ACKNOWLEDGEMENTS The Joint Committee on Taxation study of the overall state of the Federal tax system and recommendations to simplify taxpayer and administrative burdens is required by the IRS Restructuring and Reform Act of 1998 and funded by appropriations approved by the Congress. The study was prepared and produced by virtually the entire Joint Committee staff. Special recognition must be given to Mary Schmitt and Carolyn Smith who helped on every stage of this project, from planning and coordinating staff teams to the final editing of the report. In addition, Rick Grafmeyer, who left the staff last year, was instrumental in assisting in the planning of this report. Cecily Rock, who contributed to various portions of the report, also coordinated the final production of the Joint Committee staff recommendations in Volume II. This study was prepared by the legislative staff of the Joint Committee on Taxation, each of whom contributed to this final product: Carolyn D. Abraham, Secretary; R. Gregory Bailey, Legislation Counsel; Thomas A. Barthold, Senior Economist; E. Ray Beeman, Legislation Counsel; B. Jean Best, Secretary; John H. Bloyer, Chief Clerk; Michael E. Boren, Administrative Assistant; Mary Ann Borrelli, Economist; Tanya Butler, Statistical Analyst; Roger Colinvaux, Legislation Counsel; William J. Dahl, Senior Computer Specialist; John W. Diamond, Economist; Timothy A. Dowd, Economist; Patrick A. Driessen, Senior Economist; Christopher P. Giosa, Economist; H. Benjamin Hartley, Senior Legislation Counsel; Robert P. Harvey, Economist; Patricia A. Hensley, Data Set Specialist; Harold E. Hirsch, Senior Legislation Counsel; Thomas P. Holtmann, Economist; Melani Houser, Chief Statistical Analyst; Deirdre A. James, Legislation Counsel; Ronald A. Jeremias, Senior Economist; Gary Koenig, Economist; Thomas F. Koerner, Associate Deputy Chief of Staff; Lauralee A. Matthews, Senior Legislation Counsel; Patricia M. McDermott, Legislation Counsel; Debra L. McMullen, Senior Staff Assistant; Neval E. McMullen, Staff Assistant; Brian A. Meighan, Accountant; Pamela H. Moomau, Senior Economist; Tracy S. Nadel, Director Of Tax Resources; John F. Navratil, Economist; Joseph W. Nega, Legislation Counsel; Hal G. Norman, Computer Specialist; Melissa A. O'Brien, Tax Resource Specialist; Samuel Olchyk, Legislation Counsel; Christopher J. Overend, Economist; Lindy L. Paull, Chief of Staff; Oren S. Penn, Legislation Counsel; Cecily W. Rock, Senior Legislation Counsel; Lucia J. Rogers, Secretary; Bernard A. Schmitt, Deputy Chief of Staff; Mary M. Schmitt, Deputy Chief of Staff; Todd C. Simmens, Legislation Counsel; Christine J. Simmons, Secretary; Carolyn E. Smith, Associate Deputy Chief of Staff; William T. Sutton, Senior Economist; Melvin C. Thomas, Jr., Senior Legislation Counsel; Michael A. Udell, Economist; and Barry L. Wold, Legislation Counsel. In addition, the following former staff members contributed to this report: David P. Hering, Paul M. Schmidt, and Melbert E. Schwarz. The Joint Committee staff gratefully acknowledges the contribution of the academic and tax policy advisors for the significant commitment of time and substantive contributions they made to the development of this report. The tax policy advisors provided guidance on the principal focus of the report, and the academic advisors provided significant input on the recommendations in the report. The meetings with the advisors were a rare opportunity for our staff to engage in informative and thought-provoking discussions with former government officials and scholars. The advisors are listed in Appendices A and B, respectively, of Volume I. Special recognition is given to three of the advisors who spent significant time working as consultants to the Joint Committee staff: Patricia E. Dilley, Christopher H. Hanna, and Frances R. Hill, and to the advisors who prepared papers for inclusion in Volume III of this study: Jonathan Barry Forman, Deborah A. Geier, Frances R. Hill, Annette Nellen, George K. Yin, and David J. Shakow. The Joint Committee staff also recognizes the significant contributions of the General Accounting Office and the Congressional Research Service to this study. The work of these organizations is reproduced in Appendices C and D, respectively, of Volume I. Lindy L. Paull Chief of Staff CONTENTS Page 222 B. Joint Committee Staff Study Methodology. 1. Review of the overall state of the Federal tax system. PART TWO.--OVERALL STATE OF THE FEDERAL TAX SYSTEM. 54 C. Use of the Federal Tax System to Advance Social and Economic Policies... 3. Generally accepted accounting principles G. Interaction of Federal Tax Laws with Laws of Foreign Countries D. Effect of Complexity on Perceived Fairness of the Federal Tax System....... E. Effect of Complexity on Tax Administration....................................... PART THREE.--RECOMMENDATIONS OF THE STAFF OF THE 8. Dependency exemption, child credit, and earned income credit .......... 9. Treatment of capital gains and losses.............. 10. Treatment of home mortgage interest of individuals .... B. Filing Status, Personal Exemptions, and Credits....... 1. Uniform definition of qualifying child....... 2. Dependent care tax benefits............. 3. Modifications to the earned income credit 4. Determinations relating to filing status ........ C. Income-Based Phase-outs and Phase-ins......... D. Taxation of Social Security Benefits. E. Individual Capital Gains and Losses ....... 1. Adopt a uniform percentage deduction for capital gains in lieu of 2. Definition of "small business" for capital gain and loss provisions F. Two-Percent Floor on Miscellaneous Itemized Deductions G. Provisions Relating to Education ......... 1. Overview of tax provisions relating to education 2. Definition of qualified higher education expenses........ 3. Combine HOPE and Lifetime Learning Credits.. Page 1. Adopt uniform definition of compensation for qualified retirement plans............. 2. Modifications to minimum coverage and nondiscrimination rules.......... 166 173 183 185 188 192 7. Simplification of distribution rules applicable to qualified retirement 194 a. Simplify minimum distribution rules 194 b. Adopt uniform early withdrawal rules 198 8. Make 401(k) plans available to all governmental employers.............. 201 202 10. Adopt uniform ownership attribution rules for qualified retirement 204 2. Qualified retirement plans.......... E. Employee Benefits.............. D. Basis Recovery Rules for Qualified Retirement Plans and IRA................ 1. Modify cafeteria plan election requirements 211 211 211 221 221 C. Section 355 "Active Business Test" Applied to Chains of Affiliated 251 D. Uniform Definition of a Family for Purposes of Applying Attribution H. Conform Treatment of Boot Received in a Reorganization with the Stock 267 269 A. Structural Issues Relating to Pass-Through Entities......... 269 B. Partnership Simplification Recommendations 277 1. Modernize references to "limited partner" and "general partner". 277 287 |