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effect, would establish the principles of the Beeghley case as the Federal law.

(c) To provide that the period in which an owner of property taken for public use may defer the recognition of gain on the transfer by purchasing replacement property shall begin at any time after the owner has reason to be believe that his property

probably will be taken. Comment.-Section 1033 (a) (3) (B) provides for nonrecognition of gain where an owner acquires replacement property for property that is taken for public use or is under threat or imminence of condemnation. The replacement period begins on "the date of threat of imminence of condemnation."

The determination of the time when property is “under threat or imminence of condemnation" sometimes causes difficulty. The Internal Revenue Service generally requires that the property owner have actual notice of the fact that his property is to be taken. Apparently, Internal Revenue Service regions have some flexibility in applying the requirement, but there is no uniform policy to guide the taxpayer.

Sometimes, property owners have good reason to believe that their property will be taken for a public project, and have an opportunity to purchase replacement property before the price rises which often accompany large reservoir takings. However, they are reluctant to do so because of the uncertainty of the "time of threat or imminence of condemnation."

The experience of the U.S. Army Engineers is explained in the following statement:

In many instances owners will have had good reason to believe that their land will be required, prior to being told so definitely by corps' personnel. This results by reason of the land having been surveyed or inspected; or the owners having heard of the general project location or having been requested to sign a right-of-entry for survey and exploration. Answer to questionnaire, pt. III, answer to question 81,

1963, app. D): Two cases which demonstrate the difficulty of taxpayers under the present standards and practice are Carson Estate Company v. Commissioner, 22 T.C.M. 425; and Dominquez Estate Company v. Commissioner, 22 T.C.M. 521.

The provision providing for nonrecognition of gain and tax deferment treatment, being a relief provision by which a taxpayer may postpone the taxation of so much of the gain from an involuntary conversion as he uses in replacement, should be liberally construed. This would be assured under the proposed amendment.

(d) To provide that an owner or tenant of real property acquired for public use may exclude from gross income any relocation payment authorized by Federal law or that is substantially similar in kind to a relocation payment authorized by Federal

law. Comment.-This amendment would make it clear that any relocation payments received by a person displaced by a public project after December 31, 1964, pursuant to a law of the United States, will be excluded from gross income.

The amendment would also exclude from gross income relocation payments received after December 31, 1964, from State or local condemnation authorities so long as such payments are substantially similar in kind to payments authorized by a law of the United States. The taxability of relocation payments under the present practice of the Internal Revenue Service is dealt with to a limited extent in & paragraph captioned "Relocation Payments” on page 3 of U.S. Treasury Department, Internal Revenue Service Document No. 5383 (12-63). The document is entitled "How the Federal Income Tax Applies to Condemnations of Private Property for Public Use.” The above-cited paragraph is quoted:

Relocation payments received by individuals and families under section 106(f) (2) of the Housing Act of 1949 because of their displacement from their personal residences by an urban renewal project are not part of the award for condemnation of property and are not includible in the gr income of the recipients to the extent that such payments are expended for the purposes for which they are provided. Any expenses incurred by such individuals and families for their relocation in excess of reimbursement are nondeductible

personal expenses. The above-quoted paragraph from Document 5383 shows exclusion from gross income of relocation payments under section 106 (f) (2) of the Housing Act of 1949 only. No specific wording in either a statute or the Internal Revenue regulations covering this point has been discovered. It is understood that the statement quoted is based upon an Internal Revenue Service ruling directed to facts involving that particular section of law only.

This recommendation would provide equal treatment for taxpayers receiving relocation payments because of displacement by public programs.

(e) To exempt from the documentary stamp tax any transfer of real property to the United States, a State, or any other public

body. Comment. It is manifestly unfair to take private property for public use and require the owner, who frequently is unwilling to sell, to pay a documentary tax on the transfer. Such is the case under present law.

In connection with the documentary stamp tax it is of interest to take note of a decision of the Comptroller General of the United States, which decision appears never to have been overruled, questioned, or modified. This reference is to the Comptroller General's Decision B-102460 of May 8, 1951. This decision involved a factual situation wherein the relocation of a railroad line was required by the Government without any planned benefits to the railroad company and was to be at the expense of the Government. The decision held that in such circumstances and as the contract expressly provided that the United States "shall bear all costs and expenses in the conveyance to the company of real estate involved,” the Comptroller was not required to object to the payment to the contractor of an amount equivalent to the value of the documentary stamps affixed to the deed. This was held no to be a reimbursement of a tax imposed by the United States, but as an item in the cost of relocating the railroad line.

Consistent with the reasoning of the Comptroller General as set out above, acquiring agencies could contract with property owners to pay the cost of taxes imposed upon conveyance as a relocation cost. It is far preferable to accept such transfers from the tax, and such is the purpose of this amendment.

It seems appropriate to quote from a statement made at the hearing held by the subcommittee in Providence, R.I., on February 28, 1964, by Mr. Timothy J. McCarthy, general counsel of the Providence Redevelopment Authority:

From experience, perhaps the loudest complaint arises when the former owner is informed that an amount of money must be deducted from the sum paid him to purchase the required

documentary stamps. Recommendation 14. Loans and counseling for displaced and in

jured small business (title III, sec. 301) It is recommended that the Small Business Act be amended

(a) To extend the provisions of the displaced business disaster loan program to any small business concern that incurs substantial economic injury as a direct result of its location adjacent to, or in the vicinity of a public project conducted by the Federal

Government, or with the assistance of Federal funds. Comments. The Housing Act of 1961 authorized the Small Business Administration to make favorable loans to displaced business concerns that suffer substantial economic injury because of displacement by Federal or federally assisted programs. Many small business concerns suffer similar injury although the property they occupy is located outside project boundaries. In general, highway-oriented businesses are the most adversely affected. Some need working capital in order to continue in business during the period of construction or while developing local patronage to replace the lost highway trade. Others have no alternatives except relocation or discontinuance. This recommendation would provide the same loan assistance for these businesses as for displaced business concerns.

