2. Property held for use in a trade or business or held for investment 303 B. Low-Income Housing Tax Credit...... 306 C. Rehabilitation Tax Credit...... 307 D. Orphan Drug Tax Credit........... E. Work Opportunity Tax Credit and Welfare-to-Work Tax Credit G. Electric Vehicle Credit and Clean Fuel Vehicle Deduction A. Structural Issues Relating to Accounting for Capital Expenditures. 310 311 317 320 322 322 328 332 334 VIII. FINANCIAL PRODUCTS AND INSTITUTIONS ........... 336 A. Structural Issues Relating to Financial Products and Institutions 336 339 C. Provide More Uniform Treatment of Interest Charges 344 356 E. Special Rules for Mortgage Guaranty Insurance, Lease Guaranty 377 F. Special Deduction and Exception to Reduction in Unearned B. Anti-Deferral Regimes Applicable to Income Earned Through Foreign Corporations............. 398 C. Expand Subpart F De Minimis Rule....... 419 D. Look-Through Rules for Dividends from Noncontrolled Section 902 421 E. Foreign Tax Credits Claimed Indirectly Through Partnerships 424 F. Conform Sections 30A and 936 ............. 428 G. Application of Uniform Capitalization Rules for Foreign Persons. 432 H. Secondary Withholding Tax on Dividends From Foreign Corporations .... 436 440 J. U.S. Model Tax Treaties..... 445 A. Percentage Limits on Grass-Roots Lobbying Expenditures of C. Capital Gains Treatment to Apply to Outright Sales of Timber by 465 D. Qualifications for the Zero-Percent Capital Gain Rate in the D.C. 466 XII. E. Uniform Rules and Incentives for Economically Distressed Areas .... A. Highway Trust Fund Excise Taxes....... 468 475 478 478 B. Airport and Airway Trust Fund Excise Taxes............... 490 C. Harbor Maintenance Trust Fund Excise Tax and Tax on Passenger 497 D. Aquatic Resources Trust Fund Excise Taxes........ F. Black Lung Trust Fund Excise Tax.......... G. Communications Excise Tax...... H. Ozone-Depleting Chemicals Excise Tax.......... I. Alcohol Excise Taxes......... J. Tobacco Excise Taxes...... XIII. TAX-EXEMPT BONDS...... 499 E. Federal Aid to Wildlife Fund and Non-Regular Firearms Excise Tax.. 501 503 504 507 508 513 516 A. Eliminate Five-Percent Disproportionate Use Limit. B. Consolidate Prohibited/Restricted Use Facilities Rules. 516 517 ....... C. Provisions Rendered or Being Rendered Obsolete by the Passage of Time .. 1. Deadwood provisions.... 520 a. Mortgage revenue bonds--Federal disaster area modifications.......... 520 520 521 2. Other provisions. 522 ..... a. Consolidate qualified mortgage bonds and qualified veterans' 522 b. Eliminate $150 million limit for qualified 501(c)(3) bonds... 524 c. Eliminate qualified small-issuer exception for certain bank-qualified 525 d. Modify public notice requirements 526 D. Arbitrage Rebate Provisions....... 528 XIV. ESTATE AND GIFT TAX PROVISION--Conform Certain XV. XVI. Family-Owned and Small Business Provisions A. Structural Issues Relating to Worker Classification.............. B. Structural Issues Relating to Determination of Individuals Subject to COMPLIANCE AND ADMINISTRATION PROVISIONS.......... D. Disclosure of Returns and Return Information ... XVII. DEADWOOD PROVISIONS .......... Page 531 539 539 551 555 555 560 568 572 579 VOLUME III I. II. SUMMARIES OF ACADEMIC PAPERS SUBMITTED TO THE JOINT A. Jonathan Barry Forman, Simplification for Low-Income Taxpayers: 2001.... C. Frances R. Hill, Private Benefit, Public Benefit and Exemption D. Frances R. Hill, Exemption and Commercial Activities: Approaches to E. Annette Nellen, Simplification of the EITC Through Structural Changes.... ACADEMIC PAPERS SUBMITTED TO THE JOINT COMMITTEE ...... A. Jonathan Barry Forman, Simplification for Low-Income Taxpayers: 2001.... C. Frances R. Hill, Private Benefit, Public Benefit and Exemption. E. Annette Nellen, Simplification of the EITC Through Structural Changes..... Page 22 34 19 9 10 10 19 143 175 205 220 INTRODUCTION This document,' is a report of the staff of the Joint Committee on Taxation (“Joint Committee staff") in connection with a study of the overall state of the Federal tax system. This report is being transmitted, as required under section 8022(3)(B) of the Internal Revenue Code of 1986, to the House Committee on Ways and Means and the Senate Committee on Finance. Under section 8022(3)(B), the Joint Committee staff is required to report at least once each Congress on the overall state of the Federal tax system and to make recommendations with respect to possible simplification proposals and other matters relating to the administration of the Federal tax system. The Joint Committee staff is publishing this study in three volumes. Volume I of this study contains Part One (Executive Summary and Joint Committee on Taxation Staff Study Mandate and Methodology), Part Two (Overall State of the Federal Tax System), and four Appendices (Academic Advisors to the Joint Committee on Taxation, Tax Policy Advisors to the Joint Committee on Taxation, General Accounting Office Materials, and Congressional Research Service Materials). Volume II of this study contains Part Three (Recommendations of the Joint Committee on Taxation Staff to Simplify the Federal Tax System). Volume III of this study contains papers relating to simplification submitted to the Joint Committee on Taxation by tax scholars in connection with the study. 1 This document may be cited as follows: Joint Committee on Taxation, Study of the Overall State of the Federal Tax System and Recommendations for Simplification, Pursuant to Section 8022(3)(B) of the Internal Revenue Code of 1986 (JCS-3-01), April 2001. 2 Section 8022(3)(B) was added by section 4002(a) of the Internal Revenue Service Restructuring and Reform Act of 1998. |