift taxes. Establishes progressive rates based on cumulative lifetime transfers and transfers at death. Determines the amount of estate tax by applying the unified rates to such cumulative transfers and then subtracting the taxes payable on lifetime transfers. Provides that for purposes of determining the amount of the gross estate, the amount of gift tax paid with respect to transfers made within three years of death shall be included in the decedent's gross estate. Provides, as a transitional rule, that the lifetime transfers taken into account in determining cumulative transfers at death, for purposes of imposing the estate tax under the unified schedule, shall only include taxable gifts made after December 31, 1976.
Repeals the estate and gift tax exemptions. Substitutes for such exemptions a unified credit against estate and gift taxes in the amount of $47,000.
Eliminates the contemplation of death presumption and provides for the inclusion in the decedent's gross estate of all gifts in excess of the annual exclusion made within the three-year period prior to the decedent's death.
Increases the estate tax marital deduction to $250,000 or one-half of the decedent's gross estate, whichever is greater. Increases the gift tax marital deduction in the case of lifetime gifts to a spouse. Allows an unlimited marital deduction for the first $100,000 of lifetime gifts made to a spouse and, thereafter, a deduction for one-half of the aggregate lifetime gifts made to a spouse in excess of $200,000.
Treats, under a fractional interest rule, joint tenancies, created by a transfer subject to gift tax at the time of creation, as belonging 50 percent to each spouse for estate tax purposes.
Allows the executor of an estate which includes real property being put to a qualified use to value such property at such use, rather than its fair market value determined on the basis of its highest and best use. Defines qualified use as: (1) use as a farm; or (2) use in a trade or business. Imposes special conditions for such valuation, including: (1) the value of the qualified real property and related personal property must be at least 50 percent of the decedent's gross estate; (2) at least 25 percent of the adjusted value of the gross estate must be qualified real property; (3) the real property must pass to a qualified heir; (4) the real property must have been used or held for qualified use for five of the last eight years prior to the decedent's death; and (5) there must have been material participation in the operation or management of the real property by the decedent or a member of his family in five out of the eight years immediately preceding the decedent's death.
Provides for recapture of any tax benefits obtained by use of the reduced valuation if, prior to the death of the qualified heir or within 15 years of the death of the decedent, the property is disposed of to nonfamily members or ceases to be used for qualified purposes.
Provides for a lien on all such real property with respect to which the special valuation is elected.
Provides a 15-year period for the payment of the estate tax attributable to the decedent's interest in a farm or closely held business, with a deferral of the tax for five years and installment payments over the next ten years. Requires, as a qualification for such deferral and installment treatment, the value of the closely held business or farm in the decedent's estate to be at least 65 percent of the gross estate.
Allows discretionary extensions of up to ten years to pay the estate tax for reasonable cause (rather than for "undue hardship" as under present law).
Provides for a lien for payment of the deferred taxes attributable to a closely held business or farm.
Provides that the basis of property acquired from a decedent dying after December 31, 1976, shall be the adjusted basis of the property immediately before the death of the decedent increased by a specified proportion of the Federal and State estate taxes. Stipulates that such increase shall not increase the basis of the property above its fair market value.
Excludes personal and household effects from the carryover basis rule. Limits such exclusion to $10,000.
Imposes a tax, in the case of generation skipping transfers under a trust, upon a distribution of the trust assets to a generation skipping heir, or upon the termination of an intervening interest in the trust. Determines the tax by adding the value of the distributed property, or terminated interest, to the heir's taxable transfers and applying the heir's marginal transfer tax rate to the value of such interest.
Allows a deduction from value of the gross estate of a decedent for amounts left to children of the decedent if the decedent's spouse has predeceased him. Limits such deduction to $5,000 multiplied by the number of years each child is under the age of 21.
Requires gift tax returns to be filed for any quarter only when the total cumulative gifts made during the taxable year exceed $25,000, or during the last quarter if the total does not reach $25,000.
Provides that if the Internal Revenue Service proposes a deficiency in the estate tax because of a higher valuation of the assets included in the decedent's gross estate, it must disclose to the executor during the settlement process the basis on which the higher valuation was determined.
Requires the inclusion of stock in the gross estate of the decedent if the decedent retained the voting rights in the stock.
