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1976/10/04 HR10612 Tax Reform Act of 1976 (6)
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12009637
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1976/10/04 HR10612 Tax Reform Act of 1976 (6)
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White House Records Office: Legislation Case Files
Legislation Case Files
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The original documents are located in Box 60, folder "10/4/76 HR10612 Tax Reform Act of
1976 (6)" of the White House Records Office: Legislation Case Files at the Gerald R. Ford
Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
Digitized from Box 60 of the White House Records Office Legislation Case Files at the Gerald R. Ford Presidential Library
H. R. 10612-201
actions brought under section 7428 of the Internal Revenue Code
of 1954".
(9) (A) Chapter 92 of title 28, United States Code, is amended
by adding at the end thereof the following new section:
"§ 1507. Jurisdiction for certain declaratory judgments
"The Court of Claims shall have jurisdiction to hear any suit for
and issue a declaratory judgment under section 7428 of the Internal
Revenue Code of 1954.
(B) The table of sections for such chapter is amended by add-
ing at the end thereof the following new item:
"1507. Jurisdiction for certain declaratory judgments."
(c) EFFECTIVE DATE.-The amendments made by this section shall
apply with respect to pleadings filed with the United States Tax
Court, the district court of the United States for the District of Colum-
bia, or the United States Court of Claims more than 6 months after the
date of the enactment of this Act but only with respect to determina-
tions (or requests for determinations) made after January 1, 1976.
SEC. 1307. LOBBYING BY PUBLIC CHARITIES.
(a) Loss OF EXEMPT STATUS.-
(1) Loss OF EXEMPT STATUS BECAUSE OF SUBSTANTIAL LOBBY-
ING.-Section 501 (relating to exemption from income tax) is
amended by redesignating subsection (h) as subsection (i) and by
inserting after subsection (g) the following new subsection:
(h) EXPENDITURES BY PUBLIC CHARITIES To INFLUENCE
LEGISLATION.-
(1) GENERAL RULE.-In the case of an organization to which
this subsection applies, exemption from taxation under subsection
(a) shall be denied because a substantial part of the activities of
such organization consists of carrying on propaganda, or other-
wise attempting, to influence legislation, but only if such organi-
zation normally-
'(A) makes lobbying expenditures in excess of the lobbying
ceiling amount for such organization for each taxable year, or
"(B) makes grass roots expenditures in excess of the grass
roots ceiling amount for such organization for each taxable
year.
(2) DEFINITIONS.-For purposes of this subsection-
(A) LOBBYING EXPENDITURES.-The term 'lobbying
expenditures' means expenditures for the purpose of influ-
encing legislation (as defined in section 4911 (d)).
(B) LOBBYING CEILING AMOUNT.-The lobbying ceiling
amount for any organization for any taxable year is 150 per-
cent of the lobbying nontaxable amount for such organiza-
tion for such taxable year, determined under section 4911.
"(C) GRASS ROOTS EXPENDITURES.-The term 'grass roots
expenditures' means expenditures for the purpose of influ-
encing legislation (as defined in section 4911 (d) without
regard to paragraph (1) (B) thereof).
" (D) GRASS ROOTS CEILING AMOUNT.-The grass roots ceiling
amount for any organization for any taxable year is 150 per-
cent of the grass roots nontaxable amount for such organiza-
tion for such taxable year, determined under section 4911.
(3) ORGANIZATIONS TO WHICH THIS SUBSECTION APPLIES.-This
subsection shall apply to any organization which has elected (in
such manner and at such time as the Secretary may prescribe)
to have the provisions of this subsection apply to such organiza-
H. R. 10612-202
tion and which, for the taxable year which includes the date the
election is made, is described in subsection (c) (3) and-
"(A) is described in paragraph (4), and
(B) is not a disqualified organization under paragraph
(5).
'(4) ORGANIZATIONS PERMITTED TO ELECT TO HAVE THIS SUB-
SECTION APPLY.-An organization is described in this paragraph if
it is described in-
"(A) section 170(b) (1) (A) (ii) (relating to educational
institutions),
"(B) section 170(b) (1) (A) (iii) (relating to hospitals and
medical research organizations),
"(C) section 170 (b) (1) (A) (iv) (relating to organizations
supporting government schools),
(D) section 170(b) (1) (A) (vi) (relating to organizations
publicly supported by charitable contributions),
'(E) section 509 (a) (2) (relating to organizations publicly
supported by admissions. sales, etc.), or
(F) section 509(a) (3) (relating to organizations sup-
porting certain types of public charities) except that for pur-
poses of this subparagraph, section 509(a) (3) shall be
applied without regard to the last sentence of section 509 (a).
'(5) DISQUALIFIED ORGANIZATIONS.-For purposes of paragraph
(3) an organization is a disqualified organization if it is-
(A) described in section 170(b) (1) (A) (i) (relating to
churches),
((B) an integrated auxiliary of a church or of a conven-
tion or association of churches. or
"(C) a member of an affiliated group of organizations
(within the meaning of section 4911 (f) (2)) if one or more
members of such group is described in subparagraph (A)
or (B).
"(6) YEARS FOR WHICH ELECTION IS EFFECTIVE.-An election
by an organization under this subsection shall be effective for all
taxable years of such organization which—
'(A) end after the date the election is made, and
(B) begin before the date the election is revoked by such
organization (under regulations prescribed by the Secretary).
"(7) No EFFECT ON CERTAIN ORGANIZATIONS.-With respect to
any organization for a taxable year for which—
(A) such organization is a disqualified organization
(within the meaning of paragraph (5) or
"(B) an election under this subsection is not in effect for
such organization,
nothing in this subsection or in section 4911 shall be construed
to affect the interpretation of the phrase, 'no substantial part of
the activities of which is carrying on propaganda, or otherwise
attempting, to influence legislation,' under subsection (c) (3).
"(8) AFFILIATED ORGANIZATIONS.
"For rules regarding affiliated organizations, see section 4911(f).".
(2) STATUS OF ORGANIZATION WHICH CEASES TO QUALIFY FOR
EXEMPTION UNDER SECTION 501 (C) (3) BECAUSE OF SUBSTANTIAL
LOBBYING.-Part I of subchapter F of chapter 1 (relating to gen-
eral rules as to exempt organizations) is amended by adding at the
end thereof the following new section:
H. R. 10612-203
"SEC. 504. STATUS AFTER ORGANIZATION CEASES TO QUALIFY FOR
EXEMPTION UNDER SECTION 501(c)(3) BECAUSE OF SUB-
STANTIAL LOBBYING.
"(a) GENERAL RULE.-An organization which-
(1) was exempt (or was determined by the Secretary to be
exempt) from taxation under section 501 (a) by reason of being
an organization described in section 501 (c) (3), and
(2) is not an organization described in section 501 (c) (3) by
reason of carrying on propaganda, or otherwise attempting, to
influence legislation,
shall not at any time thereafter be treated as an organization described
in section 501 (c) (4).
(b) REGULATIONS To PREVENT AVOIDANCE-The Secretary shall
prescribe such regulations as may be necessary or appropriate to pre-
vent the avoidance of subsection (a), including regulations relating to
a direct or indirect transfer of all or part of the assets of an organi-
zation to an organization controlled (directly or indirectly) by the
same person or persons who control the transferor organization.
(c) CHURCHES, Erc.-Subsection (a) shall not apply to any orga-
nization which is a disqualified organization within the meaning of
section 501(h) (5) (relating to churches, etc.) for the taxable year
immediately preceding the first taxable year for which such organiza-
tion is described in paragraph (2) of subsection (a).".
(3) RULES OF INTERPRETATION.-It is the intent of Congress that
enactment of this section is not to be regarded in any way as an
approval or disapproval of the decision of the Court of Appeals
for the Tenth Circuit in Christian Echoes National Ministry,
Inc. versus United States, 470 F.2d 849 (1972), or of the reason-
ing in any of the opinions leading to that decision.
(4) DISCLOSURE.-Section 6033(b) (relating to information
required to be furnished annually by certain exempt organiza-
tions) is amended by striking out "and" at the end of paragraph
(6), by striking out the period at the end of paragraph (7) and
inserting in lieu thereof and", and by adding at the end thereof
the following:
(8) in the case of an organization with respect to which an
election under section 501 (h) is effective for the taxable year, the
following amounts for such organization for such taxable year:
" (A) the lobbying expenditures (as defined in section 4911
(c) (1)),
(B) the lobbying nontaxable amount (as defined in sec-
tion 4911 (c) (2)),
(C) the grass roots expenditures (as defined in section
4911 (c) (3)), and
"(D) the grass roots nontaxable amount (as defined in sec-
tion 4911 (c) (4))
For purposes of paragraph (8), if section 4911 (f) applies to the orga-
nization for the taxable year, such organization shall furnish the
amounts with respect to the affiliated group as well as with respect to
such organization.".
(b) TAXES ON EXCESS EXPENDITURES To INFLUENCE LEGISLATION.-
Subtitle D (relating to miscellaneous excise taxes) is amended by
inserting before chapter 42 the following new chapter:
H. R. 10612-204
"CHAPTER 41-PUBLIC CHARITIES
"Sec. 4911. Tax on excess expenditures to influence legislation.
"SEC. 4911. TAX ON EXCESS EXPENDITURES TO INFLUENCE LEGISLA-
TION.
"(a) Tax IMPOSED.-
"(1) IN GENERAL-There is hereby imposed on the excess lobby-
ing expenditures of any organization to which this section applies
a tax equal to 25 percent of the amount of the excess lobbying
expenditures for the taxable year.
" (2) ORGANIZATIONS TO WHICH THIS SECTION APPLIES.-This
section applies to any organization with respect to which an elec-
tion under section 501 (h) (relating to lobbying expenditures by
public charities) is in effect for the taxable year.
" (b) EXCESS LOBBYING EXPENDITURES.-For purposes of this section,
the term 'excess lobbying expenditures' means, for a taxable year, the
greater of-
"(1) the amount by which the lobbying expenditures made by
the organization during the taxable year exceed the lobbying non-
taxable amount for such organization for such taxable year, or
"(2) the amount by which the grass roots expenditures made
by the organization during the taxable year exceed the grass roots
nontaxable amount for such organization for such taxable year.
"(c) DEFINITIONS:-For purposes of this section-
'(1) LOBBYING EXPENDITURES.-The term 'lobbying expendi-
tures' means expenditures for the purpose of influencing legisla-
tion (as defined in subsection (d)).
"(2) LOBBYING NONTAXABLE AMOUNT.-The lobbying nontaxable
amount for any organization for any taxable year is the lesser of
(A) $1,000,000 or (B) the amount determined under the follow-
ing table:
"If the proposed ex-
The lobbying nontaxable
penditures are-
amount is-
Not over $500,000
20 percent of the exempt purpose
expenditures.
Over $500,000 but not over $1,000,000
$100,000, plus 15 percent of the excess
of the exempt purpose expenditures
over $500,000.
Over $1,000,000 but not over $1,500,000
$175,000 plus 10 percent of the excess
of the exempt purpose expenditures
over $1,000,000.
Over $1,500,000
$225,000 plus 5 percent of the excess of
the exempt purpose expenditures over
$1,500,000.
"(3) GRASS ROOTS EXPENDITURES.-The term 'grass roots
expenditures' means expenditures for the purpose of influencing
legislation (as defined in subsection (d) without regard to para-
graph (1) (B) thereof).
"(4) GRASS ROOTS NONTAXABLE AMOUNT.-The grass roots non-
taxable amount for any organization for any taxable year is 25
percent of the lobbying nontaxable amount (determined under
paragraph (2)) for such organization for such taxable year.
"(d) INFLUENCING LEGISLATION.-
"(1) GENERAL RULE.-Except as otherwise provided in para-
graph (2), for purposes of this section, the term 'influencing leg-
islation' means-
"(A) any attempt to influence any legislation through an
attempt to affect the opinions of the general public or any
segment thereof, and
H. R. 10612-205
" (B) any attempt to influence any legislation through com-
munication with any member or employee of a legislative
body, or with any government official or employee who may
participate in the formulation of the legislation.
(2) EXCEPTIONS.-For purposes of this section, the term 'influ-
encing legislation', with respect to an organization, does not
include-
"(A) making available the results of nonpartisan analysis,
study, or research;
((B) providing of technical advice or assistance (where
such advice would otherwise constitute the influencing of leg-
islation) to a governmental body or to a committee or other
subdivision thereof in response to a written request by such
body or subdivision, as the case may be;
(C) appearances before, or communications to, any legis-
lative body with respect to a possible decision of such body
which might affect the existence of the organization, its pow-
ers and duties, tax-exempt status, or the deduction of con-
tributions to the organization;
"(D) communications between the organization and its
bona fide members with respect to legislation or proposed
legislation of direct interest to the organization and such
members, other than communications described in paragraph
(3) and
(E) any communication with a government official or
employee, other than—
(i) a communication with a member or employee of a
legislative body (where such communication would
otherwise constitute the influencing of legislation), or
'(ii) a communication the principal purpose of which
is to influence legislation.
'(3) COMMUNICATIONS WITH MEMBERS.-
"(A) A communication between an organization and any
bona fide member of such organization to directly encourage
such member to communicate as provided in paragraph (1)
(B) shall be treated as a communication described in para-
graph (1) (B).
"(B) A communication between an organization and any
bona fide member of such organization to directly encourage
such member to urge persons other than members to com-
municate as provided in either subparagraph (A) or sub-
paragraph (B) of paragraph (1) shall be treated as a
communication described in paragraph (1) (A).
"(e) OTHER DEFINITIONS AND SPECIAL RULES.-For purposes of this
section-
"(1) EXEMPT PURPOSE EXPENDITURES.-
(A) IN GENERAL-The term 'exempt purpose expendi-
tures' means, with respect to any organization for any taxable
year, the total of the amounts paid or incurred by such orga-
nization to accomplish purposes described in section 170(c)
(2) (B) (relating to religious, charitable, educational, etc.,
purposes).
"(B) CERTAIN AMOUNTS INCLUDED.-The term 'exempt pur-
pose expenditures' includes—
(i) administrative expenses paid or incurred for pur-
poses described in section 170 (c) (2) (B), and
H. R. 10612-206
"(ii) amounts paid or incurred for the purpose of
influencing legislation (whether or not for purposes
described in section 170(c) (2) (B)).
"(C) CERTAIN AMOUNTS EXCLUDED.-The term 'exempt pur-
pose expenditures' does not include amounts paid or incurred_
to or for-
"(i) a separate fundraising unit of such organization,
or
(ii) one or more other organizations, if such amounts
are paid or incurred primarily for fundraising.
"(2) LEGISLATION.-The term 'legislation' includes action with
respect to Acts, bills, resolutions, or similar items by the Congress,
any State legislature, any local council, or similar governing body,
or by the public in a referendum, initiative, constitutional amend-
ment, or similar procedure.
"(3) ACTION.-The term 'action' is limited to the introduction,
amendment, enactment, defeat, or repeal of Acts, bills, resolutions,
or similar items.
"(4) DEPRECIATION, ETC., TREATED AS EXPENDITURES.-In com-
puting expenditures paid or incurred for the purpose of influ-
encing legislation (within the meaning of subsection (b) (1) or
(b) (2)) or exempt purpose expenditures (as defined in para-
graph (1)), amounts properly chargeable to capital account shall
not be taken into account. There shall be taken into account a rea-
sonable allowance for exhaustion, wear and tear, obsolescence, or
amortization. Such allowance shall be computed only on the basis
of the straight-line method of depreciation. For purposes of this
section, a determination of whether an amount is properly charge-
able to capital account shall be made on the basis of the principles
that apply under subtitle A to amounts which are paid or incurred
in a trade or business.
"(f) AFFILIATED ORGANIZATIONS.-
"(1) IN GENERAL.-Except as otherwise provided in paragraph
(4), if for a taxable year two or more organizations described
in section 501 (c) (3) are members of an affiliated group of orga-
nizations as defined in paragraph (2), and an election under sec-
tion 501 (h) is effective for at least one such organization for
such year, then-
"(A) the determination as to whether excess lobbying
expenditures have been made and the determination as to
whether the expenditure limits of section 501 (h) (1) have
been exceeded shall be made as though such affiliated group
is one organization,
"(B) if such group has excess lobbying expenditures,
each such organization as to which an election under section
501 (h) is effective for such year shall be treated as an orga-
nization which has excess lobbying expenditures in an amount
which equals such organization's proportionate share of such
group's excess lobbying expenditures,
(C) if the expenditure limits of section 501 (h) (1) are
exceeded, each such organization as to which an election
under section 501 (h) is effective for such year shall be treated
as an organization which is not described in section 501 (c)
(3) by reason of the application of 501 (h), and
" (D) subparagraphs (C) and (D) of subsection (d) (2),
paragraph (3) of subsection (d), and clause (i) of subsec-
H. R. 10612-207
tion (e) (1) (C) shall be applied as if such affiliated group
were one organization.
(2) DEFINITION OF AFFILIATION.-For purposes of paragraph
(1), two organizations are members of an affiliated group of
organizations but only if-
"(A) the governing instrument of one such organization
requires it to be bound by decisions of the other organization
on legislative issues, or
(B) the governing board of one such organization
includes persons who—
" (i) are specifically designated representatives of
another such organization or are members of the
governing board, officers, or paid executive staff members
of such other organization, and
(ii) by aggregating their votes, have sufficient voting
power to cause or prevent action on legislative issues by
the first such organization.
(3) DIFFERENT TAXABLE YEARS.-If members of an affiliated
group of organizations have different taxable years, their expend-
itures shall be computed for purposes of this section in a manner
to be prescribed by regulations promulgated by the Secretary.
"(4) LIMITED CONTROL.-If two or more organizations are
members of an affiliated group of organizations (as defined in
paragraph (2) without regard to subparagraph (B) thereof), no
two members of such affiliated group are affiliated (as defined in
paragraph (2) without regard to subparagraph (A) thereof),
and the governing instrument of no such organization requires it
to be bound by decisions of any of the other such organizations on
legislative issues other than as to action with respect to Acts, bills,
resolutions, or similar items by the Congress, then—
(A) in the case of any organization whose decisions bind
one or more members of such affiliated group, directly or
indirectly, the determination as to whether such organization
has paid or incurred excess lobbying expenditures and the
determination as to whether such organization has exceeded
the expenditure limits of section 501 (h) (1) shall be made as
though such organization has paid or incurred those amounts
paid or incurred by such members of such affiliated group to
influence legislation with respect to Acts, bills, resolutions, or
similar items by the Congress, and
"(B) in the case of any organization to which subpara-
graph (A) does not apply, but which is a member of such
affiliated group, the determination as to whether such organi-
zation has paid or incurred excess lobbying expenditures and
the determination as to whether such organization has
exceeded the expenditure limits of section 501 (h) (1) shall be
made as though such organization is not a member of such
affiliated group.".
(c) DISALLOWING OF DEDUCTION FOR CONTRIBUTION To INFLUENCE
LEGISLATION.-Section 170(f) (relating to disallowance of charitable
contribution deductions in certain cases) is amended by striking out
paragraph (6) and inserting in lieu thereof the following:
(6) DEDUCTIONS FOR OUT-OF-POCKET EXPENDITURES.-No deduc-
tion shall be allowed under this section for an out-of-pocket
expenditure made by any person on behalf of an organization
described in subsection (c) (other than an organization described
in section 501 (h) (5) (relating to churches, etc.)) if the expendi-
H. R. 10612-208
ture is made for the purpose of influencing legislation (within the
meaning of section 501 (c) (3))
(d) TECHNICAL AMENDMENTS.-
(1) AMENDMENTS CONFORMING TO NEW SECTION 501 (h)
(A) Section 501 (c) (3) is amended by striking out "no sub-
stantial part of the activities of which is carrying on propa-
ganda, or otherwise attempting, to influence legislation," and
inserting in lieu thereof "no substantial part of the activities
of which is carrying on propaganda, or otherwise attempting,
to influence legislation (except as otherwise provided in sub-
section (h)
(B) The following sections are amended by striking out
"no substantial part of the activities of which is carrying on
propaganda, or otherwise attempting, to influence legisla-
tion," each place it appears and inserting in lieu thereof in
each such place "which is not disqualified for tax exemption
under section 501 (c) (3) by reason of attempting to influence
legislation,":
(i) section 170 (c) (2) (D) (relating to the definition of
charitable contributions) ;
(ii) section 2055 (a) (2) (relating to transfers for pub-
lic, charitable, and religious uses)
(iii) section 2106 (a) (2) (A) (ii) (relating to transfers
for public, charitable, and religious uses) ;
(iv) section 2522 (a) (2) (relating to charitable and
similar gifts of citizens or residents) ; and
(v) section 2522 (b) (2) (relating to charitable and
similar gifts of nonresidents).
(C) Sections 2055 (a) (3) and 2106(a) (2) (A) (iii) (relat-
ing to transfers for public, charitable, and religious uses) are
amended by striking out "no substantial part of the activities
of such trustee or trustees, or of such fraternal society, order,
or association, is carrying on propaganda, or otherwise
attempting, to influence legislation," each place it appears and
inserting in lieu thereof in each such place "such trust, fra-
ternal society, order, or association would not be disqualified
for tax exemption under section 501 (c) (3) by reason of
attempting to influence legislation,".
(2) AMENDMENTS CONFORMING TO NEW CHAPTER 41.-
(A) Paragraph (6) of section 275 (a) (denying deductions
for certain taxes), as amended by this Act, is amended to read
as follows:
"(6) Taxes imposed by chapters 41, 42, 43, and 44."
(B) Section 6104(c) (1) (B) (relating to notification of
state officers regarding taxes imposed on certain exempt orga-
nizations), is amended by striking out "chapter 42" and
inserting in lieu thereof "chapter 41 or 42".
(C) Section 6161 (b) (relating to extensions of time for
paying tax) is amended—
(i) in paragraph (1) by striking out "12" and insert-
ing in lieu thereof "12, 41"; and
(ii) in the second sentence by striking out "42," and
inserting in lieu thereof "41, 42,".
(D) Section 6201 (d) (relating to assessment authority)
is amended by striking out "chapter 42, and chapter 43 taxes"
and inserting in lieu thereof "and certain excise taxes".
H. R. 10612-209
(E) Section 6211 (a) (defining deficiency) is amended by
striking out "chapters 42" and inserting in lieu thereof
"chapters 41, 42,".
(F) The following sections are amended by striking out
"chapter 42" each place it appears and inserting in lieu
thereof in each such place "chapter 41, 42,";
(i) subsections (a) and (b) (2) of section 6211 (defin-
ing deficiency) ;
(ii) section 6212 (a) (relating to notice of deficiency) ;
(iii) section 6213 (a) (relating to restrictions appli-
cable to deficiencies and petitions to Tax Court) ;
(iv) subsections (c) and (d) of section 6214 (relating
to determinations by Tax Court)
(v) section 6344 (a) (1) (relating to cross references) ;
(vi) section 6501 (e) (3) (relating to limitations on
assessment and collection)
(vii) subsections (a) and (b) (1) of section 6512 (relat-
ing to limitations in case of petition to Tax Court) ; and
(viii) section 7422 (e) (relating to civil actions for
refund).
(G) Section 6212 (relating to notice of deficiency) is
amended-
(i) in subsection (b) (1) by striking out "chapter 42"
each place it appears and inserting in lieu thereof in each
place "chapter 41, chapter 42"; and
(ii) in subsection (c) (1) by striking out "of chapter
43 tax for the same taxable years," and inserting in lieu
thereof "of chapter 41 tax for the same taxable year, of
chapter 43 tax for the same taxable year,".
(H) The headings of section 6214 (c) (relating to determi-
nations by Tax Court) and 6601 (c) (relating to interest on
underpayments, etc.) are amended by striking out "Chapter
42" and inserting in lieu thereof in each such place "Chapter
41, 42.".
(3) AMENDMENTS TO TABLES OF CHAPTERS AND SECTIONS.-
(A) The table of chapters for subtitle D is amended by
inserting before the item relating to chapter 42 the following:
"Chapter 41. Public charities."
(B) The table of sections for part I of subchapter F of
chapter 1 is amended by adding at the end thereof the fol-
lowing:
"Sec. 504. Status after organization ceases to qualify for exemp-
tion under section 501 (c) (3) because of substantial
lobbying."
(e) EFFECTIVE DATE.-The amendments made by this section shall
apply-
(1) except as otherwise specified in paragraph (2), in the case of
amendments to subtitle A, to taxable years beginning after Decem-
ber 31, 1976;
(2) in the case of the amendments made by subsection (a) (2),
to activities occurring after the date of the enactment of this Act;
(3) in the case of amendments to chapter 11, to the estates of
decedents dying after December 31, 1976;
(4) in the case of amendments to chapter 12, to gifts in calendar
years beginning after December 31, 1976;
H. R. 10612-210
(5) in the case of amendments to subtitle D, to taxable years
beginning after December 31, 1976; and
(6) in the case of amendments to subtitle F, on and after the
date of the enactment of this Act.
SEC. 1308. TAX LIENS, ETC,, NOT TO CONSTITUTE ACQUISITION-
INDEBTEDNESS.
(a) GENERAL RULE.-Section 514(c) (2) (relating to property
acquired subject to mortgages, etc.) is amended by adding at the end
thereof the following new subparagraph:
"(C) LIENS FOR TAXES OR ASSESSMENTS.-Where State law
provides that-
" (i) a lien for taxes, or
" (ii) a lien for assessments,
made by a State or a political subdivision thereof attaches to
property prior to the time when such taxes or assessments
become due and payable, then such lien shall be treated as
similar to a mortgage (within the meaning of subparagraph
(A)) but only after such taxes or assessments become due
and payable and the organization has had an opportunity to
pay such taxes or assessments in accordance with State law.".
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply to taxable years ending after December 31, 1969.
SEC. 1309. EXTENSION OF SELF-DEALING TRANSITION RULES FOR
PRIVATE FOUNDATIONS.
(a) EXTENSION OF RULE.-Section 101 (1) (2) (B) of the Tax Reform
Act of 1969 is amended by striking out "January 1, 1975" and insert-
ing in lieu thereof "January 1, 1977".
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply to dispositions made after the date of the enactment of this
Act.
SEC. 1310. IMPUTED INTEREST.
(a) GENERAL RULE.-Section 4942 (f) (2) (relating to income modi-
fications) is amended—
(1) by striking out "and" at the end of subparagraph (B),
(2) by striking out the period at the end of subparagraph (C)
and inserting in lieu thereof "; and", and
(3) by adding at the end thereof the following new sub-
paragraph:
"(D) section 483 (relating to imputed interest) shall not
apply in the case of a binding contract made in a taxable
year beginning before January 1, 1970.".
(b) EFFECTIVE DATE.-The amendments made by this section shall
apply to taxable years ending after the date of the enactment of
this Act.
SEC. 1311. CERTAIN HOSPITAL SERVICES.
(a) IN GENERAL-Section 513 (relating to unrelated trade or
business) subsection: is amended by adding at the end thereof the following new
"(e) CERTAIN HOSPITAL SERVICES.-In the case of a hospital
described in section 170(b) (1) (A) (iii), the term 'unrelated trade or
business' does not include the furnishing of one or more of the services
described in section 501 (e) (1) (A) to one or more hospitals described
in section 170 (1) (A) (iii) if-
H. R. 10612-211
"(1) such services are furnished solely to such hospitals which
have facilities to serve not more than 100 inpatients;
'(2) such services, if performed on its own behalf by the
recipient hospital, would constitute activities in exercising or
performing the purpose or function constituting the basis for
its exemption; and
"(3) such services are provided at a fee or cost which does not
exceed the actual cost of providing such services, such cost includ-
ing straight line depreciation and a reasonable amount for return
on capital goods used to provide such services."
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply to all taxable years to which the Internal Revenue Code of
1954 applies.
SEC. 1312. CLINICAL SERVICES OF COOPERATIVE HOSPITALS.
(a) IN GENERAL-Section 501(e) (1) (A) (relating to cooperative
hospital service organizations) is amended by inserting "clinical,"
after "food,".
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply to taxable years ending after December 31, 1976.
SEC. 1313. EXEMPTION OF CERTAIN AMATEUR ATHLETIC ORGANIZA-
TIONS FROM TAX.
(a) IN GENERAL-Paragraph (3) of section 501 (c) (relating to
exempt religious, charitable, etc., organizations) is amended by insert-
ing after "or educational purposes," the following: "or to foster
national or international amateur sports competition (but only if no
part of its activities involve the provision of athletic facilities or
equipment),".
(b) TREATMENT OF GIFTS TO SUCH ORGANIZATIONS FOR INCOME,
ESTATE AND GIFT Tax PURPOSES.-
(1) Subparagraph (B) of section 170(c) (2) (relating to defi-
nition of charitable contribution) is amended by inserting after
"or educational purposes" the following: ", or to foster national
or international amateur sports competition (but only if no part
of its activities involve the provision of athletic facilities or
equipment),".
(2) Paragraph (2) of section 2055 (a) (relating to transfers
for public, charitable, and religious uses) is amended by inserting
after "the encouragement of art" the following: ", or to foster
national or international amateur sports competition (but only
if no part of its activities involve the provision of athletic facili-
ties or equipment),".
(3) Paragraph (2) of section 2522 (a) (relating to charitable
and similar gifts) is amended by inserting after "or educational
purposes" the following: ", or to foster national or international
amateur sports competition (but only if no part of its activities
involve the provision of athletic facilities or equipment),".
(c) An organization which (without regard to the amendments
made by this section) is an organization described in section 170(c) (2)
(B), 501 (c) (3), 2055 (a) (2), or 2522(a) (2) of the Internal Revenue
Code of 1954 shall not be treated as an organization not so described as
a result of the amendments made by this section.
(d) EFFECTIVE DATE.-The amendments made by this section shall
apply on the day following the date of the enactment of this Act.
H. R. 10612-212
TITLE XIV-TREATMENT OF CERTAIN
CAPITAL LOSSES; HOLDING PERIOD FOR
CAPITAL GAINS AND LOSSES
SEC. 1401. INCREASE IN AMOUNT OF ORDINARY INCOME AGAINST
WHICH CAPITAL LOSS MAY BE OFFSET.
(a) GENERAL RULE.-Subparagraph (B) of section 1211 (b) (1)
(relating to limitation on capital losses for taxpayers other than cor-
porations) is amended by striking out "$1,000" and inserting in lieu
thereof "the applicable amount".
(b) APPLICABLE AMOUNT DEFINED.-Paragraph (2) of section
1211 (b) (relating to limitation on capital losses for taxpayers other
than corporations) is amended to read as follows:
'(2) APPLICABLE AMOUNT.-For purposes of paragraph (1) (B),
the term 'applicable amount' means—
(A) $2,000 in the case of any taxable year beginning in
1977; and
((B) $3,000 in the case of any taxable year beginning after
1977.
In the case of a separate return by a husband or wife, the appli-
cable amount shall be one-half of the amount determined under
the preceding sentence."
(c) EFFECTIVE DATE.-The amendments made by this section shall
apply to taxable years beginning after December 31, 1976.
SEC. 1402. INCREASE IN HOLDING PERIOD REQUIRED FOR CAPITAL
GAIN OR LOSS TO BE LONG TERM.
(a) INCREASE IN Two STEPS FROM 6 MONTHS TO 1 YEAR.-
(1) TAXABLE YEARS BEGINNING IN 1977.-Effective with respect
to taxable years beginning in 1977, paragraphs (1), (2), (3), and
(4) of section 1222 (relating to other terms relating to capital
gains and losses) are each amended by striking out "6 months"
and inserting in lieu thereof "9 months".
(2) TAXABLE YEARS BEGINNING AFTER 1977.-Effective with
respect to taxable years beginning after December 31, 1977, para-
graphs (1), (2), (3), and (4) of section 1222 are each amended
by striking out "9 months" and inserting in lieu thereof "1 year".
(b) CONFORMING AMENDMENTS.-
(1) TAXABLE YEARS BEGINNING IN 1977.-Effective with respect
to taxable years beginning in 1977, the following provisions are
each amended by striking out "6 months" each place it appears
and inserting in lieu thereof "9 months":
(A) Paragraph (1) (B) of section 166 (d) (relating to non-
business debts).
(B) Subsection (a) of section 341 (relating to treatment
of gain to shareholders in the case of collapsible corpora-
tions).
(C) Paragraph (2) of subsection (a) of section 402 (relat-
ing to capital gains treatment for certain distributions in the
case of a beneficiary of an exempt employees' trust) and sub-
paragraph (L) of paragraph (4) of section 402(e) (relating
ticipation). to election to treat pre-1974 participation as post-1973 par-
(D) Subparagraph (A) of section 403 (a) (2) (relating to
capital gains treatment for certain distributions in the case of
a beneficiary under a qualified annuity plan).
H. R. 10612-213
(E) Paragraph (1) of section 423 (relating to employee
stock purchase plans).
(F) Paragraph (1) of subsection (a) and paragraphs (1)
and (2) of subsection (c) of section 424 (relating to restricted
stock options).
(G) Paragraph (2) of section 582(c) (relating to capital
gains of banks).
(H) Subparagraphs (A) and (B) of section 584(c) (1)
(relating to inclusions in taxable income of participants in
common trust funds).
(I) Section 631 (relating to gain or loss in the case of
timber, coal, or domestic iron ore).
(J) Paragraphs (3) and (4) of section 642(c) (relating
to charitable deductions for certain trusts).
(K) Section 644 (relating to special holding period rules
for gain on property transferred to trust at less than fair
market value).
(L) Paragraphs (1) and (2) of section 702 (relating to
income and credits of partner).
(M) Subparagraph (A) of section 817 (a) (1) (relating to
certain gains and losses in the case of life insurance
companies).
(N) Subparagraph (B) of paragraph (3), and paragraph
(4), of section 852 (b) (relating to taxation of shareholders of
regulated investment companies).
(0) Subparagraph (A) of section 856(c) (4) (relating to
definition of real estate investment trust).
(P) Subparagraph (B) of paragraph (3), and paragraph
(5), of section 857(b) (relating to taxation of shareholders
of real estate investment trusts).
(Q) Paragraph (11) of section 1223 (relating to holding
period of property).
(R) Section 1231 (relating to property used in the trade or
business and involuntary conversions).
(S) Paragraph (2) of section 1232(a) (relating to sale
or exchange in the case of bonds and other evidences of
indebtedness).
(T) Subsections (b), (d), and (e) of section 1233 (relat-
ing to gains and losses from short sales).
(U) Paragraph (1) of section 1234(b) (relating to special
rule for gain on lapse of an option granted as part of a
straddle), as amended by this Act.
(V) Subsection (a) of section 1235 (relating to sale or
exchange of patents).
(W) Paragraph (4) of section 1246(a) (relating to hold-
ing period in the case of gain on foreign investment company
stock).
(X) Subsection (i) of section 1247 (relating to loss on sale
or exchange of certain stock in the case of foreign investment
companies electing to distribute income currently).
