(On June 25, 1998, the Supreme Court ruled that the Line Item Veto Act (Public Law 104-130) is unconstitutional, thus restoring provisions that had been cancelled as summarized below.)
(On August 11, 1997, the President line-item-vetoed Sec. 968 and Sec. 1175. Sec. 968 would have provided for the nonrecognition of the gain on the sale of stock of a qualified domestic refiner or processor of agricultural or horticultural products to an eligible farmers' cooperative engaged in the marketing of agricultural or horticultural products. Sec. 1175 would have allowed, during calendar year 1998, a tax exemption for income earned in connection with the active conduct of foreign financial services businesses. The following revised digest of H.R. 2014 reflects the Act as signed into law, minus the line-item-vetoed provisions. For more information on the specific items vetoed, see the text of the conference report for H.R. 2014, H. Rept. 105-220, and the Presidential Cancellation Numbers 97-1 and 97-2)
TABLE OF CONTENTS:
Title I: Child Tax Credit
Title II: Education Incentives Expenses
Subtitle A: Tax Benefits Relating to Education Expenses
Subtitle B: Expanded Education Investment Savings
Opportunities
Subtitle C: Other Education Initiatives
Title III: Savings and Investment Incentives
Subtitle A: Retirement Savings
Subtitle B: Capital Gains
Title IV: Alternative Minimum Tax Reform
Title V: Estate, Gift, and Generation-Skipping Tax
Provisions
Subtitle A: Estate and Gift Tax Provisions
Subtitle B: Generation-Skipping Tax Provision
Title VI: Extensions
Title VII: Incentives for Revitalization of the District of
Columbia
Title VIII: Welfare-to-Work Incentives
Title IX: Miscellaneous Provisions
Subtitle A: Provisions Relating to Excise Taxes
Subtitle B: Revisions Relating Disasters
Subtitle C: Provisions Relating to Employment Taxes
Subtitle D: Provisions Relating to Small Businesses
Subtitle E: Brownfields
Subtitle F: Empowerment Zones, Enterprise Communities,
Brownfields, and Community Development Financial
Institutions
Subtitle G: Other Provisions
Subtitle H: Extension of Duty-Free Treatment Under
Generalized System of Preferences
Title X: Revenues
Subtitle A: Financial Products
Subtitle B: Corporate Organizations and Reorganizations
Subtitle C: Administrative Provisions
Subtitle D: Excise and Employment Tax Provisions
Subtitle E: Provisions Relating to Tax-Exempt Entities
Subtitle F: Foreign Provisions
Subtitle G: Partnership Provisions
Subtitle H: Pension Provisions
Subtitle I: Other Revenue Provisions
Title XI: Simplification and Other Foreign-Related
Provisions
Subtitle A: General Provisions
Subtitle B: Treatment of Controlled Foreign
Corporations
Subtitle C: Treatment of Passive Foreign Investment
Companies
Subtitle D: Repeal of Excise Tax on Transfers to
Foreign Entities
Subtitle E: Information Reporting
Subtitle F: Determination of Foreign or Domestic Status
of Partnerships
Subtitle G: Other Simplification Provisions
Subtitle H: Other Provisions
Title XII: Simplification Provisions Relating to Individuals
and Businesses
Subtitle A: Provisions Relating to Individuals
Subtitle B: Provisions Relating to Businesses Generally
Subtitle C: Simplification Relating to Electing Large
Partnerships
Subtitle D: Provisions Relating to Real Estate
Investment Trusts
Subtitle E: Provisions Relating to Regulated Investment
Companies
Subtitle F: Taxpayer Protections
Title XIII: Simplification Provisions Relating to Estate and
Gift Taxes
Title XIV: Simplification Provisions Relating to Excise
Taxes, Tax-Exempt Bonds, and Other Matters
Subtitle A: Excise Tax Simplification
Subtitle B: Tax-Exempt Bond Provisions
Subtitle C: Tax Court Procedures
Subtitle D: Other Provisions
Title XV: Pensions and Employee Benefits
Subtitle A: Simplification
Subtitle B: Other Provisions Relating to Pensions and
Employee Benefits
Subtitle C: Provisions Relating to Certain Health Acts
Subtitle D: Provisions Relating to Plan Amendments
Title XVI: Technical Amendments Related to Small Business
Job Protection Act of 1996 and Other Legislation
Title XVII: Identification of Limited Tax Benefits Subject
to Line Item Veto
Taxpayer Relief Act of 1997 - Title I: Child Tax Credit - Amends the Internal Revenue Code (IRC) to allow a tax credit of up to $500 dollars for each qualifying child of a taxpayer, beginning in taxable years starting after December 31, 1997.
