SUMMARY OF SENATE 

AMENDMENTS TO H.R. 15414 

PREPARED FOR THE USE OF 

THE HOUSE AND SENATE CONFEREES 

92- 97 

BY THE STAFF OF THE 

JOINT COMMITTEE ON 

INTERNAL REVENUE TAXATION 

APRIL 3, 1968 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1968 JCS-13-GS ' 
SUMMARY OF SENATE AMENDMENTS TO H.R. 15414 

Section of 

Senate Bill 

Sec. 1 

Sec.2 

Dcscription of amendmcllt 

SlIon'r TiTLE 

This section changes the murre of the :lct from the "Tax 

Adjustn::ent Act of 1968" tu the "Balanee of Payments and 

Domestlc Economy Act of 1968". (The long title of the bill 

is also changed. In addition to referring to '- continuing "the 

existing excise tax rates on communications services and on 

automobiles, and to apply more generally the provisions 

relating to payments of estimated tax by corporations" the 

Senate adds "to amend the Social Security Act, to impose 

import qnotas on certain items, to increase income taxes, to 

limit expenditures, and for other purpo:::;es." 

The sh01,t title chanfJe was a part (d the Willlams-Smathel's 

su,bstitute. The long title chan!/e was a floo), amendment offered 

by Senator Long oj Lonisiana. 

REDUCTION IN NUMBER OF CIVILIAN OFFICERS AND EMPLOYEES 

IN THE EXECUTIVE BRANCH 

This section provides that no vnen,ncy in the executiye 

branch is to be filled, except as determined by the Director 

of the Bureau of the Budget, during the period the aggregate 

llmnber of employees in the executive branch exceeds the 

aggregate llurnber mnployed on September 20, 1966. Ho.wever, the Director of the Burean of the Budget lllay authorIze 

the filling of not more than 50 percent of the aggregate number of vacancies. He is to determine the vacancies to be filled 

on the basis of continuing studies he is to lllake as to the 

needs of the departments for personnel, having in mind the 

importance of the national health, secnrity and ,,-elfnre of 

their activities. 

The follo,ving executive agencies are excluded from the 

operation of this provision: the Defense Department, the 

Postal Field Servlce, the FBI, the CIA, and TVA mnployees 

engaged in its power program n,nd IHtid from ot.her t.han 

appropriated funds. Also excluded nre rn,sunl employees, 

employees employed without compensatioll~ officer:::; appointed by the President with the ndviee nnd ('onsent of 

the Senate, and employees transferred beL,,-eell positions 

within the same department 01' agency. 

(1) 
Section of 

Senate Bill 

Sec. 3 

2 

Description of amendment 

This provision also requires the Director of the Bureau of 

the Budget to make studies of the savings resulting from the 

operation of this provision, requires reports from the department heads to be submitted to the Director to enable him to 

carry out this provision, requires the Director to submit to 

the Congress on a quarterly basis a report of his activities 

under this section and provides that this section is not to 

supersede or modify employment rights of persons under the 

l\1ilitary Selective Service Act of 1967. 

This section takes effect on April 1, 1968. 

Th1~s section was a part of the Williams-Smathers sl1bstitl1te 

elcept that it was modified by fioor amendments offered by 

Senator Jackson (adding the exception for OIA employees) and 

by Senator Baker (adding the exception for TV A employees). 

LIl\UTATION ON EXPENDITURES DURING FISCAL YEAR 1969 

This section provides that budget expenditures are not to 

exceed $180.1 billion in the fiscal year 1969. This is $6 billion 

less than the expenditures called for by the budget. However, 

five exceptions to this $180.1 billion ceiling are provided. 

First, it is provided that expenditures in excess of $25 billion 

"rhich the President may detennine are necessary for our 

military efforts in Southeast Asia are not to come under the 

ceiling. The four remaining categories where expenditures 

in excess of the amounts shown in the budget are not taken 

into account in the computation of the ceiling of $180.1 

'billion are: 

(1) Expenditures for interest, 

(2) Expenditures for veterans benefits, 

(3) Expenditures fronl social security trust funds, and 

(4) Expenditures from power proceeds of the Tennessee 

Valley Authority. 

In the ease of categories 2 and 3, the only excess amounts 

over that shown in the budget to be taken into account are 

those provided for by law on l\IIarch 1, 19.68. 

The President is authorized to reserve frOln expenditure 

amounts from obligational [lllthority to effectuate the application of this section. 

This section was a part of the ll'illiams-Smathers substitute 

except that the exception with respect to the TV A expenditures 

was added by an amendment by Senator Baker. 

Sec. 4 REEXAMINATION OF THE BUDGET 

This section directs the Director of the Budget to reexamine the budget for the fiscal year 1969 and to submit 

to Congress within 30 days a report setting forth proposed 

reductions aggregating at least $10 billion in obligational 

authority and specifying priorities for allocating these reductions among the various Governnlent agencies in a way 

as to least impair the efficiency of the Government. 