(Y) Subsection (b), and subparagraph (C) of subsection
(f) (3), of section 1248 (relating to gain from certain sales
or exchanges of stock in certain foreign corporations).
(Z) Paragraph (1) of section 1251(e) (defining farm
recapture property).
(2) TAXABLE YEARS BEGINNING AFTER 1977.-Effective with
respect to taxable years beginning after December 31, 1977, each
H. R. 10612-214
provision referred to in paragraph (1) is amended by striking out
"9 months" each place it appears and inserting in lieu thereof
"1 year".
(3) TECHNICAL AMENDMENT.-Effective with respect to taxable
years beginning after December 31, 1976, section 631 (a) (relating
to gain or loss in the case of timber) is amended by striking out
"before the beginning of such year".
(c) TRANSITIONAL RULE FOR CERTAIN INSTALLMENT OBLIGATIONS.-
In the case of amounts received from sales or other dispositions of
capital assets pursuant to binding contracts, including sales or other
dispositions the income from which is returned on the basis and in the
manner prescribed in section 453 (a) (1) of the Internal Revenue Code
of 1954, if the gain or loss was treated as long-term for the taxable year
for which the amount was realized, such gain or loss shall be treated
as long-term for the taxable year for which the gain or loss is returned
or otherwise recognized.
(d) RETENTION OF 6-MONTH PERIOD FOR FUTURES TRANSACTIONS
IN COMMODITIEs.-Section 1222 (relating to other terms relating to
capital gains and losses) is amended by adding at the end thereof the
following new sentence:
"For purposes of this subtitle, in the case of futures transactions
in any commodity subject to the rules of a board of trade or com-
modity exchange, the length of the holding period taken into account
under this section or under any other section amended by section 1402
of the Tax Reform Act of 1976 shall be determined without regard to
the amendments made by subsections (a) and (b) of such section
1402."
SEC. 1403. ALLOWANCE OF 8-YEAR CAPITAL LOSS CARRYOVER IN
CASE OF REGULATED INVESTMENT COMPANIES.
(a) GENERAL RULE.-Paragraph (1) of section 1212 (a) (relating to
capital loss carrybacks and carryovers for corporations) is amended
by striking out "and" at the end of subparagraph (A) and by striking
out subparagraph (B) and inserting in lieu thereof the following:
(B) except as provided in subparagraph (C), a capital
loss carryover to each of the 5 taxable years succeeding the
loss year; and
(C) a capital loss carryover-
'(i) in the case of a regulated investment company (as
defined in section 851) to each of the 8 taxable years
succeeding the loss year, and
(ii) to the extent such loss is attributable to a foreign
expropriation capital loss, to each of the 10 taxable years
exceeding the loss year."
(b) EFFECTIVE DATE.-The amendments made by this section shall
apply to loss years (within the meaning of section 1212 (a) (1) of the
Internal Revenue Code of 1954) ending on or after January 1, 1970.
SEC. 1404. SALE OF RESIDENCE BY ELDERLY.
(a) IN GENERAL.-Section 121(b) (1) (relating to gain from sale
or exchange of residence of individual who has attained age 65) is
amended by striking out "$20,000" each place it appears therein and
inserting in lieu thereof "$35,000".
(b) EFFECTIVE DATE.-The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1976.
H.R. 10612-215
TITLE XV-PENSION AND INSURANCE
TAXATION
SEC. 1501. RETIREMENT SAVINGS FOR CERTAIN MARRIED INDIVID-
UALS.
(a) ALLOWANCE OF DEDUCTION.-Part VII of subchapter B of chap-
ter 1 (relating to additional itemized deductions for individuals) is
amended by redesignating section 220 as 221 and by inserting after
section 219 the following new section:
"SEC. 220. RETIREMENT SAVINGS FOR CERTAIN MARRIED INDIVID-
UALS.
(a) DEDUCTION ALLOWED.-In the case of an individual, there is
allowed as a deduction amounts paid in cash for a taxable year by or
on behalf of such individual for the benefit of himself and his spouse-
" (1) to an individual retirement account described in section
408 (a),
" (2) for an individual retirement annuity described in section
408 (b), or
" (3) for a retirement bond described in section 409 (but only
if the bond is not redeemed within 12 months of the date of its
issuance).
For purposes of this title, any amount paid by an employer to such a
retirement account or for such a retirement annuity or retirement bond
constitutes payment of compensation to the employee (other than a
self-employed individual who is an employee within the meaning of
section 401 (c) (1)) includible in his gross income, whether or not a
deduction for such payment is allowable under this section to the
employee after the application of subsection (b).
(b) LIMITATIONS AND RESTRICTIONS.-
(1) MAXIMUM DEDUCTION.-The amount allowable as a deduc-
tion under subsection (a) to an individual for any taxable year
may not exceed—
'(A) twice the amount paid to the account or annuity, or
for the bond, established for the individual or for his spouse
to or for which the lesser amount was paid for the taxable
year,
(B) an amount equal to 15 percent of the compensation
includible in the individual's gross income for the taxable
year, or
"(C) $1,750,
whichever is the smallest amount.
" (2) ALTERNATIVE DEDUCTION.-No deduction is allowed under
subsection (a) for the taxable year if the individual claims the
deduction allowed by section 219 for the taxable year.
" (3) COVERAGE UNDER CERTAIN OTHER PLANS.-No deduction is
allowed under subsection (a) for an individual for the taxable
year if for any part of such year-
(A) he or his spouse was an active participant in-
(i) a plan described in section 401 (a) which includes
a trust exempt from tax under section 501 (a),
(ii) an annuity plan described in section 403 (a),
(iii) a qualified bond purchase plan described in sec-
tion 405(a), or
H. R. 10612-216
(iv) a plan established for its employees by the United
States, by a State or political subdivision thereof, or by
an agency or instrumentality of any of the foregoing, or
'(B) amounts were contributed by his employer, or his
spouse's employer, for an annuity contract described in sec-
tion 403 (b) (whether or not his, or his spouse's, rights in such
contract are nonforfeitable).
(4) CONTRIBUTIONS AFTER AGE 70½ deduction is allowed
under subsection (a) with respect to any payment which is made
for a taxable year of an individual if either the individual or his
spouse has attained age 701/2 before the close of such taxable year.
'(5) RECONTRIBUTED AMOUNTS.-No deduction is allowed under
this section with respect to a rollover contribution described in
section 402 (5), 403 (a) (4), 408 (3), or 409 (b) (3) (C).
"(6) AMOUNTS CONTRIBUTED UNDER ENDOWMENT CONTRACT.-In
the case of an endowment contract described in section 408(b), no
deduction is allowed under subsection (a) for that portion of the
amounts paid under the contract for the taxable year properly
allocable, under regulations prescribed by the Secretary, to the
cost of life insurance.
"(7) EMPLOYED SPOUSES.-No deduction is allowed under sub-
section (a) with respect to a payment described in subsection (a)
made for any taxable year of the individual if the spouse of the
individual has any compensation (determined without regard to
section 911) for the taxable year of such spouse ending with or
within such taxable year.
'(c) DEFINITIONS AND SPECIAL RULES.-
'(1) COMPENSATION.-For purposes of this section, the term
'compensation' includes earned income as defined in section 401
(c) (2).
"
(2) MARRIED INDIVIDUALS.-This section shall be applied with-
out regard to any community property laws.
" (3) DETERMINATION OF MARITAL STATUS.-The determination of
whether an individual is married for purposes of this section shall
be made in accordance with the provisions of section 143 (a).
(4) TIME WHEN CONTRIBUTIONS DEEMED MADE.-For purposes of
this section, a taxpayer shall be deemed to have made a contribu-
tion on the last day of the preceding taxable year if the contri-
bution is made on account of such taxable year and is made not
later than 45 days after the end of such taxable year.
" (5) PARTICIPATION IN GOVERNMENTAL PLANS BY CERTAIN INDI-
VIDUALS.-A member of a reserve component of the armed forces
or a volunteer firefighter is not considered to be an active par-
ticipant in a plan described in subsection (b) (3) (A) (iv) if,
under section 219 (c) (4), he is not considered to be an active
participant in such a plan."
(b) CONFORMING AMENDMENTS.-
(1) Paragraph (10) of section 62 (relating to retirement sav-
ings) is amended by inserting before the period the following:
"and the deduction allowed by section 220 (relating to retirement
savings for certain married individuals)".
(2) Paragraph (2) of section 408(c) is amended by inserting
" (or spouse of an employee or member)" after "member".
(3) Subsection (a) of section 415 (relating to limitations on
benefits and contributions under qualified plans) is amended-
(A) by striking out "In the case" in paragraph (2) and
inserting in lieu thereof "Except as provided in paragraph
(3), in the case", and
H.R. 10612-217
(B) by adding at the end thereof the following new para-
graph:
(3) ACCOUNTS, ETC., ESTABLISHED FOR NON-EMPLOYED SPOUSE.-
Paragraph (2) shall not apply for any year to an account,
annuity, or bond described in section 408(a), 408(b), or 409,
respectively, established for the benefit of the spouse of the indi-
vidual contributing to such account, or for such annuity or bond,
if a deduction is allowed under section 220 to such individual
with respect to such contribution for such year.".
(4) Section 219 (relating to retirement savings) is amended—
(A) by striking out "during" in subsection (a) and
inserting in lieu thereof "for",
(B) by adding at the end of subsection (b) the following
new paragraph:
'(6) ALTERNATIVE DEDUCTION.-No deduction is allowed under
subsection (a) for the taxable year if the individual claims the
deduction allowed by section 220 for the taxable year.",
(C) by adding at the end of subsection (c) (2) the follow-
ing new sentence: "For purposes of this section, the deter-
mination of whether an individual is married shall be made
in accordance with the provisions of section 143 (a).", and
(D) by adding at the end of subsection (c) the following
new paragraph:
(3) TIME WHEN CONTRIBUTIONS DEEMED MADE.-For purposes
of this section, a taxpayer shall be deemed to have made a contri-
bution on the last day of the preceding taxable year if the contri-
bution is made on account of such taxable year and is made not
later than 45 days after the end of such taxable year."
(5) Paragraph (4) of section 408 (d) (relating to excess con-
tributions returned before due date of return) is amended-
(A) by inserting "or 220" after "219", and
(B) by striking out the last sentence and inserting in lieu
thereof the following: "In the case of such a distribution, for.
purposes of section 61, any net income described in subpara-
graph (C) shall be deemed to have been earned and receiv-
able in the taxable year in which such excess contribution is
made."
(6) Paragraph (4) of section 409 (a) (relating to retirement
bonds) is amended by striking out "in any taxable year" and
inserting in lieu thereof "for any taxable year".
(7) Paragraph (12) of section 3401 (a) (relating to definition
of wages) is amended by inserting "or 220(a)" after "219(a)".
(8) Section 4973 (relating to tax on excess contributions to
individual retirement accounts, etc.) is amended-
(A) by striking out "such individual" in the last sentence
of subsection (a) and inserting in lieu thereof the following:
"the individual to whom a deduction is allowed for the tax-
able year under section 219 (determined without regard to
subsection (b) (1) thereof) or section 220 (determined with-
out regard to subsection (b) (1) thereof), whichever is appro-
priate";
(B) by inserting "or 220" after "219" in subsection (b) (1)
(B) ; and
(C) by striking out paragraph (2) of subsection (b) and
inserting in lieu thereof the following:
"(2) the amount determined under this subsection for the
preceding taxable year, reduced by the excess (if any) of the
maximum amount allowable as a deduction under section 219
H. R. 10612-218
or 220 for the taxable year over the amount contributed to the
accounts or. for the annuities or bonds for the taxable year and
reduced by the sum of the distributions out of the account (for
the taxable year and all prior taxable years) which were included
in the gross income of the payee under section 408 (d) (1).
For purposes of this subsection, any contribution which is distributed
from the individual retirement account, individual retirement annu-
ity, or bond in a distribution to which section 408 (d) (4) applies
shall be treated as an amount not contributed if such distribution con-
sists of an excess contribution solely because of employer contributions
to a plan or contract described in section 219(b) (2) or by reason of
the application of section 219 (b) (1) (without regard to the $1,500
limitation) or section 220 (b) (1) (without regard to the $1,750 limi-
tation) and only if such distribution does not exceed the excess of
$1,500 or $1,750 if applicable, over the amount described in paragraph
(1) (B).'
(9) Subsection (d) of section 6047 (relating to other pro-
grams) is amended by inserting "or 220(a) after "219(a)".
(10) Paragraph (1) of section 408 (d) (relating to tax treat-
ment of distributions) is amended by striking out the second sen-
tence and inserting in lieu thereof the following: "Notwithstand-
ing any other provision of this title (including chapters 11 and
12), the basis any person in such an account or annuity is zero.".
(c) CLERICAL AMENDMENT.-The table of sections for part VII of
subchapter B of chapter 1 is amended by striking out the item relat-
ing to section 220 and inserting in lieu thereof the following
"Sec. 220. Retirement savings for certain married individuals.
"Sec. 221. Cross references.".
(d) EFFECTIVE DATE-The amendments made by this section, other
than the amendment made by subsection (b) (3), shall apply to taxa-
ble years beginning after December 31, 1976. The amendment made
by subsection (b) (3) shall apply to years beginning after December 31,
1976.
SEC. 1502. LIMITATION ON CONTRIBUTIONS TO CERTAIN PENSION,
ETC., PLANS.
(a) IN GENERAL.-
(1) LIMIT ON CONTRIBUTIONS.-Section 415 (c) (relating to limi-
tation for defined contribution plans) is amended by adding at
the end thereof the following new paragraph:
(5) APPLICATION WITH SECTION 404 (e) (4) .-In the case of a
plan which provides contributions or benefits for employees some
or all of whom are employees within the meaning of section 401
(c) (1), the amount determined under paragraph (1) (B) with
respect to any participant shall not be less than the amount deduct-
ible under section 404(e) with respect to any individual who is
an employee within the meaning of section 401 (c) (1)."
(2) MINIMUM DEDUCTION LIMITATION.-Section 404 (e) (4) of
such Code (relating to minimum deductible amount for pension
plan contributions by self-employed individuals) is amended by
adding after subparagraph (B) the following: "This paragraph
does not apply for any taxable year to any employee whose
adjusted gross income for such taxable year (determined sepa-
rately for each individual, without regard to any community
property laws, and without regard to the deduction allowable
under subsection (a)) exceeds $15,000."
H. R. 10612-219
(b) EFFECTIVE DATE.-The amendment made by subsection (a) (1)
shall apply to years beginning after December 31, 1975. The amend-
ment made by subsection (a) (2) shall apply to taxable years beginning
after December 31, 1975.
SEC. 1503. PARTICIPATION BY MEMBERS OF RESERVES OR NATIONAL
GUARD, AND VOLUNTEER FIREFIGHTERS IN INDIVIDUAL
RETIREMENT ACCOUNTS, ETC.
(a) GENERAL RULE.Section 219 (c) (relating to definitions and
special rules for retirement savings deduction) is amended by adding
at the end thereof the following new paragraph:
(4) PARTICIPATION IN GOVERNMENTAL PLANS BY CERTAIN
INDIVIDUALS.-
"(A) MEMBERS OF RESERVE COMPONENTS.-A member of a
reserve component of the armed forces (as defined in section
261 (a) of title 10) is not considered to be an active participant
in a plan described in subsection (b) (3) (A) (iv) for a taxable
year solely because he is a member of a reserve component
unless he has served in excess of 90 days on active duty (other
than active duty for training) during the year.
"(B) VOLUNTEER FIREFIGHTERS.-An individual whose
participation in a plan described in subsection (b) (3) (A)
(iv) is based solely upon his activity as a volunteer firefighter
and whose accrued benefit as of the beginning of the taxable
year is not more than an annual benefit of $1,800 (when
expressed as a single life annuity commencing at age 65) is
not considered to be an active participant in such a plan for
the taxable year."
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply to taxable years beginning after December 31, 1975.
SEC. 1504. CERTAIN INVESTMENTS BY ANNUITY PLANS.
(a) IN GENERAL-Paragraph (7) of section 403 (b) (relating to
custodial accounts for regulated investment company stock) is
amended by striking out ", and which issues only redeemable stock" in
subparagraph (C).
(b) EFFECTIVE DATE.-The amendment made by this section
applies to taxable years beginning after December 31, 1975.
SEC. 1505. SEGREGATED ASSET ACCOUNTS.
(a) SEGREGATED ASSET ACCOUNTS OF LIFE INSURANCE COMPANIES.-
Paragraph (1) (B) of section 801 (g) is amended-
(1) by striking out clause (ii) and inserting in lieu thereof the
following:
(ii) which is described in subparagraph (A), (B),
(C), (D), or (E) of section 805 (d) (1) (other than a life,
health or accident, property, casualty, or liability insur-
ance contract) or which provides for the payment of
annuities, and", and
(2) by striking out "as annuities" in clause (iii) and inserting in
lieu thereof "out".
(b) CONFORMING AMENDMENT.-Section 401 (relating to qualified
pension, etc. plans) is amended by striking out subsection (f) and
inserting in lieu thereof the following:
(f) CERTAIN CUSTODIAL ACCOUNTS AND CONTRACTS.-For purposes
of this title, a custodial account, an annuity contract, or a contract
(other than a life, health or accident, property, casualty, or liability
insurance contract) issued by an insurance company qualified to do
H. R. 10612-220
business in a State shall be treated as a qualified trust under this
section if-
"(1) the custodial account or contract would, except for the
fact that it is not a trust, constitute a qualified trust under this
section, and
"(2) in the case of a custodial account the assets thereof are
held by a bank (as defined in subsection (d) (1)) or another per-
son who demonstrates, to the satisfaction of the Secretary, that
the manner in which he will hold the assets will be consistent with
the requirements of this section.
For purposes of this title, in the case of a custodial account or contract
treated as a qualified trust under this section by reason of this subsec-
tion, the person holding the assets of such account or holding-such
contract shall be treated as the trustee thereof.".
(c) EFFECTIVE DATE.-The amendments made by this section apply
for taxable years beginning after December 31, 1975.
SEC. 1506. STUDY OF SALARY REDUCTION PENSION PLANS.
Section 2006 of the Employee Retirement Income Security Act of
1974 is amended—
(1) by striking out "January 1, 1977" each place it appears and
inserting in lieu thereof "January 1, 1978", and
(2) by striking out "December 31, 1976" in subsection (d) and
inserting in lieu thereof "December 31, 1977".
SEC. 1507. CONSOLIDATED RETURNS FOR LIFE AND OTHER INSUR-
ANCE COMPANIES.
(a) IN GENERAL-Section 1504(c) (relating to the definition of
includible insurance companies) is amended to read as follows:
"(c) INCLUDIBLE INSURANCE COMPANIES-Notwithstanding the pro-
visions of paragraph (2) of subsection (b)-
"(1) Two or more domestic insurance companies each of which
is subject to tax under section 802 shall be treated as includible
corporations for purposes of applying subsection (a) to such
insurance companies alone.
(2) (A) If an affiliated group (determined without regard to
subsection (b) (2) includes one or more domestic insurance com-
panies taxed under section 802 or 821, the common parent of such
group may elect (pursuant to regulations prescribed by the Sec-
retary) to treat all such companies as includible corporations for
purposes of applying subsection (a) except that no such company
shall be so treated until it has been a member of the affiliated
group for the 5 taxable years immediately preceding the taxable
year for which the consolidated return is filed.
"(B) If an election under this paragraph is in effect for a
taxable year-
"(i) section 243(b) (6) and the exception provided under
section 243 (b) (5) with respect to subsections (b) (2) and (c)
of this section,
(iii) section 542 (b) (5), and
(iii) subsection (a) (4) and (b) (2) (D) of section 1563,
and the reference to section 1563 (b) (2) (D) contained in sec-
tion 1563 (b) (3) (C),
shall not be effective for such taxable year.
(b) SPECIAL RULES AND CONFORMING AMENDMENTS.-
(1) Section 821 (relating to tax on mutual insurance companies
to which part II applies, as amended by section 1901 (a) (104) (C)
of this Act,) is amended by redesignating subsection (e) as sub-
H. R. 10612-221
section (f), and by adding after subsection (d) the following
new subsection:
'(e) TAX APPLICABLE TO MEMBER OF GROUP FILING CONSOLIDATED
RETURN.-Notwithstanding any other provision of this section, if a
mutual insurance company to which this section applies joins in the
filing of a consolidated return (or is required to SO file), the applicable
tax shall consist of a normal tax and a surtax computed as provided
in section 11 as though the mutual insurance company taxable income
of such company were the taxable income referred to in section 11.".
(2) Section 843 (relating to annual accounting period) is
amended by adding at the end thereof the following sentence:
"Under regulations prescribed by the Secretary, an insurance
company which joins in the filing of a consolidated return (or
is required to so file) may adopt the taxable year of the common
parent corporation even though such year is not a calendar year."
(3) Section 1503 (relating to computation and payment of tax)
is amended by adding the following new subsection:
"(c) SPECIAL RULE FOR APPLICATION OF CERTAIN LOSSES AGAINST
INCOME OF INSURANCE COMPANIES TAXED UNDER SECTION 802.-
"(1) IN GENERAL.-If an election under section 1504(c) (2) is
in effect for the taxable year and the consolidated taxable income
of the members of the group not taxed under section 802 results
in a consolidated net operating loss for such taxable year, then
under regulations prescribed by the Secretary, the amount of such
loss which cannot be absorbed in the applicable carryback periods
against the taxable income of such members not taxed under sec-
tion 802 shall be taken into account in determining the consoli-
dated taxable income of the affiliated group for such taxable year
to the extent of 35 percent of such loss or 35 percent of the taxable
income of the members taxed under section 802, whichever is less.
The unused portion of such loss shall be available as a carryover,
subject to the same limitations (applicable to the sum of the loss
for the carryover year and the loss (or losses) carried over to such
year), in applicable carryover years. For purposes of this subsec-
tion, in determining the taxable income of each insurance com-
pany subject to tax under section 802, section 802 (b) (3) shall not
be taken into account. For taxable years ending with or within
calendar year 1981, '25 percent' shall be substituted for '35 per-
cent' each place it appears in the first sentence of this subsection.
For taxable years ending with or within calendar year 1982, '30
percent' shall be substituted for '35 percent' each place it appears
in that sentence.
(2) LOSSES OF RECENT NONLIFE AFFILIATES.-Notwithstanding
the provisions of paragraph (1), a net operating loss for a taxable
year of a member of the group not taxed under section 802 shall
not be taken into account in determining the taxable income of a
member taxed under section 802 (either for the taxable year or as
a carryover or carryback) if such taxable year precedes the sixth
taxable year such members have been members of the same affili-
ated group (determined without regard to section 1504 (b) (2)
(c) EFFECTIVE DATE AND TRANSITIONAL RULES.-
(1) EFFECTIVE DATE.-The amendments made by subsections
(a) and (b) shall apply to taxable years beginning after Decem-
ber 31, 1980.
(2) TRANSITION RULES WITH RESPECT TO CARRYOVERS OR CARRY-
BACKS RELATING TO PRE-ELECTION TAXABLE YEARS AND NONTERMINA-
TION OF GROUP.-
H. R. 10612-222
(A) LIMITATIONS ON CARRYOVERS OR CARRYBACKS FOR GROUPS
ELECTING UNDER SECTION 1504 (C) (2).-If an affiliated group
elects to file a consolidated return pursuant to section 1504
(c) (2) of the Internal Revenue Code of 1954, a carryover of
a loss or credit from a taxable year ending before January 1,
1981, and losses or credits which may be carried back to tax-
able years ending before such date, shall be taken into account
as if this section had not been enacted.
(B) NONTERMINATION OF AFFILIATED GROUP.-The mere
election to file a consolidated return pursuant to such sec-
tion 1504(c) (2) shall not cause the termination of an affiliated
group filing consolidated returns.
SEC. 1508. TREATMENT OF CERTAIN LIFE INSURANCE CONTRACTS
GUARANTEED RENEWABLE.
(a) IN GENERAL-Paragraph (d) (5) of section 809 (relating to
certain nonparticipating contracts) is amended by adding at the end
thereof the following sentence: "For purposes of this paragraph, the
period for which any contract is issued or renewed includes the period
for which such contract is guaranteed renewable."
(b) EFFECTIVE DATE-The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1957.
SEC. 1509. STUDY OF EXPANDED PARTICIPATION IN INDIVIDUAL
RETIREMENT ACCOUNTS.
The Joint Committee on Taxation shall carry out a study with
respect to broadening the class of individuals who are eligible to claim
a deduction for retirement savings under section 219 or 220 of the
Internal Revenue Code of 1954 to include individuals who are partici-
pants in pension plans described in section 401 (a) of such Code
(relating to qualified pension, profit-sharing, and stock bonus plans)
or similar plans established for its employees by the United States,
by a State or political division thereof, or by an agency or instru-
mentality of the United States or a State or political division thereof.
The Joint Committee shall report its findings to the Committee on
Ways and Means of the House of Representatives and to the Commit-
tee on Finance of the Senate.
SEC. 1510. TAXABLE STATUS OF PENSION BENEFIT GUARANTY
CORPORATION.
(a) IN GENERAL-Section 4002 (g) (1) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1302(f) (1)) is amended by
inserting "by the United States (other than taxes imposed under
chapter 21 of the Internal Revenue Code of 1954, relating to Federal
Insurance Contributions Act, and chapter 23 of such Code, relating to
Federal Unemployment Tax Act), or" immediately after "imposed".
(b) EFFECTIVE DATE.-The amendment made by subsection (a) shall
take effect on September 2, 1974.
SEC. 1511. LEVEL PREMIUM PLANS COVERING OWNER-EMPLOYEES.
(a) IN GENERAL-Section 415 (c) (relating to limitation for defined
contribution plans) is amended by adding after paragraph (6) the
following new paragraph:
"(7) CERTAIN LEVEL PREMIUM ANNUITY CONTRACTS UNDER PLANS
BENEFITING OWNER-EMPLOYEES-Paragraph (1) (B) shall not
apply to a contribution described in section 401 (e) which is made
on behalf of a participant for a year to a plan which benefits an
owner-employee (within the meaning of section 401 (c) (3)), if-
H.R. 10612-223
'(A) the annual addition determined under this section
with respect to the participant for such year consists solely
of such contribution, and
(B) the participant is not an active participant at any
time during such year in a defined benefit plan maintained
-by the employer.
For purposes of this section and section 401 (e), in the case of a
plan which provides contributions or benefits for employees who
are not owner-employees, such plan will not be treated as failing
to satisfy section 401 (a) (4) merely because contributions made
on behalf of employees who are not owner-employees are not
permitted to exceed the limitations of paragraph (1) (B).
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply for years beginning after December 31, 1975.
SEC. 1512. LUMP-SUM DISTRIBUTIONS FROM QUALIFIED PENSION,
ETC., PLANS.
(a) IN GENERAL.Section 402(e) (4) (relating to definitions and
special rules) is amended by adding at the end thereof the following
new subparagraph:
(L) ELECTION TO TREAT PRE-1974 PARTICIPATION AS POST-
1973 PARTICIPATION.-For purposes of subparagraph (E),
subsection (a) (2), and section 403 (a) (2), if a taxpayer elects
(at the time and in the manner provided under regulations
prescribed by the Secretary), all calendar years of an employ-
ee's active participation in all plans in which the employee
has been an active participant shall be considered years of
active participation by such employee after December 31,
1973. An election made under this subparagraph, once made,
shall be irrevocable and shall apply to all lump-sum distri-
butions received by the taxpayer with respect to the employee.
This subparagraph shall not apply if the taxpayer received
a lump-sum distribution in a previous taxable year of the
employee beginning after December 31, 1975, unless no por-
tion of such lump-sum distribution was treated under sub-
section (a) (2) or section 403 (a) (2) as gain from the sale or
exchange of a capital asset held for more than 6 months."
(b) EFFECTIVE DATE.-The amendment made by this section shall
apply to distributions and payments made after December 31, 1975, in
taxable years beginning after such date.
TITLE XVI-REAL ESTATE INVESTMENT
TRUSTS
SEC. 1601. DEFICIENCY DIVIDEND PROCEDURE.
(a) IN GENERAL.-
(1) Part II of subchapter M of chapter 1 (relating to real
estate investment trusts) is amended by adding at the end thereof
the following new section:
"SEC. 859. DEDUCTION FOR DEFICIENCY DIVIDENDS.
"(a) GENERAL RULE.-If a determination (as defined in subsec-
tion (c)) with respect to a real estate investment trust results in any
adjustment (as defined in subsection (b) (1)) for any taxable year,
a deduction shall be allowed to such trust for the amount of deficiency
dividends (as defined in subsection (d)) for purposes of determining
H. R. 10612-224
the deduction for dividends paid (for purposes of section 857) for
such year.
'(b) RULES FOR APPLICATION OF SECTION.-
(1) ADJUSTMENT.-For purposes of this section, the term
'adjustment' means—
'(A) any increase in the sum of-
"
(i) the real estate investment trust taxable income
of the real estate investment trust (determined without
regard to the deduction for dividends paid (as defined
in section 561) and by excluding any net capital gain),
and
" (ii) the excess of the net income from foreclosure
property (as defined in section 857 (b) (4) (B)) over the
tax on such income imposed by section 857 (b) (4) (A),
'(B) any increase in the amount of the excess described
in section 857 (b) (3) (A) (ii) (relating to the excess of the
net capital gain over the deduction for capital gains dividends
paid), and
(C) any decrease in the deduction for dividends paid (as
defined in section 561) determined without regard to capital
gains dividends.
" (2) INTEREST AND ADDITIONS TO TAX DETERMINED WITH
RESPECT TO THE AMOUNT OF DEFICIENCY DIVIDEND DEDUCTION
ALLOWED.-For purposes of determining interest, additions to tax,
and additional amounts—
(A) the tax imposed by this chapter (after taking into
account the deduction allowed by subsection (a)) on the real
estate investment trust for the taxable year with respect to
which the determination is made shall be deemed to be
increased by an amount equal to the deduction allowed by
subsection (a) with respect to such taxable year,
((B) the last date prescribed for payment of such increase
in tax shall be deemed to have been the last date prescribed
for the payment of tax (determined in the manner provided
by section 6601 (c) for the taxable year with respect to which
the determination is made, and
" (C) such increase in tax shall be deemed to be paid as
of the date the claim for the deficiency dividend deduction
is filed.
(3) CREDIT OR REFUND.-If the allowance of a deficiency
dividend deduction results in an overpayment of tax for any tax-
able year, credit or refund with respect to such overpayment shall
be made as if on the date of the determination 2 years remained
before the expiration of the period of limitations on the filing of
claim for refund for the taxable year to which the overpayment
relates.
(c) DETERMINATION.-For purposes of this section, the term
'determination' means—
(1) a decision by the Tax Court, or a judgment, decree, or
other order by any court of competent jurisdiction, which has
become final;
" (2) a closing agreement made under section 7121 or
" (3) under regulations prescribed by the Secretary, an agree-
ment signed by the Secretary and by, or on behalf of, the real
estate investment trust relating to the liability of such trust for
tax.
H. R. 10612-225
"(d) DEFICIENCY DIVIDENDS.-
"(1) DEFINITION.-For purposes of this section, the term
'deficiency dividends' means a distribution of property made by
the real estate investment trust on or after the date of the determi-
nation and before filing claim under subsection (e), which would
have been includible in the computation of the deduction for divi-
dends paid under section 561 for the taxable year with respect to
which the liability for tax resulting from the determination exists,
if distributed during such taxable year. No distribution of prop-
erty shall be considered as deficiency dividends for purposes of
subsection (a) unless distributed within 90 days after the deter-
mination, and unless a claim for a deficiency dividend deduction
with respect to such distribution is filed pursuant to subsection
(e).
(2) LIMITATIONS.-
(A) ORDINARY DIVIDENDS.-The amount of deficiency
dividends (other than deficiency dividends qualifying as
capital gain dividends) paid by a real estate investment trust
for the taxable year with respect to which the liability for
tax resulting from the determination exists shall not exceed
the sum of-
"(i) the excess of the amount of increase referred to
in subparagraph (A) of subsection (b) (1) over the
amount of any increase in the deduction for dividends
paid (computed without regard to capital gain divi-
dends) for such taxable year which results from such
determination, and
(ii) the amount of decrease referred to in subpara-
graph (C) of subsection (b) (1).
" (B) CAPITAL GAIN DIVIDENDs.-The amount of deficiency
dividends qualifying as capital gain dividends paid by a real
estate investment trust for the taxable year with respect to
which the liability for tax resulting from the determination
exists shall not exceed the amount by which (i) the increase
referred to in subparagraph (B) of subsection (b) (1) exceeds
(ii) the amount of any dividends paid during such taxable
year which are designated as capital gain dividends after such
determination.
(3) EFFECT ON DIVIDENDS PAID DEDUCTION.-
(A) FOR TAXABLE YEAR IN WHICH PAID.-Deficiency
dividends paid in any taxable year shall not be included in
the amount of dividends paid for such year for purposes of
computing the dividends paid deduction for such year.
'(B) FOR PRIOR TAXABLE YEAR.-Deficiency dividends paid
in any taxable year shall not be allowed for purposes of
section 858 (a) in the computation of the dividends paid deduc-
tion for the taxable year preceding the taxable year in which
paid.
'(e) CLAIM REQUIRED.-No deficiency dividend deduction shall be
allowed under subsection (a) unless (under regulations prescribed by
the Secretary) claim therefor is filed within 120 days after the date of
the determination.
(f) SUSPENSION OF STATUTE OF LIMITATIONS AND STAY OF CoL-
LECTION.-
"(1) SUSPENSION OF RUNNING OF STATUTE.-If the real estate
investment trust files a claim as provided in subsection (e), the
H. R. 10612-226
running of the statute of limitations provided in section 6501 on
the making of assessments, and the bringing of distraint or a
proceeding in court for collection, in respect of the deficiency
established by a determination under this section, and all interest,
additions to tax, additional amounts, or assessable penalties in
respect thereof, shall be suspended for a period of 2 years after
the date of the determination.
(2) STAY OF COLLECTION.-In the case of any deficiency estab-
lished by a determination under this section-
(A) the collection of the deficiency, and all interest, addi-
tions to tax, additional amounts, and assessable penalties in
respect thereof, shall, except in cases of jeopardy, be stayed
until the expiration of 120 days after the date of the deter-
mination, and
"(B) if claim for a deficiency dividend deduction is filed
under subsection (e), the collection of such part of the
deficiency as is not reduced by the deduction for deficiency
dividends provided in subsection (a) shall be stayed until
the date the claim is disallowed (in whole or in part), and if
disallowed in part collection shall be made only with respect
to the part disallowed.
No distraint or proceeding in court shall be begun for the
collection of an amount the collection of which is stayed under
subparagraph (A) or (B) during the period for which the
collection of such amount is stayed.
