L5. 1%. :8/23 MB 30217 NW0 LO N G E R PRO P E RTY OF 0 LIN ‘L! 13 RA RY Washington University ‘ flu’ -6-’ W» «‘|' up ‘;.«".. F-‘ "‘ -:- ' ~‘ Q .5 " .35‘. .‘ 3"?-:.\. ':>:v"*"-id-1 g Q K ._ 4. .f\ ‘x_‘..;.,. :3 _.,. -4 E‘ V) ,1 v: . V, ‘V: ,3 1‘ _.~‘ “ "5’ ~L..-2' ' *. . . L: M1111 Brlef Novmsae L E R A E E 55 yr- _ V SST; §m’©U§§3_, MQ_ CONGRESSIONAL RESEARCH SERVICE ‘L"°Bm“'F % IImMHmIflB[mj@ILi1f§,@@i1[j@g@flijyfii‘mInu @ SIGNIFICANT FEDERAL TAX LEGISLATION OF THE CURRENT CONGRESS MINI BRIEF NUMBER MB80217 AUTHOR: Talley, Louis Alan Economics Division THE LIBRARY 0? CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE OBIGINATED gggggggg DATE UPDATED gzglzggg FOR ADDITIONAL INFORMATION CALL 287-5700 0718 CRS- 1 ISSUE DEFINITION HB80217 UPDATE-07/17/80 This mini brief provides an overview of the significant tax legislation of the current Congress by supplying a general synopsis of the key provisions of each of the significant acts and the projected overall revenue effect of each act. (1) (2) (3) W) (5) (5) This nini brief supplements CR5 Report No. 79—232E, Le9i§le§;9n;-12§Q:12§2l and CR5 Report No. 79-2073. The brief covers the following pieces of enacted legislation: Distilled Spirits Tax Revision Act of 1979 Prohibition of Issuance of Fringe Benefit Regulations Business Expenses of State Legislation; Social Services and Related Amendments Technical Corrections Act of 1979 Crude Oil Windfall Profits Act of Airport and Airway Trust Fund. 1980. gggiglgtionl 1970-197g: CRS- 2 MB80217 UPDATE-07/17/80 DISTILLED SPIRITS TAX REVISION ACT OF 1979; TRADE AGREEMENTS ACT OF 1979 96-39 July 26, 1979 Repeals (1) the wine-gallon method for determining the excise tax on distilled spirits; (2) the rectification taxes on suchyspirits; and (3) the occupational taxes on rectifiers. Revises method and tile for paying such tax. Requires all operations of distillers, warehousemen, or processors be conducted on bonded premises by qualified persons. Revises procedure for tax refunds for loss of distilled spirits. Provides for the use of the internal revenue standard for assessing duties on distilled spirits imports and revises the rates of duty to reflect that change. Authorizes the President, after reviewing and submitting to Congress a report on foreign barriers to U.S. exports of alcoholic beverages, to proclaim a lower rate of duty on proof gallon basis upon receiving adequate reciprocal trade concessions. Permits the transfer of specified liquor products between bonded warehouses. Numerous changes to trade agreements. Revenue Effect : A reduction in excise tax collections and customs duties is expected to reduce budget receipts by $83 million in FY80, $1u5 million in FY81, $205 million in FY82, $108 million in FY83, and $108 million in FYBH. Act Title Public Law Nunber Date of Enactment Primary Provisions Act Title Public Law Number Date of Enactment Primary Provisions Revenue Effect CRS- 3 MB80217 UPDATE-07/17/80 PROHIBITION OF ISSUANCE OF FRINGE BENEFIT REGGLATIONS 96-167 December 29, 1979 Prohibits the issuance of regulations on fringe benefits through Ray 31, 1981. Extends, through May 31, 1981, the present moratorium with respect to the deductibility of commuting or transportation expenses. Provides an extension until January 1, 1981, the date until which a State legislator may qualify for the income tax deduction for living expenses incurred while engaged in legislative business away from his home district. Authorizes payment of interest to an individual whose property is wrongfully seized by the Internal Revenue Service. Repeals the requirement that an individual who transfers property with a fair market value: in excess of $50,000 to a tax-exempt organization must file an informational return detailing such transactions. Conforms due dates for gift tax with income tax returns. Provides an automatic extension of time for filing gift tax returns when an extension for filing the donor's income tax return is granted. Excludes for one year gross income received by. participants in the Uniformed Services Health Professions Scholarship program and National Research Service Awards. Extends until December 31, 1982, the deduction: up to $25,000 annually in capital cost for the removal of architectural and transportation barriers to the handicapped and elderly. Prohibits the issuance of regulation regarding the employment status of any individual for purposes of the employment tax. Extends the provisions of the Revenue Act of 1978 setting forth criteria for determining whether individuals are self—employed. Defers for two years the effective date of the provisions under the Tax Reform Act of 1976 relating to special limitations on net operating loss carryovers. Requires information in connection with certain options. The provision concerning State legislators’ away-from-home travel expenses will reduce budget receipts by $8 million in FY80 and by $2 million in FY81. other provisions have no effect on budget receipts. cns- u HB80217 UPDATE—07/17/80 Kct Title BUSINESS EXPENSES OF STATE LEGISLATORS; SOCIAL SERVICES AND RELATED AMENDMENTS 96-178 January 2, 1980 Extends for one year the provisions of law relating to the business expenses of State legislators. 