This section was a part of the JVilliams-Smathers substitl1te. 
Section of 

8enate Bill 

Sec. 5 

Sec. 6 

Sec. 7 

Description of amendment 

A )'IE~D1IENT OF EXISTING LAW 

This section is identical to section l(b) of the House bill. 

CONTINUATION OF EXCISE TAXES ON CO:VI:HUNICATIONS 

SERVICES AND ON A UTOlVIOBILES 

This section is identical to section 2 of the House bill. 

PAYMENT OF ESTUIATED TAX BY COHPORATlONS 

Under the Honse bill, corporations make estimated tax 

payments if their estimated income tax exceeded $40. 

Present In,w requires estimated tax payments only to the 

exten t of a taxpn,yer's reasonably expected tax liabili ty o,Ter 

$100,000. The $100,000 exemption was eliminated by the 

House bill over a 5-year transi tional period. 

The Senate amendment retained the concept in present 

law of an exemption but reduced the present $100,000 exemption to $5,500 (that is genernlly the tax on the first 

$25,000 of taxable income). The reduct.ion of the exemption 

to $5,500 is prmTided over a 5-year transitional period in the 

same manner as the elimination of the exemption under the 

House bill. 

The Senate made no chnnge in the House pl'mTision 

raising from 70 to 80 percen t th e percen ta ge of es tinm ted 

tax which must be reported currently. 

The Senate bill retained the House bill prmTision reb ting 

to "quickie" refunds of o\Terpayments of estimated blX by 

corpora tions. The House bill, ho,,'eYer, pl'u,Tic1ed thn t to be 

eligible for the refund the m'erpaymen t mnst exceed the 

corporation's expected tax by at least 5 percent and ~1lso 

amount to at least $200. The ~enate changed t,his limitation 

to provide that to be eligible for the refullcl the o,·erpnymen t 

must exceed the eOl'porntion's expected tax by at least 10 

percent and also amount to n t least. $500. 

A third modification in this section ll1nde by the Senate 

provides a special rule for the pnyment of e...;timn ted t;lX by a 

corporation clue on April 15, 1968. Under this rule. the 

Treasury Departmen t is to preseribe a date not more tlwll 

30 days after April 15 during "'hich a corporn tion mny pay 

the increase in the amount of it~ required estim:l ted tux 

payments ,,-hich result from the enactment of tbis nn. (The 

increases provided by this net are n ttl'ibu table both to the 

two changes accelerating corporate tnx payments and to the 

imposition of the 10 percent income tax surchnrge--::;ee 

sec. 17 belo,,' for description of surcharge.) 

The first two oj the three modifications t/(,8Cl'ibe(l abnce 'U;(J'(' 

changes made by the Sfnate Final/Cf Committa. The. thiJ'll 

change 'Was a floor amendment o..tfeJ'(,fl by 8(,11OtO'/' lrilliam.s (~f 

Delaware. 
Section of 

Senate Bill 

Sec. 8 

Sec. 9 

Sec. 10 

4 

Description of amendment 

TIMELY MAILING OF DEPOSITS 

This section is identical to section 4 of the House bilL 

INTEREST ON INDUSTRIAL DEVELOPMENT BONDS 

This section provides that interest on so-called industrial 

development bonds is to be excluded from income tax under 

the code in accordance with the Treasury regulations as in 

effect on March 13, 1968, and in accordance with the principles set forth in certain prior revenue rulings. The Treasury 

is authorized and directed to issue ruling letters with respect 

to industrial development bonds in conformity with the 

statement set forth above. 

This was a Senate Finance Oommittee amendment. 

INDUSTRIAL DEVELOPMENT BONDS 

This section provides that interest on industrial development bonds issued after December 31, 1968, is not to be considered tax exempt under the Internal Revenue Code. 

Industrial development bonds are defined as obligations 

secured in whole or in part by a lien on depreciable property 

(or on money) under a lease, sale, or loan arrangement for 

industrial o,r commercial purposes. 

Industrial development bonds for purposes of this provision do not include: 

1. Debt with respect to recreational facilities for the 

general public; 

2. Facilities for holding a convention, trade show, etc.; 

3. An airport, flight training facility, dock, wharf, 

grain storage facility, parking facility or similar transportation facility; 

4. Facilities for furnishing or sale of electric energy, 

gas, water, sewage or solid waste disposal services or air 

or water pollution abatement facilities; or 

5. Facilities used by the State or local government in 

an active trade or business. 

This was a floor amendment offered by Senator RibicoiJ. 

