INTRODUCTION 1. S. 1239 (Senators Armstrong and Daschle): Tax treatment of short-term loans of small banks ...... Page 1 4. S. 2409 (Senator Bumpers): Designation of over- payments and contributions on tax return for the Organ Transplant Trust Fund.. 6. S. 2611 (Senator Cranston): Disclosure of certain tax return information to Veterans' Administra- (III) The Senate Finance Subcommittee on Taxation and Debt Management has scheduled a public hearing on July 12, 1988 on the following eight bills: (1) S. 1239 (tax treatment of short-term loans of small banks); (2) S. 1821 (treatment of seafood processors for employment tax purposes); (3) S. 2078 (majority voting requirement for ESOPs); (4) S. 2409 (designation of overpayments and contributions on tax return for the Organ Transplant Trust Fund); (5) S. 2484 (extension and modification of research credit); (6) S. 2611 (disclosure of certain tax return information to the Veterans' Administration); (7) H.R. 1961 (portability of pension plan benefits); and (8) H.R. 2792 (tax treatment of Indian fishing rights). The first part of the pamphlet1 is a summary. The second part is a description of the bills, including present law, explanation of the bills, and effective dates. 1 This pamphlet may be cited as follows: Joint Committee on Taxation, Description of Tax Bills (S. 1239, S. 1821, S. 2078, S. 2409, S. 2484, S. 2611, H.R. 1961, and H.R. 2792) (JCS-12-88), July 11, 1988. 1. S. 1239-Senators Armstrong and Daschle Tax Treatment of Short-Term Loans of Small Banks Under present law, certain taxpayers must accrue as interest any acquisition discount and stated interest on short-term obligations. For taxpayers that are not subject to this accrual requirement, present law defers the deduction of net direct interest expense with respect to any short-term obligations until the interest income on such short-term obligations is recognized. The bill would exempt loans made by small banks in the ordinary course of the bank's trade or business from the rules applicable to short-term obligations requiring accrual of any acquisition discount, accrual of stated interest, and the deferral of interest expense. This provision would be effective for loans acquired after July 18, 1984. The bill also would change the effective date of the provision that requires the accrual of stated interest on short-term obligations. 2. S. 1821-Senator Breaux Treatment of Seafood Processors for Employment Tax Purposes Under present law, an employer is required, with respect to its employees, to (1) withhold the employees' share of the Federal Insurance Contributions Act (FICA) tax, (2) pay its share of the FICA tax, (3) pay the Federal Unemployment Tax Act (FUTA) tax, and (4) withhold Federal income taxes. FICA and FUTA taxes and Federal income tax withholding apply only with respect to employees. In general, employees are exempt from the tax on self-employment income because they are subject to FICA taxes. Under the bill, certain seafood processors are excluded from the definition of employees for purposes of the FICA tax, FUTA tax, and Federal income tax withholding, and thus are not subject to such provisions; instead, such seafood processors are subject to the tax on self-employment income. The bill generally applies beginning on January 1, 1988. 3. S. 2078-Senator Armstrong Majority Vote Requirement for ESOPs An employee stock ownership plan (ESOP) is a type of qualified pension plan. An ESOP must be designed to invest primarily in employer securities. Under present law, the decision whether to establish an ESOP is within the discretion of the employer, except in the case of a collectively bargained plan. Present law imposes voting requirements |