"(g) DEDUCTION DENIED IN CASE OF FRAUD.-No deficiency dividend
deduction shall be allowed under subsection (a) if the determination
contains a finding that any part of any deficiency attributable to an
adjustment with respect to the taxable year is due to fraud with intent
to evade tax or to willful failure to file an income tax return within
the time prescribed by law or prescribed by the Secretary in pursuance
of law.
(h) PENALTY.-
"For assessable penalty with respect to liability for tax of real estate
investment trust which is allowed a deduction under subsection (a), see
section 6697."
(2) The table of sections for such part II is amended by adding
at the end thereof the following new item:
"Sec. 859. Deduction for deficiency dividends."
(b) PENALTY.-
(1) Subchapter B of chapter 68 (relating to assessable penal-
ties) is amended by adding at the end thereof the following new
section:
"SEC. 6697. ASSESSABLE PENALTIES WITH RESPECT TO LIABILITY FOR
TAX OF REAL ESTATE INVESTMENT TRUSTS.
"(a) CIVIL PENALTY.-In addition to any other penalty provided by
law, any real estate investment trust whose tax liability for any tax-
able year is deemed to be increased pursuant to section 859 (b) (2) (A)
(relating to interest and additions to tax determined with respect
to the amount of the deduction for deficiency dividends allowed)
shall pay a penalty in an amount equal to the amount of interest for
which such trust is liable that is attributable solely to such increase.
"(b) 50-PERCENT LIMITATION.-The penalty payable under this
section with respect to any determination shall not exceed one-half
of the amount of the deduction allowed by section 859 (a) for such
taxable year.
H. R. 10612-227
'(c) DEFICIENCY PROCEDURES NoT To APPLY.-Subchapter B of
chapter 63 (relating to deficiency procedure for income, estate, gift,
and certain excise taxes) shall not apply in respect of the assessment
or collection of any penalty imposed by subsection (a).'
(2) The table of sections for such subchapter B is amended by
adding at the end thereof the following:
"Sec. 6697. Assessable penalties with respect to liability for tax of real
estate investment trusts."
(c) LATE DESIGNATION AND PAYMENT OF CAPITAL GAIN DIVIDEND.-
The first sentence of subparagraph (C) of section 857 (b) (3) (defin-
ing capital gain dividend) is amended by inserting before the period
at the end thereof the following "; except that, if there is an increase
in the excess described in subparagraph (A) (ii) of this paragraph
for such year which results from a determination (as defined in sec-
tion 859(c)), such designation may be made with respect to such
increase at any time before the expiration of 120 days after the date
of such determination".
(d) DEFINITION OF DIVIDEND.-Subsection (b) of section 316
(relating to the definition of dividend) is amended by adding a new
paragraph (3) at the end thereof, to read as follows:
(3) DEFICIENCY DIVIDEND DISTRIBUTIONS BY A REAL ESTATE
INVESTMENT TRUST.-The term 'dividend' also means any distribu-
tion of property (whether or not a dividend as defined in
subsection (a)) which constitutes a 'deficiency dividend' as defined
in section 859 (d)."
(e) CARRYOVER OF DEFICIENCY DIVIDEND.-Section 381 (c) (relating
to carryovers in certain corporate acquisitions) is amended by adding
a new paragraph (25) at the end thereof, to read as follows:
" (25) DEFICIENCY DIVIDEND OF REAL ESTATE INVESTMENT TRUST.-
If the acquiring corporation pays a deficiency dividend (as
defined in section 859 (d)) with respect to the distributor or trans-
feror corporation, such distributor or transferor corporation shall,
with respect to such payments, be entitled to the deficiency divi-
dend deduction provided in section 859."
(f) TECHNICAL AMENDMENTS.-
(1) Section 6422 (relating to certain cross references) is
amended by adding a new paragraph (14) at the end thereof to
read as follows:
"(14) for credit or refund in case of deficiency dividends paid by a
real estate investment trust, see section 859."
(2) Section 6503 (i) (relating to certain cross references) is
amended by adding a new paragraph (5) at the end thereof, to
read as follows:
"(5) Deficiency dividends of a real estate investment trust, see section
859(f)."
(3) Section .6515 (relating to certain cross references) is
amended by adding a new paragraph (8) at the end thereof, to
read as follows:
"(8) Deficiency dividends of a real estate investment trust, see section
859."
SEC. 1602. TRUST NOT DISQUALIFIED IN CERTAIN CASES WHERE
INCOME TESTS WERE NOT MET.
(a) DISQUALIFICATION Nor APPLIED.-Section 856(c) (relating to
limitations) is amended by adding at the end thereof the following
new paragraph:
H. R. 10612-228
"(7) A corporation, trust, or association which fails to meet the
requirements of paragraph (2) or (3), or of both such para-
graphs, for any taxable year shall nevertheless be considered to
have satisfied the requirements of such paragraphs for such tax-
able year if-
"(A) the nature and amount of each item of its gross
income described in such paragraphs is set forth in a schedule
attached to its income tax return for such taxable year;
((B) the inclusion of any incorrect information in the
schedule referred to in subparagraph (A) is not due to fraud
with intent to evade tax; and
'(C) the failure to meet the requirements of paragraph
(2) or (3), or of both such paragraphs, is due to reasonable
cause and not due to willful neglect.".
(b) IMPOSITION OF SPECIAL TAXES.-
(1) Section 857 (b) (relating to method of taxation of real
estate investment trusts, etc.) is amended by redesignating para-
graph (5) as paragraph (7) and by inserting after paragraph
(4) the following new paragraph:
(5) IMPOSITION OF TAX IN CASE OF FAILURE TO MEET CERTAIN
REQUIREMENTS.-If section 856(c) (7) applies to a real estate
investment trust for any taxable year, there is hereby imposed on
such trust a tax in an amount equal to the greater of-
"(A) the excess of-
" (i) 95 percent (90 percent in the case of taxable years
beginning before January 1, 1980) of the gross income
(excluding gross income from prohibited transactions)
of the real estate investment trust, over
"(ii) the amount of such gross income which is derived
from sources referred to in section 856(c) (2) ; or
"(B) the excess of-
(i) 75 percent of the gross income (excluding gross
income from prohibited transactions) of the real estate
investment trust, over
(ii) the amount of such gross income which is derived
from sources referred to in section 856(c) (3),
multiplied by a fraction the numerator of which is the real
estate investment trust taxable income for the taxable year
(determined without regard to the deductions provided in
paragraphs (2) (B) and (2) (E), without regard to any net
operating loss deduction, and by excluding any net capital
gain) and the denominator of which is the gross income for
the taxable year (excluding gross income from prohibited
transactions; gross income and gain from foreclosure prop-
erty (as defined in section 856(e), but only to the extent such
gross income and gain is not described in subparagraph (A),
(B), (C), (D), (E), or (G) of section 856(c) (3) ; long-
term capital gain; and short-term capital gain to the extent
of any short-term capital loss)."
(2) Section 857 (b) (2) (relating to real estate investment trust
taxable income) is amended by inserting after subparagraph (D)
(as redesignated by section 1606(a) of this Act) the following
new subparagraph:
(E) There shall be deducted an amount equal to the tax
imposed by paragraph (5) for the taxable year.".
H. R. 10612-229
SEC. 1603. TREATMENT OF PROPERTY HELD FOR SALE TO CUSTOMERS.
(a) ELIMINATION OF HOLDING FOR SALE RULE AS QUALIFICATION
REQUIREMENT.-Section 856(a) (defining real estate investment trust)
is amended by striking out paragraph (4).
(b) Tax ON INCOME FROM PROPERTY DESCRIBED IN SECTION 1221 (1)
THAT Is NoT FORECLOSURE PROPERTY.-Section 857 (b) (relating to
method of taxation of real estate investment trusts, etc.) is amended
by inserting after paragraph (5) (as added by section 1602(b) (1) of
this Act) the following new paragraph:
" (6) INCOME FROM PROHIBITED TRANSACTIONS.
(A) IMPOSITION OF TAX-There is hereby imposed for
each taxable year of every real estate investment trust a tax
equal to 100 percent of the net income derived from pro-
hibited transactions.
"(B) DEFINITIONS.-For purposes of this part-
(i) the term 'net income derived from prohibited
transactions' means the excess of the gain from prohib-
ited transactions over the deductions allowed by this
chapter which are directly connected with prohibited
transactions;
(ii) the term 'net loss derived from prohibited trans-
actions' means the excess of the deductions allowed by
this chapter which are directly connected with prohib-
ited transactions over the gain from prohibited trans-
actions; and
(iii) the term 'prohibited transaction' means a sale
or other disposition of property described in section
1221 (1) which is not foreclosure property."
(c) TECHNICAL AMENDMENTS.-
(1) So much of paragraph (3) of section 856 (c) (relating to
limitations) as precedes subparagraph (A) thereof is amended to
read as follows:
"(3) at least 75 percent of its gross income (excluding gross
income from prohibited transactions) is derived from-".
(2) Section 856(c) (2) (relating to limitations) is amended by
inserting before the semicolon in subparagraph (D) thereof
"which is not property described in section 1221 (1)".
(3) Section 856 (c) (3) (relating to limitations) is amended by
inserting before the semicolon in subparagraph (C) thereof
"which is not property described in section 1221 (1)
(4) Section 856(e) (1) (defining foreclosure property) is
amended by adding at the end thereof the following sentence:
"Such term does not include property acquired by the real estate
investment trust as a result of indebtedness arising from the sale
or other disposition of property of the trust described in section
1221 (1) which was not originally acquired as foreclosure
property."
(5) Section 857 (b) (2) (relating to real estate investment trust
taxable income) is amended by adding a new subparagraph (F)
immediately after subparagraph (E) (as added by section 1602
(b) (2) of this Act), to read as follows:
(F) There shall be excluded an amount equal to any net
income derived from prohibited transactions and there shall
be included an amount equal to any net loss derived from pro-
hibited transactions."
H. R. 10612-230
SEC. 1604. OTHER CHANGES IN LIMITATIONS AND REQUIREMENTS.
(a) INCREASE IN 90-PERCENT GROSS INCOME REQUIREMENT TO 95
PERCENT.-Section 856 (c) (2) (relating to limitations) is amended by
striking out "90 percent of its gross income" and inserting in lieu
thereof "95 percent (90 percent for taxable years beginning before
January 1, 1980). of its gross income (excluding gross income from~
prohibited transactions)"
(b) APPORTIONMENT OF RENTAL INCOME AND CHARGES FOR CUSTOM-
ARY SERVICES; CHANGE IN DEFINITION OF INDEPENDENT CONTRACTOR.-
Subsection (d) of section 856 (defining rents from real property) is
amended to read as follows:
(d) RENTS FROM REAL PROPERTY DEFINED.-
(1) AMOUNTS INCLUDED.-For purposes of paragraphs (2) and
(3) of subsection (c), the term 'rents from real property' includes
(subject to paragraph (2))
'(A) rents from interests in real property,
(B) charges for services customarily furnished or rendered
in connection with the rental of real property, whether or not
such charges are separately stated, and
(C) rent attributable to personal property which is leased
under, or in connection with, a lease of real property, but
only if the rent attributable to such personal property for
the taxable year does not exceed 15 percent of the total rent
for the taxable year attributable to both the real and personal
property leased under, or in connection with, such lease.
For purposes of subparagraph (C), with respect to each lease of
real property, rent attributable to personal property for the tax-
able year is that amount which bears the same ratio to total rent
for the taxable year as the average of the adjusted bases of the
personal property at the beginning and at the end of the taxable
year bears to the average of the aggregate adjusted bases of both
the real property and the personal property at the beginning and
at the end of such taxable year.
"(2) AMOUNTS EXCLUDED.-For purposes of paragraphs (2) and
(3) of subsection (c), the term 'rents from real property' does not
include-
'(A) except as provided in paragraph (4), any amount
received or accrued, directly or indirectly, with respect to any
real or personal property, if the determination of such amount
depends in whole or in part on the income or profits derived
by any person from such property (except that any amount
so received or accrued shall not be excluded from the term
'rents from real property' solely by reason of being based on a
fixed percentage or percentages of receipts or sales) ;
(B) any amount received or accrued directly or indirectly
from any person if the real estate investment trust owns,
directly or indirectly—
" (i) in the case of any person which is a corporation,
stock of such person possessing 10 percent or more of the
total combined voting power of all classes of stock
entitled to vote, or 10 percent or more of the total number
of shares of all classes of stock of such person; or
(ii) in the case of any person which is not a corpora-
tion, an interest of 10 percent or more in the assets or net
profits of such person; and
" (C) any amount received or accrued, directly or indirectly,
with respect to any real or personal property if the real
H. R. 10612-231
estate investment trust furnishes or renders services to the ten-
ants of such property, or manages or operates such property,
other than through an independent contractor from whom the
trust itself does not derive or receive any income.
(3) INDEPENDENT CONTRACTOR DEFINED.-For purposes of this
subsection and subsection (e), the term 'independent contractor'
means any person-
"(A) who does not own, directly or indirectly, more than
35 percent of the shares, or certificates of beneficial interest,
in the real estate investment trust; and
(B) if such person is a corporation, not more than 35 per-
cent of the total combined voting power of whose stock (or 35
percent of the total shares of all classes of whose stock), or, if
such person is not a corporation, not more than 35 percent of
the interest in whose assets or net profits is owned, directly or
indirectly, by one or more persons owning 35 percent or more
of the shares or certificates of beneficial interest in the trust.
" (4) SPECIAL RULE FOR CERTAIN CONTINGENT RENTS.-Where a
real estate investment trust receives or accrues, with respect to real
or personal property, any amount which would be excluded from
the term 'rents from real property' solely because the tenant of the
real estate investment trust receives or accrues, directly or indi-
rectly, from subtenants any amount the determination of which
depends in whole or in part on the income or profits derived by
any person from such property, only a proportionate part (deter-
mined pursuant to regulations prescribed by the Secretary)
of the amount received or accrued by the real estate investment
trust from that tenant will be excluded from the term 'rents from
real property'.
"(5) CONSTRUCTIVE OWNERSHIP OF STOCK.-For purposes of this
subsection, the rules prescribed by section 318(a) for determining
the ownership of stock shall apply in determining the ownership
of stock, assets, or net profits of any person; except that '10 per-
cent' shall be substituted for '50 percent' in subparagraph (C)
of section 318( (2) and 318 (3)."
(c) COMMITMENT FEES.-
(1) IN GENERAL.-Paragraphs (2) and (3) of section 856 (c)
(relating to limitations) are each amended by striking out "and"
after the semicolon at the end of subparagraph (E), by inserting
"and" after the semicolon at the end of subparagraph (F), and
by adding at the end thereof the following new subparagraph:
(G) amounts (other than amounts the determination of
which depends in whole or in part on the income or profits of
any person) received or accrued as consideration for entering
into agreements (i) to make loans secured by mortgages on
real property or on interests in real property or (ii) to pur-
chase or lease real property (including interests in real prop-
erty and interests in mortgages on real property)
(2) CONFORMING AMENDMENT.-Section 857 (b) (4) (B) (relat-
ing to net income from foreclosure property) is amended by strik-
ing out " (D), or (E)' in subdivision (i) and inserting in lieu
thereof (D), (E), or (G)".
(d) INCOME FROM SALE OF MORTGAGES HELD LESS THAN 4 YEARS.-
Section 856 (c) (4) (relating to limitations) is amended to read as
follows:
(4) less than 30 percent of its gross income is derived from
the sale or other disposition of-
H. R. 10612-232
(A) stock or securities held for less than 6 months;
'(B) section 1221 (1) property (other than foreclosure
property) ; and
(C) real property (including interests in real property
and interests in mortgages on real property) held for less
than 4 years other than-
(i) property compulsorily or involuntarily converted
within the meaning of section 1033, and
(ii) property which is foreclosure property within
the definition of section 856 (e) ; and".
(e) OPTIONS To PURCHASE REAL PROPERTY TREATED AS INTERESTS
IN REAL PROPERTY-Section 856(c) (6) (C) (relating to limitations) is
amended to read as follows:
"(C) The term 'interests in real property' includes fee own-
ership and co-ownership of land or improvements thereon,
leaseholds of land or improvements thereon, options to acquire
land or improvements thereon, and options to acquire lease-
holds of land or improvements thereon, but does not include
mineral, oil, or gas royalty interests."
(f) REAL ESTATE INVESTMENT TRUSTS MAY BE INCORPORATED.-
(1) IN GENERAL.-So much of subsection (a) of section 856
(defining real estate investment trust) as precedes paragraph (3)
thereof is amended to read as follows:
"(a) IN GENERAL.-For purposes of this title, the term 'real estate
investment trust' means a corporation, trust, or association-
"(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by trans-
ferable shares, or by transferable certificates of beneficial
interest;".
(2) EXCEPTION FOR FINANCIAL INSTITUTIONS AND INSURANCE COM-
PANIES.-Section 856 (a) (defining real estate investment trust)
is amended by inserting after paragraph (3) the following new
paragraph:
(4) which is neither (A) a financial institution to which sec-
tion 585, 586, or 593 applies, nor (B) an insurance company to
which subchapter L applies;".
(3) CONFORMING AMENDMENTS.-
(A) So much of section 856(c) (relating to limitations) as
precedes paragraph (1) thereof is amended by striking out
"A trust or association" and inserting in lieu thereof "A cor-
poration, trust, or association".
(B) The second sentence of section 857 (d) (relating to
earnings and profits) is amended by striking out "a domestic
unincorporated trust" and inserting in lieu thereof "a domes-
tic corporation, trust,".
(g) INTEREST.-Section 856 (relating to definition of real estate
investment trust) is amended by adding after subsection (e) the
following new subsection:
"(f) INTEREST.-For purposes of paragraphs (2) (B) and (3) (B) of
subsection (c), the term 'interest' does not include any amount received
or accrued, directly or indirectly, if the determination of such amount
depends in whole or in part on the income or profits of any person
except that:
"(1) any amount so received or accrued shall not be excluded
from the term 'interest' solely by reason of being based on a fixed
percentage or percentages of receipts or sales, and
"(2) where a real estate investment trust receives or accrues
any amount which would be excluded from the term 'interest'
H. R. 10612-233
solely because the debtor of the real estate investment trust receives
or accrues any amount the determination of which depends in
whole or in part on the income or profits of any person, only a
proportionate part (determined pursuant to regulations pre-
scribed by the Secretary) of the amount received or accrued by
the real estate investment trust from such debtor will be excluded
from the term 'interest'.
The provisions of this subsection shall apply only with respect to
amounts received or accrued pursuant to loans made after May 27,
1976. For purposes of the preceding sentence, a loan is considered to be
made before May 28, 1976, if such loan is made pursuant to a binding
commitment entered into before May 28, 1976."
(h) CERTAIN DIVIDENDS.-The first sentence of section 858 (a) (relat-
ing to dividends paid by real estate investment trust after close of
taxable year) is amended-
(1) by inserting ((and specifies in dollar amounts)" after "to
the extent the trust elects in such return", and
(2) by striking out "paid during such taxable year" and insert-
ing in lieu thereof "paid only during such taxable year".
(i) ADOPTION OF ANNUAL ACCOUNTING PERIOD.-
(1) Part II of subchapter M of chapter 1 (relating to real
estate investment trusts) is amended by adding at the end thereof
the following new section:
"SEC. 860. ADOPTION OF ANNUAL ACCOUNTING PERIOD.
"For purposes of this subtitle, a real estate investment trust shall
not change to or adopt any annual accounting period other than the
calendar year."
(2) The table of sections for such part II is amended by adding
at the end thereof the following:
"Sec. 860. Adoption of annual accounting period."
(j) CHANGE IN DISTRIBUTION REQUIREMENTS.-Section 857 (a) (1)
(relating to requirements applicable to real estate investment trusts)
is amended to read as follows:
"(1) the deduction for dividends paid during the taxable year
(as defined in section 561, but determined without regard to capi-
tal gains dividends) equals or exceeds-
(A) the sum of-
(i) 95 percent (90 percent for taxable years begin-
ning before January 1, 1980) of the real estate investment
trust taxable income for the taxable year (determined
without regard to the deduction for dividends paid (as
defined in section 561) and by excluding any net capital
gain) ; and
(ii) 95 percent (90 percent for taxable years begin-
ing before January 1, 1980) of the excess of the net
income from foreclosure property over the tax imposed
on such income by subsection (b) (4) (A) ; minus
"(B) the sum of-
'(i) the amount of any penalty imposed on the real
estate investment trust by section 6697 which is paid by
such trust during the taxable year; and
(ii) the net loss derived from prohibited transactions,
and".
(k) MANNER AND EFFECT OF TERMINATION OR REVOCATION OF
ELECTION.-
H. R. 10612-234
(1) IN GENERAL-Section 856 (relating to definition of real
estate investment trust) is amended by adding after subsection
(f) (as added by section 1604(g) of this Act) the following new
subsection:
(g) TERMINATION OF ELECTION.-
" (1) FAILURE TO QUALIFY.-An election under subsection (c) (1)
made by a corporation, trust, or association shall terminate if
the corporation, trust, or association is not a real estate invest-
ment trust to which the provisions of this part apply for the tax-
able year with respect to which the election is made, or for any
succeeding taxable year. Such termination shall be effective for
the taxable year for which the corporation, trust, or association
is not a real estate investment trust to which the provisions of
this part apply, and for all succeeding taxable years.
" (2) REVOCATION.-An election under subsection (c) (1) made
by a corporation, trust, or association may be revoked by it for
any taxable year after the first taxable year for which the elec-
tion is effective. A revocation under this paragraph shall be effec-
tive for the taxable year in which made and for all succeeding
taxable years. Such revocation must be made on or before the 90th
day after the first day of the first taxable year for which the
revocation is to be effective. Such revocation shall be made in such
manner as the Secretary shall prescribe by regulations.
(3) ELECTION AFTER TERMINATION OR REVOCATION.-Except as
provided in paragraph (4), if a corporation, trust, or association
has made an election under subsection (c) (1) and such election
has been terminated or revoked under paragraph (1) or para-
graph (2), such corporation, trust, or association (and any suc-
cessor corporation, trust, or association) shall not be eligible to
make an election under subsection (c) (1) for any taxable year
prior to the fifth taxable year which begins after the first taxable
year for which such termination or revocation is effective.
(4) EXCEPTION.-If the election of a corporation, trust, or
association has been terminated under paragraph (1), paragraph
(3) shall not apply if-
(A) the corporation, trust, or association does not will-
fully fail to file within the time prescribed by law an income
tax return for the taxable year with respect to which the ter-
mination of the election under subsection (c) (1) occurs;
(B) the inclusion of any incorrect information in the
return referred to in subparagraph (A) is not due to fraud
with intent to evade tax; and
(C) the corporation, trust, or association establishes to
the satisfaction of the Secretary that its failure to qualify as
a real estate investment trust to which the provisions of this
part apply is due to reasonable cause and not due to willful
neglect.
(2) CONFORMING AMENDMENTS.-
(A) Section 856 (c) (1) (relating to limitations) is amended
by striking out the semicolon at the end and inserting in lieu
thereof ", and such election has not been terminated or revoked
under subsection (g)
(B) Section 857 (a) (relating to requirements applicable to real
estate investment trust) is amended by striking out " (other than
subsection (d) of this section)" and inserting in lieu thereof
(other than subsection (d) of this section and subsection (g) of
section 856)".
H. R. 10612-235
SEC. 1605. EXCISE TAX.
(a) IMPOSITION OF Tax.-Subtitle D (relating to miscellaneous excise
taxes) is amended by adding at the end thereof the following new
chapter:
"CHAPTER 44-REAL ESTATE INVEST-
MENT TRUSTS
"Sec. 4981. Excise tax based on certain real estate investment trust
taxable income not distributed during the taxable year.
"SEC. 4981. EXCISE TAX BASED ON CERTAIN REAL ESTATE INVEST-
MENT TRUST TAXABLE INCOME NOT DISTRIBUTED
DURING THE TAXABLE YEAR.
"Effective with respect to taxable years beginning after Decem-
ber 31, 1979, there is hereby imposed on each real estate investment
trust for the taxable year a tax equal to 3 percent of the amount (if
any) by which 75 percent of the real estate investment trust taxable
income (as defined in section 857(b)(2), but determined without
regard to section 857 (b) (2) (B), and by excluding any net capital gain
for the taxable year) exceeds the amount of the dividends paid deduc-
tion (as defined in section 561, but computed without regard to capital
gains dividends as defined in section 857(b)(") (C) and without
regard to any dividend paid after the close of the axable year) for the
taxable year. For purposes of the preceding sen ence, the determina-
tion of the real estate investment trust taxable ino me shall be made by
taking into account only the amount and char ter of the items of
income and deduction as reported by such trust a its return for the
taxable year."
(b) TECHNICAL AMENDMENTS.-
(1) Paragraph (6) of section 275 (a) to denial of
deduction for certain taxes) is amended by striking out "and
chapter 43." and inserting in lieu thereof ", chapter 43, and chap-
ter 44."
(2) Section 857 (relating to taxation of real estate investment
trusts and their beneficiaries) is amended by adding at the end
thereof the following new subsection:
"(e) CROSS REFERENCE.-
"For provisions relating to excise tax based on certain real estate
investment trust taxable income not distributed during the taxable
year, see section 4981."
(3) Section 6161 (b) (1) relating to extensions of time for pay-
ment of tax), as amended by this Act, is amended by striking
out "42 or 43" and inserting in lieu thereof "42, 43, or 44". The
second sentence of section 6161 (b) is amended by striking out "or
chapter 43" and inserting in lieu thereof "43, or 44".
(4) Section 6211 (defining deficiency) is amended—
(A) by striking out "and 43" in subsection (a) and insert-
ing in lieu thereof "43, and 44",
(B) by striking out "or 43" in subsection (a) and insert-
ing in lieu thereof "43, or 44", and
(C) by striking out "or 43" in subsection (b) (2) and
inserting in lieu thereof "43, or 44".
(5) Section 6212 (relating to notice of deficiency) is amended—
(A) by striking out "or 43" in subsection (a) and insert-
ing in lieu thereof "43, or 44",
H. R. 10612-236
(B) by striking out "or chapter 43" in subsection (b) (1)
and inserting in lieu thereof "chapter 43, or chapter 44",
(C) by striking out "chapter 43, and this chapter" in sub-
section (b) (1) and inserting in lieu thereof "chapter 43, chap-
ter 44, and this chapter", and
(D) by striking out "of chapter 43 tax for the same tax-
able years," in subsection (c) (1) and inserting in lieu thereof
"of chapter 43 tax for the same taxable years, of chapter 44
tax for the same taxable years,".
(6) Section 6213 (a) (relating to restrictions applicable to defi-
ciencies and petition to Tax Court) is amended by striking out
"or 43" and inserting in lieu thereof "43, or 44".
(7) Section 6214 (relating to determinations by Tax Court) is
amended—
(A) by striking out "or 43" in the heading of subsection
(c) and inserting in lieu thereof "43, or 44", and
(B) by striking out "or 43" each place it appears in sub-
section (c) and inserting in lieu thereof "43, or 44", and
(C) by striking out "or 43" in subsection (d) and insert-
ing in lieu thereof "43, or 44".
(8) Section 6344 (a) (1) (relating to cross references) is
amended by striking out "or 43" and inserting in lieu thereof "43,
or 44".
(9) Section 6512 (relating to limitations in case of petition to
Tax Court) is amended by striking out "or 43" each place it
appears and inserting in lieu thereof "43, or 44".
(10) Section 6601 (c) (relating to suspension of interest in cer-
tain income, etc. tax cases) is amended by striking out in the head-
ing thereof "or 43" and inserting in lieu thereof "43, or 44".
(11) Section 7422 (relating to civil actions for refund) is
amended by striking out "or 43" in subsection (e) and inserting
in lieu thereof "43, or 44".
(c) CLERICAL AMENDMENT.-The table of chapters for subtitle D
is amended by adding at the end thereof the following:
"Chapter 44. Real estate investment trusts."
SEC. 1606. ALLOWANCE OF NET OPERATING LOSS CARRYOVER.
(a) ALLOWANCE OF DEDUCTION.-Section 857 (b) (2) (relating to
real estate investment trust taxable income) is amended by striking
out subparagraph (E) and by redesignating subparagraph (F) as
subparagraph (D).
(b) YEARS TO WHICH Loss MAY BE CARRIED.-Section 172(b) (1)
(relating to years to which a net operating loss may be carried) is
amended by inserting after subparagraph (D) thereof the following:
" (E) In the case of a taxpayer which has a net operating
loss for any taxable year for which the provisions of part II
of subchapter M (relating to real estate investment trusts)
apply to such taxpayer, such loss shall not be a net operating
loss carryback to any taxable year preceding the taxable year
of such loss and shall be a net operating loss carryover to
each of the 8 taxable years following the taxable year of such
loss, except, in the case of a net operating loss for a taxable
year ending before January 1, 1976, such loss shall not be car-
ried to the 6th, 7th, or 8th taxable year following the taxable
year of such loss unless part II of subchapter M applied to the
taxpayer for the taxable year to which the loss is carried and
for all intervening taxable years following the year of loss.
H. R. 10612-237
A net operating loss shall not be carried back to a taxable
year for which part II of subchapter M applied to the
taxpayer."
(c) DETERMINATION OF THE AMOUNT OF THE NET OPERATING Loss
AND THE CARRYOVER.-Section 172(d) (relating to modifications in
computing net operating loss) is amended by adding a new paragraph
(7) at the end thereof, to read as follows:
"(7) In the case of any taxable year for which part II of sub-
chapter M (relating to real estate investment trusts) applies to
the taxpayer-
(A) the net operating loss for such taxable year shall be
computed by taking into account the adjustments described
in section 857 (b) (2) (other than the deduction for dividends
paid described in section 857 (b) (2) (B)) and
"(B) where such taxable year is a 'prior taxable year'
referred to in paragraph (2) of subsection (b), the term
'taxable income' in such paragraph shall mean 'real estate
investment trust taxable income' (as defined in section 857
(b) (2))
(d) CONFORMING AMENDMENT.-Subparagraph (B) of section 857
#
(b) (2) (relating to real estate investment trust taxable income), as
redesignated by section 1607 (b) of this Act, is amended by striking
out "subparagraph (F)" and inserting in lieu thereof "subparagraph
(D)".
SEC. 1607. ALTERNATIVE TAX IN CASE OF CAPITAL GAINS.
(a) ALTERNATIVE Tax.-Section 857 (b) (3) (A) (relating to imposi-
tion of tax on capital gain) is amended to read as follows:
"(A) ALTERNATIVE TAX IN CASE OF CAPITAL GAINS.-If for
any taxable year a real estate investment trust has a net
capital gain, then, in lieu of the tax imposed by subsection
(b) (1), there is hereby imposed a tax (if such tax is less
than the tax imposed by such subsection) which shall con-
sist of the sum of—
"(i) a tax, computed as provided in subsection (b) (1),
on the real estate investment trust taxable income (deter-
mined by excluding such net capital gain and by com-
puting the deduction for dividends paid without regard
to capital gain dividends), and
(ii) a tax of 30 percent of the excess of the net capital
gain over the deduction for dividends paid (as defined
in section 561) determined with reference to capital gains
dividends only."
(b) CONFORMING AMENDMENTS.-
(1) (A) Section 857(b) (2) (relating to method of taxation
of real estate investment trust taxable income) is amended by
deleting subparagraph (A) and redesignating subparagraphs
(B), (C), and (D) as subparagraphs (A), (B), and (C), respec-
tively.
(B) Subsection (e) (2) of section 46 (relating to investment
credit) is amended—
(i) by striking out "857 (b) (2) (C) in subparagraph (B)
and inserting in lieu thereof "857 (b) (2) (B)", and
(ii) by inserting "determined without regard to any deduc-
tion for capital gains dividends (as defined in section
857 (b) (3) (C)) and by excluding any net capital gain"
immediately before the period at the end of the last sentence
thereof.
H. R. 10612-238
(C) Section 443 (e) (5) (relating to cross references) is amended
by striking out "857 (b) (2) (D) and inserting in lieu thereof
"857 (b) (2) (C)".
(2) Subparagraph (B) of section 857 (b) (2) (relating to real
estate investment trust taxable income), as redesignated by para-
graph (1) of this subsection, is amended by striking out "shall
be computed without regard to capital gains dividends and".
(3) Section 857 (b) (3) (C) (relating to definition of capital
gain dividend) is amended by inserting after the second sentence
thereof the following: "For purposes of this subparagraph, the
net capital gain shall be deemed not to exceed the real estate
investment trust taxable income (determined without regard to
the deduction for dividends paid (as defined in section 561) for
the taxable year).'
SEC. 1608. EFFECTIVE DATE FOR TITLE.
(a) DEFICIENCY DIVIDEND PROCEDURES.-The amendments made by
section 1601 shall apply with respect to determinations (as defined
in section 859 (c) of the Internal Revenue Code of 1954) occurring
after the date of the enactment of this Act. If the amendments made
by section 1601 apply to a taxable year ending on or before the date of
enactment of this Act:
(1) the reference to section 857 (b) (3) (A) (ii) in sections
857 (b) (3) (C) and 859 (b) (1) (B) of such Code, as amended, shall
be considered to be a reference to section 857 (b) (3) (A) of such
Code, as in effect immediately before the enactment of this Act,
and
(2) the reference to section 857 (b) (2) (B) in section 859 (a)
of such Code, as amended, shall be considered to be a reference to
section 857 (b) (2) (C) of such Code, as in effect immediately before
the enactment of this Act.
(b) TRUST Nor DISQUALIFIED IN CERTAIN CASES WHERE INCOME
TESTS NoT MET.-The amendment made by section 1602 shall apply to
taxable years of real estate investment trusts beginning after the date
of the enactment of this Act. In addition, the amendments made by
section 1602 shall apply to a taxable year of a real estate investment
trust beginning before the date of the enactment of this Act if, as the
result of a determination (as defined in section 859 (c) of the Internal
Revenue Code of 1954) with respect to such trust occurring after the
date of the enactment of this Act, such trust for such taxable years
does not meet the requirements of section 856(c) (2) or section 856
(c) (3), or of both such sections, of such Code as in effect for such tax-
able year. In any case, the amendment made by section 1602 (a)
requiring a schedule to be attached to the income tax return of certain
real estate investment trusts shall apply only to taxable years of such
trusts beginning after the date of the enactment of this Act. If the
amendments made by section 1602 apply to a taxable year ending on
or before the date of enactment of this Act, the reference to paragraph
(2) (B) in section 857 (b) (5) of such Code, as amended, shall be con-
sidered to be a reference to paragraph (2) (C) of section 857(b) of
such Code, as in effect immediately before the enactment of this Act.
