Summary: H.R.81 — 97th Congress (1981-1982)All Information (Except Text)

There is one summary for H.R.81. Bill summaries are authored by CRS.

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Introduced in House (01/05/1981)

Omnibus Tax Reform and Industry Tax Assistance Act of 1981 - Title I: Amendments Related to Business - Amends the Internal Revenue Code to permit a taxpayer engaged in a trade or business a nonrefundable income tax credit equal to 25 percent of the cash contributions made by such taxpayer to a reserve fund established to finance basic research in the scientific or engineering fields. Limits the total amount of such credit to five percent of the taxable business income of the taxpayer for the taxable year. Exempts such reserve fund from income taxation. Allows an income tax deduction for the basic research expenses paid out of the reserve fund during the taxable year.

Specifies that research financed pursuant to this Act shall be performed by an institution of higher education.

Allows a nonrefundable income tax credit of 25 percent of the qualified research and experimental expenditures paid or incurred by a taxpayer in carrying on a trade or business. Defines "qualified research and experimental expenditures" as those business-related expenditures which are currently deductible under provisions of the Internal Revenue Code. Limits the scope of such expenditures to technological research designed to develop or improve products or services. Excludes expenditures for research in the social sciences or humanities or for government-funded research.

Limits the amount of expenditures eligible for the credit to those which exceed the annual average of such expenditures for the immediately preceding three years. Requires taxpayers under common control to aggregate such expenditures for purposes of computing the credit. Sets forth rules for adjusting such expenditure amounts when there is a change in business ownership. Provides for a three-year carryback and seven-year carryover of unused credits.

Provides for a system of simplified cost recovery as an alternative method of computing depreciation on all tangible personal property, except public utility property. Assigns the depreciable basis of all such property to one of four recovery periods, representing either two, four, seven or ten years. Specifies that such property shall be placed in a recovery period which is at least 40 percent shorter than its comparable useful life under the Asset Depreciation Range system (ADR) presently utilized under current Treasury Regulations, except that no recovery period shall be shorter than two years.

Permits a taxpayer, under the simplified cost recovery system, to elect one of three declining balance methods (200 percent, 150 percent, or 100 percent) in computing allowable depreciation deductions.

Excludes from eligibility for recovery cost depreciation treatment the following types of property: (1) livestock; (2) amortization property; (3) property depreciable under certain alternative methods of depreciation; (4) public utility property; (5) oil or gas fired boilers; and (6) property used predominantly outside the United States.

Provides for the deferral of gain or loss realized on the disposition of recovery cost property.

Increases the permissible variance for assigned useful lives of public utility property under the Asset Depreciation Range system from 20 to 30 percent for utility property.

Increases the rate of investment tax credit for depreciable property which has a useful life of between two and seven years.

Permits a taxpayer to elect to expense (i.e. currently deduct) up to $25,000 of the costs of new or used tangible personal property used in the taxpayer's business during a taxable year in lieu of current provisions permitting additional first year depreciation.

Revises the treatment of progress expenditure property with respect to the investment tax credit.

Provides for the nonrecognition of gain from the sale or exchange of qualified new business stock, but only to the extent that such gain does not exceed the cost of qualified new business stock purchased by the taxpayer within one year of the date of the original sale. Defines "qualified new business stock" for the purposes of this Act. Reduces the basis of such stock by the amount of gain which is not recognized.

Title II: Amendments Related to Individuals - Revises requirements for the tax exclusion of earned income of Americans working abroad. Permits such exclusion for individuals working in specified developing countries and in other foreign countries if such individuals perform charitable, export-related, or natural resource-related services. Reduces from 17 to 11 months the residency requirement in a foreign country for such tax exclusion. Waives such requirement if the Secretary of the Treasury determines that the taxpayer would otherwise have met the 11 month residency requirement but for the occurrence of civil unrest, war, or other adverse conditions precluding the normal conduct of business. Reduces from 17 to 11 months the residency requirement with respect to the tax treatment of housing costs of such taxpayers. Allows married couples filing a joint tax return an income tax deduction from gross income equal to ten percent of the lesser of $30,000 or the earned income of the spouse with the lower income.

Increases to $500 ($1,000 in the case of a joint return) the amount of interest and dividend income which may be excluded from gross income. Amends the Crude Oil Windfall Profit Tax Act of 1980 to repeal the termination date for such exclusion.

Allows individuals who are saving for their first home a nonrefundable income tax credit for cash contributions made during the taxable year to an individual housing account. Limits the amount of such credit to $2500 for any taxable year and $10,000 during a lifetime.

Sets forth requirements for the establishment of an individual housing account. Imposes penalties for distributions made from an individual housing account which are not used in connection with the purchase of a principal residence.

Exempts interest earned on an individual housing account from income taxation. Requires the trustee of an individual housing account to make such reports regarding the maintenance of an individual housing account as the Secretary of the Treasury may require. Prohibits contributions to an individual housing account in excess of prescribed limits and imposes a tax on such excess contributions.

Title III: Payroll-Based ESOP Credit - Permits an employer an income tax credit equal to the lesser of the value of securities contributed to an ESOP, or a specified percentage in 1981, 1982, and 1983 of compensation paid to employees who purchase employer stock pursuant to a qualified employee stock ownership plan. Specifies that such credit shall terminate after 1984.

Title IV: Development of Legislation for Reducing Inflation Through Tax Incentives - Expresses the sense of the House of Representatives that the Committee on Ways and Means should study and consider legislation to control inflation by providing certain tax benefits.

Title V: Study of Foreign Capital Formation Approaches Used by Business - Directs the Joint Committee on Taxation to study and report to specified congressional committees the approaches used by foreign businesses to acquire capital.