Title II: Education Incentives - Subtitle A: Tax Benefits Relating to Education Expenses - Creates a credit equal to the sum of the: (1) Hope Scholarship Credit; plus (2) Lifetime learning Credit. Allows the Hope Credit for two years in an amount equal to up to: (1) 100 percent of the first $1,000 of qualified tuition and fees; plus (2) 50 percent above $1,000 up to the applicable limit (two times the dollar amount utilized in clause (1). Makes the Lifetime Learning Credit equal to 20 percent of up to $10,000 of annual qualified tuition and fees.
(Sec. 202) Permits a deduction of up to $2,500 for interest paid during the first five years interest is due on a qualified higher education loan. Makes a dependent ineligible for the deduction if a personal exemption is taken with respect to such dependent.
(Sec. 203) Waives the ten percent early withdrawal tax due on IRA distributions if the withdrawal is used to pay higher education expenses.
Subtitle B: Expanded Education Investment Savings Opportunities - Includes room and board in the definition of qualified higher education expenses with respect to qualified State tuition tax exemption programs. Makes additional modifications to the qualified State tuition program including, among other things, provisions concerning: (1) the definition of a family member; (2) estate and gift tax treatment; and (3) excess contributions.
(Sec. 213) Exempts an education individual retirement account (defined as a trust created exclusively to pay qualified higher education expenses) from taxation, subject to an exception relating to the imposition of tax on unrelated business income of charitable organizations.
Subtitle C: Other Education Initiatives - Extends, until May 31, 2000, the exclusion for employer-provided educational expenses.
(Sec. 222) Repeals the $150 million limit applicable to qualified 501(c)(3) (charitable organization) bonds, if 95 percent or more of the net proceeds are used to finance capital expenditures.
(Sec. 223) Increases the arbitrage rebate exception for public school capital expenditure bonds.
(Sec. 224) Sets forth a special rule for the donation of computer technology and equipment to elementary and secondary schools.
(Sec. 225) Revises provisions concerning the cancellation of certain student loans made by tax-exempt organizations.
(Sec. 226) Permits, in the case of an eligible taxpayer holding a qualified zone academy bond, a specified credit. Defines such a bond. Sets annual national bond limits of $400 million for 1998 and 1999, and, subject to an exception concerning carryovers, zero thereafter.
Title III: Savings and Investment Incentives - Subtitle A: Retirement Savings - Increases the income limits for active participants with respect to the IRA (Individual Retirement Account) deduction. Removes limitations on a spouse's participation.
(Sec. 302) Permits an individual to establish a Roth IRA which shall be treated in the same manner as an IRA. Prohibits deductions for contributions to such accounts. Sets forth distribution rules (including excluding qualified distributions from gross income).
(Sec. 303) Permits distributions without penalty for: (1) first home purchases.
(Sec. 304) Permits the investment of IRA assets in certain bullion.
Subtitle B: Capital Gains - Reduces the maximum capital gains rate for individuals from 28 to 20 percent.
(Sec. 312) Revises provisions concerning the one-time exclusion for the gain from the sale of a principal residence to, among other things:
(1) increase the exclusion to $250,000 ($500,000 for certain joint returns); (2) allow the exclusion once every two years; and (3) remove the age limitation.
(Sec. 313) Permits the nontaxable rollover of the gain from the sale of small business stock to another qualified small business stock, if done within 60 days of the sale date.
Title IV: Alternative Minimum Tax Reform - Provides, with respect to the alternative minimum tax, for: (1) exempting certain small corporations; (2) repealing separate depreciation lives for tangible property; and (3) permitting the use of the installment method of accounting.
Title V: Estate, Gift, and Generation-Skipping Tax Provisions - Subtitle A: Estate and Gift Tax Provisions - Increases, incrementally, the unified estate and gift tax credit to $1 million by the year 2006.
(Sec. 502) Provides, in general, for the exclusion from the estate tax of the first $1.3 million of the value of a qualified family owned business.
(Sec. 503) Modifies provisions concerning the four percent rate of interest on extended estate taxes.
(Sec. 504) Permits a lineal descendent to rent specially-valued farm or trade property without imposition of the additional estate tax.
(Sec. 505) Authorizes a U.S. Tax Court to make declaratory judgments concerning initial or continuing eligibility for the payment of an estate tax largely consisting of interests in a closely held business.
(Sec 506) Prohibits revaluing gifts for estate tax purposes after the expiration of the statute of limitations.
(Sec. 507) Provides that, for a qualified trust, any distribution shall be computed without regard to any undistributed net income.
(Sec. 508) Excludes from the estate tax a portion of land subject to a qualified conservation easement.
Subtitle B: Generation-Skipping Tax Provision - Extends the predeceased parent exception to transfers to collateral heirs, as specified.
Title VI: Extensions - Extends: (1) the research tax credit until June 30, 1998; (2) the special rule for contributions of stock (for which market quotations are readily available) to private foundations until June 30, 1998; (3) the work opportunity tax credit for nine months; and (4) permanently, the orphan drug credit.