(c) ALTERATIVE TAX AND NET OPERATING Loss.-The amendments
made by sections 1606 and 1607 shall apply to taxable years ending
after the date of the enactment of this Act, except that in the case of
a taxpayer which has a net operating loss (as defined in section 172 (c)
of the Internal Revenue Code of 1954) for any taxable year ending
after the date of enactment of this Act for which the provisions of
H. R. 10612-239
part II of subchapter M of chapter 1 of subtitle A of such Code apply
to such taxpayer, such loss shall not be a net operating loss carryback
under section 172 of such Code to any taxable year ending on or before
the date of enactment of this Act.
(d) OTHER AMENDMENTS.-
(1) Except as provided in paragraphs (2) and (3), the amend-
ments made by sections 1603, 1604, and 1605 shall apply to taxable
years of real estate investment trusts beginning after the date of
the enactment of this Act.
(2) If, as a result of a determination (as defined in section
859 (c) of the Internal Revenue Code of 1954), occurring after
the date of enactment of this Act, with respect to the real estate
investment trust, such trust does not meet the requirement of sec-
tion 856 (a) (4) of the Internal Revenue Code of 1954 (as in effect
before the amendment of such section by this Act) for any tax-
able year beginning on or before the date of the enactment of this
Act, such trust may elect, within 60 days after such determina-
tion in the manner provided in regulations prescribed by the Sec-
retary of the Treasury or his delegate, to have the provisions of
section 1603 (other than paragraphs (1), (2), (3), and (4) of
section 1603 (c) apply with respect to such taxable year. Where
the provisions of section 1603 apply to a real estate investment
trust with respect to any taxable year beginning on or before the
date of the enactment of this Act-
(A) credit or refund of any overpayment of tax which
results from the application of section 1603 to such taxable
year shall be made as if on the date of the determination (as
defined in section 859 (c) of the Internal Revenue Code of
1954) 2 years remained before the expiration of the period of
limitation prescribed by section 6511 of such Code on the
filing of claim for refund for the taxable year to which the
overpayment relates,
(B) the running of the statute of limitations provided in
section 6501 of such Code on the making of assessments, and
the bringing of distraint or a proceeding in court for collec-
tion, in respect of any deficiency (as defined in section 6211
of such Code) established by such a determination, and all
interest, additions to tax, additional amounts, or assessable
penalties in respect thereof, shall be suspended for a period
of 2 years after the date of such determination, and
(C) the collection of any deficiency (as defined in section
6211 of such Code) established by such determination and all
interest, additions to tax, additional amounts, and assessable
penalties in respect thereof shall, except in cases of jeopardy,
be stayed until the expiration of 60 days after the date of
such determination.
No distraint or proceeding in court shall be begun for the collec-
tion of an amount the collection of which is stayed under sub-
paragraph (C) during the period for which the collection of
such amount is stayed.
(3) Section 856 (g) (3) of the Internal Revenue Code of 1954,
as added by section 1604 of this Act, shall not apply with respect
to a termination of an election, filed by a taxpayer under section
856 (c) (1) of such Code on or before the date of the enactment of
this Act, unless the provisions of part II of subchapter M of chap-
ter 1 of subtitle A of such Code apply to such taxpayer for a tax-
able year ending after the date of the enactment of this Act for
which such election is in effect.
H. R. 10612-240
TITLE XVII-RAILROAD AND AIRLINE
PROVISIONS
SEC. 1701. CERTAIN PROVISIONS RELATING TO RAILROADS.
(a) TREATMENT OF CERTAIN RAILROAD Tres.-Section 263 (relating
to capital expenditures) is amended by adding at the end thereof the
following new subsection:
(g) RAILROAD Tres.-In the case of a domestic common carrier by
rail (including a railroad switching or terminal company) which uses
the retirement-replacement method of accounting for depreciation of
its railroad track, expenditures for acquiring and installing replace-
ment ties of any material (and fastenings related to such ties) shall be
accorded the same tax accounting treatment as expenditures for
replacement ties of wood (and fastenings related to such ties)."
(b) INCREASE IN 50-PERCENT LIMITATION.-Subsection (a) of section
46 (relating to determination of amount of investment credit) is
amended by adding at the end thereof the following new paragraph:
(8) ALTERNATIVE LIMITATION IN THE CASE OF CERTAIN
RAILROADS.-
(A) IN GENERAL.-If, for a taxable year ending after
calendar year 1976, and before calendar year 1983, the amount
of the qualified investment of the taxpayer which is attribut-
able to railroad property is 25 percent or more of his aggre-
gate qualified investment, then subparagraph (C) of
paragraph (3) of this subsection shall be applied by sub-
stituting for 50 percent his applicable percentage for such
year.
"(B) APPLICABLE PERCENTAGE.-The applicable percentage
of any taxpayer for any taxable year under this paragraph
is-
'(i) 50 percent, plus
(ii) that portion of the tentative percentage for the
taxable year which the taxpayer's amount of qualified
investment which is railroad property bears to his aggre-
gate qualified investment.
If the proportion referred to in clause (ii) is 75 percent or
more, the applicable percentage of the taxpayer for the year
shall be 50 percent plus the tentative percentage for such
year.
"(C) TENTATIVE PERCENTAGE.-For purposes of subpara-
graph (B), the tentative percentage shall be determined
under the following table:
"If the taxable
The tentative
year ends in:
percentage is:
1977 or 1978
50
1979
40
1980
30
1981
20
1982
10
"(D) RAILROAD PROPERTY DEFINED.-For purposes of this
paragraph, the term 'railroad property' means section 38
property used by the taxpayer directly in connection with the
trade or business carried on by the taxpayer of operating
a railroad (including a railroad switching or terminal
company)."
H. R. 10612-241
SEC. 1702. AMORTIZATION OVER 50-YEAR PERIOD OF RAILROAD GRAD-
ING AND TUNNEL BORES PLACED IN SERVICE BEFORE
1969.
(a) IN GENERAL.Section 185 (relating to amortization of railroad
grading and tunnel bores) is amended by redesignating subsections
(d), (e), (f), (g), and (h) as subsections (f), (g), (h), (i), and (j),
respectively, and by inserting after subsection (c) the following new
subsections:
"(d) ELECTION WITH RESPECT TO PRE-1969 PROPERTY.-A taxpayer
may, for any taxable year beginning after December 31, 1974, elect for
purposes of this section to treat the term 'qualified railroad grading
and tunnel bores' as including pre-1969 railroad grading and tunnel
bores. An election under this subsection shall be made by filing with
the Secretary, in such manner, in such form, and within such time, as
the Secretary may by regulations prescribe, a statement of such elec-
tion. The election under this subsection shall remain in effect for all
taxable years, after the first year for which it is effective, for which an
election under subsection (c) is effective. The election under this sub-
section shall apply to all pre-1969 railroad grading and tunnel bores of
the taxpayer, unless, on application by the taxpayer, the Secretary
permits him, subject to such conditions as the Secretary deems neces-
sary, to revoke such election.
(e) ADJUSTED BASIS FOR PRE-1969 RAILROAD GRADING AND TUNNEL
BORES.-
"(1) IN GENERAL-The adjusted basis of any pre-1969 railroad
grading and tunnel bore shall be determined under this subsection.
(2) PROPERTY ACQUIRED OR CONSTRUCTED AFTER FEBRUARY 28,
1913.-
"(A) In the case of pre-1969 railroad grading and tunnel
bores—
"(i) acquired by the taxpayer after February 28, 1913,
or
"(ii) the construction of which was completed by the
taxpayer after February 28, 1913,
the adjusted basis of such property shall be equal to the
adjusted basis (for determining gain) of such property in
the hands of the taxpayer.
" (B) In the case of property described in subparagraph
(A)
(i) which was in existence on February 28, 1913,
" (ii) for which the taxpayer has a substituted basis,
and
" (iii) such substituted basis for which would, but for
the provisions of this section, be determined under sec-
tion 1053,
then the adjusted basis of such property shall be determined
as if such property were property described in paragraph
(3) (A).
"(3) PROPERTY ACQUIRED OR CONSTRUCTED BEFORE MARCH 1,
1913.-
"(A) In the case of pre-1969 railroad grading and tunnel
bores—
"(i) acquired by the taxpayer before March 1, 1913, or
" (ii) the construction of which was completed by the
taxpayer before March 1, 1913,
H. R. 10612-242
the adjusted basis of such property shall be determined
under the provisions of subparagraph (B), (C), or (D) of
this paragraph.
(B) In the case of any property valued under an original
valuation made by the Interstate Commerce Commission pur-
suant to section 19a of part I of the Interstate Commerce Act
(49 U.S.C. 19a), the adjusted basis of such property shall be
equal to the amount ascertained by the Interstate Commerce
Commission as of the date of such valuation to be such prop-
erty's cost of reproduction new (as the term 'cost of repro-
duction new' is used in such section 19a).
(C) In the case of property which was not valued by the
Interstate Commerce Commission in the manner described in
subparagraph (B), but which was valued under an original
valuation made by a comparable State regulatory body, the
adjusted basis of such property shall be equal to the amount
ascertained by such State regulatory body as of the date of
its original valuation to be such property's value.
"(D) If, in the case of any property to which this para-
graph applies-
"(i) neither subparagraph (B) nor (C) applies, or
(ii) notwithstanding subparagraphs (B) and (C),
either the taxpayer or the Secretary can establish the
adjusted basis (for purposes of determining gain) of
such property in the hands of the taxpayer,
then the adjusted basis of such property shall be equal to its
adjusted basis (for purposes of determining gain) in the
hands of the taxpayer."
(b) DEFINITION OF PRE-1969 RAILROAD GRADING AND TUNNEL
Bores.Subsection (f) of section 185 (as redesignated by subsection
(a) of this section) is amended by adding at the end thereof the
following new paragraph:
"(3) PRE-1969 RAILROAD GRADING AND TUNNEL BORES.-The
term "pre-1969 railroad grading and tunnel bores' means rail-
road grading and tunnel bores the original use of which com-
mences before January 1, 1969.".
SEC. 1703. CERTAIN PROVISIONS RELATING TO AIRLINES.
Subsection (a) of section 46 (relating to determination of amount
of investment credit) is amended by adding at the end thereof the
following new paragraph:
'(9) ALTERNATIVE LIMITATION IN THE CASE OF CERTAIN
AIRLINES.-
(A) IN GENERAL-If, for a taxable year ending after
calendar year 1976 and before calendar year 1983, the amount
of the qualified investment of the taxpayer which is attribut-
able to airline property is 25 percent or more of his aggregate
qualified investment, then subparagraph (C) of paragraph
(3) of this subsection shall be applied by substituting for 50
percent his applicable percentage for such year.
"(B) APPLICABLE PERCENTAGE.-The applicable percentage
is- of any taxpayer for any taxable year under this paragraph
"(i) 50 percent, plus
(ii) that portion of the tentative percentage for the
taxable year which the taxpayer's amount of qualified
H. R. 10612-243
investment which is airline property bears to his aggre-
gate qualified investment.
If the proportion referred to in clause (ii) is 75 percent or
more, the applicable percentage of the taxpayer for the year
shall be 50 percent plus the tentative percentage for such
year.
'(C) TENTATIVE PERCENTAGE.-For purposes of subpara-
graph (B), the tentative percentage shall be determined
under the following table:
"If the taxable
The tentative
year ends in:
percentage is:
1977 or 1978
50
1979
40
1980
30
1981
20
1982
10
'(D) AIRLINE PROPERTY DEFINED.-For purposes of this
paragraph, the term 'airline property' means section 38 prop-
erty used by the taxpayer directly in connection with the
trade or business carried on by the taxpayer of the furnish-
ing or sale of transportation as a common carrier by air
subject to the jurisdiction of the Civil Aeronautics Board or
the Federal Aviation Administration."
TITLE XVIII-INTERNATIONAL TRADE
AMENDMENTS
SEC. 1801. UNITED STATES INTERNATIONAL TRADE COMMISSION.
(a) TERMS OF OFFICE.-The last sentence of section 330 (b) of the
Tariff Act of 1930 (19 U.S.C. 1330 (b)) is amended to read as follows:
"The term of office of each commissioner appointed after such date
shall expire 9 years from the date of the expiration of the term for
which his predecessor was appointed, except that-
"(1) any commissioner appointed to fill a vacancy occurring
prior to the expiration of the term for which his predecessor was
appointed " shall be appointed for the remainder of such term, and
(2) any commissioner may continue to serve as a commissioner
after an expiration of his term of office until his successor is
appointed and qualified."
(b) VOTING PROCEDURES.-Section 330(d) of the Tariff Act of 1930
is amended by-
(1) redesignating paragraph (2) as paragraph (5) ; and
(2) striking out paragraph (1) and inserting in lieu thereof
the following new paragraphs:
"(1) In a proceeding in which the Commission is required to
determine-
"(A) under section 201 of the Trade Act of 1974, whether
increased imports of an article are a substantial cause of
serious injury, or the threat thereof, as described in sub-
section (b) (1) of that section (hereafter in this subsection
referred to as 'serious injury'), or
(B) under section 406 of such Act, whether market dis-
ruption exists,
and the commissioners voting are equally divided with respect
to such determination, then the determination agreed upon by
H. R. 10612-244
either group of commissioners may be considered by the President
as the determination of the Commission.
"(2) If under section 201 or 406 of the Trade Act of 1974 there
is an affirmative determination of the Commission, or a determina-
tion of the Commission which the President may consider an
affirmative determination under paragraph (1), that serious
injury or market disruption exists, respectively, and a majority of
the commissioners voting are unable to agree on a finding or rec-
ommendation described in section 201 (d) (1) of such Act or the
finding described in section 406(a) (3) of such Act, as the case may
be (hereafter in this subsection referred to as a 'remedy finding'),
then—
"(A) if a plurality of not less than three commissioners SO
voting agree on a remedy finding, such remedy finding shall,
for purposes of sections 202 and 203 of such Act, be treated as
the remedy finding of the Commission, or
(B) if two groups, both of which include not less than 3
commissioners, each agree upon a remedy finding and the
President reports under section 203(b) of such Act that—
"(i) he is taking the action agreed upon by one such
group, then the remedy finding agreed upon by the other
group shall, for purposes of sections 202 and 203 of
such Act, be treated as the remedy fin ing of the Com-
mission, or
"(ii) he is taking action which differ from the action
agreed upon by both such groups, or hat he will not
take any action, then the remedy find g agreed upon
by either such group may be considere by the Congress
as the remedy finding of the Commiss 1 and shall, for
purposes of sections 202 and 203 of snon Act, be treated
as the remedy finding of the Commission.
(3) In any proceeding to which paragraph (1) applies in
which the commissioners voting are equally divided on a deter-
mination that serious injury exists, or that market disruption
exists, the Commission shall report to the President the deter-
mination of each group of commissioners. In any proceeding to
which paragraph (2) applies, the Commission shall report to the
President the remedy finding of each group of commissioners
voting.
"(4) In a case to which paragraph (2) (B) (ii) applies, for
purposes of section 203 (c) (1) of the Trade Act of 1974, notwith-
standing section 152 (a) (1) (A) of such Act, the second blank
space in the concurrent resolution described in such section 152
shall be filled with the appropriate date and the following:
"The action which shall take effect under section 203 (c) (1) of
the Trade Act of 1974 is the finding or recommendation
agreed upon by Commissioners
and
, The three blank spaces shall be filled with the
names of the appropriate Commissioners."
(c) EFFECTIVE DATE-The amendments made by subsection (b)
shall apply to determinations, findings, and recommendations made
under sections 201 and 406 of the Trade Act of 1974 after the date
of the enactment of this Act.
SEC. 1802. TRADE ACT OF 1974 AMENDMENTS.
Section 502 (b) of the Trade Act of 1974 (Public Law 93-618; 88
Stat. 1978) is amended—
(1) by striking out "and" at the end of paragraph (5),
H. R. 10612-245
(2) by striking out the period at the end of paragraph (6) and
inserting in lieu thereof " and",
(3) by inserting immediately after paragraph (6) the follow-
ing new paragraph:
" (7) if such country aids or abets, by granting sanctuary from
prosecution to, any individual or group which has committed an
act of international terrorism." ; and
(4) by striking out "and (6)" in the unnumbered paragraph
at the end of such section and inserting in lieu thereof (6), and
(7)".
TITLE XIX-REPEAL AND REVISION OF
OBSOLETE, RARELY USED, ETC., PROVI-
SIONS OF INTERNAL REVENUE CODE
OF 1954
SUBTITLE A-AMENDMENTS OF INTERNAL
REVENUE CODE GENERALLY
SEC. 1901. AMENDMENTS OF SUBTITLE A; INCOME TAXES.
(a) IN GENERAL.-
(1) AMENDMENT OF SECTION 2.-Subsection (c) of section 2
(relating to certain married individuals living apart) is amended
to read as follows:
"(c) CERTAIN MARRIED INDIVIDUALS LIVING APART.-For purposes
of this part, an individual shall be treated as not married at the close
of the taxable year if such individual is SO treated under the provi-
sions of section 143 (b).
(2) REPEAL OF SECTION 35.-Section 35 (relating to partially
tax-exempt interest received by individuals) is repealed.
(3) AMENDMENT OF SECTION 39.-Section 39 (relating to certain
uses of gasoline, special fuels, and lubricating oil) is amended
by striking out subsections (b) and (c) and inserting after sub-
section (a) the following new subsection:
'(b) EXCEPTION.-Credit shall not be allowed under subsection (a)
for any amount payable under section 6421, 6424, or 6427, if a claim
for such amount is timely filed and, under section 6421 (i), 6424 or
6427 (f), is payable under such section."
(4) AMENDMENTS OF SECTION 46.-
(A) The second sentence of section 46(a) (4), as redesig-
nated by this Act, is amended by striking out "section 408 (e)"
and inserting in lieu thereof "section 408(f)".
(B) Clause (iii) of section 46(c) (3) (B) (relating to pub-
lic utility property) is amended by striking out "47 U.S.C.,
sec. 222 (a) (5)" and inserting in lieu thereof "47 U.S.C.
222 (a) (5)".
(5) AMENDMENTS OF SECTION 48.-
(A) Section 48(a) (2) (B) (vi) (relating to section 38 prop-
erty used outside the United States) is amended by striking
out"; 43 U.S.C., sec. 1331) and inserting in lieu thereof (43
U.S.C. 1331))".
(B) Section 48(a) (2) (B) (viii) is amended by striking out
"47 U.S.C., sec. 702" and inserting in lieu thereof "47 U.S.C.
702".
H. R. 10612-246
(6) AMENDMENT OF SECTION 50A.-The second sentence of sec-
tion 50A (a) (3) (relating to liability for tax) is amended by
striking out "section 408 (e) and inserting in lieu thereof "section
408(f)".
(7) REPEAL OF SECTION 51.-Subchapter A of chapter 1 is
amended by striking out part V (relating to tax surcharge).
!
(8) AMENDMENTS OF SECTION 62.-Section 62 (relating to defi-
nition of adjusted gross income) is amended by redesignating
paragraph (11), as added by the Act of October 26, 1974 (Public
Law 93-483), as paragraph (12).
(9) ADDITIONAL AMENDMENT OF SECTION 62.-Section 62 (12), as
redesignated by subparagraph (A) of this paragraph, is amended
by striking out "trade or business to the extent" and inserting in
lieu thereof "trade or business, to the extent".
(10) DEFINITION OF ORDINARY INCOME.-Part I of subchapter B
of chapter 1 (relating to definitions of gross income, adjusted
gross income, and taxable income) is amended by adding at the
end thereof the following new section:
"SEC. 64. ORDINARY INCOME DEFINED.
"For purposes of this subtitle, the term 'ordinary income' includes
any gain from the sale or exchange of property which is neither a
capital asset nor property described in section 1231 (b). Any gain
from the sale or exchange of property which is treated or considered,
under other provisions of this subtitle, as 'ordinary income' shall be
treated as gain from the sale or exchange of property which is neither
a capital asset nor property described in section 1231 (b)
(11) DEFINITION OF ORDINARY Loss.-Part I of subchapter B of
chapter 1 (relating to definitions of gross income, adjusted gross
income, and taxable income) is amended by adding at the end
thereof the following new section:
"SEC. 65. ORDINARY LOSS DEFINED.
"For purposes of this subtitle, the term 'ordinary loss' includes any
loss from the sale or exchange of property which is not a capital asset.
Any loss from the sale or exchange of property which is treated or con-
sidered, under other provisions of this subtitle, as 'ordinary loss' shall
be treated as loss from the sale or exchange of property which is not a
capital asset."
(12) AMENDMENT OF SECTION 72.-Section 72(d) (1) (relating
to employees' annuities) is amended by striking out (whether
or not before January 1, 1954) and by striking out "(under this
paragraph and prior income tax laws)'
(13) ADDITIONAL AMENDMENT OF SECTION 72.-Section 72 (m)
(4) (A) (relating to assignments or pledges) is amended by
striking out "an individual retirement amount" and inserting
in lieu thereof "an individual retirement account".
(14) REPEAL OF SECTION 76.-Section 76 (relating to mortgages
made or obligations issued by joint stock land banks) is repealed.
(15) AMENDMENT OF SECTION s3.-Section 83 (b) (2) (relating
to election to include the value of restricted property in gross
income) is amended by striking out "(or, if later, 30 days after
the date of the enactment of the Tax Reform Act of 1969)"
(16) AMENDMENT OF SECTION 101.-Section 101 is amended by
striking out subsection (f) (relating to effective date of section).
(17) AMENDMENTS OF SECTION 103.-
(A) Section 103 (a) (relating to tax-exempt interest), as
amended by this Act, is amended by inserting "and" at the
H. R. 10612-247
end of paragraph (1), by striking out paragraphs (2) and
(3), and by redesignating paragraph (4) as paragraph (2).
(B) Section 103 is amended by striking out subsection (b)
(relating to certain exceptions) and by redesignating sub-
sections (c), (d), (e), (f) and (g) (as added by this Act)
as subsections (b), (c), (d), (e), and (f) respectively.
(C) Section 103 (b) (1) (relating to industrial develop-
ment bonds), as redesignated by subparagraph (B) of this
paragraph, is amended by inserting "or (2) after (a) (1)".
(D) Section 103 (c) (2) (A) (relating to definition of arbi-
trage bonds), as redesignated by subparagraph (B) of this
paragraph, is amended by inserting "or (2)" after (a) (1)".
(E) Section 103 (e) (relating to certain cross references)
as redesignated by subparagraph (B) of this paragraph,
is amended to read as follows:
"(e) CROSS REFERENCES.-
"For provisions relating to the taxable status of-
"(1) Puerto Rican bonds, see section 3 of the Act of March 2, 1917, as
amended (48 U.S.C. 745).
"(2) Virgin Islands insular and municipal bonds, see section ] of the
Act of October 27, 1919 (48 U.S.C. 1403).
"(3) Certain obligations issued under title I of the Housing Act of
1949, see section 102(g) of title I of such Act (42 U.S.C. 1452(g))."
(18) AMENDMENTS OF SECTION 104.-
(A) Section 104(a) (4) (relating to exclusion of com-
pensation for injuries or sickness) is amended by striking out
; 60 Stat. 1021".
(B) Section 104(c) (2) as redesignated by section 505 of
this Act, is amended to read as follows:
"(2) For exclusion of part of disability retirement pay from the
application of subsection (a)(4) of this section, see section 1403 of title
10, United States Code (relating to career compensation laws)."
(19) AMENDMENT OF SECTION 115.-Section 115 (relating to
income of States, municipalities, etc.) is amended to read as
follows:
"SEC. 115. INCOME OF STATES, MUNICIPALITIES, ETC.
"Gross income does not include-
(1) income derived from any public utility or the exercise
of any essential governmental function and accruing to a State
or any political subdivision thereof, or the District of Columbia;
or
"(2) income accruing to the government of any possession of
the United States, or any political subdivision thereof."
(20) AMENDMENT OF SECTION 116.-Subsection (a) of section
116 (relating to partial exclusion of dividends received by indi-
viduals) is amended by striking out "Effective with respect to
any taxable year ending after July 31, 1954, gross income" and
inserting in lieu thereof "Gross income".
(21) AMENDMENT OF SECTION 124.-Section 124 (relating to
cross references to other Acts) is amended to read as follows:
"SEC. 124. CROSS REFERENCES TO OTHER ACTS.
"(a) For exemption of-
"(1) Adjustments of indebtedness under wage earners' plans, see
section 679 of the Bankruptcy Act (11 U.S.C. 1079).
"(2) Allowances and expenditures to meet losses sustained by per-
sons serving the United States abroad, due to appreciation of foreign
currencies, see section 5943 of title 5, United States Code.
H. R. 10612-248
"(3) Amounts credited to the Maritime Administration under sec-
tion 9(b)(6) of the Merchant Ship Sales Act of 1946, see section
9(c)(1) of that Act (50 U.S.C. App. 1742).
"(4) Benefits under laws administered by the Veterans' Admin-
istration, see section 3101 of title 38, United States Code.
"(5) Earnings of ship contractors deposited in special reserve funds,
see section 607(d) of the Merchant Marine Act, 1936 (46 U.S.C. 1177).
"(6) Income derived from Federal Reserve banks, including capital
stock and surplus, see section 7 of the Federal Reserve Act (12 U.S.C.
531).
"(7) Railroad retirement annuities and pensions, see section 12 of
the Railroad Retirement Act of 1935 (45 U.S.C. 2281).
"(8) Railroad unemployment benefits, see section 2(e) of the Rail-
road Unemployment Insurance Act (45 U.S.C. 352).
"(9) Special pensions of persons on Army and Navy medal of honor
roll, see 38 U.S.C. 562(a)-(c).
"(b) For extension of military income-tax-exemption benefits to commis-
sioned officers of Public Health Service in certain circumstances, see section
212 of the Public Health Service Act (42 U.S.C. 213)."
(22) AMENDMENT OF SECTION 143.-Section 143 (relating to
determination of marital status) is amended by striking out "this
part" each place it appears and inserting in lieu thereof "this part
and part V".
(23) AMENDMENT OF SECTION 151.-Section 151 (e) (4) (defining
student and educational institution) is amended to read as
follows:
(4) STUDENT DEFINED.-For purposes of paragraph (1) (B)
(ii), the term 'student' means an individual who during each of
5 calendar months during the calendar year in which the taxable
year of the taxpayer begins-
"(A) is a full-time student at an educational organization
described in section 170 (b) (1) (A) (ii) ; or
(B) is pursuing a full-time course of institutional
on-farm training under the supervision of an accredited
agent of an educational organization described in section
170(b) (1) (A) (ii) or of a State or political subdivision of
a State."
(24) AMENDMENTS OF SECTION 152.-
(A) Section 152 (a) (defining dependent) is amended-
(i) by inserting "or" at the end of paragraph (8),
(ii) by striking out ", or" at the end of paragraph (9)
and inserting in lieu thereof a period, and
(iii) by striking out paragraph (10).
(B) Section 152 (b) (3) (relating to rules concerning the
definition of dependent) is amended to read as follows:
"(3) The term 'dependent' does not include any individual who
is not a citizen or national of the United States unless such
individual is a resident of the United States or of a country con-
tiguous to the United States. The preceding sentence shall not
exclude from the definition of 'dependent' any child of the tax-
payer legally adopted by him, if, for the taxable year of the tax-
payer, the child has as his principal place of abode the home of the
taxpayer and is a member of the taxpayer's household, and if the
taxpayer is a citizen or national of the United States."
(25) AMENDMENTS OF SECTION 164.-Section 164(d) (2) (relat-
ing to apportionment of taxes on real property between the seller
and purchaser) is amended by striking out subparagraphs (B)
and (C), and by redesignating subparagraph (D) as subpara-
graph (B).
(26) AMENDMENTS OF SECTION 165.-Section 165 (relating to
deduction of losses) is amended by striking out subsection (i)
H.R. 10612-249
(relating to property confiscated by Cuba), and by redesignating
subsection (j) as subsection (i).
(27) AMENDMENTS OF SECTION 167.-
(A) Section 167 (d) (relating to agreement as to useful life
for depreciation) is amended by striking out "after the date
of enactment of this title" and inserting in lieu thereof "after
!
August 16, 1954".
(B) Section 167 (f) (2) (defining personal property) is
amended by striking out "the date of the enactment of the
Revenue Act of 1962" and inserting in lieu thereof "Octo-
ber 16, 1962".
(C) Section 167 (1) (4) (A) (relating to election as to
increased-capacity property) is amended by striking out
"within 180 days after the date of the enactment of this
subparagraph" and inserting in lieu thereof "before June 29,
1970,".
(28) AMENDMENTS OF SECTION 170.-
(A) (i) Section 170 (relating to charitable deductions) is
amended by striking out subsections (f) (6) and (g) (relating
to unlimited charitable deductions allowed for taxable years
beginning before January 1, 1975), and by redesignating sub-
sections (h), (i), and (j) as subsections (g), (h), and (i),
respectively.
(ii) Section 170(b) (1) (relating to percentage limitations
on deductions for individuals) is amended by striking out
subparagraph (C) (relating to unlimited deductions), and
by redesignating subparagraphs (D), (E), and (F) as sub-
paragraphs (C), (D), and (E), respectively.
(iii) Section 170 (b) (1) (A) (vii) is amended by striking
out "subparagraph (E)" and inserting in lieu thereof "sub-
paragraph (D)".
(iv) Section 170(b) (1) (B) (ii) is amended by striking out
"subparagraph (D) and inserting in lieu thereof "subpara-
graph (C)".
(v) Section 170(c) (relating to definition of charitable
contribution) is amended by striking out in the last sentence
"subsection (h)" and inserting in lieu thereof "subsec-
tion (g)".
(vi) Section 170(e) (1) (B) (ii) (relating to certain con-
tributions of ordinary income and capital gain property) is
amended by striking out "subsection (b) (1) (E) and insert-
ing in lieu thereof "subsection (b) (1) (D)".
(B) Section 170 (d) (1) (A) (relating to carryover of excess
charitable contributions) is amended by striking out "(30
percent, in the case of a contribution year beginning before
January 1, 1970)"
(C) Section 170(h) (relating to disallowance of deduc-
tions in certain cases), as redesignated by subparagraph
(A) (i) of this paragraph, is amended by striking out "64
Stat. 996;".
(D) Section 170(i) (relating to cross references), as
redesignated by subparagraph (A) (i) of this paragraph, is
amended to read as follows:
"(i) OTHER CROSS REFERENCES.-
"(1) For charitable contributions of estates and trusts, see sec-
tion 642(c).
H. R. 10612-250
"(2) For nondeductibility of contributions by common trust funds,
see section 584.
"(3) For charitable contributions of partners, see section 702.
"(4) For charitable contributions of nonresident aliens, see sec-
tion 873.
"(5) For treatment of gifts for benefit of or use in connection with
the Naval Academy as gifts to or for use of the United States, see
section 6973 of title 10, United States Code.
"(6) For treatment of gifts accepted by the Secretary of State under
the Foreign Service Act of 1946 as gifts to or for the use of the United
States, see section 1021(e) of that Act (22 U.S.C. 809(e)).
"(7) For treatment of gifts of money accepted by the Attorney Gen-
eral for credit to the 'Commissary Funds, Federal Prisons' as gifts
to or for the use of the United States, see section 2 of the Act of May 15,
1952. as amended by the Act of July 9, 1952 (31 U.S.C. 725s-4)."
(29) AMENDMENTS OF SECTION 172.-
(A) (i) Section 172(b) (1) (relating to years to which loss
may be carried) is amended by striking out subparagraph
(E).
(ii) Section 172(b) (3) is amended by striking out subpara-
graphs (E) and (F).
(B) Section 172(c) (relating to definition of net operating
loss) is amended by striking out (for any taxable year end-
ing after December 31, 1953)"
(C) (i) Section 172 (relating to net operating loss deduc-
tion) is amended by striking out subsections (f), (g), and
(i), and by redesignating subsections (h), (j), (k), and (1)
as subsections (f), (g), (h), and (i), respectively.
(ii) Section 172(b) (1) (C) (relating to regulated transpor-
tation corporations) is amended by striking out "subsection
(j) (1) and "subsection (j)", and inserting in lieu thereof
"subsection (g) (1)" and "subsection (g) respectively.
(iii) Paragraphs (1) (D) and (3) (C) (i) of section 172
(b) (relating to net operating loss carryovers and carry-
backs) are each amended by striking out "subsection (k)' and
inserting in lieu thereof "subsection (h)
(iv) Section 172(b) (2) (relating to amount of carrybacks
and carryovers) is amended by striking out "subsections (i)
and (j) and inserting in lieu thereof "subsection (g)"
(D) Section 172(e) (relating to law applicable to compu-
tations) is amended by striking out the last sentence.
(E) Section 172(g) (2) (relating to certain regulated
transportation corporations), as redesignated by subpara-
graph (C) of this paragraph, is amended by striking out
paragraph (4).
(30) AMENDMENTS OF SECTIONS 174 AND 175.-Section 174(a) (2)
(A) (i) (relating to research and development expenditures)
and section 175 (d) (1) (A) (relating to soil and water conserva-
tion expenditures) are each amended by striking out "the date on
which this title is enacted," and inserting in lieu thereof
"August 16, 1954,".
(31) REPEAL OF SECTION 187.-Section 187 (relating to rapid
amortization for certain coal mine safety equipment) is repealed.
(32) AMENDMENT OF SECTION 219.-Section 219 (b) (2) (A) (iv)
(disqualifying governmental plan participants from contributing
to individual retirement accounts, etc.) is amended by striking out
"division" and inserting in lieu thereof "subdivision".
(33) REPEAL OF SECTION 242.-Section 242 (relating to par-
tially tax-exempt interest received by corporations) is repealed.
(34) AMENDMENTS OF SECTION 243.-
H. R. 10612-251
(A) Section 243 (a) (2) (relating to the dividends received
deduction) is amended by inserting after "Small Business
Investment Act of 1958" the following: (15 U.S.C. 661 and
following)"
(B) Section 243 (b) (2) (A) (relating to dividends received
by a member of an affiliated group) is amended by striking
out " (except that in the case of a taxable year of a mem-
ber beginning in 1963 and ending in 1964, if the election
is effective for the taxable year of the common parent cor-
poration which includes the last day of such taxable year
of such member, such election shall be effective for such tax-
able year of such member, if such member consents to such
election with respect to such taxable year)".
(35) AMENDMENT OF SECTION 247.-Section 247 (b) (2) (relating
to preferred stock) is amended to read as follows:
(2) PREFERRED STOCK.-
(A) IN GENERAL-The term 'preferred stock' means stock
issued before October 1, 1942, which during the whole of the
taxable year (or the part of the taxable year after its issue)
was stock the dividends in respect of which were cumulative,
limited to the same amount, and hyable in preference to
the payment of dividends on othe stock.
