95th Congress, H.R. 13511

November 6, 1978

An Act

To amend the Internal Revenue Code of 1954 to reduce income taxes, and
for other purposes.

Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.-This Act may be cited as the "Revenue Act of 1978".
(b) TABLE OF Contents.—

Sec. 1. Short title; table of contents

Sec. 2. Amendment of 1954 Code

Sec. 3. Policy with respect to additional tax reductions

TITLE I-PROVISIONS PRIMARILY AFFECTING

INDIVIDUAL INCOME TAX

Subtitle A-Tax Reductions and Extensions

Sec. 101. Widening of brackets; rate cuts in certain brackets; increase in

zero bracket amounts

Sec. 102. Personal exemptions increased to $1,000

Sec. 103. Earned income credit made permanent

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Sec. 106. Application of certain changes in the case of fiscal year taxpayers --

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Sec. 104. Increase in and simplification of the earned income tax credit

Sec. 105. Advance payment of earned income credit

Subtitle B-Itemized Deductions

Sec. 111. Repeal of nonbusiness deduction for State and local taxes on gas-

oline and other motor fuels

Sec. 112. Unemployment compensation

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Subtitle C--Credits

Sec. 121. Payments to related individuals under child care credit

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Subtitle D-Deferred Compensation

PART I-DEFERRED COMPENSATION PROVISIONS

Sec. 131. Deferred compensation plans with respect to service for State and

local governments

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Sec. 132. Certain private deferred compensation plans

Sec. 133. Clarification of deductibility of payments of deferred compensa-

tion, etc., to independent contractors

Sec. 134. Tax treatment of cafeteria plans

Sec. 135. Certain cash or deferred arrangements

PART II-EMPLOYEE STOCK OWNERSHIP PLANS

Sec. 141. ESOPS

Sec. 142. Certain lump sum distributions excluded from gross estate where

recipient elects not to apply 10-year averaging

Sec. 143. Qualified plans required to pass through voting rights on em-

ployer securities

Subtitle E-Retirement Plans

Sec. 152. Simplified employee pensions

Sec. 153. Defined benefit plan limits

Sec. 154. Custodial accounts for regulated investment company stock

Sec. 155. Pension plan reserves

Sec. 157. Individual retirement account technical changes

Sec. 156. Rollover of section 403(b) annuities permitted

Subtitle F-Other Individual Items

Sec. 161. Certain Government scholarship and award programs

Sec. 162. Cancellation of student loans

Sec. 163. Tax counseling for the elderly

Sec. 164. Exclusion of value of certain educational assistance programs

TITLE II-TAX SHELTER PROVISIONS

Subtitle A-Provisions Related to At Risk Rules

Sec. 201. Extension of section 465 at risk rules to all activities other than

real estate

Sec. 202. Extension of at risk provisions to closely held corporations --

Sec. 203. Recapture of losses where amount at risk is less than zero

Sec. 204. Effective dates

Subtitle B-Partnership Provisions

Sec. 211. Penalty for failure to file partnership return

Sec. 212. Extension of statute of limitations in the case of partnership items

TITLE III-PROVISIONS PRIMARILY AFFECTING BUSINESS

INCOME TAX

Subtitle A-Corporate Rate Reductions

Sec. 301. Corporate rate reductions

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Subtitle B- -Credits

Sec. 311. 10-percent investment tax credit and $100,000 limitation on used

property made permanent

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Sec. 312. Increase in limitation on investment credit to 90 percent of tax

liability

Sec. 314. Investment credit for certain single purpose agricultural or horti-
cultural structures

Sec. 313. Investment credit for pollution control facilities.

Sec. 315. Investment credit allowed for certain rehabilitated buildings

Sec. 316. Tax treatment of the investment credit in the case of cooperative

organizations

Sec. 317. Transfers to ConRail not treated as dispositions for purposes of

the investment credit

Sec. 331. Increase in limit on small issues of industrial development bonds

Sec. 332. Local furnishing of electric energy

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Sec. 333. Industrial development bonds for water facilities

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Sec. 334. Advance refunding of industrial development bonds for qualified

public facilities

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PART II-OTHER TAX-EXEMPT BOND PROVISIONS