Title VII: Incentives for the Revitalization of the District of Columbia - Provides, with respect to the District of Columbia, for: (1) the establishment of the District of Columbia Enterprise Zone; (2) tax-exempt economic development bonds for the DC Zone; (3) a zero percent capital gains rate for the sale or exchange of any DC Zone asset held for more than five years; and (4) a first-time homebuyer tax credit of up to $5,000.
Title VIII: Welfare-to-Work Incentives - Provides employers a specified tax credit on wages paid to long-term family assistance recipients for the first two years of their employment.
Title IX: Miscellaneous Provisions - Subtitle A: Provisions Relating to Excise Taxes - Provides for the transfer of a portion of the General Fund motor fuel excise tax to the Highway Trust Fund.
(Sec. 902) Repeals the diesel fuel tax applicable to diesel fuel used in recreational boats.
(Sec. 903) Revises provisions concerning the tax on recycled halon.
(Sec. 904) Provides for a uniform rate of taxation on vaccines.
(Sec. 905) Treats an operator of ten or more gasoline retail outlets as a wholesale distributor for refund purposes.
(Sec. 906) Provides an exception for electric and other clean-fuel vehicles from the ten percent luxury automobile tax.
(Sec. 907) Revises the rate of tax on certain special motor fuels (benzol, naphtha, and etc).
(Sec. 908) Provides for the tax treatment of certain hard cider derived from apples.
(Sec. 909) Directs the Secretary of the Treasury to conduct a study concerning the options for changing the collection point of the distilled spirits excise tax.
(Sec. 910) Adds provisions which regulate the use of semi-generic designations on wine labels.
Subtitle B: Revisions Relating to Disasters - Authorizes the Secretary of the Treasury to postpone, for up to 90 days, certain tax- related deadlines in the case of a taxpayer affected by a Presidentially declared disaster.
(Sec. 912) Permits the Secretary to prescribe regulations under which an appraisal for the purpose of obtaining a Federal loan as a result of such a disaster may be used to establish the amount of the disaster loss.
(Sec. 913) Provides special treatment for income from the sale of livestock sold or involuntarily converted because of drought or other weather related conditions.
(Sec. 914) Waives, with respect to qualified mortgage bond financing, specified requirements for residences located in disaster areas.
(Sec. 915) Requires that, for presidentially declared disaster areas, if the Secretary extends for any period the time for filing income tax returns and for paying income tax, the Secretary also abate for that period any underpayment interest.
Subtitle C: Provisions Relating to Employment Taxes - Sets forth standards to be used for determining the: (1) employment tax status of securities brokers; and (2) exemption from the self- employment tax for certain termination payments received by former insurance salesman.
Subtitle D: Provisions Relating to Small Businesses - Waives any penalty through July 1, 1998, for a taxpayer first required to use the electronic fund transfer system after July 1, 1997, and who does not use such system.
(Sec. 932) Provides that a home office qualifies as the principal place of business if: (1) the office is the place of business used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer; and (2) there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business.
(Sec. 933) Permits the averaging of farm income, as specified.
(Sec. 934) Increases, incrementally, the deduction for the health insurance costs of self-employed individuals to 100 percent by the year 2007.
Subtitle E: Brownfields - Permits, as specified, a taxpayer to expense any qualified environmental remediation expenditure which is not chargeable to capital account. Terminates the provisions of this subtitle after December 31, 2000.
Subtitle F: Empowerment Zones, Enterprise Communities, Brownfields, and Community Development Financial Institutions - Increases from nine to eleven the number of areas which may be empowerment zones and from six to eight the number which may be in urban areas. Allows the aggregate population of all zones in urban areas to be no more than 1,000,000 (an increase of 250,000).
(Sec. 952) Permits, in addition to the areas permitted above, the designation of an additional 20 nominated areas as empowerment zones, subject to the availability of eligible nominated areas.
(Sec. 953) Makes the volume cap inapplicable to enterprise zone facility bonds with respect to the empowerment zones designated in Sec.
952. Places limits on the aggregate amount of such bonds.
(Sec. 954) Sets forth special eligibility criteria for Alaska and Hawaii.
(Sec. 955) Modifies, for all empowerment zones and enterprise communities: (1) enterprise zone facility bond rules; and (2) the definition of enterprise zone business.
Subtitle G: Other Provisions - States that a method of determining inventories shall not be deemed not to clearly reflect income solely because it utilizes estimates of inventory shrinkage that are confirmed by a physical count only after the last day of the taxable year, subject to conditions.
(Sec. 962) Includes liability to pay workers' compensation within the definition of personal injury liability assignments (thus, making amounts received for agreeing to such liability assignment eligible for exclusion from gross income).
(Sec. 963)Provides for the tax-exempt status of any organization created by State law which is organized and operated exclusively to provide workmen's compensation.
