CONTENTS Introduction ..... I Summary Boren, Durenberger, Danforth, Roth, Glenn, Treasury Regulations Explanation of the Bill. Grassley, Symms, Boren, Tsongas, Durenberger, Present Law......... Explanation of the Bill..... Thurmond): "Mortgage Debt Forgiveness Tax Act Present Law........... Explanation of the Bill..... dick, Pell, Wilson, Inouye, and Cohen): "Technol- 1983”; and ......... Technology Research and Educational Develop- ic, Technical, or Computer Equipment for Cer- Overview .............. Effective date........ Overview..... 18 18 19 21 21 21 21 22 24 24 25 27 29 29 30 30 30 Page 31 32 34 35 35 36 36 38 Introduction-Continued 5. S. 1195 (Senators Bentsen and Chafee-Continued a. Increased Deduction for Transfers of Scientif ic, Technical, or Computer Equipment for Cer- Transfers of qualified scientific property Effective date...... Present Law..... Expenditures for faculty wages and student Effective date.... Expenditures for faculty wages and student Effective date..... giveness Received by Certain Graduate Sci- (Section 4)........... 38 39 40 40 40 ..... 41 41 42 42 43 INTRODUCTION The bills described in this pamphlet have been scheduled for a public hearing on May 27, 1983, by the Senate Finance Subcommittee on Taxation and Debt Management. There are five bills scheduled for the hearing. Four of the bills (S. 654, S. 738, S. 1194, and S. 1195) generally would extend or expand provisions of present law relating to the tax treatment of expenditures for research and development. The fifth bill (S. 1147) relates to the tax treatment of income from discharge of indebtedness on a personal residence. 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, explanation of provisions, and effective dates. I. SUMMARY 1. S. 654–Senators Wallop, Armstrong, Symms, Boren, Duren berger, Danforth, Roth, Glenn, Heinz, Packwood, Chafee, Bentsen, and Baucus Rules for Allocating Research Expenditures to U.S.-Source Income In determining foreign-source taxable income for purposes of computing the foreign tax credit limitation, taxpayers must allo cate or apportion expenses between foreign-source income and U.S.source income (Code secs. 861-863). Rules for allocating and apportioning research and other expenses are set forth in Treasury regulations. In the Economic Recovery Tax Act of 1981 (ERTA), the Congress directed the Treasury Department to study the impact of its section 861 regulations on activities conducted in the United States and on the availability of the foreign tax credit. Pending action on the study, the Congress provided that for a taxpayer's first two taxable years beginning after the date of enactment of ERTA (August 13, 1981), all research expenditures in those years for research activities conducted in the United States are to be allocated or apportioned to sources within the United States for tax purposes. The bill would provide a permanent rule allocating to U.S. sources all research expenditures attributable to activities conducted in the United States. The amendment made by the bill would apply retroactively to taxable years beginning after 1980. 2. S. 738–Senators Danforth, Bentsen, Chafee, Glenn, Grassley, Symms, Boren, Tsongas, Durenberger, Wilson, and Cohen Make Permanent the Credit for Increased Research Expenditures An income tax credit is allowed for certain qualified research expenditures incurred in carrying on a trade or business (Code sec. 44F, enacted in ERTA). The credit applies only to the extent that the taxpayer's qualified research expenditures for the taxable year exceed the average amount of yearly qualified research expenditures in the specified base period (generally, the preceding three taxable years). The rate of the credit is 25 percent of the incremental research expenditure amount. For purposes of the section 44F credit, the definition of research is the same as that used for purposes of the special deduction rules under section 174, but subject to certain exclusions. A taxpayer's research expenditures eligible for the section 44F incremental credit consist of (1) "in-house" expenditures by the taxpayer for research wages and supplies used in research, plus certain amounts paid for research use of laboratory equipment, computers, or other |
0 Reviews Reviews aren't verified, but Google checks for and removes fake content when it's identified Write review |