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be to increase the foreign tax credit limitation and, thus, potentially, the amount of utilizable foreign tax credits, in the later year or years.

This provision of the bill would apply retroactively to taxable years beginning after 1981.

b. Extended carryover for certain excess foreign tax credits

Under present law, excess foreign tax credits generally may be carried back for two years and carried over for five years (sec. 904(c)).

The bill would extend the foreign tax credit carryover period to 15 years for excess foreign tax credits that arise in taxable years beginning after 1978.

c. Ordering rule for foreign tax credits

Under present law, current foreign taxes are credited against U.S. tax before foreign taxes carried from other years are credited against U.S. tax (sec. 904(c)).

The bill would provide a new FIFO ordering rule for foreign tax credits. Under this rule, foreign tax credits would generally be utilized in the order in which they arose. Thus, in any taxable year, foreign tax credit carryovers would be utilized first, followed by credits for foreign taxes paid currently in the taxable year, then credit carrybacks.

The bill would also clarify the present computational rules for foreign tax credit carrybacks and carryovers.

The new ordering rule and related amendments would apply retroactively to taxable years beginning after 1981.

4. S. 1814-Senator Packwood

Deduction for Loss in Value of Bus Operating Authorities Under present law, courts have denied an ordinary loss deduction (Code sec. 165) where the value of an operating permit or license decreased as a result of legislation expanding the number of issued licenses or permits. In 1981, as a result of the deregulation of the trucking industry, the Congress enacted a tax provision that allows trucking companies an ordinary deduction ratably over five years for loss in value of motor carrier operating authorities (sec. 266 of the Economic Recovery Tax Act of 1981). The value of bus operating authorities has diminished significantly as a result of Federal legislation that deregulated the intercity bus industry. The bill would provide tax deductions for the owners of bus operating authorities similar to that granted in 1981 with respect to motor carrier authorities.

The provisions of the bill would apply retroactively to taxable years ending after November 18, 1982.

5. S. 1815-Senator Packwood

Income Tax Exemption for Certain Title-Holding Corporations Under present law, a corporation that is organized for the exclusive purpose of holding title to property, collecting income on the

property, and distributing the net income to a tax-exempt organization is itself exempt from Federal income tax (Code sec. 501(c)(2)). The Internal Revenue Service interprets this provision to mean that the title-holding corporation may distribute income only to one or more "related" tax-exempt organizations.

The bill would exempt from Federal income tax any corporation organized exclusively to acquire, hold title to, and collect income from property and turn over all income (less expenses) from the property to one or more qualifying organizations, whether or not related. For this purpose, qualifying organizations would be (1) a qualified pension, etc., plan; (2) a governmental plan (sec. 414(d)); (3) the United States, any State or political subdivision, or any agency or instrumentality of such a governmental unit; or (4) any charitable organization (sec. 501(c)(3)).

The bill would be effective for taxable years beginning after 1983. 6. S. 1826-Senator Danforth

Present law

"Hunger Relief Incentives Tax Act of 1983"

Under present law, the amount of charitable deduction otherwise allowed for donated property generally must be reduced by the amount of any ordinary gain which the taxpayer would have realized had the property been sold at its fair market value on the date of the donation (Code sec. 170(e)). For example, a retailer which makes a charitable contribution of its inventory generally may deduct only its basis in the property.

However, under a special rule, corporations are allowed an augmented charitable deduction for qualified contributions to a public charity (other than a governmental unit) or a private operating foundation of certain types of ordinary income property donated for the care of the needy, the ill, or infants (sec. 170(e)(3)). The augmented charitable deduction allowed under this rule is generally for the sum of (1) the corporation's basis in the donated property and (2) one-half of the unrealized appreciation. In no event may the amount of the deduction exceed twice the basis of the property.

Under present law, no deduction is allowed for the value of services donated to a charitable organization. However, a taxpayer may deduct unreimbursed out-of-pocket expenses (such as fuel costs) incurred incident to the rendition of such services.