(6) To require that the Small Business Administration provide relocation and management counseling as needed for small business concerns that are displaced or suffer substantial economic injury because of public projects conducted by the Federal Government, or with the aid of Federal funds; and to provide information concerning the displaced business disaster loan program, and advice and guidance in the relocation and adjustment of displaced or injured business, to Federal, State, and local govern

ment agencies conducting such public projects. Comments.- Testimony before the subcommittee disclosed that business advisory services and counseling are essential to the survival of some small business proprietorships. This recommendation would require the Small Business Administration to intensify its assistance to displaced or injured small business concerns and to provide advice and guidance and information concerning its programs, to all public agencies that displace or cause substantial economic injury to business concerns in connection with Federal or federally assisted programs.

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Recommendation 15. Retraining (title III, sec. 302)
It is recommended-

(a) That the Manpower Development and Training Act of 1962 be amended to provide that widows, widowers, and other single persons, who are owners or employees of business concerns, farm operations, or nonprofit organizations that are displaced or caused to incur substantial economic injury by public programs conducted by the Federal Government or with the assistance of Federal funds, may be eligible for training allowances under the act without regard to the "head of family or head of household” limitations of the act; and

(b) That legislation be enacted to emphasize that owners and employees of business concerns, farm operations, or nonprofit organizations displaced or caused to incur substantial economic injury by such public programs are to be afforded the testing, counseling, training, and placement services provided for under the Manpower Development and Training Act of 1962 and the Area

Redevelopment Act. Comment.--The Manpower Development and Training Act of 1962 permits subsistence allowances for heads of households being trained for new skills. Many owners and employees of displaced business concerns and farm operations that discontinue are elderly or have little training for other employment and a large number are widows or widowers.

Testimony before the subcommittee emphasized the fact that many could have continued in business or employment, but for the Government's action. This recommendation would assist such persons in preparing themselves for new occupations and permit them to continue as self-supporting citizens. Recommendation 16. Unemployment compensation for employees

of displaced business concerns having less than four em

ployees (title III, sec. 303) It is recommended that the Social Security Act be amended (1) to include in the unemployment system employees of business concerns displayed by public programs conducted by the Federal Government or with the assistance of Federal funds, who are not now eligible for compensation because their employer has fewer than four employees, under conditions set by the States in which they were last employed, except as to the size of the employer, and (2) to provide for Federal reimbursement of the costs to the States.

Comment. Studies of business displacement by Federal and federally assisted programs disclose that a large number of these businesses are very small in terms of number of employees. One study of some 300 businesses displaced during the period 1954 through 1959 found that nearly one-fifth were owner operated with no employees, 80 percent employed fewer than 10 workers, and the median for all of the displaced establishments was 3.2 employees. The range was from a low of 1.4 employees for service establishments to 9.2 for manufacturing, wholesale, and construction units.

All studies agree that the small, neighborhood-type service businesses suffer the greatest rate of liquidation. The study above found that one-third of the nonsurvivors had no employees and more than three out of four had less than three workers.

In these types of businesses, the jobs are generally of a semiskilled or unskilled nature. With opportunities for such jobs constantly diminishing, employees of displaced small businesses have difficulty in finding new employment. Adding to their dislocation problems is the fact that in more than one-half the States, unemployment compensation is not available to employees of firms having three or fewer employees.

This recommendation would extend unemployment compensation to these persons, in order to assist them over the period needed to find new employment, and would provide that the Federal Government would reimburse the States for the full cost of such unemployment benefits. This program would be similar to the existing program of Federal underwriting of the full cost of providing unemployment compensation for unemployed Government workers and veterans. Recommendation 17. Rental adjustment payments (title IV, secs.

401 and 403) It is recommended that legislation be enacted to authorize the Housing and Home Finance Administrator to make monthly "rental adjustment” payments to assist families and elderly or handicapped individ, uals with low or moderate income in obtaining decent, safe, and sanitary housing when they are displaced by Federal or federally assisted public programs, if they cannot obtain low-rent public housing under the Housing Act of 1937, or under a State or local program found by the Administrator to have the same general purpose as such Federal program.

Payments totaling not more than $1,000 would be authorized for not to exceed 24 months. The total, in any one year, could not exceed an amount which, if added to 20 percent of the annual family or individual income equals the average annual rent required for a modest, decent, safe, and sanitary dwelling, adequate in size to accommodate the displaced family or individual.

The Administrator would be authorized (1) to make payments according to family size, income, rents, or similar considerations uniformly applied in a rural or smaller urban locality where data needed to determine average annual rents is not reasonably available, or where the cost of developing the data is disproportionate to the number of eligible families or individuals displaced; (2) to make lumpsum payments where the amount involved is too small to warrant the administrative costs of separate monthly payments; and (3) to issue regulations to carry out the objectives of the legislation.

Comment. In his message to the Congress, January 27, 1964, proposing the “Housing and Community Development Act of 1964," President Johnson said:

The vast majority of those displaced by urban renewal and public housing have relocated in better and standard housing, but some have not. For most, the cost of improving housing has been an unsought burden. For some, the inconvenience of displacement has meant only another slum dwelling and the likelihood of repeating this experience.

To assist further those families and persons least able to bear the burden of displacement, I recommend

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