0 Provides continuing authority for a 75% Federal matching to families not on welfare in assisting them to obtain child support payments from absent parents for the periodg Oct. 1, 1978, through Mar. 31, 1980. Changes both the Internal Revenue Code and Title XX of the Social Security Act to coordinate the targeted jobs credit and funding provisions of Title XX to reimburse the costs of hiring welfare recipients in child care jobs. Establishesi the maximum per-recipient annual combined tax credit and Title IX reimbursement at $6,000, based on full amount of wages paid,: and makes such credit available for full- and part-time employment. Makes the reimbursement provisions applicable to the period between Oct. 1, 1979, and Mar. 31, 1980, and the tax credit applicable to taxable years beginning after Dec. 31, 1978, but before Jan. 1, 1980. Grants authority, for the period between 1 Oct. 1, 1978, and Har. 31, 1980, to continue use of the provisions of the Social Securitv Act relating to Title XX matching funds for the treatment of alcoholics and drug addicts. Revenue Effect : The extension of the State legislators provision will reduce budget receipts by $2.7 million in FY79. other provisions were 11 ot estimated . Public Law Number Date of Enactment Primary Provisions Act Title Public Law Number Date of Enactment Prim ary Provis ions CRS- 5 MB80217 UPDATE-07/17/80 TECHNICAL CORRECTIONS ACT OF 1979 96-222 April 1, 1980 Amends provisions of the Revenue Act of 1978, Energy Tax Act of 1978, Foreign Earned Income Act, and the Black Lung Benefit Act.w Permits employers to exclude from simplified employee pension plans (SEP) two classes of employees. Retroactively allows withdrawal of excess employer contributions to a SEP without imposition of the 10% penalty tax. Provides that an employee who has attained agea 70 before the close of the tax year may deduct the employer's contribution if it is a SEP. Adoption of a broader aggregation rule for sEPs, and coordination rules for H.R. 10 plans and for tax-option corporation shareholder-employees and other plans. Exempts employer contributions to SEPs from FICA and FUTA taxes if believed that the employee can deduct employer contributions under the IRA rules applicable to SEPs. Bars employers from making integrated contributions to a SEP for a year in which the employer maintains an integrated pension, profit sharing, or stock bonus plan. ' Specifies a $10 penalty for failure to file or, furnish reports with respect to SEPs. Allows rollover treatment of lump-sum distributions paid to the surviving spouse of a deceased participant of a qualified retirement plan. Amends the transitional rule to allow rollover treatment concerning the 5-year participation requirement. Changes the names of tax-qualified employee stock ownership vehicles. Changes the vote pass through rules for ESOPs maintained by an employer that does not have a registration-type class of securities. Provides ESOP plan establishment must take place by the employer's income tax filing deadline. Provides for ESOP lump sum distributions in coordination with the estate tax deduction. Exempts all clubs dues from the limitation on business deductions for entertainment facility expense. Expands the denial of deductions for entertainment facility expenses for 1979-80 to include expenses for goods, services, and facilities to individuals who are not the taxpayer's employees. CRS- 6 HBBOZ17 UPDATE-O 7/17/so Confirms the permanency of the 10% investment tax credit. 1 Provides that the normalization rules on public utility property for the period to which the restored investment credit applies. Makes the noncorporate lessor provision on investment tax credit inoperative with respect to rehabilitation expenditures that qualify for investment tax credit under I.R.C. 46(e)(3). Allows both the energy investment tax credit and the regular investment tax credit to be available where rehabilitation expenditures also qualify as expenditures for energy property. Provides that pollution control equipment which is energy property and financed by tax-exempt industrial development bonds is to be eligible for an energy credit of 5%. Applies normal recapture rules to subsidized low-income housing on which 5-year amortization has been taken. Extends rules for cooperatives with respect to jobs credit and the WIN credit. Provides that the targeted jobs tax credit cover wages paid through 1981. Clarifies the transitional rule for fiscal year taxpayers in computing the jobs tax credit for 1978-79. many other provisions dealing with the WIN and jobs tax credit. Conforms the calculation of the 1978 alternative tax to reflect the increased capital gains deduction. Modifies the maximum tax transitional rule for capital gains. Clarifies the term "alternative minimum taxable income" and modifies the term regular tax. States that foreign taxes are not to be considered as itemized deductions when computing adjusted itemized deductions. nodifies the alternative itemized deductions of estates and trusts. Expands for purposes of the alternative minimum tax, types of charitable contributions made by an estate or trust that will be exempted from consideration as items of the adjusted itemized deductions preference. . Provides an election such that gifts made by a decedent during 1977 within 3 years of death will be included in the decedent's gross estate at the death-time value less the