S. 1826

The bill would expand the section 170(e) augmented charitable deduction in a number of respects

(1) Eligible donees.-The category of eligible donees for the augmented charitable deduction would be expanded to include governmental units.

(2) Eligible donors.-In the case of charitable contributions of food that otherwise qualify for the augmented charitable deduction, the bill would extend the category of eligible donors to include noncorporate taxpayers who are actively engaged in the trade or business of production or marketing of food.

(3) Eligible contributions.-Certain charitable contributions of transportation services for the movement of food would be treated as qualified contributions under the bill. In addition, contributions of food which a donee removes from the donor's fields ("gleaning") would be treated as qualified contributions.

The bill would provide special rules for computing the amount of the augmented charitable deduction for (1) qualified contributions of transportation services for the movement of food and (2) qualified contributions of food by a donor who is not required to and does not use inventories (e.g., farmers on cash-basis accounting for tax purposes).

The amendments made by the bill would be effective for qualified contributions made after the date of enactment.


1. S. 120-Senators Dole, Symms, Pryor, Grassley, and others Extend Allowance of Special Deduction for Expenses of Removing Barriers to the Handicapped

Present Law

Under present law, a taxpayer may elect each year to treat as a deductible expense up to $25,000 of expenditures incurred for purposes of making facilities and certain vehicles accessible to, and usable by, handicapped and elderly individuals (Code sec. 190). This provision applies to expenditures made in taxable years beginning before January 1, 1983.

The section 190 deduction was initially limited to taxable years beginning before 1980 in order to permit the Congress to review the cost effectiveness of the deduction. In 1979, the Congress made the provision applicable to taxable years beginning prior to 1983 (P.L. 96-167).

Explanation of the Bill

The allowance of the section 190 deduction for expenses of removing barriers to the handicapped and elderly (which applied for taxable years beginning before 1983) would be extended for two years, i.e., to such expenditures paid or incurred in taxable years beginning before January 1, 1985.

Effective Date

The bill would be effective on enactment. The changes that would be made by the bill would apply to taxable years beginning after 1982 and before 1985.


2. S. 1397-Senators Danforth and Eagleton

Alternative Test for Qualification for the Rehabilitation
Investment Credit

Present Law

Present law provides a three-tier investment credit for expenditures incurred in the rehabilitation of certain older buildings (Code secs. 48(a)(1)(E) and 48(g)).

The rehabilitation credit is equal to 15 percent of qualified rehabilitation expenditures in the case of buildings at least 30 years old; 20 percent of such expenditures in the case of buildings at least 40 years old; and 25 percent of such expenditures in the case of certified historic structures. A certified historic structure is a building of a character subject to depreciation which is either listed in the National Register of Historic Places or located in an historic district approved by, and certified as contributing to the character of the district by, the Secretary of the Interior.

The 15- and 20-percent credits apply only to rehabilitations of commercial and industrial buildings; the 25-percent credit also applies to rehabilitations of depreciable residential property. For purposes of determining cost recovery deductions, the basis of a building with respect to which either the 15-percent credit or the 20-percent credit is allowed is adjusted for the full amount of the credit. The basis of a certified historic structure is adjusted by one-half of the allowable 25-percent credit.

Several conditions must be satisfied before a rehabilitation investment credit is allowable. The rehabilitation expenditures must exceed the greater of $5,000 or the adjusted basis of the building, and the building must have been placed in service before the beginning of rehabilitation. In addition, 75 percent or more of the existing external walls must remain in place as external walls after the rehabilitation.

Explanation of the Bill

The bill would provide an alternative test to the requirement that at least 75 percent of the external walls of a building must remain as such after completion of a qualified rehabilitation. Under the bill, the 75-percent requirement would be deemed to be satisfied if (1) 50 percent or more of the external walls are retained as such after completion of the rehabilitation; (2) 75 percent or more of the external walls are retained in place (even if not as external walls); and (3) 95 percent or more of the pre-rehabilitation internal structural framework is retained in place.


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