(Sec. 964) Excepts an electing 1987 partnership which chooses to be subjected to a specified additional tax from the general rule that a publicly traded partnership be treated as a corporation.
(Sec. 965) Excludes certain sponsorship payments received by a tax-exempt organization from unrelated taxable income.
(Sec. 966) Permits timeshare associations to be taxed under provisions provided for the taxation of other homeowners associations.
(Sec. 967) Revises provisions concerning the advance refunding of certain Virgin Island bonds.
(Sec. 969) Increases the business meals deduction for certain individuals subject to the hours of service limitations of the Department of Transportation.
(Sec. 970) Revises provisions concerning: (1) the de minimis fringe benefit rules concerning no-charge employee meals; (2) rules for certain clean-fuel passenger vehicles; and (3) the temporary suspension of the taxable income limit on percentage depletion for marginal income.
(Sec. 973) Increases, for purposes of computing the charitable deduction for the use of a passenger automobile, the standard mileage rate.
(Sec. 974) Permits cooperative hospital service organizations to purchase patron accounts receivable on a recourse basis and remain tax-exempt.
(Sec. 975) Permits a State or local government employee to deduct expenses incurred in connection with such employment.
(Sec. 976) Directs the Secretary of the Treasury to provide for a demonstration project assessing the feasibility and desirability of expanding combined Federal and State tax reporting.
(Sec. 977) Permits the National Railroad Passenger Corporation (AMTRAK), if it agrees to use refunds solely to finance qualified expenses and to make specified payments to non-AMTRAK States, to be treated as having paid specified taxes.
Subtitle H: Extension of Duty-Free Treatment Under Generalized System of Preferences - Amends the Trade Act of 1974 to extend the Generalized System of Preferences through June 30, 1998.
Title X: Revenues - Subtitle A: Financial Products - Provides that if there is a constructive sale of an appreciated financial position: (1) a taxpayer shall recognize gain as if such position were sold for its fair market value on the date of the constructive sale; and (2) for purposes of the treatment of gains and losses for periods after the constructive sale, proper adjustment shall be made in the amount of any gain or loss subsequently realized with respect to such position for any gain taken into account by reason of the above and the holding period of such position shall be determined as if such position were originally acquired on the date of such constructive sale.
(Sec. 1002) Modifies the definition of an investment company for purposes of determining whether a gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock and immediately such person or persons controls such corporation.
(Sec. 1003) Extends to all property (currently, only personal property) specified provisions concerning gains or losses from certain cancellations or other terminations of rights or obligations which are capital assets.
(Sec. 1004) Set forth provisions concerning: (1) original issue discount where pooled debt obligations are subject to acceleration; and (2) the denial of interest deductions on certain debt instruments.
Subtitle B: Corporate Organizations and Reorganizations - Revises provisions concerning a corporate shareholder's basis in stock being reduced by the nontaxed portion of extraordinary dividends received to provide that if the nontaxed portion of such dividends exceeds such basis, such excess shall be treated as gain for the sale or exchange of such stock for the taxable year in which the extraordinary dividend is received.
(Sec. 1012) Revises rules for: (1) distributions of stock and securities of a controlled corporation; (2) redemptions of stock through the use of related corporations; (3) the treatment of certain preferred stock as boot; and (4) the holding period applicable to the dividends received deduction.
Subtitle C: Administrative Provisions - Sets forth provisions concerning: (1) the reporting of payments to attorneys; (2) the reporting of payments made by Federal agencies to corporations; (3) extending the Department of Veterans Affairs disclosure provision; (4) a continuous levy, levy exemptions, and levy disclosure; and (5) requiring consistent reporting of the return of a beneficiary's estate or trust return and the return of the estate or trust.
Subtitle D: Excise and Employment Tax Provisions - Extends, for ten years, the Airport and Airway Trust Fund taxes.
(Sec. 1032) Provides for the taxation of kerosene at the diesel fuel rate.
(Sec. 1033) Restores, until April 1, 2005, the Leaking Underground Storage Tank Trust Fund excise tax.
(Sec. 1034) Applies the three percent communications tax to long- distance prepaid telephone cards.
(Sec. 1035) Extends the 6.2 unemployment tax rate through calendar 2007 (currently, it applies through calendar year 1998) and applies the 6.0 unemployment tax rate to calendar year 2008 and all following years.
Subtitle E: Provisions Relating to Tax-Exempt Entities - Modifies provisions concerning interest, annuities, royalties, and rents received by a tax-exempt organization from a subsidiary and the unrelated business income tax to define the term "control" of a subsidiary to mean ownership of more than 50 percent.
(Sec. 1042) Provides for the tax treatment of certain tax-exempt organizations which provide commercial-type insurance.
