MISCELLANEOUS TAX REFORMS TUESDAY, JULY 11, 1995 HOUSE OF REPRESENTATIVES, Washington, DC. The Committee met, pursuant to call, at 10:02 a.m., in room 1100, Longworth House Office Building, Hon. Bill Archer (Chair man of the Committee) presiding. [The advisory announcing the hearings follows:] (1) Congressman Bill Archer (R-TX), Chairman of the Committee on Ways and Means, today announced that the Committee will hold a series of hearings on miscellaneous tax reforms. The hearings will take place on Tuesday, July 11, Wednesday, July 12, and Thursday, July 13, 1995, in the main Committee Hearing Room, 1100 Longworth House Office Building, beginning at 10:00 a.m. BACKGROUND: This hearing will cover various revenue issues which have been brought to the attention of the Committee as well as tax simplification legislation which was most recently before the Committee on Ways and Means as part of H.R. 3419 in the 103rd Congress. Because of the large number of items described below which are within the scope of the hearing, it will not be possible for the Committee to hear oral testimony on all of the issues. Written submissions are strongly encouraged in lieu of appearances before the Committee. Requests to appear are strongly discouraged with respect to issues that have previously been the subject of a hearing before the Committee (including simplification items from H.R. 3419 which are not proposed below to be modified). In announcing the hearing, Chairman Archer stated: "The purpose of the hearing is to allow the Committee on Ways and Means to consider various relatively minor ways to simplify and improve the current tax laws while the Committee continues its longer range project of fundamental reform of our nation's tax system. Because of the large number of proposals, it will obviously not be possible for the Committee to take action on all of them. As the Committee moves forward, I intend to oppose any proposals which are targeted tax relief or which have significant cost. In addition, any proposals which are adopted will be accompanied by a sufficient offset to avoid increasing the deficit." The proposals below, which are the subjects of the hearings, will be more fully described in a pamphlet to be issued by the Joint Committee on Taxation prior to the hearing. MISCELLANEOUS TAX PROPOSALS Accounting 1. Expense certain costs associated with natural disasters 2. Allow installment method of reporting income from sale of certain residential real property to first-time homebuyers 3. Eliminate "look-back method" for nonresidential construction contractors 4. Repeal 1986 provision requiring contributions in aid of construction to be included in gross income 5. Allow trading partnerships and corporations to use a mark-to-market method of accounting for securities 6. Allow partnerships and S corporations to use fiscal year by paying estimated tax on behalf of their owners 7. Allow deduction for intrastate operating rights of motor carriers I 8. Permit taxpayers to estimate shrinkage for inventory accounting 9. Provide exclusion for certain amounts received by a utility with respect to nuclear decommissioning costs 10. Repeal Treasury ruling requirement for nuclear decommissioning costs 11. Treatment of certain compensation payable by certain personal service corporations using an accrual method of accounting 12. Treatment of livestock sold on account of weather-related conditions 13. Treatment of certain crop insurance proceeds and disaster assistance payments 14. Clarify availability of cash accounting method for construction contractors Business expenses 1. Any period during which a Federal employee is certified by the Attorney General to be participating in a Federal criminal investigation not included in computation of oneyear limitation with respect to deductibility of travel expenses while temporarily away from home 2. Deduction for regularly scheduled air transportation limited to normal tourist class fare 3. Increase deductibility of business meal expenses for individuals subject to Federal hours of service limitations Business tax credits 1. Credit for rehabilitation of certain historic homes 2. Tax credit for electric vehicles 3. Tax credit and tax-exempt financing for environmental remediation expenses Capital gains 1. 10-percent alternative tax on gains from assets held 5 years or more 2. One-time exclusion of the sale of a principal residence by an individual who has attained age 55 3. a. Allow multiple exclusions where two otherwise eligible taxpayers marry b. Allow multiple exclusions in certain cases c. Allow multiple exclusions in the case of certain unemployed persons d. Treat certain disabled persons as satisfying the age 55 requirement 4. Restore exception to market discount rules for tax-exempt bonds Charitable deduction 1. Deduction for commemorative coins purchased from U.S. Mint 2. Charitable deduction for non-itemizers 3. Remove charitable deductions from overall limitation on itemized deductions 4. Repeal charitable substantiation rule for contributions of $250 or more 5. Allocation of basis to sale portion of bargain sales of real estate interests to charities or governments 6. Enhanced deduction for corporate contributions of scientific equipment for design research Child Care Credit -- Extend dependent care credit and dependent assistance programs to certain overnight camp expenses Compliance 1. Allow offset of State tax liability with overpayments of Federal tax 2. Repeal reporting requirement for real estate brokers 3. Extend IRS offset authority for undercover operations 4. Modify tip income reporting rules Corporate 1. Provide that Alaska Native Corporation distributions of the proceeds from sale of ANCSA resources not be treated as taxable dividends until shareholders have received a return of capital on the resources sold 2. Lengthen corporate capital loss carryover from 5 to 15 years 3. Eliminate rule that accumulated earnings tax applies without regard to number of shareholders 4. Provide exception to large corporate interest underpayment rules Depreciation and amortization 1. Normalization of consolidated tax adjustments of a non-regulated subsidiary of a regulated public utility 2. Establish 15-year recovery period for small retail motor fuel outlet stores 3. Establish 3-year recovery period for semiconductor manufacturing equipment 4. Establish 3-year recovery period for property subject to certain rental purchase agreements 5. Establish 10-year recovery period for "qualified commercial improvement property" 6. Establish 10-year recovery period for leasehold improvements 7. Treatment of intermodal cargo containers 8. Exempt acquisition of software and software services businesses from 15-year intangibles amortization EITC -- Allow State agencies to administer an advanced EITC payment Education 1. Exclusion for income earned on State prepaid tuition plans 2. Adopt education savings accounts 3. Expand section 108(f) to provide that cancellation of certain private college student loans not taxable income Employment taxes 1. Tax status of certain fishermen 2. FICA exemption for certain seasonal children camp employees 3. Extend FICA tip credit with respect to tips received by all persons who receive tips in connection with the provisions of food or beverages 4. Effective date of FICA tip credit 5. Repeal presumption that bakery distributors are employees for employment tax purposes 6. FUTA exemption for certain religious schools 7. FICA tax on health professionals' corporation paid by two or more entities under single employment contract 8. Repeal section 1706 of the 1986 Tax Reform Act Empowerment zones 1. Expand number of community development corporations (from 20 to 40) eligible for tax credit and increase aggregate amount of contributions eligible for the credit 2. Tax incentives for economic recovery in designated areas with employment loss in financial and real estate businesses 3. Allow 20-percent tax credit for commercial revitalization costs in empowerment zones and other specially designated areas Energy 1. Amend the section 29 credit for fuels derived from nonconventional sources b. Repeal the requirement that fuel be sold to an unrelated party in certain cases d. Redefine "tar sands" as a qualifying source and extend the period during which 2. Increase the permitted refining activity in which an independent producer may engage while still qualifying for tax benefits not available to integrated producers 3. Allow independent producers to engage in retail sales through regulated utility affiliates while still qualifying for tax benefits not available to integrated producers 4. Allow a tax credit for lubricating oil produced for discarded motor oil 5. Allow oil and gas producers to expense geological and geophysical expenses in the year incurred |