Provides rules for disclaimers for purposes of estate, gift, and generation skipping transfers.
Excludes from the gross estate a survivor's interest in an H.R. 10 plan and an individual retirement account.
=Title XXI: Miscellaneous Provisions= - Permits a qualified homeowners' association (a condominium management association or a residential real estate association) to elect to be treated as a tax-exempt organization, so that it will not be taxed on "exempt function income" (membership dues, fees, and assessments). Stipulates that such an association shall be taxed as a corporation, without the surtax exemption, on its taxable income. Sets forth qualifications, including income and expenditure qualifications, for such associations to meet.
Permits crop disaster payments to be included in the year in which the crop income would normally have been reported.
Allows accrual basis taxpayers a bad debt deduction for debts of political parties which are accrued as a receivable in a bona fide sale of goods or services in the ordinary course of 30 percent of their trade or businesses.
Exempts from taxation those obligations of nonprofit corporations organized by, or requested to act by, a State or a political subdivision thereof solely to acquire student loan notes.
Provides that amounts received under a lease of intangible personal property to a 25 percent or greater shareholder are to be governed by the rule applying to a corporate lease of tangible property to such a shareholder.
Makes the WIN credit available from the date of hiring if employment is not terminated without cause before the end of 90 days.
Doubles the limit on the credit from $25,000 to $50,000 plus one half of the excess over $50,000.
Refunds the eight percent excise tax on truck parts and accessories where the part or accessory is sold on or in connection with the first retail sale of a light-duty truck.
States that with respect to specified partnership distributions, sales of partnership interest, and distributions in liquidation of partnership interests, the term "unrealized receivable" is to include the ordinary income which would have been recognized had the partnership transferred a franchise, trademark, or trade name.
Prohibits the IRS from taking action before 1979 to enforce its recent rulings with respect an employer's duty to keep records and to report tips.
Restores and extends indefinitely the five-year amortization of pollution control facilities.
Provides that the number of shareholders permitted in order for a corporation to qualify for subchapter S (of the Internal Revenue Code) status is increased from 10 to 15 after the corporation has elected such status for five taxable years.
Makes changes in the exclusion of retailers from the small producer exemption on oil and gas wells, so that if gross receipts from the sale of oil or gas by all retail outlets of the taxpayer do not exceed $5,000,000 for the year, such taxpayer will not be treated as a retailer. Permits a retailer taxpayer to claim such small producer exemption where all retail sales of oil or gas for the year are made outside the United States.
Makes explicit that the Federal Government will not charge a State for Federal administration of the State's income taxes (under the piggybacking provisions). Permits a State to provide a credit for State sales taxes.
Provides that no amount shall be included in gross income by reason of the discharge of all or part of a student loan, if pursuant to the loan agreement the individual works for a specified period of time under specified conditions.
Permits the general rule on nonrecognition of gain or loss from the sale of property to apply to a controlled subsidiary which sells property and then liquidates completely, provided that the parent corporation also liquidates completely in the same transaction.
Allows publishers to continue their customary tax accounting regarding prepublication expenditures without regard to an IRS regulation which requires such expenditures to be capitalized and depreciated.
Provides that amounts received as contributions in aid of construction by a water or sewage disposal utitity which are used for qualified expenditures and which are not included in the rate base for rate making purposes by the regulatory body having rate-making jurisdiction over a utility will be treated as nontaxable contributions to the capital of the utility.
Prohibits the State or local governments from imposing any tax with respect to the generation of electricity for transmission in interstate commerce if the tax is discriminatory against out-of-state manufacturers, producers, wholesalers, retailers, or consumers of such electricity.
Permits taxpayers to elect to treat specified expenditures for the removal of architectural and transportation barriers as deductible expenses instead of capitalizing them.
Requires publication of statistics on the tax liability of people with high total incomes.
Allows an amortization deduction based on a period of 60 months for any certified historic structure. Prohibits such amortization deduction for any amount expended for the demolition of a certified historic structure.
Extends the period of time during which the one-third reduction in Supplemental Security Income benefits may be suspended for individuals displaced as a result of a major disaster.
Prohibits countries which aid or abet any individual or group which has committed an act of international terrorism from being designated as a beneficiary developing country.
Extends the carryover period for Cuban expropriation losses.
