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The Senate Finance Subcommittee on Taxation and Debt Management has scheduled a public hearing on August 3, 1983, on three bills: H.R. 2163, S. 927, and S. 1183.
H.R. 2163, as passed by the House of Representatives on July 12, 1983 (H. Rep. No. 98-133, Part 2), would expand the articles subject to the 10-percent excise tax on fishing equipment; impose the tax at a special 3-percent rate on electric outboard boat motors; modify the purposes for which the revenues from these taxes, the taxes on motorboat fuels, and the tariff revenues attributable to fishing tackles, yachts, and pleasure craft are expended; extend the payment date for the excise tax on sport fishing equipment; provide rules governing the tax treatment of a National Fish and Wildlife Foundation proposed to be established by H.R. 2809 (as passed by the House of Representatives on July 12, 1983); and expand the types of arrows subject to the excise tax on bows and arrows.
S. 927 (introduced by Senators Durenberger, Boren, and Percy) would extend the time for payment of the present excise tax on fishing equipment, with payment generally being required on a quarterly basis.
S. 1183 (introduced by Senators Matsunaga, Long, Bentsen, Durenberger, Grassley, and Moynihan) would exempt certain debt-financed income of educational organizations from the unrelated business income provisions generally applicable to tax-exempt organizations.
The first part of the pamphlet is a summary of the bills. This is followed by a more detailed description of the bills, including present law, issues, explanation of provisions, effective dates, and estimated revenue effects, except for S. 1183 for which a revenue estimate is not available at this time.
1. H.R. 2163—As Passed by the House of Representatives Expansion of Excise Tax on Fishing Equipment; Modification of
Sport Fish Restoration and Federal Boating Safety Programs;
and Other Matters Sport fish restoration, Federal boat safety, and Land and Water
Conservation Fund programs Present law imposes a 10-percent excise tax on the sale of fishing rods, creels, reels, and certain other articles by the manufacturer, producer, or importer of the articles (Code sec. 4161(a)). Revenues equivalent to the tax are distributed to the States in partial reimbursement of the costs they incur in approved fish restoration and management projects (the Šport Fish Restoration Program).
Present law also imposes excise taxes on gasoline and special motor fuels used in motorboats (secs. 4041, 4081, and 9503).
For fiscal years 1983-1988, up to $45 million per year of revenues from these taxes are deposited in the National Recreational Boating Safety and Facilities Improvement Fund, with the balance, if any, being deposited in the Land and Water Conservation Fund. Part of the revenue from the Boating Safety Fund is used for marine conservation programs, and part is used for recreational boating programs.
The bill would expand the articles subject to the 10-percent excise tax on fishing equipment and impose the tax at a special 3percent rate on electric outboard boat motors. The bill also would extend the time for payment of the expanded excise tax until March 31, June 30, and September 24 for calendar quarters ending on December 31, March 31, and June 30, respectively. Tax for the quarter ending September 30 would be payable on a date prescribed by Treasury Department regulations.
Finally, the bill would modify the financing sources for the three programs and the expenditure purposes for the sport fish restoration and Boating Safety Fund programs.
The excise tax expansion would be effective with respect to articles sold after December 31, 1983; the extension of the time for payment of excise tax would be effective on October 1, 1983; and the other amendments would be effective on October 1, 1983. Tax treatment of proposed National Fish and Wildlife Foundation
A charitable organization is exempt from Federal income tax if it meets certain specific Internal Revenue Code requirements (Code sec. 501). With certain exceptions (e.g., churches), organizations are exempt only if the Internal Revenue Service makes a determination of exempt status following submission of an application on behalf of the organization (sec. 508). Contributions to the organization for use in carrying out its exempt function generally are deductible by the donor for income, estate, and gift tax purposes (secs. 170, 2055, and 2522).
Organizations maintain their tax-exempt status and eligibility to receive tax-deductible gifts only as long as statutory criteria are satisfied. An organization otherwise exempt from tax is nevertheless taxable on its unrelated business income (secs. 511-514), and certain otherwise exempt organizations may incur liability for certain other special taxes if specified actions are taken or certain conditions exist.
H.R. 2809, as passed by the House of Representatives on July 12, 1983, would establish a new organization, the National Fish and Wildlife Foundation, to assist in carrying out the programs of the U.S. Fish and Wildlife Service. Under that bill, an amount not to exceed $1 million over a 10-year period, would be authorized to be made available from general revenues to the Foundation for administrative expenses and for a one-for-one matching program with private contributions for use in carrying out its exempt purpose.
H.R. 2809 has been referred to the Senate Committee on Environment and Public Works.