(B) CERTAIN STOCK ISSUED ON OF AFTER OCTOBER 1, 1942.-
Stock issued on or after October 1, )42, shall be deemed for
purposes of this paragraph to have been issued before Octo-
ber 1, 1942, if it was issued to re. nd or replace bonds or
debentures issued before October 1942, or to refund or
replace other preferred stock (i luding stock which is
preferred stock by reason of this subparagraph or subpara-
graph (D)), but only to the extent that the par or stated
value of the new stock does not exceed the par, stated, or face
value of the bonds or debentures issued before October 1, 1942,
or the other preferred stock, which such new stock is issued
to refund or replace.
"(C) DETERMINATION UNDER REGULATIONS.-The determi-
nation of whether stock was issued to refund or replace bonds
or debentures issued before October 1, 1942, or to refund or
replace other preferred stock, shall be made under regula-
tions prescribed by the Secretary.
(D) ISSUANCE OF STOCK.-For purposes of subparagraph
(B), issuance of stock includes issuance either by the same
or another corporation in a transaction which is a reorganiza-
tion (as defined in section 368(a)), a transaction to which
section 371 (relating to insolvency reorganizations) applies,
or a transaction subject to part VI C subchapter O (relating
to exchanges in SEC obedience orders), or the respectively
corresponding provisions of the Internal Revenue Code of
1939."
(36) AMENDMENT OF SECTION 248.-Section 248(c) (relating to
organizational expenditures) is amended by striking out "the
date of enactment of this title" and inserting in lieu thereof
"August 16, 1954".
(37) AMENDMENT OF SECTION 265.-Section 265 (2) (relating to
tax-exempt interest) is amended by striking out (other than obli-
gations of the United States issued after September 24, 1917, and
originally subscribed for by the taxpayer)"
H. R. 10612-252
(38) AMENDMENT OF SECTION 269.-Section 269 (relating to
acquisitions made to evade or avoid income tax) is amended by
striking out subsection (c) (relating to presumption in the case
of disproportionate purchase price).
(39) AMENDMENT OF SECTION 275.-Section 275(a) (1) (C)
relating to nondeductible taxes) is amended by striking out
(", and corresponding provisions of prior revenue laws".
(40) AMENDMENTS OF SECTION 281.-
(A) Section 281 (d) (1) (A) (relating to definition of ter-
minal railroad corporation) is amended by inserting after
"Interstate Commerce Act" the following: (49 U.S.C. 1 and
following)".
(B) Section 281 (relating to terminal railroad corpora-
tions and their shareholders) is amended by striking out
subsection (e) (relating to taxable years ending before Octo-
ber 23, 1962) and by redesignating subsection (f) as subsection
(e).
(41) AMENDMENT OF SECTION 301.-Section 301 (relating to dis-
tributions of property) is amended by striking out subsec-
tion (e) (relating to certain distributions by personal service
corporations).
(42) AMENDMENTS OF SECTION 311.-
(A) Section 311(d) (1) (relating to appreciated property
used to redeem stock) is amended by striking out "then again
shall be recognized" and inserting in lieu thereof "then a gain
shall be recognized".
(B) (i) Section 311 (d) (2) (relating to exceptions and
limitations) is amended by striking out subparagraph (C)
(relating to certain distributions before December 1, 1974)
and by redesignating subparagraphs (D), (E), (F), and (G)
as subparagraphs (C), (D), (E), and (F), respectively.
(ii) The amendments made by clause (i) shall apply only
with respect to distributions after November 30, 1974.
(C) Section 311 (d) (2) (C), as redesignated by subpara-
graph (B) of this paragraph, is amended by striking out
"26 Stat. 209 and "38 Stat. 730;".
(43) AMENDMENTS OF SECTION 312.-
(A) Section 312 (d) (1) (relating to certain distributions
of stock and securities) is amended by striking out "this
Code" each place it appears and inserting in lieu thereof
"this title".
(B) Section 312 (relating to earnings and profits) is
amended by striking out subsection (h) (relating to per-
sonal service corporations) and by redesignating subsections
(i) and (j) as subsections (h) and (i), respectively.
(C) Subsection (i) of section 312 (relating to distribution
of proceeds of certain loans), as redesignated by subpara-
graph (B) of this paragraph. is amended to read as follows:
'(i) DISTRIBUTION OF PROCEEDS OF LOAN INSURED BY THE UNITED
STATES.-If a corporation distributes property with respect to its stock
and if, at the time of distribution-
"(1) there is outstanding a loan to such corporation which
was made, guaranteed, or insured by the United States (or by any
agency or instrumentality thereof), and
(2) the amount of such loan so outstanding exceeds the
adjusted basis of the property constituting security for such loan,
then the earnings and profits of the corporation shall be increased by
H. R. 10612-253
the amount of such excess, and (immediately after the distribution)
shall be decreased by the amount of such excess. For purposes of para-
graph (2), the adjusted basis of the property at the time of distribu-
tion shall be determined without regard to any adjustment under
section 1016(a) (2) (relating to adjustment for depreciation, etc.). For
purposes of this subsection, a commitment to make, guarantee, or
insure a loan shall be treated as the making, guaranteeing, or insuring
of a loan."
(D) Section 312(j) (3) (relating to foreign investment
companies), as redesignated by subsection (b) (32) (B) (i), is
amended to read as follows:
"(3) PARTIAL LIQUIDATIONS AND REDEMPTIONS.-If a foreign
investment company (as defined in section 1246) distributes
amounts in partial liquidation or in a redemption to which sec-
tion 302 (a) or 303 applies, the part of such distribution which is
properly chargeable to earnings and profits shall be an amount
which is not in excess of the ratable share of the earnings and
profits of the company accumulated after February 28, 1913,
attributable to the stock SO redeemed."
(44) AMENDMENT OF SECTION 333.-Section 333 (a) (1) (relating
to election as to recognition of gain in certain liquidations) is
amended by striking out "on or after June 22, 1954".
(45) AMENDMENT OF SECTION 334.-Section 334 (b) (2) (A)
(relating to liquidation of subsidiary) is amended to read as
follows:
"(A) the distribution is pursuant to a plan of liquidation
adopted not more than 2 years after the date of the transac-
tion described in subparagraph (B) (or, in the case of a series
of transactions, the date of the last such transaction) ; and".
(46) AMENDMENTS OF SECTION 337.-
(A) Section 337 (a) (relating to nonrecognition of gain
or loss on certain liquidations) is amended to read as follows:
"(a) GENERAL RULE.-If, within the 12-month period beginning on
the date on which a corporation adopts a plan of complete liquidation,
all of the assets of the corporation are distributed in complete liquida-
tion, less assets retained to meet claims, then no gain or loss shall be
recognized to such corporation from the sale or exchange by it of
property within such 12-month period."
(B) The first sentence of section 337 (d) (relating to cer-
tain minority stockholders) is amended by striking out "on
or after January 1, 1958".
(47) REPEAL OF SECTION 342.-Section 342 (relating to the
repealed. liquidation of certain foreign personal holding companies) is
(48) AMENDMENTS OF SECTION 351.-
(A) Section 351(a) (relating to transfer to corporation
controlled by transferor) is amended by striking out
((including, in the case of transfers made on or before
June 30, 1967, an investment company)".
(B) Section 351 (d) (relating to application of June 30,
1967, date) is amended to read as follows:
"(d) EXCEPTION.-This section shall not apply to a transfer of
property to an investment company."
(C) The amendments made by this paragraph shall take
effect with respect to transfers of property occurring after
the date of the enactment of this Act.
H. R. 10612-254
(49) REPEAL OF SECTION 363.-Section 363 (a cross reference to
other sections) is repealed.
(50) AMENDMENTS OF SECTION 371.-Section 371 (a) (1) (relat-
ing to certain reorganization exchanges by corporations) is
amended—
(A) by striking out "49 Stat. 922 and
(B) by striking out " (52 Stat. 883-905; 11 U.S.C., chapter
10) or the corresponding provisions of prior law" and
inserting in lieu thereof " (11 U.S.C. 501 and following)'
(51) AMENDMENT OF SECTION 372.-Section 372 (a) (relating
to basis in connection with bankruptcy proceedings) is amended
by striking out "54 Stat. 709;".
(52) REPEAL OF SECTION 373.-Section 373 (relating to nonrec-
ognition of loss in certain railroad reorganizations) is repealed.
(53) AMENDMENT OF SECTION 374.-Section 374 (a) (1) (relating
to nonrecognition of gain or loss in certain railroad reorganiza-
tions) is amended by striking out "49 Stat. 922;".
(54) AMENDMENT OF SECTION 381.-Section 381 (c) (relating to
items carried over in certain corporate acquisitions) is amended
by striking out paragraph (20).
(55) REPEAL OF SECTIONS 391 THROUGH 395.-Subchapter C of
chapter 1 (relating to corporate distributions and adjustments)
is amended by striking out part VII (relating to effective dates
of subchapter C).
(56) AMENDMENTS OF SECTION 401.-
(A) Paragraphs (12) and (13) of section 401 (a) (relat-
ing to requirements for qualification) are each amended by
striking out "the date of the enactment of the Employee
Retirement Income Security Act of 1974" and inserting in lieu
thereof "September 2, 1974".
(B) Paragraph (15) of section 401 (a) is amended by
striking out "the date of the enactment of the Employee
Retirement Income Security Act of 1974" and inserting in lieu
thereof "September 2, 1974,".
(C) Paragraph (19) of section 401 (a) is amended by
striking out "enactment of the Employee Retirement Income
Security Act of 1974" and inserting in lieu thereof "Septem-
ber 2, 1974".
(D) The last sentence of section 401 (a) is amended to read
as follows:
"Paragraphs (11), (12), (13), (14), (15), (19), and (20) shall apply
only in the case of a plan to which section 411 (relating to minimum
vesting standards) applies without regard to subsection (e) (2) of such
section."
(57) AMENDMENTS OF SECTION 402.-
(A) Section 402 (a) (4) (relating to distributions made to
non-resident alien individuals) is amended by striking out
"basic salary" each place it appears therein and inserting in
lieu thereof "basic pay", and by amending the last sentence in
such paragraph to read as follows:
"In the case of distributions under the civil service retirement
laws, the term 'basic pay' shall have the meaning provided in
section 8331 (3) of title 5, United States Code."
(B) Section 402 (relating to taxability of beneficiary of
employees' trusts) is amended by striking out subsection (d)
(relating to certain trust agreements made before October 21,
1942).
H. R. 10612-255
(C) (i) So much of the third sentence of section 402(e) (4)
(A) (relating to definition of lump sum distributions) as pre-
cedes "a distribution of an annuity contract" is amended to
read as follows: "Except for purposes of subsection (a) (2)
and section 403 (a) (2),
(ii) The amendment made by clause (i) shall apply with
respect to distributions or payments made after December 31,
1973, in taxable years beginning after such date.
(58) AMENDMENT OF SECTION 403.-The last two sentences of
section 403 (a) (4) (relating to taxation of employee annuities)
are amended to read as follows: "For purposes of this title,
a transfer described in subparagraph (B) (i) shall be treated
as a rollover contribution described in section 408 (d) (3). Sub-
paragraph (B) (ii) does not apply in the case of a transfer to an
employees' trust, or annuity plan if any part of a payment
described in subparagraph (A) is attributable to an annuity plan
under which the employee was an employee within the meaning
of section 401 (c) (1) at the time contributions were made on his
behalf under the plan."
(59) AMENDMENT OF SECTION 404.-Section 404 (relating to
deduction for contributions to pension plans, etc.) is amended
by striking out subsection (d) (relating to carryover of pre-1954
unused deductions).
(60) AMENDMENT OF SECTION 409.-Section 409 (b) (3) (C)
(relating to tax-free rollovers of individual retirement bonds)
is amended by striking out "section 403 (d) (3) and inserting
in lieu thereof "section 408 (d) (3).
(61) AMENDMENTS OF SECTION 410.-
(A) Subparagraphs (C) and (D) of section 410(a) (5)
(relating to breaks in service) are each amended by striking
out "purposes of subsection (a) (1)" and inserting in lieu
thereof "purposes of paragraph (1)".
(B) Paragraph (1) (C) of section 410(c) (relating to
application of minimum participation standards) is amended
by striking out "the date of the enactment of the Employee
Retirement Income Security Act of 1974" and inserting in
lieu thereof "September 2, 1974,".
(C) Paragraph (2) of section 410(c) is amended by strik-
ing out "the day before the date of the enactment of this
section" and inserting in lieu thereof "September 1, 1974".
(62) AMENDMENTS OF SECTION 411.-
(A) Subsection (a) of section 411 (relating to minimum
vesting standards) is amended by striking out "subsection
(a) (8)" and inserting in lieu thereof "paragraph (8)".
(B) Subsection (a) (3) (D) (iii) of section 411 is amended-
(i) by striking out "the date of the enactment of the
Employee Retirement Income Security Act of 1974" and
"the date of the enactment of such Act" and inserting
in lieu thereof in both such places "September 2, 1974",
and
(ii) by striking out "the date of the enactment of the
Act" and inserting in lieu thereof "September 2, 1974,".
(C) The heading for subparagraph (C) of section 411
(a) (7) is amended to read as follows:
(C) REPAYMENT OF SUBPARAGRAPH (B) DISTRIBUTIONS.-
(D) Subsection (b) (1) (D) (i) and (e) (1) (C) of section
411 are each amended by striking out "the date of the
H. R. 10612-256
enactment of the Employee Retirement Income Security Act
of 1974" and inserting in lieu thereof "September 2, 1974".
(E) Subsection (e) (2) of section 411 is amended by strik-
ing out "the date before the date of the enactment of the
Employee Retirement Income Security Act of 1974" and
inserting in lieu thereof "September 1, 1974".
(63) AMENDMENTS OF SECTION 412.-
(A) Subsection (h) of section 412 (relating to minimum
funding standards) is amended by striking out "the day
before the date of the enactment of the Employee Retirement
Income Security Act of 1974" and inserting in lieu thereof
"September 1, 1974".
(B) Subsection (h) (5) of section 412 is amended by strik-
ing out "the date of the enactment of the Employee Retire-
ment Income Security Act of 1974" and inserting in lieu
thereof "September 2, 1974".
(64) AMENDMENTS OF SECTION 414.-
(A) The heading for section 414(f) (relating to multi-
employer plans) is amended to read as follows:
"(f) MULTIEMPLOYER PLAN.-"
(B) Section 414(1) (relating to mergers and consolidations
of plans or transfers of plan assets) is amended by striking
out "the date of the enactment of the Employee Retirement
Income Security Act of 1974" and inserting in lieu thereof
"September 2, 1974".
(65) AMENDMENTS OF SECTION 415.-
(A) Section 415(b) (2) (A) (relating to adjustments for
certain forms of benefits) is amended by striking out "and
409 (b) (3) (C) and inserting in lieu thereof "and 409 (b) (3)
(C))
(B) Section 415(b) (2) (B) is amended by striking out
"(as defined in section 401(a) (11) (H) (iii)) and inserting
in lieu thereof "(as defined in section 401 (a) (11) (G) (iii)
(66) AMENDMENTS OF SECTION 453.-
(A) Section 453(c) (3) (relating to adjustment in tax for
amounts previously taxed) is amended by striking out "cor-
responding provisions of the Internal Revenue Code of 1939"
and inserting in lieu thereof "corresponding provisions of the
Internal Revenue Code of 1954".
(B) Section 453 (d) (4) (B) (relating to liquidations to
which section 337 applies) is amended by striking out "or
section 617 (d) (1)" and inserting in lieu thereof ", 66 617 (d)
(1)".
(67) AMENDMENT OF SECTION 455.-Section 455(c) (3) (B)
(relating to prepaid subscription income) is amended by striking
out "for his first taxable year (i) which begins after December 31,
1957, and (ii) in which he receives prepaid subscription income
in the trade or business" and inserting in lieu thereof "for his
first taxable year in which he receives prepaid subscription income
in the trade or business".
(68) AMENDMENT OF SECTION 456.-Section 456(c) (3) (B)
(relating to election without consent with respect to treatment of
prepaid dues) is amended by striking out "for its first taxable
year (i) which begins after December 31, 1960, and (ii)" and
inserting in lieu thereof "for its first taxable year".
(69) AMENDMENTS OF SECTION 461.-
H. R. 10612-257
(A) Section 461 (c) (relating to accrual of real property
taxes) is amended by striking out paragraph (2) and by
redesignating paragraph (3) as paragraph (2).
(B) Section 461 (c) (2) (relating to elections without con-
sent), as redesignated by subparagraph (A), is amended by
striking out "his first taxable year which begins after Decem-
ber 31, 1953, and ends after the date of enactment of this title
in which the taxpayer" and inserting in lieu thereof "his first
taxable year in which he".
(70) AMENDMENTS OF SECTION 481.-
(A) Section 481 (b) (relating to limitation on tax where
substantial adjustments are required by a change in account-
ing method) is amended by striking out paragraphs (4), (5),
and (6) (relating to pre-1954 adjustments).
(B) Section 481(b) (1) and (2) are each amended by
striking out ", other than the amount of such adjustments to
which paragraph (4) or (5) applies," each place it appears.
(71) AMENDMENTS OF SECTION 508.-
(A) Subsections (a) and (b) of section 508 (relating to
special rules relating to 501 (c) (3) organizations) are each
amended by striking out the last sentence therein.
(B) Section 508 (e) (2) (relating to special rules for exist-
ing private foundations) is amended by striking out subpara-
graph (A) (relating to taxable years beginning before 1972),
by redesignating subparagraphs (B) and (C) as subpara-
graphs (A) and (B), respectively, and by striking out "(B)"
in subparagraph (B) (as SO redesignated) and inserting in
lieu thereof "(A)".
(C) Section 508(d) (2) (A) (relating to disallowance of
deductions for certain charitable gifts or bequests) is amended
by striking out (e) (2) (B) and (C)" and inserting in lieu
thereof (e) (2)".
(72) AMENDMENTS OF SECTION 514.-
(A) Section 514(c) (1) (relating to definition of acquisi-
tion indebtedness) is amended by striking out the comma at
the end of subparagraph (C) and all that follows, and insert-
ing in lieu thereof a period.
(B) Section 514 (relating to unrelated debt-financed
income) is amended by striking out subsection (f) (relating
to definition of business lease), by striking out subsection (g)
(relating to definition of business lease indebtedness), and by
redesignating subsection (h) as subsection (f).
(C) Section 514(b) (3) (C) (iii) (relating to definition of
debt-financed property) is amended to read as follows:
"(iii) shall not apply to property subject to a lease
which is a business lease (as defined in this section
immediately before the enactment of the Tax Reform Act
of 1976)."
(D) Section 514(f) (relating to personal property leased
with real property), as redesignated by subparagraph (B)
of this paragraph, is amended by striking out "and the term
'premises' include" and inserting in lieu thereof "includes".
(73) AMENDMENTS OF SECTION 534.-
(A) Section 534(b) (relating to mailing notices of
deficiency) is amended by striking out the last sentence.
(B) Subsection (e) of section 534 (relating to effective
date of section) is repealed.
H. R. 10612-258
(74) AMENDMENT OF SECTION 535.-Section 535 (b) (1) (relating
to adjustments in computing accumulated taxable income) is
amended by striking out "(other than the excess profits tax
imposed by subchapter E of chapter 2 of the Internal Revenue
Code of 1939 for taxable years beginning after December 31,
1940)".
(75) AMENDMENTS OF SECTION 537.-
(A) Section 537 (b) (2) (relating to definition of excess
business holdings redemption needs) is amended by striking
out with respect to taxable years of the corporation ending
after May 26, 1969,".
(B) Section 537(b) (4) (relating to inferences as to prior
years) is amended by striking out "or (2)".
(76) AMENDMENTS OF SECTION 542.-
(A) Section 542(a) (2) (relating to definition of personal
holding company) is amended by striking out the last
sentence.
(B) Section 542 (b) (2) (relating to ineligible affiliated
group) is amended by striking out ", other than an affiliated
group of railroad corporations the common parent of which
would be eligible to file a consolidated return under section
141 of the Internal Revenue Code of 1939 prior to its amend-
ment by the Revenue Act of 1942,".
(C) Section 542 (c) (2) (relating to financial institutions)
is amended by striking out "without regard to subparagraphs
(D) and (E) thereof".
(D) Section 542(c) (8) (relating to small business invest-
ment companies) is amended by inserting after "Small Busi-
ness Investment Act of 1958" the following: (15 U.S.C. 661
and following)".
(77) AMENDMENTS OF SECTION 545.-
(A) Section 545 (b) (1) (relating to deduction of taxes in
computing undistributed personal holding company income)
is amended-
(i) in the first sentence, by striking out '(other than
the excess profits tax imposed by subchapter E of chap-
ter 2 of the Internal Revenue Code of 1939 for taxable
years beginning after December 31, 1940) and
(ii) by striking out the last two sentences (relating
to deduction of taxes).
(B) Section 545 (b) (relating to adjustments in computing
undistributed personal holding company income) is amended
by striking out paragraph (7) (relating to payment of
indebtedness incurred before 1934).
(C) Section 545 (c) (2) (A) (relating to corporations to
which special adjustment applies) is amended by striking
out "the date of enactment of this subsection" and inserting
in lieu thereof "February 26, 1964".
(78) AMENDMENT OF SECTION 547.-Section 547 (relating to the
deduction of deficiency dividends) is amended by striking out
subsection (h) (relating to the effective date).
(79) AMENDMENT OF SECTION 551.-Section 551(c) (relating to
foreign personal holding company income tax returns), as
redesignated by subsection (b) (1) (F) of this section, is amended
by striking out "taxable income, foreign personal holding com-
H. R. 10612-259
pany," and inserting in lieu thereof "taxable income, foreign per-
sonal holding company income,".
(80) AMENDMENT OF SECTION 556.-The first sentence of section
556(b) (1) (relating to deduction of taxes in computing undis-
tributed foreign personal holding company income) is amended
by striking out (other than the excess profits tax imposed by
subchapter E of chapter 2 of the Internal Revenue Code of 1939
for taxable years beginning after December 1, 1940)
(81) AMENDMENT OF SECTION 564.-Section 564 (relating to
dividend carryovers) is amended by striking out subsection (c)
(relating to carryovers from pre-1954 years).
(82) REPEAL OF SECTION 583.-Section 583 (relating to deduc-
tion of dividends paid on certain preferred stock by banks or
trust companies) is repealed.
(83) REPEAL OF SECTION 592.-Section 592 (relating to the
deduction by mutual savings banks for repayment of certain
loans) is repealed.
(84) AMENDMENTS OF SECTION 593.-
(A) Section 593(b) (2) (relating to additions to bad debt
reserves for mutual savings banks, etc.) is amended by strik-
ing out, in the table in subparagraph (A), the following:
"1969
60 percent.
1970
57 percent.
1971
54 percent.
1972
51 percent.
1973
49 percent.
1974
47 percent.
1975
45 percent."
(B) Section 593 (c) (relating to reserves for mutual sav-
ings banks) is amended by striking out paragraphs (2), (3),
(4), and (5), by redesignating paragraph (6) as paragraph
(3), and by inserting immediately after paragraph (1) the
following:
'(2) CERTAIN PRE-1963 RESERVES.-Notwithstanding the second
sentence of paragraph (1), any amount allocated pursuant to
paragraph (5) (as in effect immediately before the enactment of
the Tax Reform Act of 1976) during a taxable year beginning
before January 1, 1977, to the reserve for losses on qualifying real
property loans out of the surplus, undivided profits, and bad
debt reserves (determined as of December 31, 1962) attributable
to the period before the first taxable year beginning after Decem-
ber 31, 1951, shall not be treated as a reserve for bad debts for any
purpose other than determining the amount referred to in subsec-
tion (b) (1) (B), and for such purpose such amount shall be
treated as remaining in such reserve."
(C) Section 593 is amended by striking out subsection (d)
(relating to taxable years beginning in 1962 and ending in
1963), and by redesignating subsections (e) and (f) as sub-
sections (d) and (e), respectively.
(D) Section 593 (b) (2) (E) (i) is amended by striking out
"subsection (f)" and inserting in lieu thereof "subsection
(e)".
(85) REPEAL OF SECTION 601.-Subchapter H of chapter 1 relat-
ing to banking institutions) is amended by striking out part III
(relating to special deduction for bank affiliates).
H. R. 10612-260
(86) AMENDMENTS OF SECTION 613A.-
(A) Section 613A (b) (1) (C) (relating to exemption for
certain domestic gas wells) is amended by striking out "within
the meaning of section 613 (b) (1) (A)".
(B) Section 613A (c) (6) (i) (relating to limitations on
percentage depletion in case of oil and gas wells) is amended -
by striking out "determined with" and inserting in lieu
thereof "determined without".
(87) AMENDMENTS OF SECTION 614.-
(A) (i) Section 614 (c) (relating to aggregation of mineral
interests in mines) is amended by striking out paragraph (4)
(relating to special rule as to exploration deductions prior to
aggregation).
(ii) The amendment made by clause (i) shall apply with
respect to elections to form aggregations of operating min-
eral interests made under section 614(c) (1) of the Internal
Revenue Code of 1954 for taxable years beginning after
December 31, 1976.
(B) The third sentence of section 614(c) (2) (relating to
election to treat a single interest as more than one property)
is amended to read as follows: "A separate property so
formed may, under regulations prescribed by the Secretary,
be included as a part of an aggregation in accordance with
paragraphs (1) and (3)."
(C) Section 614 (3) (relating to ; anner and scope of
election) is amended to read as follows:
" (3) MANNER AND SCOPE OF ELECTION.-T elections provided
by paragraphs (1) and (2) shall be made in accordance with
regulations prescribed by the Secretary, no later than the time
prescribed for filing the return (including excensions thereof) for
the first taxable year-
'(A) in which, in the case of an election under paragraph
(1), any expenditure for development or operation in respect
of the separate operating mineral interest is made by the
taxpayer after the acquisition of such interest, or
((B) in which, in the case of an election under paragraph
(2), expenditures for development or operation of more than
one mine in respect of a property are made by the taxpayer
after the acquisition of the property.
An election made under paragraph (1) or (2) for a taxable year
shall be binding upon the taxpayer for such year and all subse-
quent taxable years, except that the Secretary may consent to a
different treatment of any interest with respect to which an elec-
tion has been made."
(88) REPEAL OF SECTION 615.-Section 615 (relating to deduc-
tion of pre-1970 exploration expenses) is repealed.
(89) AMENDMENT OF SECTION 617.-Section 617 (a) (2) (B)
(relating to time and scope of election to deduct certain mining
exploration expenditures) is amended by striking out "may not be
revoked after the last day of the third month following the month
in which the final regulations issued under the authority of this
subsection are published in the Federal Register, unless" and
inserting in lieu thereof "may not be revoked unless".
(90) REPEAL OF SECTION 632.-Section 632 (relating to tax in
case of sale of oil and gas properties) is repealed.
(91) AMENDMENT OF SECTION 691.-Section 691 (c) (1) (B)
(relating to deduction for estate tax) is amended by striking out
the last sentence.
H. R. 10612-261
(92) AMENDMENT OF SECTION 692.-The heading of section 692
(relating to income taxes of members of Armed Forces who die
in a combat zone) is amended by striking out "ON" the first time
it appears in the section heading and inserting in lieu thereof
"OF".
(93) AMENDMENT OF SECTION 751.-Section 751 (c) (relating to
unrealized receivables) is amended by striking out "1254(a), or
1250 (a), and inserting in lieu thereof "1245 (a), 1250(a),'
(94) REPEAL OF SECTION 771.-Part IV of subchapter K of
chapter 1 (relating to effective date of subchapter K) is repealed.
(95) AMENDMENTS OF SECTION 802.-
(A) Section 802(a) (1) (relating to tax imposed on life
insurance companies) is amended by striking out "beginning
after December 31, 1957,".
(B) Section 802(a) (2) (relating to alternative tax in case
of capital gains) is amended by striking out "beginning after
December 31, 1961,".
(C) Section 802(a) is amended by striking out paragraph
(3) (relating to special rules for 1959 and 1960).
(96) AMENDMENTS OF SECTION 804.-
(A) Section 804(a) is amended by striking out paragraph
(6) (relating to certain exceptions).
(B) Section 804(b) (2) (relating to short-term capital
gains) is amended by striking out "In the case of a taxable
year beginning after December 31, 1958, the" and inserting in
lieu thereof "The".
(97) AMENDMENTS OF SECTION 805.-
(A) Section 805(b) (3) (B) (relating to average earnings
rate) is amended to read as follows:
(B) SPECIAL RULE.-For purposes of subparagraph (A),
the current earnings rate for any taxable year of any company
which, for such year, is an insurance company (but not a life
insurance company) shall be determined as if this part
applied to such company for such year."
(B) Section 805 (b) (4) (B) (relating to basis of assets) is
amended by striking out "(determined without regard to fair
market value on December 31, 1958)".
(C) Section 805(d) (relating to pension plan reserves) is
amended to read as follows:
"(d) PENSION PLAN RESERVES.-For purposes of this part, the
term 'pension plan reserves' means that portion of the life insurance
reserves which is allocable to contracts—
"(1) purchased under contracts entered into with trusts which
(as of the time the contracts were entered into) were deemed to be
(A) trusts described in section 401 (a) and exempt from tax under
section 501 (a), or (B) trusts exempt from tax under section 165 of
the Internal Revenue Code of 1939 or the corresponding provi-
sions of prior revenue laws;
"(2) purchased under contracts entered into under plans which
(as of the time the contracts were entered into) were deemed to be
plans described in section 403(a), or plans meeting the require-
the Internal Revenue Code of-1939;
ments of paragraphs (3), (4), (5), and (6) of section 165 (a) of
"(3) provided for employees of the life insurance company
under a plan which, for the taxable year, meets the requirements
of paragraphs (3), (4), (5), (6), (7), (8), (11), (12), (13),
(14), (15), (16), (19), and (20) of section 401 (a)
H. R. 10612-262
"(4) purchased to provide retirement annuities for its employ-
ees by an organization which (as of the time the contracts were
purchased) was an organization described in section 501 (c) (3)
which was exempt from tax under section 501 (a) or was an orga-
nization exempt from tax under section 101 (6) of the Internal
Revenue Code of 1939 or the corresponding provisions of prior
revenue laws, or purchased to provide retirement annuities for
employees described in section 403 (b) (1) (A) (ii) by an employer
which is a State, a political subdivision of a State, or an agency
or instrumentality of any one or more of the foregoing; or
"(5) purchased under contracts entered into with trusts which
(at the time the contracts were entered into) were individual
retirement accounts described in section 408 (a) or under contracts
entered into with individual retirement annuities described in
section 408 (b)
(98) AMENDMENTS OF SECTION 809.-
(A) Section 809 (b) (relating to definition of gain and loss
from operations) is amended by striking out paragraph (4).
(B) (i) Section 809 (d) (relating to life insurance company
deductions) is amended by striking out paragraph (11)
relating to mutualization distributions before 1963), and by
redesignating paragraph (12) as paragraph (11).
(ii) Section 809 (e) is amended by striking out "subsection
(d) (12)" and inserting in lieu thereof "subsection (d) (11)"
(C) Section 809 (relating to computation of gain and loss
from operations) is amended by striking out subsection (g)
(relating to deduction for certain mutualization distributions
before 1963).
(99) AMENDMENT OF SECTION s12.-Section 812 (b) (1) (relat-
ing to years to which operating losses of an insurance company
may be carried), other than the last sentence thereof, as added by
section 806 (d) (1) (A) of this Act, is amended to read as follows:
(1) YEARS TO WHICH LOSS MAY BE CARRIED.-The loss from
operations for any taxable year (hereinafter in this section
referred to as the 'loss year') shall be-
(A) an operations loss carryback to each of the 3 taxable
years preceding the loss year,
"(B) an operations loss carryover to each of the 5 taxable
years following the loss year, and
"(C) subject to subsection (e), if the life insurance com-
pany is a new company for the loss year, an operations loss
carryover to each of the 3 taxable years following the 5 tax-
able years described in subparagraph (B)."
(100) AMENDMENTS OF SECTION 817.-Section 817 (relating to
rules applicable to certain gains and losses) is amended by strik-
ing out subsection (c) (relating to treatment of pre-1959 capital
losses) and subsection (e) (relating to certain 1958 reinsurance
transactions).
(101) AMENDMENT OF SECTION 818.-Section 818 (relating to
life insurance accounting provisions) is amended by striking out
subsection (e) (relating to certain rules applicable to taxable
years 1957, 1958, and 1959), and by redesignating subsections (f)
and (g) as subsections (e) and (f), respectively.
(102) AMENDMENTS OF SECTION 819.-
(A) The first sentence of section 819 (a) (2) (A) (relating
to definition of minimum figure for foreign life insurance
companies) is amended to read as follows: "The minimum
figure is the amount determined by multiplying the tax-
H. R. 10612-263
payer's total insurance liabilities on United States business
by a percentage for the taxable year to be determined and
proclaimed by the Secretary."
(B) The second sentence of section 819(a) (2) (A) is
amended by striking out "under clause (ii) and inserting in
lieu thereof "under the preceding sentence".
(C) Clause (i) of section 819(b) (2) (B) (relating to dis-
tributions pursuant to certain mutualizations) is amended to
read as follows:
"(i) the minimum figure for 1958 determined under
subsection (a) (2) (A) computed by using a percentage of
9 percent in lieu of the percentage determined and pro-
claimed by the Secretary, or".
(103) AMENDMENTS OF SECTION 820.-
(A) Section 820 (c) (relating to optional treatment of cer-
tain reinsured policies) is amended by striking out paragraph
(6) (relating to reimbursement for 1957 income taxes), and
by redesignating paragraph (7) as paragraph (6).
(B) The last sentence of section 820(c) is amended by
striking out '(5), and (6) and the rules prescribed under
paragraph (7) and inserting in lieu thereof "and (5) and
the rules prescribed under paragraph (6)".
(104) AMENDMENTS OF SECTION 821.-
(A) Section 821 (a) (relating to imposition of tax on cer-
tain mutual insurance companies) is amended by striking out
"beginning after December 31, 1963,".
(B) Section 821 (c) (1) (relating to alternative tax for
certain small insurance companies) is amended by striking
out "In the case of taxable years beginning after December 31,
1963, there is" and inserting in lieu thereof "There is".
(C) Section 821 (relating to tax on certain mutual insur-
ance companies) is amended by striking out subsection (e)
(relating to 1962 transitional rules) and by redesignating
subsection (f) as subsection (e).
(105) AMENDMENTS OF SECTION 822.-
(A) Section 822 (c) (5) (relating to deduction of interest)
is amended by striking out (other than obligations of the
United States issued after September 24, 1917, and originally
subscribed for by the taxpayer)".
(B) The last sentence of section 822 (d) (2) (relating to
amortization of premium and accrual of discount) is amended
by striking out "For taxable years beginning after Decem-
ber 31, 1962, no accrual" and inserting in lieu thereof "No
accrual".