Subtitle F: Foreign Provisions - Treats as foreign personal holding company income: (1) income from notional principal contracts; and (2) payments in lieu of dividends. Provides, for dealers, for an exception from certain foreign personal holding company income provisions.
(Sec. 1052) Provides, for purposes of like-kind exchanges, that personal property used predominantly within the United States and personal property used predominantly outside the United States are not property of a like kind.
(Sec. 1053) Establishes minimum holding periods for stock dividends in order to qualify for foreign tax credits.
(Sec. 1054) Denies tax treaty benefits for payments made through certain hybrid entities.
(Sec. 1055) Prohibits the reduction of interest on underpayments by foreign tax credit carrybacks.
(Sec. 1056) Sets forth provisions concerning: (1) the period of limitations on a claim for a credit or refund attributable to a foreign tax carryforward; and (2) the repeal of the exception concerning the use of foreign tax credits for purposes of the alternative minimum tax.
Subtitle G: Partnership Provisions - Modifies basis allocation rules upon distribution of partnership property.
(Sec. 1062) Eliminates the requirement that inventory must have substantially appreciated in value to cause ordinary income with respect to rules concerning sales and exchanges of partnership interests.
Subtitle H: Pension Provisions - Increases from $3,500 to $5,000 the nonforfeitable pension accrued benefit which is distributable without the consent of the participant.
(Sec. 1072) Sets forth provisions which: (1) include a parking benefit in income only if an employee chooses a cash benefit instead of parking; (2) repeal the excess distribution and excess retirement accumulation tax; (3) increase the tax on prohibited pension transactions by five percent; and (4) revise the basis recovery rules for annuities received over more than one life.
Subtitle I: Other Revenue Provisions - Prohibits a family farm establishing a suspense account when required to use the accrual method of accounting.
(Sec. 1082) Limits the net operating loss carryback period to two years and extends the net operating loss carryforward period to 20 years.
(Sec. 1083) Modifies the taxable years to which unused credits may be carried.
(Sec. 1084) Prohibits, with respect to life insurance, a deduction for that portion of the taxpayer's interest expense which is allocable to unborrowed policy cash values, subject to exceptions.
(Sec. 1085) Restricts the earned income credit for taxpayers who improperly claimed such credit in a prior year.
(Sec. 1086) Permits the income forecast method of depreciation to be used only for film and video tape, copyrights, books, patents, and other property specified in regulations.
(Sec. 1087) Sets forth provisions which: (1) require that involuntarily converted property be replaced with property acquired from an unrelated person in certain cases; (2) repeal the exception permitting the use of the installment method of accounting for certain sales by manufacturers to dealers; (3) revise the treatment of charitable remainder trusts with a greater than 50 percent annual payout; (4) concern coordinating enforcement efforts of the Internal Revenue Service and the Office of Child Support Enforcement of the Department of Health and Human Services; and (5) installment payments for failure to pay estimated tax.
Title XI: Simplification and Other Foreign-Related Provisions - Subtitle A: General Provisions - Exempts from the foreign tax credit limitation certain individuals whose entire gross income from sources outside the United States consists of qualified passive income and whose amount of creditable foreign taxes paid does not exceed $300.
(Sec. 1102) Revises the method of translating foreign income taxes into dollars by providing, in general, for the use of the average exchange rate for the taxable year.
Subtitle B: Treatment of Controlled Foreign Corporations - Provides, with respect to controlled a foreign corporation, for: (1) the treatment of gain on certain stock sales by controlled foreign corporations as dividends; (2) regulations concerning basis adjustments of stock in controlled foreign corporation; and (3) extending the application of the indirect foreign tax credit to taxes paid by certain lower-tier controlled foreign corporations.
Subtitle C: Treatment of Passive Foreign Investment Companies - Provides generally that certain U.S. shareholders of controlled foreign corporations will not be subject to passive foreign investment company inclusion.
(Sec. 1122) Allows, as specified, a mark-to-market election by a shareholder of a passive foreign investment company.
(Sec. 1123) Sets forth a method for determining assets of a passive foreign investment company.
Subtitle D: Repeal of Excise Tax on Transfers to Foreign Entities - Repeals Chapter 5 (Tax on Transfers to Avoid Income Tax) of the IRC. Provides for the recognition of gain on certain transfers to foreign trusts and estates.
Subtitle E: Information Reporting - Revises provisions concerning: (1) the return requirement for foreign partnership income; (2) information reporting for controlled foreign corporations; (3) returns as to interests in foreign partnerships; (4) notice of certain transfers to foreign corporations; (5) the statute of limitations applicable in the case of failure to notify the Secretary of certain transactions; and (6) increasing the filing threshold for returns as to organization or reorganization of foreign corporations and acquisitions of stock in such corporations.
Subtitle F: Determination of Foreign or Domestic Status of Partnerships - Revises the definition of "domestic" when applied to a corporation or partnership to permit the Secretary, by regulation, to provide an exception to such definition for a partnership.