Grants to taxpayers the option to treat outdoor advertising displays as real property under specified circumstances.
Revises the excise tax system on large cigars to an ad valorem tax of 8 1/2 percent of the wholesale price.
Treats as ordinary income the gains from the sales or depreciable property between two corporations that are controlled by the same individual and his family.
Extends through 1979 the exclusion for amounts received as scholarships under the Armed Forces Health Professions Scholarship Program.
Requires current taxation of gains realized by investors who transfer appreciated stocks or securities to an exchange fund operated as a partnership.
Revises the provisions governing subchapter S corporations to permit a corporation to distribute previously taxed income to the extent its distributions exceed its taxable income even though its current earnings and profits exceed its taxable income without causing such distributions to be taxable to the shareholders and not reducing the earnings and profits of the corporation.
Excludes from gross income disability payments received by U.S. Government employees on account of personal injuries occurring outside the United States as a result of a terrorist attack.
Provides that U.S. Government publications which are received by any taxpayer from the Government without charge are no longer to be treated as a capital asset in the hands of the taxpayer.
Denies tax-exempt status to organizations where a substantial part of the activities of such organization consists of attempting to influence legislation and such organization normally makes lobbying expenditures in excess of the lobbying ceiling amount or makes grass roots expenditures in excess of the grass roots ceiling amount for such organization.
Provides that amounts of indebtedness for taxes or special assessments by State or local governmental units and secured by a lien on property are not acquisition indebtedness until the amounts become due and the organization has had an opportunity to pay them.
Extends the self-dealing transition rules for private foundations through January 1, 1977.
Lowers the amount which a private operating foundation must spend on its exempt functions from two-thirds of its minimum investment return to a flat three percent of the average value of its assets which are not used in the active conduct of its charitable activities.
Directs the Joint Committee on Internal Revenue Taxation to make a study of the cost effectiveness of different kinds of tax incentives, including the use of tax cuts for economic stimulus.
Excludes from gross income amounts contributed by an employer under a qualified group legal services plan for the benefit of the employee, his spouse, or his dependents.
Adds the performance of clinical and other specified services to the types of services that can be performed on a cooperative basis by tax-exempt hospitals.
Allows a corporation an income tax deduction for up to one-half of the appreciation on various types of ordinary income property contributed to a public charity or a private operating foundation.
Reaffirms Congressional intent with respect to employees stock ownership plans and expresses concern that administrative rules and regulations may frustrate Congressional intent.
Includes as a tax-exempt organization, organizations which foster national or international amateur sports competition.
Exempts the Pension Benefit Guaranty Corporation from all Federal taxation except social security and unemployment taxes.
Permits contributions to be made to an H.R. 10 plan on behalf of an owner-employee under annuity contracts despite the overall 25 percent limitation, if no other amounts are added to his account for the year and if the employee is not an active participant for the year in a defined benefit plan maintained by the employer or a related employer.
Provides that gain or loss attributable to the sale or exchange of, or loss attributable to failure to exercise, an option to buy or sell property shall be considered gain or loss from the sale or exchange of property which has the same character as the property to which the option relates has in the hands of the taxpayer.
Revises the definition of taxable income for a regulated investment company. Provides that a regulated investment company shall be qualified to pay exempt-interest dividends if at the end of each quarter of its taxable year at least 50 percent of the total assets of such company consists of specified obligations.
Revises the support test for dependent children of divorced parents to require the providing of $1,200 for each child in determining whether or not the taxpayer may claim a dependent exemption for such child.
Provides that no gain or loss shall be recognized if real property is involuntarily converted whether or not any replacement property purchased by the taxpayer is property similar or related in service or use to the property converted.
Provides that in the sale of residence by an elderly person, gain shall be recognized on the adjusted sales price in excess of $35,000.
Provides that stock owned jointly by husband and wife in a Subchapter S corporation and now held by the estates of one or more of the spouses shall be treated as owned by one shareholder. Broadens the classes of permissable shareholders to include certain trusts.
Permits taxpayers who sell livestock in excess of the amount sold pursuant to normal business practices to defer the gain realized on such excess sales until the following taxable year.
Allows a deduction for a contribution to an individual retirement account (IRA) to persons who would be eligible for an IRA but for membership in a volunteer fire department or in a governmental plan for volunteer firemen.