(106) AMENDMENTS OF SECTION 825.-Section 825(g) (relating
to unused loss deduction of certain insurance companies) is
amended by striking out paragraph (1) and by redesignating
paragraphs (2) and (3) as paragraphs (1) and (2), respectively.
(107) AMENDMENT OF SECTION 831.-Section 831(a) (relating
to tax on certain insurance companies) is amended by striking out
"or the taxable income" and inserting in lieu thereof "on the tax-
able income."
(108) AMENDMENTS OF SECTION 832.-Paragraphs (1) and (6)
of section 832(b) (definitions relating to insurance company tax-
able income) are each amended by striking out "Convention" and
inserting in lieu thereof "Association".
H. R. 10612-264
(109) AMENDMENTS OF SECTION 851.-
(A) Section 851(a) (1) (relating to definition of regu-
lated investment company) is amended by striking out
"54 Stat. 789;".
(B) Section 851 (b) (1) (relating to regulated investment
companies) is amended by striking out "which began after
December 31, 1941".
(110) AMENDMENTS OF SECTION 852.-
(A) Subparagraph (C) of section 852 (b) (3) (relating
to method of taxation of regulated investment companies
and their shareholders) is amended by striking out the third
sentence.
(B) (i) Section 852 (b) (3) (D) (iii) is amended by strik-
ing out "by 75 percent of SO much of such amounts as equals
the amount subject to tax in accordance with section 1201
(a) (1) (A) and by 70 percent (72 percent in the case of a
taxable year beginning after December 31, 1969, and before
January 1, 1971) of SO much of such amounts as equals the
amount subject to tax in accordance with section 1201 (a)
(1) (B) or (2)" and inserting in lieu thereof "by 70 percent
of so much of such amounts as equals the amount subject to
tax in accordance with section 1201(a)".
(ii) The amendment made by clause (i) shall not be con-
sidered to affect the amount of any increase in the basis
of stock under the provisions of section 852(b) (3) (D) (iii)
of the Internal Revenue Code of 1954 which is based upon
amounts subject to tax under section 1201 of such Code in
taxable years beginning before January 1, 1975.
(C) Section 852 (d) is amended by inserting after "Invest-
ment Company Act of 1940" the following: (15 U.S.C.
80a-1 and following)".
(111) AMENDMENTS OF SECTION 856.-
(A) Section 856 (c) (1) (relating to real estate investment
trusts) is amended by striking out "which began after
December 31, 1960".
(B) Section 856(c) (6) (D) (relating to definition of other
terms) is amended by inserting after 'Investment Company
Act of 1940, as amended" the following: (15 U.S.C. 80a-1
and following)".
(112) AMENDMENT OF SECTION 857.-Section 857 (b) (3) (C)
(relating to the taxation of capital gains in the case of real estate
investment trusts) is amended by striking out the last sentence.
(113) AMENDMENTS OF SECTION 864.-
(A) Subsection (a) of section 864 (definitions relating to
determinations of sources of income) is amended to read
as follows:
"(a) PRODUCED.-For purposes of this part, the term 'produced'
includes created, fabricated, manufactured, extracted, processed,
cured, or aged."
(B) Clauses (i) and (iii) of section 864(c) (4) (B) and
subparagraph (C) of section 864(c) (5) (relating to effec-
tively connected income) are each amended by striking out
"sale" each place it appears and inserting in lieu thereof "sale
or exchange".
(C) Section 864(c) (4) (B) (iii) (relating to effectively
connected income) is amended by striking out "sold" and
inserting in lieu thereof "sold or exchanged".
H. R. 10612-265
(114) AMENDMENT OF SECTION 905.-Section 905 (b) (relating
to proof of foreign tax credits) is amended by striking out the last
sentence (relating to the treatment of certain royalty payments).
(115) AMENDMENT OF SECTION 911.-Section 911 (c) (relating
to earned income from sources without the United States) is
amended by striking out paragraph (7) (relating to taxable years
ending in 1963, 1964, or 1965).
(116) AMENDMENT OF SECTION 921.-Section 921 (relating to
definition of Western Hemisphere Trade Corporation) is amended
by striking out the last sentence (relating to taxable years before
1954).
(117) AMENDMENTS OF SECTION 931.-Section 931 (relating to
income from sources within possession) is amended by striking out
subsection (h) (relating to certain persons taken as prisoners of
war while working in a possession), and by redesignating sub-
section (i) as subsection (h).
(118) AMENDMENT OF SECTION 934.-Section 934(b) (relating
to gross income received by a corporation from the Virgin
Islands) is amended by striking out the last sentence.
(119) AMENDMENT OF SECTION 951.-Section 951 (a) (1) (relat-
ing to treatment of subpart F income) is amended by striking out
"beginning after December 31, 1962".
(120) REPEAL OF SECTION 972.-Section 972 (relating to con-
solidation of export trade corporations) is repealed.
(121) AMENDMENT OF SECTION 1001.Section 1001 (c) (relat-
ing to recognition of gain or loss) is amended to read as follows:
"(c) RECOGNITION OF GAIN OR Loss.-Except as otherwise provided
in this subtitle, the entire amount of the gain or loss, determined under
this section, on the sale or exchange of property shall be recognized."
(122) AMENDMENTS OF SECTION 1015.-
(A) Subparagraph (A) of section 1015 (d) (1) (relating
to increased basis for gift tax paid) is amended by striking
out "the date of the enactment of the Technical Amendments
Act of 1958" and inserting in lieu thereof "September 2,
1958".
(B) Subparagraph (B) of section 1015 (d) (1) is amended
by striking out "the date of the enactment of the Technical
Amendments Act of 1958" and inserting in lieu thereof
"September 2, 1958,".
(123) AMENDMENT OF SECTION 1016.-Section 1016(a) (relat-
ing to adjustments to basis) is amended by striking out paragraph
(19).
(124) AMENDMENT OF SECTION 1018.-Section 1018 (relating to
adjustment of capital structure before September 22, 1938) is
amended by striking out "54 Stat. 709;".
(125) REPEAL OF SECTION 1020.Section 1020 (relating to elec-
tion in respect of depreciation allowed before 1952) is repealed.
(126) REPEAL OF SECTION 1022.-
(A) Section 1022 (relating to the basis of certain foreign
personal holding company stock) is repealed.
(B) The repeal made by subparagraph (A) shall apply
with respect to stock or securities acquired from a decedent
dying after the date of the enactment of this Act.
(127) AMENDMENT OF SECTION 1024.Section 1024 (containing
cross references) is amended by striking out paragraph (4).
H. R. 10612-266
(128) AMENDMENTS OF SECTION 1033.-
(A) Section 1033 (a) (relating to involuntary conversions)
is amended by striking out paragraph (2) and by redesig-
nating paragraph (3) as paragraph (2).
(B) Section 1033 (a) (2) (relating to conversion into
money), as redesignated by subparagraph (A) of this para-
graph and as amended by this Act, is amended—
(i) by striking out "WHERE DISPOSITION OCCURRED AFTER
1950" in the paragraph heading;
(ii) by striking out "(g)" each place it appears and
inserting in lieu thereof "(h)";
(iii) by striking out "and the disposition of the con-
verted property (as defined in paragraph (2)) occurred
after December 31, 1950," in the text; and
(iv) by adding at the end thereof the following new
subparagraph:
"(E) DEFINITIONS.-For purposes of this paragraph-
(i) CONTROL.-The term 'control' means the owner-
ship of stock possessing at least 80 percent of the total
combined voting power of all classes of stock entitled to
vote and at least 80 percent of the total number of
shares of all other classes of stock of the corporation.
(ii) DISPOSITION OF THE CONVERTED PROPERTY.-The
term disposition of the converted property' means the
destruction, theft, seizure, requisition, or condemnation
of the converted property, or the sale or exchange of
such property under threat or imminence of requisition
or condemnation."
(C) Section 1033 (relating to involuntary conversions) is
amended by striking out subsection (b) (relating to certain
conversions occurring before 1954) and by redesignating sub-
sections (c), (d), (e), (f), (g), and (h), as subsections (b),
(c), (d), (e), (f), and (g), respectively.
(D) The first sentence of section 1033(b) (relating to basis
of a property acquired through involuntary conversions), as
redesignated by subparagraph (C) of this paragraph, is
amended by striking out "or (2)' and inserting in lieu thereof
"or section 112(f) (2) of the Internal Revenue Code of 1939".
(E) Section 1033 (f) (2) (relating to condemnation of real
property), as redesignated by subparagraph (C) of this par-
agraph, is amended to read as follows:
" (2) LIMITATION.-Paragraph (1) shall not apply to the pur-
chase of stock in the acquisition of control of a corporation
described in subsection (a) (2) (A)."
(F) Section 1033 (g) (4) (relating to condemnation of real
property), as amended by section 2140(a) of this Act, is
amended by striking out (a) (3) (B) (i) and inserting in
lieu thereof (a) (2) (B) (i)
(129) AMENDMENTS OF SECTION 1034.-
(A) Section 1034 (a) (relating to gain on sale of residence)
is amended by striking out "after December 31, 1953,".
(B) Section 1034 (b) (defining adjusted sales price) is
amended by striking out paragraph (3) (relating to effective
date of subsection (b)).
(C) Section 1034(d) (relating to certain limitations) is
amended by striking out "or section 112(n) of the Internal
Revenue Code of 1939".
H. R. 10612-267
4
(D) Section 1034(i) (relating to involuntary conversions)
is amended to read as follows:
(ii) SPECIAL RULE FOR CONDEMNATION.-In the case of the seizure,
requisition, or condemnation of a residence, or the sale or exchange of
a residence under threat or imminence thereof, the provisions of this
section, in lieu of section 1033 (relating to involuntary conversions),
shall be applicable if the taxpayer SO elects. If such election is made,
such seizure, requisition, or condemnation shall be treated as the sale
of the residence. Such election shall be made at such time and in such
manner as the Secretary shall prescribe by regulations."
(E) Section 1034(j) (relating to statute of limitations)
is amended by striking out "after December 31, 1950,".
(130) AMENDMENT OF SECTION 1037.-Section 1037(b) (1)
(relating to certain exchanges of United States obligations) is
amended by striking out "section 1232(a) (2) (A)" and inserting
in lieu thereof "section 1232 (a) (2) (B)".
(131) AMENDMENT OF SECTION 1051.-Section 1051 (relating to
property acquired before 1929 during affiliation) is amended by
striking out the last two sentences.
(132) AMENDMENTS OF SECTION 1081.-
(A) Subsection (c) of section 1081 (relating to distribu-
tions required by the SEC) is amended to read as follows:
(c) DISTRIBUTION OF STOCK OR SECURITIES ONLY.-If there is dis-
tributed, in obedience to an order of the Securities and Exchange
Commission, to a shareholder in a corporation which is a registered
holding company or a majority-owned subsidiary company, stock or
securities (other than stock or securities which are nonexempt prop-
erty), without the surrender by such shareholder of stock or securities
in such corporation, no gain to the distributee from the receipt of the
stock or securities so distributed shall be recognized."
(B) Section 1081 (f) (relating to conditions for applica-
tion of section) is amended by striking out "Except in the case
of a distribution described in subsection (c) (2), the provi-
sions" and inserting in lieu thereof "The provisions", and by
striking out "49 Stat. 820;".
(C) Section 1081 (g) (relating to applicability of other
provisions) is amended by striking out "If a distribution
described in subsection (c) (2), or an" and inserting in lieu
thereof "If an", and by striking out the comma after "Com-
mission".
(133) AMENDMENTS OF SECTION 1083.-
(A) Section 1083 (a) is amended by striking out "49 Stat.
820;".
(B) Section 1083 (b) is amended by striking out "49 Stat.
804:".
(C) Section 1083 (e) (4) is amended by striking out "49
Stat. 820;".
(134) REPEAL OF SECTION 1111.-Part IX of subchapter O of
chapter 1 (relating to distributions pursuant to orders enforcing
the antitrust laws) is repealed.
(135) AMENDMENTS OF SECTION 1201.-
(A) Section 1201 (a) (relating to the alternative tax on
capital gain) is amended to read as follows:
'(a) CORPORATIONS.-If for any taxable year a corporation has a
net capital gain, then, in lieu of the tax imposed by sections 11, 511,
821 (a) or (c) and 831 (a), there is hereby imposed a tax (if such tax
is less than the tax imposed by such sections) which shall consist of
the sum of-
H. R. 10612-268
(1) a tax computed on the taxable income reduced by the
amount of the net capital gain, at the rates and in the manner as
if this subsection had not been enacted, plus
(2) a tax of 30 percent of the net capital gain."
(B) Section 1201 (c) (relating to computation of alterna-
tive tax) is amended to read as follows:
'(c) COMPUTATION OF Tax WHERE CAPITAL GAIN EXCEEDS $50,000.-
The tax computed for purposes of subsection (b) (3) shall be the
amount by which a tax determined under section 1 or 511 on an amount
equal to the taxable income (but not less than 50 percent of the net
capital gain) for the taxable year exceeds a tax determined under
section 1 or 511 on an amount equal to the sum of (A) the amount
subject to tax under subsection (b) (1) plus (B) an amount equal to
50 percent of the sum referred to in subsection (b) (2) (A)."
(C) (i) Section 1201 is amended by striking out subsection
(d) (defining subsection (d) gain) and by redesignating sub-
section (e) as subsection (d).
(ii) Section 1201 (b) (2) (A) (relating to alternative tax
on noncorporate taxpayers) is amended by striking out "the
amount of the subsection (d) gain" and inserting in lieu
thereof "the sum of the long-term capital gains for the taxable
year, but not to exceed $50,000 ($25,000 in the case of a
married individual filing a separate return)"
(iii) Section 1201 (b) (3) is amended by striking out "the
amount of the subsection (d) gain" and inserting in lieu
thereof "the sum referred to in subparagraph (A)"
(136) AMENDMENTS OF SECTION 1222.-
(A) Paragraph (9) of section 1222 (relating to definition
of terms applicable to capital gains and losses) is amended
to read as follows:
"(9) CAPITAL GAIN NET INCOME.-The term 'capital gain net
income' means the excess of the gains from sales or exchanges of
capital assets over the losses from such sales or exchanges."
(B) Paragraph (11) of section 1222 (relating to definition
of terms applicable to capital gains and losses) is amended
to read as follows:
(11) NET CAPITAL GAIN.-The term 'net capital gain' means
the excess of the net long-term capital gain for the taxable year
over the net short-term capital loss for such year."
(137) AMENDMENT OF SECTION 1233.-Section 1233 (c) (relating
to certain options to sell) is amended by striking out "the date
of enactment of this title" and inserting in lieu thereof "August
16, 1954".
(138) AMENDMENT OF SECTION 1237.Section 1237 (relating
to real property subdivided for sale) is amended by striking out
subsection (d) (relating to effective date).
(139) REPEAL OF SECTION 1240.-Section 1240 (relating to tax-
ability to employee of certain termination payments) is repealed.
(140) AMENDMENT OF SECTION 1245.-Section 1245 (b) (7) (B)
(relating to transfers to tax-exempt organization where property
will be used in unrelated business) is amended by striking out
"such organization acquiring such property,".
(141) AMENDMENT OF SECTION 1246.Section 1246 (f) (relating
to gain on foreign investment company stock) is amended by
striking out "beginning after December 31, 1962".
H. R. 10612-269
(142) AMENDMENT OF SECTION 1311.-Paragraphs (2) (A), (2)
(B), and (3) of section 1311 (b) (relating to mitigation of effect of
limitations) are each amended by striking out "Tax Court of the
United States" and inserting in lieu thereof "Tax Court".
(143) REPEAL OF SECTION 1315.-Section 1315 (relating to effec-
tive date of part II of subchapter Q of chapter 1) is repealed.
(144) REPEAL OF SECTION 1321.-Part III of subchapter Q of
chapter 1 (relating to involuntary liquidation of LIFO inven-
tories) is repealed.
(145) REPEAL OF SECTIONS 1331 THROUGH 1337.-
(A) Part IV of subchapter Q of chapter 1 (relating to war
loss recoveries) is repealed.
(B) The repeal by subparagraph (A) shall apply with
respect to war loss recoveries in taxable years beginning after
December 31, 1976.
(146) AMENDMENT OF SECTION 1341.Section 1341 (b) (2)
(relating to claim of right) is amended by striking out the last
sentence.
(147) REPEAL OF SECTION 1342.-Section 1342 (relating to com-
putation of tax on certain amounts recovered as a result of a patent
infringement suit) is repealed.
(148) REPEAL OF SECTION 1346.Section 1346 (relating to
recovery of unconstitutional Federal taxes) is repealed.
(149) AMENDMENTS OF SECTION 1372.-
(A) Section 1372 (b) (1) (relating t effect of election
under subchapter S) is amended by striki 3 out (other than
the tax imposed by section 1378) and ins ting in lieu there-
of (other than as provided by section 5: d) (2) and by sec-
tion 1378)
(B) Section 1372 (c) (relating to subchapter S elections by
small business corporations) is amended to read as follows:
(c) WHERE AND How MADE.-An election under subsection (a)
may be made by a small business corporation for any taxable year at
any time during the first month of such taxable year, or at any time
during the month preceding such first month. Such election shall be
made in such manner as the Secretary shall prescribe by regulations."
(C) Section 1372 is amended by striking out subsection
(g) (relating to certain elections for years beginning before
1961).
(150) AMENDMENTS OF SECTION 1374.-
(A) Section 1374(b) (relating to net operating losses of
subchapter S corporations) is amended by adding at the end
thereof the following new sentence: "The deduction allowed
by this subsection shall, for purposes of this chapter, be con-
sidered as a deduction attributable to a trade or business car-
ried on by the shareholder."
(B) Subsection (d) of section 1374 (relating to treatment
of net operating losses of subchapter S corporations) is
repealed.
(151) AMENDMENTS OF SECTION 1375.-
(A) The heading of subsection (b) of section 1375 is
amended by striking out "RECEIVED CREDIT NoT ALLOWED"
and inserting in lieu thereof "Nor TREATED AS SUCH FOR
CERTAIN PURPOSES".
(B) Section 1375 (f) (relating to elections as to certain dis-
tributions) is amended by striking out paragraph (3).
H. R. 10612-270
(152) AMENDMENT OF SECTION 1378.-Section 1378 (b) (relat-
ing to the taxation of capital gain in the case of electing small
business corporations) is amended by striking out the last sentence.
(153) AMENDMENTS OF SECTION 1388.-
(A) Section 1388 (c) (2) (B) (i) (relating to patronage
dividends) is amended by striking out "the date of the enact-
ment of the Revenue Act of 1962" and inserting in lieu there-
of "October 16, 1962".
(B) Section 1388 (h) (2) (B) (i) (relating to per-unit retain
certificates) is amended by striking out "the date of the enact-
ment of this subsection" and inserting in lieu thereof "Novem-
ber 13, 1966".
(154) AMENDMENTS OF SECTION 1401.-
(A) Section 1401 (a) (relating to rate of tax on self-
employment income) is amended to read as follows:
"(a) OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE.-In addition
to other taxes, there shall be imposed for each taxable year, on the
self-employment income of every individual, a tax equal to 7.0 percent
of the amount of the self-employment income for such taxable year."
(B) Section 1401 (b) (relating to rate of tax on self-employ-
ment income for hospital insurance) is amended by striking
out paragraphs (1) and (2) and by redesignating paragraphs
(3), (4), (5), and (6), as paragraphs (1), (2), (3) and (4),
respectively.
(155) AMENDMENTS OF SECTION 1402.-
(A) Paragraph (1) of section 1402(b) (relating to defini-
tion of self-employment income) is amended to read as follows:
"(1) that part of the net earnings from self-employment which
is in excess of (i) an amount equal to the contribution and benefit
base (as determined under section 230 of the Social Security Act)
which is effective for the calendar year in which such taxable year
begins, minus (ii) the amount of the wages paid to such individual
during such taxable years; or".
(B) Section 1402 amended by striking out subsection (g)
(relating to treatment of self-employment income for years
prior to 1962), and by redesignating subsections (h) and (i)
as subsections (g) and (h), respectively.
(C) Section 1402(g) (2) (relating to self-employment
income of members of certain religious faiths), as redesig-
nated by subparagraph (B) of this paragraph, is amended to
read as follows:
(2) TIME FOR FILING APPLICATIONS.-For purposes of this sub-
section, an application must be filed on or before the time pre-
scribed for filing the return (including any extension thereof)
for the first taxable year for which the individual has self-employ-
ment income (determined without regard to this subsection or
subsection (c) (6)) except that an application filed after such date
but on or before the last day of the third calendar month follow-
ing the calendar month in which the taxpayer is first notified in
writing by the Secretary that a timely application for an exemp-
tion from the tax imposed by this chapter has not been filed by him
shall be deemed to be filed timely."
(156) REPEAL OF SECTION 1465.-Section 1465 (relating to defini-
tion of withholding agent) is repealed.
(157) AMENDMENTS OF SECTION 1481.-
(A) Section 1481 (a) (1) (A) (relating to mitigation of
effect of renegotiation of Government contracts) is amended
H. R. 10612-271
by striking out "within the meaning of the Federal renegotia-
tion act applicable to such transaction" and inserting in lieu
thereof "within the meaning of the Renegotiation Act of
1951, as amended (50 U.S.C. App. 1211 and following)".
(B) Section 1481 (a) (1) (relating to renegotiation) is
amended by striking out subparagraph (D).
(C) Subparagraphs (B) and (C) of section 1481 (a) (1)
are each amended by striking out "applicable Federal rene-
gotiation act" and inserting in lieu thereof "Renegotiation
Act of 1951, as amended".
(158) AMENDMENT OF SECTION 1551.Section 1551 (a) (relating
to disallowance of surtax exemption) is amended by striking out
"determined under subsection (d)" and inserting in lieu thereof
"determined under subsection (c)".
(159) AMENDMENT OF SECTION 1552.-The first sentence of sec-
tion 1552(a) (relating to earnings and profits of an affiliated
group) is amended by striking out "beginning after December 31,
1953, and ending after the date of enactment of this title,".
(b) CONFORMING AND CLERICAL AMENDMENTS.-
(1) AMENDMENTS CONFORMING TO REPEAL OF SECTIONS 35 AND
242.-
(A) Section 36, as amended by this Act, is amended by
striking out "sections 32 and 35" and inserting in lieu thereof
"section 32".
(B) Section 41 (b) (2) is amended by striking out "section
35 (relating to partially tax-exempt interest),".
(C) Section 46(a) (3) is amended by striking out sub-
paragraph (B), by inserting "and" at the end of subpara-
graph (A), and by redesignating subparagraph (C) as
subparagraph (B).
(D) Section 50A (a) (3) is amended by striking out sub-
paragraph (B) and redesignating subparagraphs (C), (D),
and (E), as subparagraphs (B), (C), and (D), respectively.
(E) (i) The heading of paragraph (1) of section 171 (a) is
amended to read (1) TAXABLE BONDS.-".
(ii) The heading of paragraph (2) of section 171 (a) is
amended to read (2) TAX-EXEMPT BONDS.-".
(iii) Section 171 (a) is amended by striking out paragraph
(3) and by redesignating paragraph (4) as paragraph (3).
(iv) Section 171 (b) (1) (B) (ii) is amended by striking out
"subsection (c) (1) (B)" and inserting in lieu thereof "sub-
section (a) (1)".
(v) So much of section 171(c) as precedes paragraph (2)
is amended to read as follows:
'(c) ELECTION AS TO TAXABLE BONDS.-
'(1) ELIGIBILITY TO ELECT; BONDS WITH RESPECT TO WHICH ELEC-
TION PERMITTED.-In the case of bonds the interest on which is not
excludible from gross income, this section shall apply only if
the taxpayer has so elected."
(F) (i) Section 551 is amended by striking out subsection
(c), and by redesignating subsections (d), (e), (f), and (g),
as subsections (c), (d), (e), and (f), respectively.
(ii) Section 1016(a) (13) is amended by striking out "sec-
tion 551 (f)" and inserting in lieu thereof "section 551(e)".
(G) Section 584 (c) (2) is amended to read as follows:
'(2) DIVIDENDS RECEIVED.-The proportionate share of each
participant in the amount of dividends received by the common
H.R. 10612-272
trust fund and to which section 116 applies shall be considered
for purposes of such section as having been received by such
participant."
(H) (i) Section 642 (a) is amended by striking out para-
graph (1), and by redesignating paragraphs (2) and (3) -
as paragraphs (1) and (2), respectively.
(ii) Section 41 (d) is amended by striking out "section
642 (a) (3)" and inserting in lieu thereof "section 642 (a) (2)".
(iii) Section 901 (g) (3), as amended by this Act, is
amended by striking out "section 642 (a) (2) and inserting
in lieu thereof "section 642(a) (1)".
(I) (i) Section 702 (a) is amended by striking out para-
graph (7) and by redesignating paragraphs (8) and (9) as
paragraphs (7) and (8), respectively.
(ii) Section 702 (b) is amended by striking out "paragraphs
(1) through (8)" and inserting in lieu thereof "paragraphs
(1) through (7)".
(iii) Section 1402(a) is amended by striking out "702(a)
(9) each place it appears and inserting in lieu thereof "702
(a) (8)".
(J) (i) Section 804 (a) is amended by striking out para-
graph (3), and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.
(ii) Section 243(b) (3) (C) (iii), as redesignated by para-
graph (21) (A) of this subsection, is amended by striking
out "sections 804(a) (4)" and inserting in lieu thereof "sec-
tions 804(a) (3)".
(iii) Section 804(a) (2) is amended by striking out "para-
graph (5)" and inserting in lieu thereof "paragraph (4)",
and by striking out "paragraph (4)" and inserting in lieu
thereof "paragraph (3)".
(iv) Section 809 (d) (10) is amended by striking out "sec-
tion 804(a) (4)", and inserting in lieu thereof "section 804
(a) (3)"
(v) Section 1561 (a) (3) is amended by striking out "sec-
tions 804(a) (4)" and inserting in lieu thereof "sections 804
(a) (3)"
(vi) Section 1564(a) (1) (C) is amended by striking out
"sections 804(a) (4)" inserting in lieu thereof "sections 804
(a) (3)".
(K) Section 804(a) (2) (A) is amended by striking out
clause (ii), by inserting "and" at the end of clause (i), and
by redesignating clause (iii) as clause (ii).
(L) (i) Section 809 (d) (8) (A) is amended by striking out
clause (ii), by inserting "and" at the end of clause (i), and
by redesignating clause (iii) as clause (ii).
(ii) Section 809 (d) (8) (B) is amended by striking out
"subparagraph (A) (iii) and inserting in lieu thereof "sub-
paragraph (A) (ii)".
(M) Sections 804 (a) (1), 804(a) (2), 809 (a) (1), 809 (b) (1)
(A) and 809 (b) (2) (A) are each amended by striking out
" partially tax-exempt interest,".
(N) Section 809 (e) is amended by striking out paragraph
(6), and by redesignating paragraph (7) as paragraph (6).
(0) Section 815(b) (2) (A) (iii) is amended by striking
out "the deduction for partially tax-exempt interest provided
H. R. 10612-273
by section 242 (as modified by section 804(a) (3) and by
striking out the comma after "809 (d) (8) (B)
(P) Section 822(c) (2) is amended by striking out "par-
tially tax-exempt interest and".
(Q) Section 822 (c) (6) (A) is amended by striking out "or
to the deduction provided in section 242 for partially tax-
exempt interest".
(R) Section 822(c) (7) is amended by striking out "par-
tially tax-exempt interest and to".
(S) Section 822(d) (2) is amended by striking out ", the
deduction provided in subsection (c) (1), and the deduction
allowed by section 242 (relating to partially tax-exempt
interest)" and inserting in lieu thereof "and the deduction
provided in subsection (c) (1)'
(T) Section 832 (5) (A) is amended by striking out "or
to the deductions provided in section 242 for partially tax-
exempt interest".
(U) Section 832(c) (12) is amended by striking out "par-
tially tax-exempt interest and to".
(V) Sections 852(b) (1) and 857 (b) (1) are each amended
by striking out the last sentence.
(W) Section 1244(c) (1) (E) is amended by striking out
"sections 172, 242, 243" and inserting in lieu thereof "sections
172, 243".
(X) Section 1402 (a) (2) is amended by striking out (other
than interest described in section 35)"
(Y) Section 1503 (b) (3) is amended by striking out sub-
paragraph (C).
(Z) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by striking out the
item relating to section 35.
(AA) The table of sections for part VIII of subchapter B
of chapter 1 is amended by striking out the item relating to
section 242.
(2) AMENDMENT CONFORMING TO REPEAL OF SECTION 51.-The
table of parts for subchapter A of chapter 1 is amended by
striking out the item relating to part V.
(3) AMENDMENTS CONFORMING TO ADDITIONS OF SECTIONS 64 AND
65.-
(A) Paragraphs (1) (C), (5) (A), (6) (D), and (12) of
section 341 (e) are each amended by striking out "gain from
the sale or exchange of property which is neither a capital
asset nor property described in section 1231 (b)" each place
it appears and inserting in lieu thereof "ordinary income".
(B) Section 483(f) (3) is amended by striking out "no
part of any gain on such" and inserting in lieu thereof "all of
the gain, if any, on such" and by striking out "gain from the
sale or exchange of a capital asset or property described in
section 1231" and inserting in lieu thereof "ordinary income".
(C) Section 707 (b) (2) is amended by striking out "as
gain from the sale or exchange of property other than a capi-
tal asset" and inserting in lieu thereof "as ordinary income".
(D) Paragraphs (1) and (2) of section 735 (a) are each
amended by striking out "gain or loss from the sale or
exchange of property other than a capital asset" and inserting
in lieu thereof "as ordinary income or as ordinary loss, as the
case may be".
H. R. 10612-274
(E) Section 1236 (b) is amended by striking out "loss from
the sale or exchange of property which is not a capital asset"
and inserting in lieu thereof "ordinary loss".
(F) Sections 1242 and 1243 are each amended by striking
out "a loss from the sale or exchange of property which-is
not a capital asset" each place it appears and inserting in
lieu thereof "an ordinary loss".
(G) Section 1244 is amended by striking out "a loss from
the sale or exchange of an asset which is not a capital asset"
each place it appears and inserting in lieu thereof "an ordi-
nary loss".
(H) Section 1248(g) (3) (B), as redesignated by this Act,
is amended by striking out "gain from the sale of an asset
which is not a capital asset" and inserting "ordinary income".
(I) The following provisions are each amended by striking
out gain from the sale or exchange of property which is not
a capital asset" each place it appears and inserting in lieu
thereof "ordinary income": sections 341 (a), 871 (a) (1) (C)
(i) and (ii), 881(a) (3) (A) and (B), 996(d) (1) and (2),
1037 (b) (1) (A), 1232 (a) (2) (A) and (B), 1232 (c), 1246 (a),
and 1385 (c) (2) (C).
(J) The following provisions are each amended by strik-
ing out "gain from the sale of property which is not a capital
asset" and inserting in lieu thereof "ordinary income": sec-
tions 306 (a) (1) (A), 306 (a) (1) (B), and 306(f).
(K) The following provisions are each amended by striking
out "gain from the sale or exchange of property which is
neither a capital asset nor property described in section 1231"
each place it appears and inserting in lieu thereof "ordinary
income": sections 80 (c) (1), 163 (d) (3) and (5), 613 (a), 617
(d) (1), 995 (b) (1) (C), 1238, 1245(a) (1), 1249 (a), 1250 (f)
and (g), 1251 (b) (3) (B), (c) (1), and (c) (2), and 1252 (a)
(1).
(4) CLERICAL AMENDMENTS CONFORMING TO ADDITIONS OF SEC-
TIONS 64 AND 65.-
(A) The table of sections for part I of subchapter B of
chapter 1 is amended by adding at the end thereof the
following new items:
"Sec. 64. Ordinary income defined.
"Sec. 65. Ordinary loss defined."
(B) The heading for part I of subchapter B of chapter 1
is amended by striking out "AND TAXABLE INCOME"
and inserting in lieu thereof "TAXABLE INCOME, ETC."
ETC."
(C) The table of parts for subchapter B of chapter 1 is
amended by striking out "and taxable income." in the item
relating to part I and inserting in lieu thereof "taxable
income, etc."
(5) AMENDMENT CONFORMING TO REPEAL OF SECTION 76.-The
table of sections for part II of subchapter B of chapter 1 is
amended by striking out the item relating to section 76.
(6) AMENDMENTS CONFORMING TO AMENDMENT OF SECTION 103.-
(A) Section 6049 (b) (2) (A) is amended by striking out
"section 103 (a) (1) or (3) and inserting in lieu thereof
"section 103 (a)".
H. R. 10612-275
(B) Section 852(a) (1) (B), as added by this Act, is
amended by striking out "section 103 (a) (1)" and inserting in
lieu thereof "section 103 (a)"
(7) AMENDMENTS CONFORMING TO AMENDMENT OF SECTION 143.-
(A) (i) Part V of subchapter B of chapter 1 is amended
by striking out section 153 (relating to determination of
marital status) and by redesignating section 154 as section
153.
(ii) The table of sections for part V of subchapter B of
chapter 1 is amended by striking out the items relating to
sections 153 and 154 and inserting in lieu thereof the
following:
"Sec. 153. Cross references.".
(B) Section 152 (a) (9) is amended by striking out "section
153" and inserting in lieu thereof "section 143".
(C) Section 153, as redesignated by subparagraph (A)
of this paragraph, is amended by adding at the end thereof
the following new paragraph:
"(5) For determination of marital status, see section 143."
(8) AMENDMENTS CONFORMING TO AMENDMENT OF SECTION 151.-
(A) The following provisions are each amended by strik-
ing out "educational institution (as defined in section 151
(e) (4)) each place it appears and inserting in lieu thereof
"educational organization described in section 170 (b) (1)
(A) (ii)" sections 117 (a) (1) (A), 117(b) (1), 117 (b) (2),
152 (d), 170 (g) (1) (B) (as redesignated by subsection (a)
(28) (A) (i) of this section), and 403 (b) (1) (A) (ii).
(B) Section 103(c) (3) (A), as redesignated by subsection
(a) (17) of this section, is amended by striking out "educa-
tional institution (within the meaning of section 151 (e) (4))
and inserting in lieu thereof "educational organization
described in section 170 (b) (1) (A) (ii)".
(C) Section 163(b) (1) is amended by striking out "edu-
cational institution (as defined in section 151 (e) (4)) and
which is provided for a student of such institution" and
inserting in lieu thereof "educational organization described
in section 170(b) (1) (A) (ii) and which is provided for a
student of such organization".
(D) (i) Subparagraphs (A), (B), and (C) of section 415
(c) (4) are each amended by striking out "educational insti-
tution" each place it appears and inserting in lieu thereof
"educational organization".
(ii) Subparagraph (D) (ii) of section 415(c) (4) is
amended to read as follows:
"(ii) For purposes of this paragraph the term 'edu-
cational organization' means an educational organiza-
tion described in section 170(b) (1) (A) (ii)."