Subtitle G: Other Simplification Provisions - Amends the Small Business Job Protection Act of 1996 to permit a trust in existence on August 20, 1996, and which was treated as a U.S. person on the day before enactment of such Act to elect to continue to be treated as a U.S. person notwithstanding the IRC definition of a U.S. person.
(Sec. 1162) Eliminates the stock and securities safe harbor requirement that an entity's principal office be outside the United States.
Subtitle H: Other Provisions - Provides that computer software is not excluded from the definition of export property under the foreign sales corporation provisions.
(Sec. 1172) Increases and provides an annual inflation adjustment for the dollar limitation on the exclusion from gross income of the foreign earned income of an individual.
(Sec. 1173) Excepts certain cash, securities, and obligations from the definition of U.S. property for purposes of the controlled foreign corporation (CFC) rules.
Title XII: Simplification Provisions Relating to Individuals and Businesses - Subtitle A: Provisions Relating to Individuals - Increases the: (1) standard deduction for a taxpayer with respect to whom a dependency exemption is allowed on another taxpayer's return; (2) the alternative minimum tax exemption for minors under the age of 14; and (3) estimated de minimis tax threshold.
(Sec. 1203) Revises the treatment of: (1) reimbursed expenses of rural mail carriers; (2) traveling expenses of certain Federal employees engaged in criminal investigations; and (3) the payment of taxes so as to permit payment by any commercially acceptable means (currently, only internal revenue stamps, checks, or money orders are accepted.).
Subtitle B: Provisions Relating to Businesses Generally - Permits a taxpayer to elect not to apply the look-back method for a long-term contract for de minimis (below 10 percent of taxable income or loss) amounts.
(Sec. 1213) Excludes from the gross income of a lessee any amount received in cash by a lessee from a lessor: (1) under a short-term lease of retail space; and (2) for the purpose of such lessee's constructing or improving long-term real property for use in the lessee's business.
Subtitle C: Simplification Relating to Electing Large Partnerships - Establishes special rules for large partnerships (100 or more partners) which: (1) take into account separately a partner's distributive share of specified items for purposes of determining the income tax of a partner; (2) compute the taxable income of a large partnership in the same manner as in the case of an individual, subject to stated exceptions; and (3) provide for the treatment of partnerships holding oil and gas properties.
(Sec. 1222) Creates an audit system for electing large partnerships which provides as a general rule that a partner of any electing large partnership shall, on the partner's return, treat each partnership item attributable to such partnership in a manner which is consistent with the treatment of such partnership item on the partnership return. Sets forth provisions concerning partnership adjustments which generally will flow through to partners for the year in which the adjustment takes effect.
(Sec. 1231) Authorizes the Secretary, with respect to an oversheltered return (a return which shows no taxable income and shows a net loss from partnership items), to send a notice of adjustment in specified situations.
(Sec. 1232) Provides, on the basis of a decision of the Secretary, that the partnership return shall determine the audit procedures to be followed.
(Sec. 1233) Sets forth provisions, with respect to partnerships, concerning: (1) the statute of limitations and untimely petition filing; (2) the exception for small partnerships (under the definition of partnership); (3) the period for assessing tax where a partner and the Secretary enter a settlement agreement but other partnership items remain in dispute; (4) the time for filing a request for administrative adjustment; (5) the innocent spouse defense in court proceedings; (6) partnership level penalties; (7) court jurisdiction; (8) premature petitions; (9) bonds in appeals from Tax Court decisions; and (10) closing the taxable partnership year with respect to a deceased partner.
Subtitle D: Provisions Relating to Real Estate Investment Trusts - Modifies provisions relating to qualification as, and the taxation of, a real estate investment trust, including: (1) rules relating to ownership determination; (2) tenant service income and tenant ownership; (3) repeal of the 30 percent gross income requirement; (4) earnings and profit rules; (5) income from hedges; (6) excess noncash income; and (7) shared appreciation mortgages.
Subtitle E: Provisions Relating to Regulated Investment Companies - Repeals, with respect to regulated investment companies, the 30 percent test.
Subtitle F: Taxpayer Protections - Provides for the waiver of certain penalties if a failure is shown to be due to reasonable cause and not willful neglect.
(Sec. 1282) Permits a taxpayer who was due a refund, but who initially failed to file a return and who received a deficiency notice during the third year after the return's due date, to obtain a refund.
(Sec. 1283) Repeals the requirement of the Secretary to disclose, upon request, if a prospective juror has been audited.
(Sec. 1284) Specifies, for purposes of the statute of limitations, that the term "return" means the taxpayer's return and not the return of any person form whom the taxpayer has received an item of income, gain, loss, deduction, or credit.
Title XIII: Simplification Provisions Relating to Estate and Gift Taxes - Provides that, under specified conditions, gifts to charities are not subject to gift tax filing requirements.