Sec. 336. Declaratory judgment procedure for judicial review of determi-

nations relating to governmental obligations

Sec. 337. Disposition of amounts generated by advance refunding of certain

governmental obligations

Subtitle E-Small Business Provisions

PART I-PROVISIONS RELATING TO SUBCHAPTER S

Sec. 341. Subchapter S corporations allowed 15 shareholders

Sec. 342. Permitted shareholders of subchapter S corporations

Sec. 343. Extension of period for making subchapter S elections

Sec. 344. Effective date

PART II-OTHER PROVISIONS

Sec. 345. Small business corporation stock

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Subtitle F-Accounting Provisions

Sec. 351. Treatment of certain closely held farm corporations for purposes

of rule requiring accrual accounting

Sec. 352. Accounting for growing crops

Sec. 353. Treatment of certain farms for purposes of rule requiring accrual

accounting

Subtitle G-Other Business Provisions

Sec. 361. Disallowance of certain deductions for yachts, hunting lodges, etc.

Sec. 362. Deficiency dividend procedure for regulated investment companies_

Sec. 363. Real estate investment trust provisions

Sec. 364. Contributions in aid of construction

Sec. 365. Liabilities of controlled corporations

Sec. 366. Medical expense reimbursement plans

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Sec. 367. Three-year extension of provision for 60-month depreciation of

expenditures to rehabilitate low-income rental housing

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Sec. 368. Delay in application of new net operating loss rules

Sec. 369. Use of certain expired net operating loss carryovers

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Sec. 370. Income from certain railroad rolling stock treated as income from

sources within the United States

Sec. 371. Net operating losses attributable to product liability losses

Sec. 372. Exclusion from gross income with respect to magazines, paper-

backs, and records returned after the close of the taxable year

Sec. 373. Qualified discount coupons redeemed after close of taxable year

TITLE IV-CAPITAL GAINS; MINIMUM TAX;

MAXIMUM TAX

Subtitle A-Caiptal Gains

Sec. 401. Repeal of alternative tax on capital gains of individuals

Sec. 402. Increased capital gains deductions for individuals

Sec. 403. Reduction of alternative capital gains tax for corporations

Sec. 404. One-time exclusion of gain from sale of principal residence by in-

dividual who has attained age 55

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Sec. 405. Waiver of certain 18-month rules of section 1034 when sale of

residence is connected with commencing work at new place

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Subtitle B-Minimum Tax Provisions

Sec. 421. Alternative minimum tax for taxpayers other than corporations

Sec. 422. Treatment of intangible drilling cost for purposes of the mini-

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mum tax

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Subtitle C-Maximum Tax Provisions

Sec. 441. Treatment of capital gains for purposes of the maximum tax

Sec. 442. Determination of personal service income from nonsalaried trade

or business activities

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TITLE V-OTHER TAX PROVISIONS

Subtitle A-Administrative Provisions

Sec. 501. Reporting requirements with respect to charged tips

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Sec. 502. Extension of optional small tax case procedures and expansion

of authority of commissioners of Tax Court

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Sec. 503. Disclosure of return information to certain Federal officers and

employees for purposes of tax administration, etc.

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Sec. 504. Refund adjustments for amounts held under claim of right

Subtitle B-Estate and Gift Tax Provisions

Sec. 511. Reduction of value taken into account for estate tax purposes

where spouse of decedent materially participated in farm or

other business

Sec. 512. Treatment of certain interests held by decedent's family for pur-

poses of the extension of time for payment of estate tax pro-

vided by section 6166

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Sec. 513. Subordination of special liens for additional estate tax attributa-

ble to farm, etc., valuation

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Sec. 514. Amendment of governing instruments to meet requirements for

gifts of split interest to charity

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Sec. 515. Deferral of carryover basis rules

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Subtitle C-Other Excise Tax Provisions

Sec. 520. Reduction of administration tax on private foundations

Sec. 521. Excise tax on certain gaming devices

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Sec. 522. Treatment of certain private foundations for purposes of section
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Subtitle D-Income Tax Provisions

Sec. 530. Controversies involving whether individuals are employees for

purposes of the employment taxes

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Sec. 531. Certain original stockholders of cooperative housing corporations --

Subtitle E-Other Income Tax Provisions

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Sec. 540. Deposits in certain branches of Puerto Rican savings and loan

associations

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Sec. 541. Taxation of Alaska Native Claims Settlement Act corporations

Sec. 542. Replacement of livestock with other farm property where there

has been environmental contamination

Sec. 543. Certain payments not included in gross income