(iii) Section 415(c) (4) is amended by striking out "EDU-
CATIONAL INSTITUTIONS" from the paragraph heading and
inserting in lieu thereof "EDUCATIONAL ORGANIZATIONS".
(E) Section 508(c) (2) (A) is amended to read as follows:
(A) educational organizations described in section 170
(b) (1) (A) (ii), and".
(F) Section 512(b) (15) (B), as redesignated by section
1951 (b) (8) (A) of this Act, is amended by striking out "edu-
H. R. 10612-276
cational institution (as defined in section 151 (e) (4)) and
inserting in lieu thereof "educational organization described
in section 170(b) (1) (A) (ii)".
(G) Section 1303 (d) is amended by striking out "educa-
tional institution (as defined in section 151 (e) (4)) each
place it appears and inserting in lieu thereof "educational
organization described in section 170(b) (1) (A) (ii)".
(H) Sections 4941 (d) (2) (G) (ii) and 4945 (g) (1) each
are amended by striking out "educational institution
described in section 151(e) (4) and inserting in lieu thereof
"educational organization described in section 170(b) (1)
(A) (ii)"
(9) AMENDMENTS CONFORMING TO THE AMENDMENTS OF SECTION
152.-Section 2(b) (3) (B) is amended by striking out clause (ii),
by adding "or" at the end of clause (i), and by redesignating
clause (iii) as clause (ii).
(10) AMENDMENT CONFORMING TO THE AMENDMENT OF SECTION
172.-
(A) Section 374(e) (2) is amended by striking out "sec-
tion 172(j)" and inserting in lieu thereof "172(g)".
(B) Section 904 (f) (2) (B) (i) and 904(f) (4) (B) (i), as
amended by this Act, are each amended by striking out
"section 172 (k) (1)" and inserting in lieu thereof "section
172(h)".
(11) AMENDMENTS CONFORMING TO REPEAL OF SECTION 187.-
(A) Section 48(a) (8) (relating to section 38 property) is
amended by striking out "187,".
(B) The table of sections for part VI of subchapter B of
chapter 1 is amended by striking out the item relating to sec-
tion 187.
(C) Section 1082 (a) (2) (B) (relating to basis for deter-
mining gain or loss) is amended by striking out "187,".
(D) Section 1245 (a) (2) (relating to gain from disposi-
tions of certain depreciable property) is amended by striking
out "187," each place it appears.
(12) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION 342.-
(A) Section 551(f), as redesignated by paragraph (1) (F)
of this subsection, is amended by striking out paragraph (3).
(B) The table of subparts for part II of subchapter C of
chapter 1 is amended by striking out the item relating to
subpart C and inserting in lieu thereof:
"Subpart C. Collapsible corporations."
(C) The table of sections for subpart C of part II of sub-
chapter C of chapter 1 is amended by striking out the item
relating to section 342.
(D) The heading of subpart C of part II of subchapter
C of chapter 1 is amended to read as follows:
"Subpart C-Collapsible Corporations".
(13) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION 363.-
The table of sections for subpart C of part III of subchapter C of
chapter 1 is amended by striking out the item relating to section
363.
(14) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION 373.-
(A) Section 372 (b) (1) is amended by striking out "373
(b) or".
H. R. 10612-277
(B) Section 374(b) is amended to read as follows:
"(b) BASIS.-
"(1) RAILROAD CORPORATIONS.-If the property of a railroad
corporation, as defined in section 77 (m) of the Bankruptcy Act
(11 U.S.C. 205 (m)) was acquired after December 31, 1938, in
pursuance of an order of the court having jurisdiction of such
corporation-
"(A) in a receivership proceeding, or
(B) in a proceeding under section 77 of the Bankruptcy
Act,
and the acquiring corporation is a railroad corporation (as
defined in section 77 (m) of the Bankruptcy Act) organized or
made use of to effectuate a plan of reorganization approved by the
court in such proceeding, the basis shall be the same as it would be
in the hands of the railroad corporation whose property was SO
acquired, increased in the amount of gain recognized under sub-
section (a) (2) to the transferor on such transfer.
(2) PROPERTY ACQUIRED BY STREET, SUBURBAN, OR INTERURBAN
ELECTRIC RAILWAY CORPORATION.-If the property of any street,
suburban, or interurban electric railway corporation engaged as
a common carrier in the transportation of persons or property in
interstate commerce was acquired after December 31, 1934, in
pursuance of an order of the court having jurisdiction of such
corporation in a proceeding under section 77 of the Bankruptcy
Act (11 U.S.C. 501 and following), and the acquiring corpora-
tion is a street, suburban, or interurban electric railway engaged
as a common carrier in the transportation of persons or property
in interstate commerce, organized or made use of to effectuate a
plan of reorganization approved by the court in such proceeding,
then, notwithstanding the provisions of section 270 of the Bank-
ruptcy Act (11 U.S.C. 670), the basis shall be the same as it would
be in the hands of the corporation whose property was so
acquired."
(C) Section 374(c) (3) is amended by striking out "sub-
section (b)" and inserting in lieu thereof "subsection (b)
(1)".
(D) Section 1232(b) (2) is amended by striking out "sec-
tion 371, 373, or 374" and inserting in lieu thereof "section
371 or 374".
(E) The table of sections for part IV of subchapter C of
chapter 1 is amended by striking out the item relating to sec-
tion 373.
(15) AMENDMENT CONFORMING TO REPEAL OF SECTIONS 391
THROUGH 395.-The table of parts for subchapter C of chapter 1
is amended by striking out the item relating to part VII.
(16) AMENDMENT CONFORMING TO THE AMENDMENTS OF SECTION
481.-Section 381 (c) is amended by striking out paragraph (21).
(17) AMENDMENT CONFORMING TO THE AMENDMENTS OF SECTION
545.-Section 381 (c) (15) is amended by striking out "subsections
(b) (7) and (c)" and inserting in lieu thereof "subsection (c)".
(18) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 583.-
The table of sections for part I of subchapter H of chapter 1 is
amended by striking out the item relating to section 583.
(19) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 592.-
The table of sections for part II of subchapter H of chapter 1 is
amended by striking out the item relating to section 592.
H. R. 10612-278
(20) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION 601.-
(A) Section 535 (b) is amended by striking out paragraph
(8).
(B) (i) Section 545 (b) is amended by striking out para-
graph (6), and by redesignating paragraph (8) as para--
graph (6).
(ii) Section 545 (b) (2) is amended by striking out "para-
graph (8)" and inserting in lieu thereof "paragraph (6)".
(iii) Section 545(c) (5) is amended by striking out "sub-
section (b) (8)" and inserting in lieu thereof "subsection
(b) (6)".
(C) The table of parts for subchapter H of chapter 1 is
amended by striking out the item relating to part III.
(21) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION 615.-
(A) (i) Section 243 (b) (3) (C) is amended-
(I) by striking out clauses (ii) and (iii) and inserting
in lieu thereof the following:
'(ii) $400,000 limitation for certain exploration
expenditures under section 617(h) (1),", and
(II) by redesignating clauses (iv) and (v) as clauses
(iii) and (iv), respectively.
(ii) Section 1564(b) (2) (C) is amended by striking out
"section 243 (b) (3) (C) (v)" and inserting in lieu thereof
"243 (3) (C) (iv)
(B) Section 381 (c) (10) is amended to read S follows:
(10) TREATMENT OF CERTAIN MINING DEVELOPME AND
EXPLO-
RATION EXPENSES OF DISTRIBUTOR OR TRANSFEROR CC PORATION.-
The acquiring corporation shall be entitled to deduc as if it were
the distributor or transferor corporation, expenses d erred under
section 616 (relating to certain development expenditures) if the
distributor or transferor corporation has SO elected. For the pur-
pose of applying the limitation provided in section 617 (h), if, for
any taxable year, the distributor or transferor corporation was
allowed a deduction under section 617 (a), the acquiring corpora-
tion shall be deemed to have been allowed such deduction."
(C) Section 617 (h) (1) is amended by striking out "and
section (a) and the amounts which are or have been
treated as deferred expenses under section 615(b)" and insert-
ing in lieu thereof "and subsection (a) of section 615 (as in
effect before the enactment of the Tax Reform Act of 1976)
(D) Section 617(h) (3) is amended to read as follows:
" (3) APPLICATION OF PARAGRAPH (2) (B).-Paragraph (2) (B)
shall apply with respect to all amounts deducted before the latest
such transfer from the individual or corporation to the taxpayer.
Paragraph (2) (B) shall apply only if-
"(A) the taxpayer acquired any mineral property from
the individual or corporation under circumstances which
make paragraph (7), (8), (11), (15), (17), (20), or (22)
of section 113(a) of the Internal Revenue Code of 1939 apply
to such transfer; or
"(B) the taxpayer acquired any mineral property from
the individual or corporation under circumstances which
make section 334(b), 362 (a) and (b), 372(a), 374(b) (1),
1051, or 1082 apply to such transfer."
(E) Section 617 is amended by adding at the end thereof
the following new subsection:
"(i) CERTAIN PRE-1970 EXPLORATION EXPENDITURES.-f-
H. R. 10612-279
"(1) the taxpayer receives mineral property in a transaction as
a result of which the basis of such property in the hands of the
transferee is determined by reference to the basis in the hands
of the transferor,
"(2) an election made by the transferor under subsection (e)
of section 615(e) (as in effect before the enactment of the Tax
Reform Act of 1976) applied with respect to expenditures which
were made by him and which were properly chargeable to such
property, and
"(3) the taxpayer has made or makes an election under subsec-
tion (a),
then in the application of this section with respect to the transferee,
the amounts allowed as deductions under such section 615 to the
transferor, which (but for the transferor's election) would be reflected
in the adjusted basis of such property in the hands of the transferee,
shall be treated as expenditures allowed as deductions under subsection
(a) to the transferor."
(F) Section 703(b) is amended by striking out "under sec-
tion 615 (relating to pre-1970 exploration expenditures),'
(G) Section 1016 (a) is amended by striking out paragraph
(10).
(H) The table of sections for part I of subchapter I of
chapter 1 is amended by striking out the item relating to sec-
tion 615.
(22) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION 632.-
(A) The table of sections for part III of subchapter I of
chapter 1 is amended by striking out the item relating to
section 632.
(B) Section (b) is amended by striking out paragraph
(1).
(23) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 771.-
The table of parts for subchapter K of chapter 1 is amended by
striking out the item relating to part IV.
(24) AMENDMENT CONFORMING TO THE AMENDMENT OF SECTION
so2.-Section 815 (c) (3) (B) is amended by striking out "(deter-
mined without regard to section 802 (a) (3))
(25) AMENDMENT CONFORMING TO THE AMENDMENT OF SECTION
s12.-Section 844 (b) (2) is amended by striking out "section
812(b) (1) (A) (iii) and inserting in lieu thereof "section 812
(b) (1) (C)".
(26) AMENDMENTS CONFORMING TO THE AMENDMENTS OF SECTION
864.-
(A) Paragraphs (5) and (6) of section 861 (a) (relating
to items treated as income from within United States) are
each amended by striking out in the heading "SALE" and
inserting in lieu thereof "SALE OR EXCHANGE", and by striking
out "sale" in the text and inserting in lieu thereof "sale or
exchange".
(B) Section 861 (1) (relating to income from certain
aircraft and vessels) is amended by striking out "sale or other
disposition" and inserting in lieu thereof "sale, exchange, or
other disposition".
(C) Paragraphs (5) and (6) of section 862(a) (relating
to items treated as income from without the United States)
and paragraphs (2) and (3) of section 863 (b) (relating to
sources of income) are each amended by striking out "sale"
and inserting in lieu thereof "sale or exchange".
H. R. 10612-280
(D) Paragraph (2) of section 863 (b) (relating to sources
of income) is amended by striking out "sold" each place it
appears and inserting in lieu thereof "sold or exchanged".
(27) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION
972.-
(A) Section 970(b) (1) (relating to inclusion of certain
previously excluded amounts of subpart F income) is
amended by striking out "application of section 972" and
inserting in lieu thereof "treatment (under section 972 as in
effect before the date of the enactment of the Tax Reform
Act of 1976) of two or more controlled foreign corporations
which are export trade corporations as a single controlled
foreign corporation".
(B) The table of sections for subpart G of part III of
subchapter N of chapter 1 is amended by striking out the
item relating to section 972.
(28) AMENDMENTS CONFORMING TO THE AMENDMENT OF SECTION
1001.-
(A) Subsection (c) of section 331 is amended to read as
follows:
'(c) CROSS REFERENCE.-
"For general rule for determination of the amount of gain or loss
recognized, see section 1001."
(B) (i) Section 1002 (relating to recognition of gain or
loss) is repealed.
(ii) The table of sections for part I of subchapter O of
chapter 1 is amended by striking out the item relating to sec-
tion 1002.
(29) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION
1020.-
(A) The third sentence of subsection (a) of section 1016 is
amended by striking out "under section 1020" and inserting
in lieu thereof "under section 1020 (as in effect before the
date of the enactment of the Tax Reform Act of 1976)'
(B) The table of sections for part II of subchapter O of
chapter 1 is amended by striking out the item relating to
section 1020.
(30) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION
1022.-
(A) Section 1016(a) is amended—
(i) by striking out paragraph (21), and
(ii) by redesignating paragraphs (20) and (22) as
paragraphs (19) and (20), respectively.
(B) The amendment made by subparagraph (A) (i) shall
apply with respect to stock or securities acquired from a
decedent dying after the date of the enactment of this Act.
(C) The table of sections for part II of subchapter O
of chapter 1 is amended by striking out the item relating
to section 1022.
(31) AMENDMENTS CONFORMING TO AMENDMENTS OF SECTION
1033.-
(A) Section 1250 (d) (4) (B) is amended by striking out
"1033 (a) (3) (A)' and inserting in lieu thereof "1033 (a) (2)
(A)".
(B) Section 1250(d) (4) (C) and (D) are each amended
by striking out "1033 (a) (3) and inserting in lieu thereof
"1033(a) (2)
H. R. 10612-281
(C) Section 6212(c) (2) (B) is amended by striking out
"1033 (a) (3) (C) and (D)" and inserting in lieu thereof
"1033 (a) (2) (C) and (D)".
(D) Section 6504(4) is amended by striking out "1033 (a)
(3) (C) and (D)' and inserting in lieu thereof "1033(a) (2)-
(C) and (D)".
(E) Sections 1071(b) and 1250(d) (4) (D) are each
amended by striking out "1033(c)" and inserting in lieu
thereof "1033(b)".
(32) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION
1111.-
(A) Section 301 is amended by striking out subsection (f),
and by redesignating subsection (g) as subsection (e).
(B) (i) Section 312 is amended by striking out subsection
(k), and by redesignating subsections (1) and (m) as subsec-
tions (j) and (k), respectively.
(ii) Section 1246(g) is amended by striking out "312(1)"
and inserting in lieu thereof "312(j)".
(iii) Sections 964 (a) and 1248 (c) (1) are each amended by
striking out "312(m) (3)" and inserting in lieu thereof "312
(k) (3)".
(iv) Subsection (d) of section 1377, as added by this Act,
is amended by striking out "312(m)" and inserting in lieu
thereof (k)
(C) Section 535(b) is amended by striking out paragraphs
(9) and (10).
(D) Section 543(a) (1) is amended by inserting "and" at
the end of subparagraph (A), and by striking out sub-
paragraphs (B) and (C) and inserting in lieu thereof the
following:
(B) interest on amounts set aside in a reserve fund under
section 511 or 607 of the Merchant Marine Act, 1936 (46
U.S.C. 1161 or 1177)
(E) Section 545 (b) is amended by striking out paragraphs
(10) and (11).
(F) Section 553(a) (1) is amended to read as follows:
"(1) DIVIDENDS, ETC.-Dividends, interest, royalties, and
annuities."
(G) Section 556(b) is amended by striking out paragraphs
(7) and (8).
(H) Section 561 (b) is amended to read as follows:
"(b) SPECIAL RULES APPLICABLE.-In determining the deduction for
dividends paid, the rules provided in section 562 (relating to rules
applicable in determining dividends eligible for dividends paid deduc-
tion) and section 563 (relating to dividends paid after the close of the
taxable year) shall be applicable."
(I) The table of parts for subchapter O of chapter 1 is
amended by striking out the item relating to part IX.
(33) AMENDMENTS CONFORMING TO AMENDMENT OF SECTION
1222.-
(A) Section 57 (a) (9) (A) is amended by striking out "the
amount by which the net long-term capital gain exceeds the
net short-term capital loss" and inserting in lieu thereof "the
net capital gain".
(B) So much of the first sentence of section (a) (9) (B)
as precedes "by a fraction" is amended to read as follows: "In
the case of a corporation having a net capital gain for the
H. R. 10612-282
taxable year, an amount equal to the product obtained by
multiplying the net capital gain".
(C) Section 527 (b) (2) is amended by striking out "net
section 1201 gain" and inserting in lieu thereof "net capital
gain".
(D) Sections 535 (b) (6) and 545 (b) (5) are each amended-
(1) by striking out from the paragraph heading
"LONG-TERM" and inserting in lieu thereof "NET",
(2) by striking out from the text "the excess of the net
long-term capital gain for the taxable year over the net
short-term capital loss for such year" each place it
appears and inserting in lieu thereof "the net capital gain
for the taxable year", and
(3) by striking out from the text "such excess" each
place it appears and inserting in lieu thereof "such net
capital gain".
(E) Section 802 (a) (2) is amended—
(i) by striking out "the net long-term capital gain of
any life insurance company exceeds the net short-term
capital loss" and inserting in lieu thereof "any life insur-
ance company has a net capital gain", and
(ii) by striking out "such excess" each place it appears
and inserting in lieu thereof "such net capital gain".
(F) Section 804(a) (2) is amended by striking out "by
which the net long-term capital gain exceeds the net short-
term capital loss" and inserting in lieu thereof "of the net
capital gain".
(G) Sections 809 (b) (1) (B) and 809 (b) (2) (B) are each
amended by striking out "by which the net long-term capital
gain exceeds the net short-term capital loss" and inserting in
lieu thereof "of the net capital gain".
(H) Section 815 (b) (2) (A) (ii) is amended by striking out
"by which the net long-term capital gain exceeds the net short-
term capital loss" and inserting in lieu thereof "of the net
capital gain".
(I) Section 852 (b) (2) (A) is amended by striking out
"the excess, if any, of the net long-term capital gain over the
net short-term capital loss" and inserting in lieu thereof "the
amount of the net capital gain, if any".
(J) (i) Section 852 (b) (3) (A) is amended to read as
follows:
'(A) IMPOSITION OF TAX.-There is hereby imposed for
each taxable year in the case of every regulated investment
company a tax, determined as provided in section 1201 (a), on
the excess, if any, of the net capital gain over the deduction
for dividends paid (as defined in section 561) determined
with reference to capital gain dividends only."
(ii) The second sentence of section 852 (b) (3) (C) is
amended by striking out "excess of the net long-term capi-
tal gain over the net short-term capital loss" each place it
appears and inserting in lieu thereof "net capital gain".
(K) The second sentence of section 857 (b) (3) (C) is
amended by striking out "excess of the net long-term capital
gain over the net short-term capital loss" each place it appears
and inserting in lieu thereof "net capital gain".
(L) Section 1201 (b) is amended by striking out "net sec-
tion 1201 gain" each place it appears and inserting in lieu
thereof "net capital gain".
H. R. 10612-283
(M) The first sentence of section 1202 is amended to read
as follows: "If for any taxable year, a taxpayer other than a
corporation has a net capital gain, 50 percent of the amount of
the net capital gain shall be a deduction from gross income."
(N) Sections 381 (c) (3) (B), 381 (c) (3) (C), 852 (d), 4940
(c) (1), and 4940 (c) (4) are each amended by striking out "net
capital gain" and inserting in lieu thereof "capital gain net
income".
(0) Section 1212 (a) (1) is amended by striking out "net
capital gain" each place it appears and inserting in lieu
thereof "capital gain net income", and by striking out "net
capital gains" and inserting in lieu thereof "capital gain net
income".
(P) Section 1247 (a) (1) (B) is amended by striking out
"the excess (determined as if such corporation were a domestic
corporation) of the net long-term capital gain over the net
short-term capital loss" and inserting in lieu thereof "the
amount (determined as if such corporation were a domestic
corporation) of the net capital gain".
(Q) (i) Section 1375(a) (1) is amended by striking out
"the excess of the corporation's net long-term capital gain
over its short-term capital loss" and inserting in lieu thereof
"the corporation's net capital gain".
(ii) The second sentence of section 1375(a) (1) is amended
by striking out "such excess" and inserting in lieu thereof
"such net capital gain".
(iii) Section 1375 (a) (3) is amended by striking out "the
excess of an electing small business corporation's net long-
term capital gain over its net short-term capital loss" and
inserting in lieu thereof "an electing small business corpora-
tion's net capital gain".
(R) The following provisions are each amended by strik-
ing out "the excess of the net long-term capital gain over the
net short-term capital loss," and inserting in lieu thereof "the
net capital gain": Sections 1247 (a) (2) (A) (i), 1247 (a) (2)
(C), 1247 (d) (1) and (2), 1378(a) (1), 1378 (b) (1), and 1378
(c) (3).
(34) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 1240.-
The table of sections of part IV of subchapter P of chapter 1 is
amended by striking out the item relating to section 1240.
(35) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 1315.-
The table of sections for part II of subchapter Q of chapter 1 is
amended by striking out the item relating to section 1315.
(36) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION
1321.-
(A) Section 472 is amended by striking out subsection (f).
(B) Section 6422, as amended by this Act, is amended by
striking out paragraph (2), and by redesignating paragraphs
(3) through (13) as paragraphs (2) through (12),
respectively.
(C) Section 6504 is amended by striking out paragraph
(1).
(D) Section 6515 is amended by striking out paragraph
(1)
(E) The table of parts for subchapter Q of chapter 1 is
amended by striking out the item relating to part III.
(37) AMENDMENTS CONFORMING TO THE REPEAL OF SECTIONS 1331
THROUGH 1337.-
H. R. 10612-284
(A) The third sentence of section 901 (a) is amended by
striking out "under section 1333 (relating to war loss
recoveries) or".
(B) Section 936(a) (2), as added by this Act, is
amended-
(i) by inserting "or" at the end of subparagraph (C),
and
(ii) by striking out subparagraph (D).
(C) Section 6212(c) (2) is amended by striking out sub-
paragraph (D).
(D) Section 6515 is amended by striking out paragraph
(6)
(E) Section 6515, as amended by this Act, is amended by
striking out paragraph (2), and by redesignating paragraphs
(3), (4), (5), (6), (7), and (8) as paragraphs (1), (2), (3),
(4), (5), and (6) respectively.
(F) The table of parts for subchapter Q of chapter 1 is
amended by striking out the item relating to part IV.
(38) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 1342.-
The table of sections for part V of subchapter Q of chapter 1 is
amended by striking out the item relating to section 1342.
(39) AMENDMENTS CONFORMING TO THE REPEAL OF SECTION
1346.-
(A) The table of sections for part VI of subchapter Q of
chapter 1 is amended by striking out the item relating to sec-
tion 1346.
(B) Section 6504 is amended by striking out paragraph
(7).
(40) AMENDMENT CONFORMING TO AMENDMENT OF SECTION
1372.-Section 58 (d) (2) is amended bv striking out ", notwith-
standing the provisions of section 1371 (b) (1),".
(41) AMENDMENT CONFORMING TO THE REPEAL OF SECTION
1465.-The table of sections for subchapter C of chapter 3 is
amended by striking out the item relating to section 1465.
(c) AMENDMENTS TO PROVISIONS REFERRING TO TERRITORIES.-
(1) Section 37(f) is amended by striking out "a Territory,".
(2) Sections 105 (e) (2), 273, and 454(b) (2) are each amended
by striking out ", a Territory,".
(3) Section 117 (b) (2) (A) (iv) is amended by striking out "a
territory,"
(4) Section 162 (a) is amended by striking out "territory".
(5) Section 581 is amended by striking out " of any State, or
of any Territory" and inserting in lieu thereof "or of any State",
and by striking out " Territorial,".
(6) Section 801 (b) (3) is amended by striking out "or
Territorial".
(7) Section 861 (a) (1) is amended by striking out ", any Ter-
ritory, any political subdivision of a Territory,".
(8) Paragraphs (6) and (7) of section 1014(b) are each
amended by striking out "Territory,".
(9) Section 1221 (5) is amended by striking out "or Territory,".
(d) EFFECTIVE DATE.-Except as otherwise expressly provided in
this section, the amendments made by this section shall apply with
respect to taxable years beginning after December 31, 1976. The amend-
ments made by subsections (a) (29) and (b) (10) shall apply with
respect to taxable years ending after the date of the enactment of this
Act.
H. R. 10612-285
SEC. 1902. AMENDMENTS OF SUBTITLE B; ESTATE AND GIFT TAXES.
(a) IN GENERAL.-
(1) AMENDMENTS OF SECTION 2012.-
(A) Section 2012(b) (relating to credit for gift tax) is
amended—
(i) by striking out "(b) In applying," and inserting
in lieu thereof "(b) VALUATION REDUCTIONs.-In apply-
ing,", and
(ii) by striking out in paragraphs (2) and (3) "deduc-
tion)-then" and inserting in lieu thereof "deduction),
then".
(B) Section 2012(c) (relating to gift by spouse or third
party) is amended by striking out (c) Where the decedent"
and inserting in lieu thereof (c) WHERE GIFT CONSIDERED
MADE ONE-HALF BY SPOUSE.Where the decedent".
(C) Section 2012(d) (1) (relating to computation of
amount of gift tax) is amended by striking out (d) (1) For
purposes of" and inserting in lieu thereof the following:
"(d) COMPUTATION OF AMOUNT OF GIFT Tax PAID.-
"(1) AMOUNT OF TAX.-For purposes of".
(D) Section 2012(d) (2) (relating to credit for gift tax)
is amended by striking out "(2) For purposes" and inserting
in lieu thereof: "(2) AMOUNT OF GIFT.-For purposes".
(2) AMENDMENTS OF SECTION 2013.-Section 2013(d) (3) is
amended by striking out ", or the corresponding provision of
prior law,"
(3) AMENDMENT OF SECTION 2038.-Section 2038 (relating to
revocable transfers) is amended by striking out subsection (c)
(relating to effect of disability in certain cases).
(4) AMENDMENTS OF SECTION 2055.-
(A) Section 2055 (b) (relating to powers of appointment)
is amended to read as follows:
"(b) POWERS OF APPOINTMENT.-Property includible in the dece-
dent's gross estate under section 2041 (relating to powers of appoint-
ment) received by a donee described in this section shall, for purposes
of this section, be considered a bequest of such decedent."
(B) Section 2055(f) (relating to cross references) is
amended to read as follows:
(f) CROSS REFERENCES.-
"(1) For option as to time for valuation for purpose of deduction
under this section, see section 2032.
"(2) For exemption of gifts and bequests to or for the benefit of
Library of Congress, see section 5 of the Act of March 3, 1925, as
amended (2 U.S.C. 161).
"(3) For treatment of gifts and bequests for the benefit of the Office
of Naval Records and History as gifts or bequests to or for the use
of the United States, see section 7222 of title 10, United States Code.
"(4) For treatment of gifts and bequests to or for the benefit of
National Park Foundation as gifts or bequests to or for the use of the
U.S.C. 191).
United States, see section 8 of the Act of December 18, 1967 (16
"(5) For treatment of gifts, devises, or bequests accepted by the
Secretary of State under the Foreign Service Act of 1946 as gifts,
devices, or bequests to or for the use of the United States, see section
1021(e) of that Act (22 U.S.C. 809(e)).
"(6) For treatment of gifts or bequests of money accepted by the
Attorney General for credit to Commissary Funds, Federal Prisons,'
as gifts or bequests to or for the use of the United States, see section
2 of the Act of May 15, 1952, as amended by the Act of July 9, 1952
(31 U.S.C. 725s-4).
H. R. 10612-286
"(7) For payment of tax on gifts and bequests of United States obli-
gations to the United States, see section 24 of the Second Liberty
Bond Act (31 U.S.C. 757e).
"(8) For treatment of gifts and bequests for benefit of the Naval
Academy as gifts or bequests to or for the use of the United States,
see section 6973 of title 10, United States Code.
"(9) For treatment of gifts and bequests for benefit of the Naval
Academy Museum as gifts or bequests to or for the use of the United
States, see section 6974 of title 10, United States Code.
"(10) For exemption of gifts and bequests received by National
Archives Trust Fund Board, see section 2308 of title 44, United States
Code."
(5) AMENDMENTS OF SECTION 2106.-
(A) Section 2106 (a) (2) (F) (relating to cross references
concerning the charitable deduction for estate tax purposes)
is amended to read as follows:
(F) CROSS REFERENCES.-
"(1) For option as to time for valuation for purposes of deduc-
tion under this section, see section 2032.
"(2) For exemption of certain bequests for the benefit of the United
States and for rules of construction for certain bequests, see sec-
tion 2055(f)."
(B) Section 2106 (relating to taxable estate of nonresi-
dents) is amended by striking out subsection (c) (relating to
treatment of United States bonds).
(6) AMENDMENT OF SECTIONS 2107 AND 2108.Section 2107
(relating to estate tax on expatriates) and section 2108 (a) (relat-
ing to application of pre-1967 estate tax provisions) are each
amended by striking out "the date of enactment of this section"
and inserting in lieu thereof "November 13, 1966".
(7) AMENDMENT RELATING TO SECTION 2201.-
(A) Section 6(b) (1) of the Act of January 2, 1975 (Pub-
lic Law 93-597 88 Stat. 1950) is amended by striking out
"Section 2210" and inserting in lieu thereof "Section 2201".
(B) The amendment made by subsection (A) is effective
July 1, 1973.
(8) REPEAL OF SECTION 2202.-Section 2202 (relating to mis-
sionaries in foreign service) is repealed.
(9) AMENDMENT OF SECTION 2204.-The last sentence of sec-
tion 2204(b) (relating to the discharge from personal liability of
a fiduciary other than the executor) is amended by striking out
"has not been" and inserting in lieu thereof "has been".
(10) AMENDMENT OF SECTION 2501.Section 2501 (a) (1) (relat-
ing to imposition of gift tax) is amended to read as follows:
(1) GENERAL RULE.-A tax, computed as provided in section
2502, is hereby imposed for each calendar quarter on the transfer
of property by gift during such calendar quarter by any individ-
ual, resident or nonresident."
(11) AMENDMENT OF SECTION 2522.-Subsection (d) of section
2522 (relating to cross references) is amended to read as follows:
"(d) CROSS REFERENCE.-
"For exemption of certain gifts to or for the benefit of the United
States and for rules of construction with respect to certain gifts, see
section 2055(f)."
(12) AMENDMENTS TO SECTIONS REFERRING TO TERRITORIES.-
(A) The following provisions are each amended by strik-
ing out "Territory," sections 2055 (a) (1), 2056(c) (2) (B),
and 2106(a) (2) (A) (i).
H. R. 10612-287
(B) The following provisions are each amended by strik-
ing out "or Territory": sections 2011 (a), 2011 (e), and 2053
(d).
(C) Section 2016 is amended by striking out "Territory
or".
(D) Sections 2522 (a) (1) and 2522(b) (1) are each
amended by striking out "Territory,".
(E) Section 2523 (f) (1) is amended by striking out "Ter-
ritory, or".
(b) CONFORMING AND CLERICAL AMENDMENTS.-
(1) AMENDMENT CONFORMING TO REPEAL OF SECTION 2202.-The
table of sections for subchapter C of chapter 11 is amended by
striking out the item relating to section 2202.
(2) AMENDMENTS CONFORMING TO AMENDMENT OF SECTION 2055.-
(A) Section 6503, as amended by this Act, is amended by
striking out subsection (e), and by redesignating subsections
(f), (g), (h), and (i) as subsections (e), (f), (g), and (h),
respectively.
(B) Section 6167 (h) (2) is amended by striking out "sec-
tion 6503 (f) and inserting in lieu thereof "section 6503 (e)
(c) EFFECTIVE DATES.-
(1) ESTATE TAX AMENDMENTS.-The amendments made by
paragraphs (1) through (10), and paragraphs (14) (A), B), and
(C), of subsection (a), and by subsection (b) shall app in the
case of estates of decedents dying after the date of the e actment
of this Act, and the amendment made by paragraph (1) of sub-
section (a) shall apply in the case of estates of decede S dying
after December 31, 1970.
(2) GIFT TAX AMENDMENTS.-The amendments made y para-
graphs (12), (13), and (14) (D) and (E) of subsection (a) shall
apply with respect to gifts made after December 31, 1976.
SEC. 1903. AMENDMENTS OF SUBTITLE C; EMPLOYMENT TAXES.
(a) IN GENERAL.-
(1) AMENDMENTS OF SECTIONS 3101 AND 3111.-
(A) Section 3101 (a) (relating to rate of tax on employees
for old-age, survivors, and disability insurance) and section
3111 (a) (relating to rate of tax on employers for such insur-
ance) are each amended by striking out paragraphs (1), (2),
(3), and (4), and by redesignating paragraphs (5) and (6)
as paragraphs (1) and (2), respectively.
(B) Section 3101(b) (relating to rate of tax on employees
for hospital insurance) and section 3111 (b) (relating to rate
of tax on employers for such insurance) are each amended
by striking out paragraphs (1) and (2), and by redesignat-
ing paragraphs (3), (4), (5), and (6) as paragraphs (1),
(2), (3), and (4), respectively.
(2) REPEAL OF SECTION 3113.-Section 3113 (relating to appli-
cation of social security tax on District of Columbia credit unions)
is repealed.
(3) AMENDMENTS OF SECTION 3121.-
(A) Section 3121 (b) (relating to employment) is
amended—
(i) by striking out "performed after 1936 and prior to
1955 which was employment for purposes of subchapter
A of chapter 9 of the Internal Revenue Code of 1939
under the law applicable to the period in which such
service was performed, and any service, of whatever
H. R. 10612-288
nature, performed after 1954" and inserting in lieu
thereof of whatever nature, performed", and
(ii) by striking out ", in the case of service performed
after 1954,".
(B) Section 3121 (b) (1) is amended by striking out "65.-
Stat. 119;".
(C) Section 3121 (b) (6) (B) (v) is amended by striking
out "Secretary of the Treasury" and inserting in lieu thereof
"Secretary of Transportation".
(D) Section 3121 (g) (3) (relating to agricultural labor)
is amended by striking out "46 Stat. 1550, § 3;".
(E) Section 3121 (k) (1) (relating to exemption of certain
organizations) is amended by striking out subparagraphs
(F) and (H) and by redesignating subparagraph (G) as
subparagraph (F).