(Sec. 1302) Waives the right of recovery with respect to qualified terminable interest property only to the extent that the language in the decedent's will specifically indicates.
(Sec. 1303) Treats any trust created before enactment of the Revenue Reconciliation Act of 1990 as satisfying the withholding requirement if it requires all trustees to be U.S. citizens or corporations.
(Sec. 1304) Sets forth provisions concerning, among other things: (1) the treatment for estate tax purposes of short-term obligations held by nonresident aliens; (2) treating certain revocable trusts as part of the estate; (3) distributions during the first 65 days of the taxable year of the estate; (4) application of the separate share rules to estates; (5) treatment of an estate and a beneficiary as related for purposes of disallowance of losses; (6) treatment of a qualified funeral trust; (7) adjustments for certain gifts within three years of a decedent's death; and (8) the authority to waive the requirement that a qualified domestic trust have a U.S. trustee.
Title XIV: Simplification Provisions Relating to Excise Taxes, Tax-Exempt Bonds, and Other Matters - Subtitle A: Excise Tax Simplification - Increases the de minimis limit for aftermarket alterations for heavy trucks and luxury cars.
(Sec. 1411) Makes refunds available for imported bottled distilled spirits returned to distilled spirits plants.
(Sec. 1412) Permits records of exportation to be maintained by the exporter for purposes of cancelling or crediting bonds furnished when distilled spirits are removed from bonded premises.
(Sec. 1413) Permits distilled spirits plants to maintain records of their activities at locations other than the premises where the operations covered by the records are performed.
(Sec. 1414) Allows beer to be transferred without payment of tax to a distilled spirits plant to be used in the production of distilled spirits regardless of whether the brewery is contiguous to the distilled spirits plant.
(Sec. 1415) Repeals the requirement that wholesale liquor dealers post a sign outside their place of business indicating that they are wholesale liquor dealers.
(Sec. 1416) Repeals the requirement that wine returned to bonded premises be unmerchantable in order for the tax to be refunded to the proprietor of the bonded wine cellar to which the wine is delivered.
(Sec. 1417) Allows the use of ameliorating material (not in excess of 60 percent) in certain wines made exclusively from a fruit or berry with a natural fixed acid of 20 parts per thousand or more.
(Sec. 1418) Allows domestically-produced beer to be withdrawn from the place of production without payment of tax for the official or family use of representatives of foreign governments or public international organizations.
(Sec. 1419) Allows beer to be removed from a brewery without payment of tax for purposes of destruction.
(Sec. 1420) Permits a domestic exporter to recover the tax paid on the exported beer with specified proof.
(Sec. 1421) Provides for imported beer to be withdrawn from customs custody for transfer to a brewery without payment of tax.
(Sec. 1431) Expands the authority of the Secretary to waive the excise tax registration requirement.
(Sec. 1432) Repeals certain provisions concerning the: (1) tax on heavy trucks and trailers sold at retail; (2) tax on the removal of hard minerals from the deep seabed; and (3) excise tax on the sale or use by a manufacturer or importer of certain ozone depleting chemicals.
(Sec. 1433) Revises provisions concerning: (1) the excise taxes on arrows; (2) the excise tax on skydiving flights; and (3) refunding certain aviation fuel taxes paid by a registered producer.
Subtitle B: Tax-Exempt Bond Provisions - Repeals the $100,000 limitation on unspent proceeds under the one-year exception from arbitrage rebate requirements.
(Sec. 1442) Exempts earnings on bond proceeds invested in bona fide debt service funds from the arbitrage rebate requirements and the penalty requirement of the 24-month exception, if the spending requirements of that exception are otherwise satisfied.
(Sec. 1443) Repeals: (1) the debt service-based limitation on investment in certain nonpurpose investments; and (2) certain expired provisions.
Subtitle C: Tax Court Procedures - Provides that an order to refund an overpayment is appealable in the same manner as a decision of the Tax Court. Declares that the Tax Court shall not have jurisdiction over the validity or merits of the credits or offsets that reduce or eliminate the refund to which the taxpayer was otherwise entitled.
(Sec. 1452) Provides for a taxpayer to file a motion, rather than a petition, to seek, in the Tax Court, a redemption of interest.
(Sec. 1453) Applies to estates and trusts the net worth limitations currently applicable to individuals.
(Sec. 1454) Permits the Tax Court to have jurisdiction over certain employment status disputes.
Subtitle D: Other Provisions - Extends the due date of the first quarter estimated tax payment of a private foundation.
(Sec. 1462) Permits any Commonwealth to enter into an agreement with the Secretary providing for income tax withholding.
(Sec. 1463) Revises provisions concerning the notice to a large corporation of a tax underpayment.
Title XV: Pensions and Employee Benefits - Subtitle A: Simplification - Treats matching contributions for self-employed individuals the same as matching contributions for employees.
