Continued III. Explanation of Additional Committee Amendment to H.R. 10612, As D. Title XXV-Miscellaneous Amendments-Continued 7. Tax-exempt organizations and charitable contribu- Page 75 g. Extension of private foundation transition h. Private operating foundations; imputed in- 8. Low income allowance_. 9. Equipment leasing-transitional rule for "at risk" 10. Architectural, etc., barriers to handicapped persons- IV. Costs of Carrying Out the Bill and Vote of the Committee in Report- V. Changes in Existing Law---- INTRODUCTION Because of time pressure and the committee's desire to get the Tax Reform Act of 1976, as amended by the Finance Committee, to the Senate floor as soon as possible, the committee reported the bill only with those amendments acted upon by the committee at the time this bill was ordered to be reported. This was to give the staff time to draft the 1,536-page bill and prepare the report. The report (S. Rept. 94– 938) included the committee's decisions up until the time it ordered the bill reported. Subsequent to this, the committee agreed to the additional amendment to be offered on the floor; the additional amendment is described in this supplemental report. This supplemental report is to be treated as if it were a regular committee report with respect to the explanation of the intent of the Finance Committee regarding the amendment. (1) I. SUMMARY The summary presented below outlines the principal features of the additional amendments agreed to by the committee subsequent to the time the committee's amendment to the Tax Reform Bill of 1976 (H.R. 10612) was ordered reported. Estate and Gift Tax Provisions (Title XXII) 1. Estate tax credit.-An estate tax credit is provided in lieu of the present estate tax exemption. The amount of the credit will be $30,000 for decedents dying in 1977 (equivalent to an exemption of $131,000) and will increase by $5,000 per year until 1981 when the credit will be $50,000 (equivalent to a $197,000 exemption). 2. Marital deduction.-The maximum estate tax marital deduction for property passing from the decedent to his surviving spouse is increased to the greater of $250,000 or one-half of the decedent's adjusted gross estate. 3. Valuation of certain real property.-Qualified real property is to be includable in the decedent's gross estate on the basis of its current use rather than on the basis of its highest and best use. Real property that can qualify for this special treatment will include property used for (1) farming, (2) woodland, (3) open pastoral space, or (4) the maintenance of historic values. 4. Extension of payment time.-The period for payment of the estate tax attributable to the decedent's interest in a farm or closelyheld business is increased from 10 to 15 years. No part of the estate tax is to be payable for the first three years; thereafter, the tax is to be payable in equal installments over the next 12 years. In addition, a special 6-percent interest rate is to apply to the tax attributable to the first $1 million of farm or other closely held business property. A "reasonable cause" standard for the discretionary 10-year extension for the payment of estate tax is to be substituted for the existing "undue hardship" standard. 5. Generation-skipping transfers.-A tax is to be imposed in the case of a generation-skipping transfer under a trust or similar arrangement upon the distribution of the trust assets to a generation-skipping heir or upon the termination of an intervening interest in the trust. The tax generally is to be paid out of the proceeds of the trust and is to be substantially equivalent to the estate or gift tax which would have been imposed if the property had actually been transferred outright to each successive generation. 6. Gift tax treatment of certain annuities. The value of a nonemployee's interest is to be excluded from the taxable gifts of the surviving spouse to the extent the value of that interest is attributable to the contributions of the employer and to the extent the value arises solely by reason of the spouse's interest in the community income of the employee under the community property laws of the State. (3) Other Amendments (Title XXIII) 1. Outdoor advertising displays.-Taxpayers are to have the election to treat outdoor advertising displays as real property under certain circumstances. 2. Large cigars.-The excise tax on large cigars is changed from a bracket system based on the intended retail price to an ad valorem tax of 812 percent of the wholesale price. 3. Gain from sales or exchanges between related parties.-Ordinary income tax treatment is extended to gains from sales of depreciable property between two corporations that are controlled by the same individual and his family. In addition, the amendment makes certain rules of constructive ownership apply in this situation. 4. Extension of Uniformed Services scholarship exclusion.-The exclusion from income for amounts received as scholarships under the Armed Forces Health Professions Scholarship Program (or any substantially similar program) is extended to cover the year 1976. 5. Tax counseling for the elderly.-Provision is to be made for a volunteer tax counseling program for the elderly. 6. Tax credit for certain education expenses.-A tax credit is to be provided for certain expenses relating to higher eduction. 7. Commission on Value Added Taxation.-A 20-member National Commission on Value Added Taxation is to be established to make a study of the value added tax and its effects on savings, consumption, capital formation, international trade policy, and general government finance, as well as its potential use as an alternative source of financing the social security system. A report is to be made to the President and to the Congress by December 31, 1977. 8. Industrial development bonds for certain hospital construction.An exception to the small issues limitation on industrial development bonds is to be provided for the construction of private hospitals where the bond issue does not exceed $20 million and the hospital has been certified as necessary in their communities by the appropriate State health agency. 9. Group legal services plans.-An exclusion from an employee's gross income is provided for amounts contributed or service or reimbursements provided by an employer under a qualified group legal services plan for the benefit of the employee, his spouse, or his dependents. 10. Exchange funds.-Generally, amounts contributed to partnership exchange funds (so-called "swap funds"), as well as the merger of certain investment companies, are to be treated as taxable transactions where a taxpayer's principal interest is to diversify his investments without current payment of tax. 11. Subchapter S corporation distributions.-An amendment was adopted modifying the rules pertaining to the number of shareholders of a subchapter S corporation. International Trade Commission (Title XXIV) The voting procedures of The International Trade Commission in import relief cases are changed to insure that the Congress will have an opportunity to override import relief decisions of the President under sections 201 and 406 of the Trade Act of 1974. The Commission |