INTRODUCTION The bills described in this pamphlet 1 have been scheduled for a public hearing on May 19, 1986, by the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means. The six bills scheduled for the hearing are: (1) H.R. 3139 (exemption of certain emergency medical helicopter transportation from air transportation excise taxes); (2) H.R. 3301 (exemption for corporations or trusts that acquire and manage real property for certain exempt organizations); (3) H.R. 4056 (disallowance of foreign earned income exclusion for individuals who are in foreign countries in violation of an Executive Order); (4) H.R. 4077 (denial of tax exemption for interest on certain electric utility bonds); (5) H.R. 4379 (nonrecognition of gain on sale of principal residence where one spouse dies before occupying new residence); and (6) H.R. 4595 (tax rules relating to limited profit housing cooperatives). The first part of the pamphlet is a summary of the bills. The second part provides a more detailed description of the bills, including present law, explanation of provisions, and effective dates. 1 This pamphlet may be cited as follows: Joint Committee on Taxation, Description of Tax Bills (H.R. 3139, H.R. 3301, H.R. 4056, H.R. 4077, H.R. 4379, and H.R. 4595) (JCS-11-86), May 16, 1986. (1) 1. H.R. 3139-Mrs. Kennelly and others Exempt Certain Emergency Medical Helicopter Transportation The bill would exempt certain emergency medical helicopter transportation from the 8-percent excise tax on domestic air passengers and the 5-percent excise on domestic air cargo. To qualify for exemption, the helicopter must be used primarily for purposes of providing emergency medical services, must be owned or leased by a nonprofit health care facility, and must be operated exclusively under the control of the facility. Also, the exemption would apply only if the helicopter does not use facilities eligible for assistance under the Airport and Airway Development Act of 1970 or services provided under the Airport and Airway System Improvement Act of 1982. The bill would apply retroactively to transportation beginning after January 1, 1985. 2. H.R. 3301-Messrs. Matsui and Archer Tax-Exempt Status for Corporations or Trusts that Acquire and Tax-exempt organizations eligible to hold interests in a title holding corporation would include (1) a qualified pension, profit-sharing, or stock bonus plan, (2) a governmental pension plan, (3) the United States, or any State or political subdivision, or (4) any charitable organization described in section 501(c)(3). The bill would apply retroactively to taxable years beginning after December 31, 1984. (2) 3 3. H.R. 4056-Messrs. Archer, Daub, Downey, Heftel, Gregg, Schulze, Vander Jagt, and others Disallowance of Foreign Earned Incomme Exclusion for Individuals Who Are in a Foreign Country in Violation of an Executive Order Under Code section 911, an individual may exclude up to $80,000 in foreign earned income from U.S. income tax. For periods after January 31, 1986, the bill would deny this foreign earned income exclusion for individuals present in a foreign country in violation of an Executive Order. These countries currently are North Korea, Cuba, Vietnam, Cambodia, Iran, and Libya. 4. H.R. 4077-Mr. Torricelli Denial of Tax Exemption for Interest on Certain Electric Utility Bonds In general, facilities for municipally owned and operated electric utilities qualify for tax-exempt financing as governmental activities. The bill would deny tax exemption for interest on bonds to finance facilities for electric utilities which are in arrears under certain take or pay agreements involving the Washington Public Power Supply System. These agreements involve electricity which was to be generated by two planned (but unconstructed) nuclear generating facilities. The bill would apply to obligations issued after the date of enactment and with respect to interest payable on bonds during periods when a purchasing utility was in default under the agreements. 5. H.R. 4379--Mr. Jenkins Nonrecognition of Gain on Sale of Principal Residence Where One Spouse Dies Before Occupying New Residence Taxpayers may defer recognition of gain on the sale of their principal residence if they purchase a new principal residence within a specified period and meet other qualifications. One such qualification is that both spouses must file a consent to allow the application of this provision on the sale of their principal place of residence. The bill would provide that in the event one spouse dies after the date of the sale of the old residence but before the purchase of the new residence, the deceased spouse would be deemed to consent to the application of this provision to the sale. Also, the requirement that both spouses must use the new residence as their principal place of residence would not apply. The bill would apply retroactively to sales and exchanges of old residences after December 31, 1984. 6. H.R. 4595-Mr. Rangel Tax Rules Relating Relating to Limited Profit Housing Cooperatives The bill would provide that earnings of the reserve fund of a limited-profit housing cooperative would be treated as income derived from members for taxable years beginning before January 1, 1986. The bill also would provide that the creation of a reserve fund or the payment of closing costs for such a cooperative in connection with certain mortgage refinancings does not constitute income for the cooperative. Further, the bill would provide that certain deductions claimed by certain cooperatives would be treated as paid by those cooperatives. II. DESCRIPTION OF THE BILLS 1. H.R. 3139-Mrs. Kennelly and others Exempt Certain Emergency Medical Helicopter Transportation From Air Transportation Excise Taxes Present Law An excise tax of 8 percent is imposed on the payment for air transportation of any person that begins and ends in the United States (Code sec. 4261). The tax is paid by the person who pays for the transportation. Revenues from this tax go into the Airport and Airway Trust Fund. Exemptions from the air passenger tax apply for helicopter transportation of individuals, equipment, or supplies in connection with certain mining, oil, or gas exploration and certain timber or logging activities. These exemptions apply only if the helicopter neither takes off from, nor lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, nor uses services provided under the Airport and Airway Improvement Act of 1982 (sec. 4261(e)).2 A 5-percent excise tax is imposed on the cost of air transportation of property within the United States (sec. 4271). Revenues from this tax go into the Airport and Airway Trust Fund. The taxes on air passenger and air cargo transportation do not apply to small aircraft (having a maximum certificated take-off weight of 6,000 pounds or less) not operating on an established line (sec. 4281).3 Explanation of the Bill The bill would provide an exemption from the tax on air passenger transportation by helicopter for certain emergency medical transportation. The exemption would apply if the helicopter (1) is used primarily for purposes of providing emergency medical services, (2) is owned or leased by a nonprofit health care facility and is operated exclusively under the control of the facility, (3) does not take-off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, and 2 Section 4041(1) also exempts such helicopter transportation from the excise taxes on noncommercial aviation fuels (12 cents per gallon for gasoline and 14 cents per gallon for nongasoline fuels). 3 Such small aircraft, unless meeting the above helicopter exemption requirements, are subject to the excise taxes on noncommercial aviation fuels. (5) |