The bill would provide that the Foundation to be established by H.R 2809 (if enacted) would not be required to provide notice to the Internal Revenue Service that it is applying for recognition of its exempt status and that it is not a private foundation. The effect of this provision is that in order to be treated as a tax-exempt organization and as a public charity, the Foundation would be subject to the provisions of the Internal Revenue Code governing organizations exempt from tax under section 501(c)(3) and would maintain its exempt status so long as it satisfies the requirements for exemption under that section. Expansion of excise tax on arrows
Under present law, an 11-percent manufacturers excise tax is imposed on the sale by a manufacturer or importer of any bow which has a draw weight of 10 pounds or more and of any arrow which measures 18 inches or more overall in length (sec. 4161(b)). Amounts equivalent to the revenues from this tax are appropriated to the Pittman-Robertson "fund” program for support of State wildlife programs.
The bill would expand the excise tax on arrows to include arrows less than 18 inches in overall length which are suitable for use with a taxable bow.
2. S. 927–Senators Durenberger, Boren, and Percy Extension of Time for Payment of Excise Tax on Fishing
Equipment Present law imposes a 10-percent excise tax on the sale of fishing rods, creels, reels, and certain other articles by the manufacturer, producer, or importer thereof (sec. 4161(a)). This tax, like the other manufacturers excise taxes, generally is payable relatively soon after the fishing equipment is sold.
The bill would extend the time for payment of the excise tax on fishing equipment until March 31, June 30, and September 24 for calendar quarters ending on December 31, March 31, and June 30, respectively. Tax for the quarter ending September 30 would be payable on a date prescribed by Treasury Department regulations.
The provisions of the bill would apply to articles sold in the first quarter beginning after the date of enactment of the bill. 3. S. 1183–Senators Matsunaga, Long, Bentsen, Durenberger,
Grassley, and Moynihan Exception for Educational Organizations from Certain Unrelated
Business Income Provisions Under present law, any qualified pension trust or organization that is otherwise exempt from Federal income tax generally is taxed on income from trades or businesses that are unrelated to the organization's exempt purposes. Included in unrelated business income is an exempt organization's income from "debt-financed property' which is not used for its exempt function (Code sec. 514).
Debt-financed property is defined as any property which is held to produce income and with respect to which there is acquisition indebtedness at any time during the taxable year or during the 12 months prior to disposition if the property is disposed of during the taxable year. With certain exceptions, indebtedness incurred by a qualified trust as a result of the acquisition or improvement of real property is not considered acquisition indebtedness. Thus, income or gain received by a qualified trust from, or with respect to such, real property generally is not treated as income from debt-financed property.
The bill would expand the exception from the definition of acquisition indebtedness for qualified trusts to include educational organizations. Thus, income or gain received from, or with respect to, debt-financed real property owned by educational organizations would not be subject to tax as unrelated business income.
A. Expansion of Excise Tax on Fishing Equipment; Modification of Sport Fish Restoration and Federal Boating Safety Programs 1. Revenue Provisions
Present Law Excise tax on fishing equipment
Present law imposes an excise tax equal to 10 percent of the price on the sale of fishing rods, creels, and reels, and on artificial lures, baits, and flies (including parts and accessories sold on or in connection with such articles) by a manufacturer, producer, or importer (Code sec. 4161(a)).
Revenues equivalent to the 10-percent tax on fishing equipment are distributed to the States in partial reimbursement of the costs they incur in approved fish restoration and management projects, discussed below under the explanation of the Sport Fish Restoration Program. Time for payment of excise tax on fishing equipment
Treasury Department regulations require returns of manufacturers excise taxes, including the tax on the sale of fishing equipment, to be filed quarterly, unless more frequent filing by an individual taxpayer is required (Treas. Reg. sec. 48.6011(a)-1). Quarterly returns are due on the last day of the first month after the end of the quarter (Treas. Reg. sec. 48.6071(a)-1).
Although most Federal excise tax returns are filed on a quarterly basis, Treasury regulations generally require monthly, or semimonthly, payment of the tax (Treas. Reg. sec. 48.6302(c)-1). If taxpayer is liable in any month for more than $100 of manufacturers excise tax and is not required to make semimonthly deposits, the taxpayer must deposit the amount on or before the last day of the next month at an authorized depository or at the Federal Reserve Bank serving the area in which the taxpayer is located.
If a taxpayer had more than $2,000 in manufacturers excise tax liability for any month of a preceding calendar quarter, such taxes
a must be deposited for the following quarter (regardless of amount) on a semimonthly basis. The taxes must be deposited by the ninth day following the last day of semimonthly payment period.
Table 1 shows the return requirements and payment requirements for selected Federal excise taxes.