(Sec. 1502) Amends the Employee Retirement Income Security Act of 1974 to: (1) permit a participant's benefit in a plan to be reduced in order to satisfy the participant's liability if an order or requirement to pay arises from a civil or criminal judgment in connection with the plan; and (2) eliminate certain filing requirements.
(Sec. 1504) Redefines includible compensation to: (1) include any elective deferral; and (2) certain amounts contributed by the employer at the employee's election which are not includible in the employee's gross income. (Sec. 1505) Exempts governmental plans from nondiscrimination and minimum participation rules.
(Sec. 1506) Sets forth provisions concerning: (1) rules relating to employee stock ownership plans of S corporations; (2) the ten percent tax on nondeductible contributions; and (3) minimum funding requirements for certain plans.
Subtitle B: Other Provisions Relating to Pensions and Employee Benefits - Increases the full funding limit for defined benefit pension plans.
(Sec. 1522) Excludes contributions from a self-employed minister to a church plan on the same basis as if such minister were a church employee.
(Sec. 1523) Repeals application of the unrelated business income tax for an employee stock ownership plan that is an S corporation shareholder.
(Sec. 1524) Revises provisions under the Employee Retirement Income Security Act of 1974 with respect to the acquisition and holding of employer securities and real property by certain plans.
(Sec. 1525) Includes certain irrigation and drainage entities in the definition of rural cooperative plan.
(Sec. 1526) Sets forth special rules relating to the portability of permissive service credit under governmental plans.
(Sec. 1527) Modifies special limitations applicable to qualified police and firefighters.
(Sec. 1528) Excludes from gross income any amount paid as a survivor annuity on the account of the death of a public safety officer killed in the line of duty.
(Sec. 1529) Treats heart disease and hypertension as personal injuries or sickness for purposes of excluding from gross income the disability benefits received by former police officers or firefighters.
(Sec. 1530) Permits limited transfers of qualified employer securities by charitable remainder trusts.
Subtitle C: Provisions Relating to Certain Health Acts - Incorporates into the Internal Revenue Code provisions of the Newborns' and Mothers' Health Protection Act of 1996 and the Mental Health Parity Act of 1996 for group health plans.
(Sec. 1532) Sets forth an exception to the nondiscrimination requirement for certain church plans.
Subtitle D: Provisions Relating to Plan Amendments - Sets forth provisions which specify when changes to a pension plan or annuity contract must be made which reflect the amendments made by this Act.
Title XVI: Technical Amendments Related to Small Business Job Protection Act of 1996 and Other Legislation - States that, for purposes of applying the amendments made by any title of this Act other than this title, the provisions of this title shall be treated as having been enacted immediately before the provisions of such other titles.
(Sec. 1601) Sets forth, with respect to sections of the Small Business Job Protection Act of 1996 which amend the IRC, provisions concerning, among other things: (1) informational returns for those engaged in selling fish; (2) the definition of an electing small business trust; (3) the treatment of a wholly owned S corporation subsidiary; (4) the definition of unrelated trade or business for certain hospitals; (5) SIMPLE retirement plans; (6) the treatment of an employee participating in an Indian tribal government annuity; (7) definitions concerning financial asset securitization trusts; (8) definitions concerning State tuition plans; and (9) the year an adoption credit is allowed.
(Sec. 1602) Sets forth, with respect to sections of the Health Insurance Portability and Accountability Act of 1996 which amend the IRC, provisions concerning, among other things: (1) the tax on nonmedical withdrawals from a medical savings account; (2) the definition of a chronically ill individual for purposes of a long-term care insurance contract; (3) deductions for the health insurance costs of self-employed individuals; (4) reporting requirements concerning long-term care contracts; (5) consumer protection provisions for long- term care insurance contracts; and (6) rules concerning expatriation to avoid tax.
(Sec. 1603) Sets forth, with respect to sections of the Taxpayer Bill of Rights Act 2 which amend the IRC, provisions concerning, among other things: (1) abatement of first-tier taxes in certain cases; and (2) returns of exempt organizations.
(Sec. 1604) Sets forth other provisions which amend the IRC which are related to the: (1) Energy Policy Act of 1992; (2) Uruguay Round Agreements Act; (3) Omnibus Budget Reconciliation Act of 1993; (4) Tax Reform Act of 1986; and (5) Tax Reform Act of 1984.
Amends the Balanced Budget Act of 1997 to direct the Secretary of Health and Human Services to provide, either directly or through grants, for research into the prevention and cure of Type I diabetes. (Currently, the Secretary is directed to make grants for services for the prevention and treatment of type I diabetes in children.)
Title XVII: Identification of Limited Tax Benefits Subject to Line Item Veto - Lists the provisions of this Act that have limited tax benefits within the meaning of the Line Item Veto Act.