(F) Section 3121 (1) (2) (relating to employees of foreign
subsidiaries) is amended by striking out but in no case prior
to January 1, 1955".
(G) Section 3121 (m) (1) (relating to service in the uni-
formed services) is amended by striking out "after Decem-
ber 1956".
(4) AMENDMENTS OF SECTION 3122.-The last sentence of section
3122 (relating to Federal service) is amended by striking out
"Secretary" each place it appears and inserting in lieu thereof
"Secretary of Transportation".
(5) AMENDMENT OF SECTION 3125.Section 3125 (c) (relating
to returns in the case of Governmental employees in the District
of Columbia) is amended by striking out "Commissioners of the
District of Columbia or such agents as they may designate" and
by inserting in lieu thereof "Mayor of the District of Columbia
or such agents as he may designate".
(6) AMENDMENT OF SECTION 3201.Section 3201 (relating to
rate of tax on railroad employees) is amended-
(A) by striking out "of the Internal Revenue Code of 1954"
each place it appears;
(B) by striking out "of such Code";
(C) by striking out "after September 30, 1973, as is" and
inserting in lieu thereof "as is"; and
(D) by striking out "any month after September 30, 1973"
and inserting in lieu thereof "any month".
(7) AMENDMENTS OF SECTION 3202.-
(A) The second sentence of section 3202 (a) (relating to
reduction of tax by railroad employer) is amended—
(i) by striking out "after September 30, 1973," each
place it appears;
(ii) by striking out "after September 30, 1973 and
the aggregate" and inserting in lieu thereof "and the
aggregate";
(iii) by striking out "of the Internal Revenue Code of
1954" each place it appears; and
(iv) by inserting a comma immediately after "for any
month" each place it appears.
(B) Section 3202(b) (relating to indemnification of
employer) is amended by striking out. "made".
(8) AMENDMENTS OF SECTION 3211.-Section 3211(a) (relating
to rate of tax on railroad employee representatives) is amended-
H. R. 10612-289
(A) by striking out "3111 (a), 3111 (b)" and inserting in
lieu thereof "3111(a), and 3111 (b)
(B) by striking out "of the Internal Revenue Code of
1954" each place it appears;
(C) by striking out "rendered by him after September 30,
1973," and inserting in lieu thereof "rendered by him"; and
(D) by striking out "after September 30, 1973".
(9) AMENDMENTS OF SECTION 3221.-
(A) The first sentence of section 3221 (a) (relating to rate
of tax on railroad employers) is amended—
(i) by striking out "after September 30, 1973," each
place it appears;
(ii) by striking out "after September 30, 1973; except
that" and inserting in lieu thereof ", except that";
(iii) by striking out "after September 30, 1973 of
the aggregate" and inserting in lieu thereof "of the
aggregate";
(iv) by striking out "of the Internal Revenue Code
of 1954" each place it appears; and
(v) by inserting a comma before "the tax imposed".
(B) Section 3221 (b) (relating to rate of tax on railroad
employers) is amended to read as follows:
'(b) The rate of tax imposed by subsection (a) shall be increased
by the rate of tax imposed with respect to wages by section 3111 (a)
plus the rate imposed by section 3111 (b)
(C) Section 3221(c) (relating to additional railroad
retirement tax) is amended—
(i) by striking out (1) at the rate of 2 cents for the
period beginning November 1, 1966, and ending March
31, 1970, and (2) commencing April 1, 1970," and
(ii) by striking out "commencing with the quarter
beginning April 1, 1970".
(10) AMENDMENTS OF SECTION 3231.-
(A) Section 3231 (a) (defining employer) is amended by
striking out "44 Stat. 577;".
(B) Section 3231 (b) (defining employee) is amended by
striking out "50 Stat. 312;".
(C) Section 3231 (c) (defining employee representative) is
amended by striking out "44 Stat. 577;".
(D) Section 3231 (d) (7) (defining service) is amended by
striking out "50 Stat. 308;".
(11) AMENDMENTS OF SECTION 3301.-Section 3301 (relating to
Federal unemployment tax rate) is amended—
(A) by striking out "the calendar year 1970 and each calen-
dar year thereafter" and inserting in lieu thereof "each calen-
dar year", and
(B) by striking out the last sentence.
(12) AMENDMENTS OF SECTION 3302.-
(A) Section 3302(a) (relating to credits against tax) is
amended by striking out ((10-month period in the case of
October 31, 1972)
(B) Section 3302(b) (relating to additional credit) is
amended—
(i) by striking out ((10-month period in the case of
October 31, 1972)", and
H. R. 10612-290
(ii) by striking out "12 or 10-month period, as the
case may be," and inserting in lieu thereof "12-month
period".
(C) (i) Section 3302(c) (relating to limitation on credits
against unemployment tax) is amended by striking out para-
graph (2) and the unnumbered paragraph immediately fol-
lowing such paragraph (2) (relating to advances made to a
State unemployment account before September 13, 1960),
and by redesignating paragraphs (3) and (4) as paragraphs
(2) and (3), respectively.
(ii) Section 3302(c) (2) (relating to advances made to a
State unemployment account after September 12, 1960), as
redesignated by clause (i) of this subparagraph, is amended
by striking out "on or after the date of the enactment of the
Employment Security Act of 1960", and by striking out
"paragraphs (1) and (2)" and inserting in lieu thereof
"paragraph (1)"
(iii) Section 3302(c) (3) (relating to reductions with
respect to certain agreements under the Trade Act of 1974), as
redesignated by clause (i) of this subparagraph, is amended
by striking out "paragraphs (1), (2), and (3) and inserting
in lieu thereof "paragraphs (1) and (2)".
(iv) Section 3302 (d) (3) (relating to effect of repayment
of advances) is amended by striking out "or (3)"
(v) Section 3302(d) (4), (5), and (6) (relating to special
rules) are each amended by striking out "subsection (c) (3)
each place it appears and inserting in lieu thereof "subsection
(c) (2)".
(vi) Section 3302(d) (7) (relating to determination and
certification of percentages) is amended by striking out "sub-
section (c) (3) (B) or (C) and inserting in lieu thereof "sub-
section (c) (2) (B) or (C)".
(D) Section 3302(d) (relating to special rules for credits
against the unemployment tax) is amended by striking out
paragraph (8) (a cross reference).
(13) AMENDMENTS TO SECTION 3303.Section 3303 (b) (relating
to amended— certification with respect to additional credit allowance) is
(A) by striking out ((10-month period in the case of
October 31, 1972) each place it appears,
(B) by striking out "12 or 10-month period, as the case may
be," each place it appears in paragraphs (1) and (2), and
inserting in lieu thereof "12-month period", and
(C) by striking out "12 or 10-month period, as the case
may be,' in paragraph (3) and inserting in lieu thereof "12-
month period,".
(14) AMENDMENTS TO SECTION 3304.-
(A) Section 3304(a) (3) (relating to requirements) is
amended by striking out "49 Stat. 640; 52 Stat. 1104, 1105;".
(B) Section 3304(c) (relating to certification) is amended
by striking out "(10-month period in the case of October 31,
1972)".
(15) AMENDMENTS OF SECTION 3305.-
(A) Section 3305 (g) (relating to vessels operated by
general agents of the United States) is amended by striking
out "on or after July 1, 1953,".
H. R. 10612-291
(B) Section 3305 (h) (relating to certain contributions to
States) is amended by striking out "on or after July 1, 1953,
and".
(C) Section 3305(j) (relating to denial of credits in cer-
tain cases) is amended by striking out "after December 31,
1971,".
(16) AMENDMENTS OF SECTION 3306.-
(A) Section 3306 (c) (9) (relating to the exclusion of serv-
ice performed by certain employees and employee representa-
tives from the definition of employment) is amended by
striking out "52 Stat. 1094, 1095
(B) Section 3306(c) (18) (relating to the exclusion of cer-
tain service performed by nonresident aliens from the defini-
tion of employment) is amended by inserting after the
"Immigration and Nationality Act, as amended" the follow-
ing: (8 U.S.C. 1101 (a) (15) (F) or (J)
(C) Section 3306 (f) (relating to the definition of an
unemployment fund) is amended by striking out "49 Stat.
640; 52 Stat. 1104, 1105;".
(D) Section 3306(n) (relating to vessels operated by gen-
eral agents of the United States) is amended by striking out
"on or after July 1, 1953,".
(17) AMENDMENT OF SECTION 3402.Section 3402(1) (3) (B)
(relating to marital status) is amended by striking out "section
2(b)" and inserting in lieu thereof "section 2(a)".
(b) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 3113.-
The table of sections for subchapter B of chapter 21 is amended by
striking out the item relating to section 3113.
(c) AMENDMENTS TO PROVISIONS REFERRING TO TERRITORIES.-Sec-
tions 3401 (c) and 3404 are each amended by striking out "Territory,"
each place it appears.
(d) EFFECTIVE DATES.-The amendments made by this section shall
apply with respect to wages paid after December 31, 1976, except that
the amendments made to chapter 22 of the Internal Revenue Code of
1954 shall apply with respect to compensation paid for services ren-
dered after December 31, 1976.
SEC. 1904. AMENDMENTS OF SUBTITLE D; MISCELLANEOUS EXCISE
TAXES.
(a) IN GENERAL.-
(1) AMENDMENTS OF CHAPTER 31.-
(A) So much of chapter 31 (relating to retailers excise
taxes) as precedes section 4041 is amended to read as follows:
"CHAPTER 31-SPECIAL FUELS
"Sec. 4041. Imposition of tax."
(B) Section 4041 (g) (relating to exemptions from fuel
taxes) is amended to read as follows:
"(g) OTHER EXEMPTIONS.-Under regulations prescribed by the
Secretary, no tax shall be imposed under this section-
"(1) on any liquid sold for use or used as supplies for vessels
or aircraft (within the meaning of section 4221 (d) (3) ;
(2) with respect to the sale of any liquid for the exclusive use
of any State, any political subdivision of a State, or the District
of Columbia, or with respect to the use by any of the foregoing of
any liquid as a fuel;
H. R. 10612-292
"(3) upon the sale of any liquid for export, or for shipment to
a possession of the United States, and in due course so exported
or shipped; and
"(4) with respect to the sale of any liquid to a nonprofit educa-
tional organization for its exclusive use, or with respect to the use
by a nonprofit educational organization of any liquid as a fuel.
For purposes of paragraph (4), the term 'nonprofit educational orga-
nization' means an educational organization described in section 170 (b)
(1) (A) (ii) which is exempt from income tax under section 501 (a).
The term also includes a school operated as an activity of an organiza-
tion described in section 501 (c) (3) which is exempt from income tax
under section 501 (a), if such school normally maintains a regular
faculty and curriculum and normally has a regularly enrolled body of
pupils or students in attendance at the place where its educational
activities are regularly carried on."
(C) Section 4041 (relating to tax on fuels) is amended by
adding at the end thereof the following new subsection:
"(i) SALES BY UNITED STATES, Erc.-The taxes imposed by this sec-
tion shall apply with respect to liquids sold at retail by the United
States, or by any agency or instrumentality of the United States,
unless sales by such agency or instrumentality are by statute specifi-
cally exempted from such taxes."
(D) Chapter 31 is amended by striking out section 4042
(a cross reference) and subchapter F (special provisions
applicable to retailers taxes).
(2) AMENDMENTS OF SECTION 4216.-
(A) Section 4216 (relating to definition of price) is
amended by redesignating subsections (e), (f), and (g) as
subsections (d), (e), and (f), respectively.
(B) Paragraphs (3), (4), and (5) of section 4216 (b)
(relating to constructive sales price) are each amended by
striking out "subsections (a) and (f)" each place it appears
and inserting in lieu thereof "subsections (a) and (e)"
(3) AMENDMENT OF SECTION 4217.-Section 4217 (d) (relating
to lease treated as sale) is amended by striking out paragraph (4)
(relating to certain 1958 transitional rules).
(4) REPEAL OF SECTION 4226.-Section 4226 (relating to floor-
stock taxes imposed before 1967) is repealed.
(5) AMENDMENT OF SECTION 4227.Section 4227 (relating to
cross references) is amended to read as follows:
"SEC. 4227. CROSS REFERENCE.
"For credit for taxes on tires and inner tubes, see section 6416(c)."
(6) AMENDMENT OF SECTION 4253.Section 4253 (relating to
exemptions from the tax on communications services) is amended
by adding at the end thereof the following new subsections:
"(i) STATE AND LOCAL GOVERNMENTAL EXEMPTION.-Under regula-
tions prescribed by the Secretary, no tax shall be imposed under
section 4251 upon any payment received for services or facilities
furnished to the government of any State, or any political subdivision
thereof, or the District of Columbia.
"(j) EXEMPTION FOR NONPROFTT EDUCATIONAL ORGANIZATIONS.-
Under regulations prescribed by the Secretary, no tax shall be
imposed under section 4251 on any amount paid by a nonprofit educa-
tional organization for services or facilities furnished to such organiza-
tion. For purposes of this subsection, the term 'nonprofit educational
organization' means an educational organization described in section
H. R. 10612-293
170(b) (1) (A) (ii) which is exempt from income tax under section
501 (a). The term also includes a school operated as an activity of an
organization described in section 501 (c) (3) which is exempt from
income tax under section 501 (a), if such school normally maintains -
a regular faculty and curriculum and normally has a regularly
enrolled body of pupils or students in attendance at the place where its
educational activities are regularly carried on."
(7) AMENDMENTS OF SECTION 4261.-
(A) Subsections (a) and (b) of section 4261 (relating to
tax on transportation of persons by air) are each amended by
striking out "which begins after June 30, 1970,".
(B) Section 4261 (c) is amended by striking out "and
begins after June 30, 1970".
(8) AMENDMENT OF SECTION 4271.Section 4271 (a) (relating to
tax on transportation of property by air) is amended by striking
out "which begins after June 30, 1970,".
(9) REPEAL OF SECTION 4292.-Section 4292 (relating to State
and local governmental exemption from the tax on communica-
tions services) is repealed.
(10) REPEAL OF SECTION 4294.-Section 4294 (relating to
exemption of nonprofit educational organizations from the tax on
communications services) is repealed.
(11) REPEAL OF SECTION 4295.Section 4295 (a cross reference)
is repealed.
(12) AMENDMENT OF CHAPTER 34.-Chapter 34 (relating to doc-
umentary stamp taxes) is amended to read as follows:
"CHAPTER 34-POLICIES ISSUED BY FOREIGN
INSURERS
"Sec. 4371. Imposition of tax.
"Sec. 4372. Definitions.
"Sec. 4373. Exemptions.
"Sec. 4374. Liability for tax.
"SEC. 4371. IMPOSITION OF TAX.
"There is hereby imposed, on each policy of insurance, indemnity
bond, annuity contract, or policy of reinsurance issued by any foreign
insurer or reinsurer, a tax at the following rates:
"(1) CASUALTY INSURANCE AND INDEMNITY BONDS.-4 cents on
each dollar, or fractional part thereof, of the premium paid on
the policy of casualty insurance or the indemnity bond, if issued
to or for, or in the name of, an insured as defined in section
4372 (d)
"(2) LIFE INSURANCE, SICKNESS AND ACCIDENT POLICIES, AND
ANNUITY CONTRACTS.-1 cent on each dollar, or fractional part
thereof, of the premium paid on the policy of life, sickness, or
accident insurance, or annuity contract, unless the insurer is sub-
ject to tax under section 819; and
(3) REINSURANCE.-1 cent on each dollar, or fractional part
thereof, of the premium paid on the policy of reinsurance cover-
ing any of the contracts taxable under paragraph (1) or (2).
"SEC. 4372. DEFINITIONS.
"(a) FOREIGN INSURER OR REINSURER.-For purposes of section 4371,
the term 'foreign insurer or reinsurer' means an insurer or reinsurer
who is a nonresident alien individual, or a foreign partnership, or a
H. R. 10612-294
foreign corporation. The term includes a nonresident alien individual,
foreign partnership, or foreign corporation which shall become bound
by an obligation of the nature of an indemnity bond. The term does
not include a foreign government, or municipal or other corporation
exercising the taxing power.
(b) POLICY OF CASUALTY INSURANCE.-For purposes of section
4371(1), the term 'policy of casualty insurance' means any policy
(other than life) or other instrument by whatever name called whereby
a contract of insurance is made, continued, or renewed.
(c) INDEMNITY BOND.-For purposes of this chapter, the term
'indemnity bond' means any instrument by whatever name called
whereby an obligation of the nature of an indemnity, fidelity, or surety
bond is made, continued, or renewed. The term includes any bond for
indemnifying any person who shall have become bound or engaged as
surety, and any bond for the due execution or performance of any con-
tract, obligation, or requirement, or the duties of any office or position,
and to account for money received by virtue thereof, where a premium
is charged for the execution of such bond.
(d) INSURED.-For purposes of section 4371(1), the term 'insured'
means-
"(1) a domestic corporation or partnership, or an individual
resident of the United States, against, or with respect to, hazards,
risks, losses, or liabilities wholly or partly within the United
States, or
(2) a foreign corporation, foreign partnership, or nonresident
individual, engaged in a trade or business within the United
States, against, or with respect to, hazards, risks, losses, or lia-
bilities within the United States.
(e) POLICY OF LIFE, SICKNESS, OR ACCIDENT INSURANCE, OR ANNU-
ITY CONTRACT.-For purposes of section 4371(2), the term "policy of
life, sickness, or accident insurance, or annuity contract' means any
policy or other instrument by whatever name called whereby a contract
of insurance or an annuity contract is made, continued, or renewed
with respect to the life or hazards to the person of a citizen or resident
of the United States.
(f) POLICY OF REINSURANCE.-For purposes of section 4371(3),
the term 'policy of reinsurance' means any policy or other instrument
by whatever name called whereby a contract of reinsurance is made,
continued, or renewed against, or with respect to, any of the hazards,
risks, losses, or liabilities covered by contracts taxable under paragraph
(1) or (2) of section 4371.
"SEC. 4373. EXEMPTIONS.
"The tax imposed by section 4371 shall not apply to-
"(1) DOMESTIC AGENT.-Any policy, indemnity bond, or annu-
ity contract signed or countersigned by an officer or agent of the
insurer in a State, or in the District of Columbia, within which
such insurer is authorized to do business; or
(2) INDEMNITY BOND.-Any indemnity bond required to be
filed by any person to secure payment of any pension, allowance,
allotment, relief, or insurance by the United States, or to secure
a duplicate for, or the payment of, any bond, note, certificate
of indebtedness, war-saving certificate, warrant, or check, issued
by the United States.
"SEC. 4374. LIABILITY FOR TAX.
"The tax imposed by this chapter shall be paid, on the basis of a
return, by any person who makes, signs, issues, or sells any of the
H. R. 10612-295
documents and instruments subject to the tax, or for whose use or
benefit the same are made, signed, issued, or sold. The United States
or any agency or instrumentality thereof shall not be liable for the
tax."
(13) AMENDMENT OF SECTION 4493.-
(A) Section 4493 (b) (1) (relating to certain persons
engaged in foreign air commerce) is amended by striking out
"beginning on or after July 1, 1970".
(B) Section 4493 (b) (2) is amended by striking out the
last sentence.
(14) AMENDMENT OF CHAPTER 37.-So much of chapter 37 as
precedes section 4501 (relating to tax on sugar) is amended to read
as follows:
"CHAPTER 37-SUGAR
"Sec. 4501. Imposition of tax.
"Sec. 4502. Definitions.
"Sec. 4503. Exemptions for sugar manufactured for home
consumption."
(15) REPEAL OF SECTIONS 4591 THROUGH 4597.-Chapter 38
(relating to import taxes on oleomargarine) is repealed.
(16) REPEAL OF SECTIONS 4801 THROUGH 4806.-Subchapter B
of chapter 39 (relating to tax on white phosphorus matches) is
repealed.
(17) REPEAL OF SECTIONS 4811 THROUGH 4826.-Subchapter C of
chapter 39 (relating to tax on unadulterated butter) is repealed.
(18) REPEAL OF SECTIONS 4881 THROUGH 4886.-Subchapter E of
chapter 39 (relating to tax on circulation other than of national
banks) is repealed.
(19) AMENDMENT OF SECTION 4901.-Section 4901 (relating to
payment of occupational taxes) is amended by striking out sub-
section (c).
(20) AMENDMENT OF SECTION 4905.-Section 4905 (a) (relating
to liability for occupational taxes in case of death or change of
location) is amended by striking out "wife" and inserting in lieu
thereof "spouse".
(21) REPEAL OF SECTION 4911 THROUGH 4931.-
(A) Chapter 41 (relating to interest equalization tax) is
repealed.
(B) The repeal made by subparagraph (A) shall apply
with respect to acquisitions of stock and debt obligations
made after June 30, 1974.
(22) AMENDMENTS OF SECTION 4973.-
(A) So much of section 4973 (relating to tax on excess
contributions) as follows "of any individual," in paragraph
(3) thereof is amended to read as follows:
"there is imposed for each taxable year a tax in an amount equal
to 6 percent of the amount of the excess contributions to such
individual's accounts, annuities, or bonds (determined as of the
close of the taxable year). The amount of such tax for any taxable
year shall not exceed 6 percent of the value of the account,
annuity, or bond (determined as of the close of the taxable year).
In the case of an endowment contract described in section 408 (b),
the tax imposed by this section does not apply to any amount
allocable to life, health, accident, or other insurance under such
contract. The tax imposed by this subsection shall be paid by such
individual."
H. R. 10612-296
(B) Section 4973(c) is amended by striking out "subsec-
tion (a) (3)" and inserting in lieu thereof "subsection (a)
(2)".
(b) CONFORMING AND CLERICAL AMENDMENTS.-
(1) AMENDMENTS CONFORMING TO AMENDMENT OF CHAPTER 3..- -
(A) Section 6416(a) (1) is amended by striking out
((retailers taxes)" and inserting in lieu thereof "(special
fuels)".
(B) Section 6416(e) is amended by striking out "subchap-
ter E of".
(2) AMENDMENT CONFORMING TO AMENDMENT OF SECTION
4216.-Section 6416(b) (1) is amended by striking out "section
4216(f) (2) and (3) and inserting in lieu thereof "section 4216
(e) (2) and (3)".
(3) AMENDMENT CONFORMING TO THE REPEAL OF SECTION 4226.-
The table of sections for subchapter G of chapter 32 is amended
by striking out the item relating to section 4226.
(4) AMENDMENT CONFORMING TO THE REPEAL OF SECTIONS 4292,
4294, AND 4295.-The table of sections for subchapter E of chapter
33 is amended by striking out the items relating to sections 4292,
4294, and 4295.
(5) AMENDMENTS CONFORMING TO THE AMENDMENT OF CHA TER
34.-
(A) Section 7270 is amended by striking out "the aff ing
of stamps on insurance policies, etc." and inserting in lieu
thereof "liability for tax on policies issued by fo ign
insurers".
(B) Section 6808 is amended by striking out parag ph
(4).
(6) AMENDMENTS CONFORMING TO THE AMENDMENT OF CHAPTER
37.-
(A) Section 7240 is amended by striking out "subchapter
A of".
(B) Section 7655 (a) is amended—
(i) by striking out "Subchapter A of chapter 37" in
paragraph (5) and inserting in lieu thereof "Chapter
37", and
(ii) by redesignating paragraph (5) as paragraph
(3).
(7) AMENDMENTS CONFORMING TO REPEAL OF SECTIONS 4591
THROUGH 4597.-
(A) Section 6808 is amended by striking out paragraph
(7)
(B) (i) Section 7234 (relating to violations of laws con-
cerning oleomargarine or adulterated butter operations) is
repealed.
(ii) The table of sections for part II of subchapter A of
chapter 75 is amended by striking out the item relating to
section 7234.
(C) (i) Section 7265 (relating to other offenses concerning
oleomargarine or adulterated butter operations) is repealed.
(ii) The table of sections for subchapter B of chapter 75 is
amended by striking out the item relating to section 7265.
(D) Section 7611 (a), as redesignated by this Act, is
amended by striking out paragraph (1).
(E) The table of chapters for subtitle D is amended by
striking out the item relating to chapter 38.
H. R. 10612-297
(8) AMENDMENTS CONFORMING TO REPEAL OF SECTIONS 4801
THROUGH 4806.-
(A) Section 4905 (b) is amended to read as follows:
"(b) REGISTRATION.-
"For registration in case of wagering, see section 4412."
(B) Section 6808 is amended by striking out paragraph
(12).
(C) Section 7012 is amended by striking out subsection
(e)
(D) (i) Section 7239 (relating to violations of laws con-
cerning white phosphorus matches) is repealed.
(ii) The table of sections for part II of subchapter A of
chapter 75 is amended by striking out the item relating to
section 7239.
(E) (i) Sections 7267 and 7274 (relating to offenses and
penalties concerning white phosphorus matches) are each
repealed.
(ii) The table of sections for subchapter B of chapter 75
is amended by striking out the items relating to sections 7267
and 7274.
(F) Section 7272(b) is amended by striking out "4804
(d) "
(G) Section 7303 is amended by striking out paragraph
(6)
(H) (i) Part II of subchapter C of chapter 75 (relating
to provisions common to forfeitures) is amended by striking
out section 7328 (relating to confiscation of white phosphorus
matches), and by redesignating section 7329 (relating to cross
references) as section 7328.
(ii) The table of sections for part II of subchapter C of
chapter 75 is amended by striking out the last two items and
inserting in lieu thereof the following:
"Sec. 7328. Cross references."
(9) AMENDMENTS CONFORMING TO REPEAL OF SECTIONS 4811
THROUGH 4826.-
(A) Section 6808 (relating to cross references) is amended
by striking out paragraph (10).
(B) (i) Section 7235 (relating to violations of laws con-
cerning adulterated butter and process or renovated butter)
is repealed.
(ii) The table of sections for part II of subchapter A of
chapter 75 is amended by striking out the item relating to
section 7235.
(C) (i) Section 7264 (relating to offenses concerning reno-
vated or adulterated butter) is repealed.
(ii) The table of sections for subchapter B of chapter 75
is amended by striking out the item relating to section 7264.
(D) Section 7303 is amended by striking out paragraphs
(3), (4), and (5), and by redesignating paragraphs (7) and
(8) as paragraphs (2) and (3), respectively.
(E) Section 7611 (a), as redesignated by this Act, is
amended by striking out paragraph (2), and by redesignat-
ing paragraphs (5) and (6) as paragraphs (1) and (2),
respectively.
(10) AMENDMENTS CONFORMING TO THE REPEAL OF SECTIONS
4911 THROUGH 4931.-
H. R. 10612-298
(A) (i) (I) Section 263, as amended by this Act, is amended
by striking out subsections (a) (3) and (d) (relating to the
allowance of deductions for payment of interest equalization
tax), and by redesignating subsections (e), (f), and (g) as
subsections (d), (e), and (f), respectively.
(II) Section 263 (d), as redesignated by clause (i) (I) of
this subparagraph, is amended by striking out "subsection
(f)" and inserting in lieu thereof "subsection (e)
(ii) Section 6011 (relating to requirement of return, state-
ment, or list) is amended by striking out subsection (d)
(relating to interest equalization tax returns, etc.), and by
redesignating subsections (e) and (f) as subsections (c) and
(d), respectively.
(iii) (I) Section 6076 (relating to time for filing interest
equalization tax returns) is repealed.
(II) The table of sections for part V of subchapter A of
chapter 61 is amended by striking out the item relating to
section 6076.
(iv) Section 6611 (relating to interest on overpayments)
is amended by striking out subsection (h) (relating to over-
payments of interest equalization tax) and by redesignating
subsection (i) as subsection (h).
(v) Section 6651 (relating to failure to file tax return
or to pay tax) is amended by striking out subsection (e)
(relating to certain interest equalization tax returns).
(vi) (I) Section 6680 (relating to failure to file interest
equalization tax returns) is repealed.
(II) The table of sections for subchapter B of chapter 68
is amended by striking out the item relating to section 6680.
(vii) The amendments made by this subparagraph shall
apply with respect to acquisitions of stock or debt obligations
made after June 30, 1974, except that the repeal of paragraph
(2) of section 6011 (d) under clause (ii) shall apply with
respect to loans and commitments made after such date.
(B) Section 861 (a) (1) (G) (relating to income from
sources within the United States) is amended-
(i) by striking out "section 4912(c)" and inserting in
lieu thereof "subsection (c) of section 4912 (as in effect
before July 1, 1974) and
(ii) by striking out "section 4912 (c) (2)" and inserting
in lieu thereof "subsection (c) (2) of such section".
(C) The second sentence of section 1232(b) (2) (relating
to the definition of the issue price of bonds and other evidences
of indebtedness) is amended by striking out "section 4911"
and inserting in lieu thereof "section 4911, as in effect before
July 1, 1974".
(D) (i) Section 6681 (relating to false equalization tax
certificates) is repealed.
(ii) The table of sections for subchapter B of chapter 68
is amended by striking out the item relating to section 6681.
(iii) The amendments made by this subparagraph shall
apply with respect to actions occurring after June 30, 1974.
(E) (i) Section 6689 (relating to failure by certain foreign
issuers and obligors to comply with United States investment
equalization tax requirements) is repealed.
(ii) The table of sections for subchapter B of chapter 68
is amended by striking out the item relating to section 6689.
H. R. 10612-299
(iii) The amendments made by this subparagraph shall
apply with respect to stock or debt obligations issued after
June 30, 1974.
(F) (i) Section 7241 (relating to penalty for fraudulent
equalization tax certificates) is repealed.
(ii) The table of sections for part II of subchapter A of
chapter 75 is amended by striking out the item relating to
section 7241.
(iii) The amendments made by this subparagraph shall
apply with respect to statements and certificates executed
after June 30, 1974.
(G) The table of chapters for subtitle D is amended by
striking out the item relating to chapter 41.
(c) AMENDMENT TO PROVISION REFERRING TO TERRITORIES.-Section
4482 (c) (1) is amended by striking out ", a Territory of the United
States,".
(d) EFFECTIVE DATE.-Except as otherwise provided in this section,
the amendments made by this section shall take effect on the first day
of the first month which begins more than 90 days after the date of the
enactment of this Act.
SEC. 1905. AMENDMENTS OF SUBTITLE E; ALCOHOL, TOBACCO, AND
CERTAIN OTHER EXCISE TAXES.
(a) IN GENERAL.--
(1) AMENDMENT OF SECTION 3005.Section 5005 (c) (2) (relat-
ing to transfers in bond of distilled spirits) is amended by strik-
ing out the last two sentences and inserting in lieu thereof the
following: "Such relief from liability shall be effective from the
time of removal from the transferor's bonded premises, or from
the time of divestment of interest, whichever is later."
(2) AMENDMENTS OF SECTION 5008.-
(A) Section 5008 (b) (1) (relating to abatement, remission,
refund, and allowance for loss of destruction of distilled
spirits) is amended by inserting immediately after "the tax
imposed by this chapter" the following: "or by section 7652".
(B) Section 5008(b) (2) is amended by striking out "the
taxes imposed under section 5001 (a) (1) and all that follows
and inserting in lieu thereof the following: "the taxes
imposed under section 5001 (a) (1), under subpart B of this
part, or under section 7652 on the spirits so destroyed, to the
proprietor of the distilled spirits plant who withdrew the
distilled spirits on payment or determination of tax.'
(C) Subsections (c) (1) and (d) (1) of section 5008 are
each amended by inserting immediately after "under section
5001 (a) (1) the following "or under section 7652".
(D) Section 5008 (d) (1) is amended by striking out ", on
or after July 1, 1959,"
(3) AMENDMENT OF SECTION 3009.Section 5009 (b) (3) is
amended by striking out "46 Stat. 694;".
(4) AMENDMENT OF SECTION 5025.Section 5025 (j) (relating to
stabilization of distilled spirits) is amended by striking out "the
bottling of distilled spirits," and inserting in lieu thereof "the
bottling of distilled spirits, or preparatory to exportation,".
(5) AMENDMENT OF SECTION 5054.Section 5054 (relating to
determination and collection of tax on beer) is amended by strik-
ing out subsection (c) (relating to stamps or other devices as
H. R. 10612-300
evidence of payment of tax) and by redesignating subsection (d)
as subsection (c).
(6) AMENDMENTS OF SECTION 5061.-
(A) Section 5061 (a) (relating to collections of alcohol
taxes) is amended by striking out the last sentence.
(B) Section 5061 (b) (relating to methods of collection) is
amended to read as follows:
(b) EXCEPTIONS.-Notwithstanding the provisions of subsection
(a), any taxes imposed on, or amounts to be paid or collected in respect
of, distilled spirits, wines, rectified distilled spirits and wines, and
beer under-
(1) section 5001 (a) (5), (6), or (7),
(2) section 5006 (c) or (d),
" (3) section 5026 (a) (2),
" (4) section 5041 (d),
" (5) section 5043 (a) (3),
(6) section 5054 (a) (3) or (4), or
(7) section 5505 (a),
shall be immediately due and payable at the time provided by such
provisions (or if no specific time for payment is provided, at the time
the event referred to in such provision occurs). Such taxes and amounts
shall be assessed and collected by the Secretary on the basis of the
information available to him in the same manner as taxes payable
by return but with respect to which no return has been filed."
(C) Section 5061 (c) (relating to applicability of other pro-
visions of law) is amended to read as follows:
"(c) IMPORT DUTIES.-The internal revenue taxes imposed by this
part shall be in addition to any import duties unless such duties are
specifically designated as being in lieu of internal revenue tax."
(7) AMENDMENT OF SECTION 5113.-Section 5113(f) (1) (relat-
ing to retail dealers in liquors) is amended by striking out "wines
or beer" and inserting in lieu thereof "distilled spirits, wines, or
beer".
(8) AMENDMENTS OF SECTION 5117.-Section 5117 (relating to
prohibited purchases by dealers) is amended by redesignating
subsection (b) as subsection (c) and by inserting after subsection
(a) the following new subsection:
(b) LIMITED RETAIL DEALERS.-A limited retail dealer may law-
fully purchase distilled spirits for resale from a retail dealer in
liquors."
(9) AMENDMENT OF SECTION 5121.Section 5121 (c) (relating
to limited retail dealers) is amended to read as follows:
'(c) LIMITED RETAIL DEALERS.-Every limited retail dealer shall
pay a special tax of $4.50 for each calendar month in which sales are
made as such dealer; except that the special tax shall be $2.20 for each
calendar month in which only sales of beer or wine are made."
(10) AMENDMENT OF SECTION 5122.-Section 5122(c) (relating
to definition of limited retail dealer) is amended by striking out
"beer or wine" each place it appears and inserting in lieu thereof
"distilled spirits, wine, or beer".
(11) AMENDMENT OF SECTION 5131.-Section 5131 (a) (relating
to eligibility for drawback) is amended by striking out "produced
in a domestic registered distillery or industrial alcohol plant and
withdrawn from bond, or using distilled spirits withdrawn from
the bonded premises of a distilled spirits plant,".