amount excluded under the annual exclusion. Clarifies that a lien on property subject to special-use valuation (i.e. farms) is transferred to the replacement property if the original property is involuntarily Revenue Effect cns- 7 nB8o217 UPDATE-07/17/80 converted and replaced. Changes the spousal material participation rules in farm or business property. Provides various changes for 0.5. citizens working out of the country. Items changed for individuals residing in hardship areas, deductions chargeable to excluded income and foreign living costs. Denies the earned income credit to Code Sec. 913 taxpayers. Treats the earned income credit as income for purposes of AFDC and SSI. Changes the effective date to June 3, 1979 for advance payments of the earned income credit. Gives the Treasury Department 90 days to act on a tentative refund application for amounts previously reported as income and held under claim of right. states that an unincorporated organization formed by dealers in securities for a short time to underwrite, sell, or distribute a particular issue may elect not to be treated for income tax purposes as partnership. Provides for commercial fishing vessel operators a direct payment or credit of 2 cents a gallon fuel and 6 cents a gallon oil excise taxes. Allows a refund of excise tax or credit to bus, manufacturers who purchased tax-paid tires or tubes. Hany other provisions. In a description of the bill as passed by the House it was stated that the revenue effects had been included in the various Acts this bill corrects. The Finance committee estimated a negligible net effect on budget receipts in FY80; will reduce budget receipts by less than $5 million in FY81 and FY82, and by less than $1 million in FY83, and have a negligible effect on budget receipts in FY84. Act Title Public Law Number Date of Enactment Primary Provisions cns- 3 MB80217 UPDATE-O7/17/80 CRUDE OIL HINDFALL PROFIT TAX ACT OF 1980 96-223 April 2, 1980 Imposes a windfall profit tax (known as an excise or severence tax) on crude oil which is domestically produced. Oil is divided into three tiers with tax rates set at 70% for tier one, 60% for tier two and 30% for tier three. The rates are ,reduced for independent producers on the first 1,000 barrels of oil a day. some exemptions provided with a phase-out of the tax starting by January 1991. Increases frrn 15 to 40% the tax credit for the first $10,000 of expenditures for residential solar, wind, and geothermal property. Extends through 1985 the refundable energy credit for solar or wind energy equipment to generate electricity or to provide heating. Provides at two sites jointly selected by the Treasury Department and DOE a 15% tax credit for ocean thermal equipment. Gives an 11% nonrefundable credit for qualifying hydroelectric facilities where the generating equipment has a capacity of less than 125 megawatts. A 10% energy tax credit was provided for cogeneration equipment not fueled by oil or gas. Defines two changes, a new category of property and standards for the Secretary of the Treasury to specify additional items of qualifying property to the existing 10% energy tax credit. Restores the investment tax credit and accelerated depreciation to boilers using petroleum coke and pitch. flakes coke and coke—gas equipment eligible for the 10% energy credit. Extends for three years the 10% energy investment credit for biomass and gasohol equipment. Gives a 10% credit for intercity buses for increases in seating capacity. Sets forth a rule where energy credits may be claimed for affirmative commitments after the credits expiration. Provides that for purposes of the energy investment credits, qualified investment is reduced to the extent qualified energy property is financed by government-su bs id iz ed , energy -rel ated financing or by tax-exempt industrial development bonds. Allows a $3 per barrel credit for production of specified alternative energy sources. Revenue Effect CRS- 9 MB80217 UPDATE-O7/17/80 Permits the use of tax-exempt industrial development bonds for solid waste disposal facilities and renewable energy property. Extends the exemption from the gasoline excise tax for gasohol through 1992. Provides appropriations to States for assistance to low-income families for heating and cooling costs. Repeals for estate taxes the carryover basis. Expands the tax exclusion for dividend income to include interest income and increases exclusion to $200 for individuals and $400 ‘for joint returns. Provides LIFCIinventory accounting rules. The windfall profit tax is expected to raise $3.1 billion, with various reductions of $57 million in FY80. In the following year $13.u billion will be raised with sseu million granted in reductions. The amounts continue to increase in the following years. Act Title Public Law Number Date of Enactnent Primary Provisions Revenue Effect CBS-10 5380217 AIRPORT AND AIRWAY TRUST FUND EXTENSION 0 F TAXES) 96-298 July 1, 1980 Provides a 3-month extension of the existing aviation excise taxes at present rates to provide Congress with time to complete consideration of the pending trust fund legislation. The revenues from the 3-month extension of the present aviation taxes, $111 million, are assumed in the FY80 budget resolution as approved by the Congress. (3 mourn uenamr-07/1 '1 I lO!'\ /uv