Sec. 11 INCOME FROM ADVERTISING IN PERIODICALS OF EXEMPT 

ORGANIZATIONS 

This section provides that the advertising income "which 

an exempt organization receives in publishing a periodical is 

to be exempt from the tax on unrelated trade or business 

income if the publication of the periodical is substantially 

related to the exelnpt activities of the organization. This 

section applies to all taxable years to which the Internal 

Revenue Code of 1954 applies. 

This was a floor amendment offered by Senator Murphy. 
Section of 

Senate Bill 

Sec. 12 

Sec. 13 

Sec. 14 

5 

Description of amendmt:'nt 

TAX-EXEMPT STATUS OF CERTAIN HOSPITAL SERVICE 

ORGANIZATIONS 

This section provides tax-exempt status to certain entities 

which provide joint services to hospitals. It also provides 

deductIble status to contributions to these organizations. To 

be exempt from tax under this provision an org anization 

must: 

(1) Provide services of a type which if provided by a 

tax-exempt hospital would constitute part of its exempt activities; 

(2) Provide services solely for hospitals which are 

tax-exempt; 

(3) Be organized and operated on a cooperative basis 

and allocate or pay all of its net earnings to patrons on 

the basis of services performed; and 

(4) If it has capital stock, the capital stock must be 

held by patrons. 

This is effective for taxable years ending after date of 

enactment. 

This was a floor amendment offered by Senator Carlson and is 

identical to an amendment included by the Senate Finance Committee in the Social Security Amendments of 1967. 

ADVERTISING IN A POLITICAL CONVENTION PROGRAl\I 

This section allows a deduction for expenses paid or incurred on or after January 1, 1968, for advertising in a program at a political con ven tion held to nominate candida t.es 

for President and Vice President. To be deductible, the 

expenses for advertising Iuust be reasonable in light of the 

business the taxpayer may expect to receive directly as a 

result of this advertising or be reasonable in light of the 

business expected to be brought by the convention to the 

area in which the taxpayer has a principal place of business. 

In addition, the funds must be used only for cOln~elltion expenses. 

This was a floor amendment offered by Sertator J{uchel on 

behalf of Senator Dirksen. 

AMENDMENTS TO TITLE IV OF THE SOCIAL SECURITY ACT 

This section repeals the limitation Oll Federal pnrticipation in aid to falnilies for dependent children. It. remm es the 

linlitation set by the Social Security Amendments of 1967 

on Federal financial participation in the AFDC program 

based upon the proportion of the child population under n~c 

18 aided because of the absence of a parent from the home. 

Under the limitation, the percentage is the ratio of the fLverage monthly number of children ill 11 StfLte in the first quarter 

of 1968 ,,~ho are dependent ber.nuse of the absence of n parent 

to the child population of the St.ate Oil In.ll 11 H.ry 1,1968. In the 
Section of 

Senate Bill 

Sec. 16 

Sec. 17 

G 

Description of amendment 

absence of this amendment, the limitation would becOlIle 

effective on July 1, 1968. 

The section also repeals the requirement established by the 

Social Security Amendments of 1967 that in order for a dependent child to qualify for assistance (in which the Federal 

Government participates) on the basis of the unemployment 

of his father, the father Inust meet certain tests of prior employment. 

A still further am.endment contained in this section removes the prohibition on payment of assistance (with 

Federal participation) to a family when the father receives 

any unemployment compensation during any part of the same 

lnonth. The choice as to whether llnenlployment compenpensation payments can be supplemented is left to the 

States. 

The three amendments made by this section were Senate 

Finance Committee amendments. 

Sec. 15 EFFECTIVE DATE OF FAl\IILY PLANNING SERVICES 

REQUIREMENT 

The Social Security Amendm.ents of 1967 required a 

State to offer fanlily planning services to all appropriate 

AFDC participants or lose a portion of Federa1 funds otherwise available for the State AFDC program .. This section 

provides that in the case of a State ,,~hich does not now 

provide the required fanlily planning services, the amendlnent 

in the Social Security Amendments of 1967 is not to apply 

to that State until after the first day of the fourth month 

beginning after the adjournm.ent of the Sta,te's first legislative session which begins after April 1, 1968. 

This was a floor amendment offered by Senator Long of 

Louisiana. 

AMENDMENT TO TITLE XIX OF THE SOCIAL SECURITY ACT 

This section extends fron1 January 1, 1968, to January 1, 

1970, the period in 'which the Federal Government is to continue to make matching payments under title XIX coverage, 

for medical services to welfare patients of a State \vhich has 

not elected such coverage. 

This was a Senate Finance Committee amendment. 

IMPOSITION OF 'l'AX SURCHARGE 

This section imposes a 10-percent income tax surcharge 

applicable both to individuals and to corporations. In the 

ease of individuals, the surcharge is effective for the period 

from April 1, 1968, through June 30, 1969, a period of 15 

months. In the case of corporations, the surcharge is effective from January 1, 1968, throngh June 30, 1969, a period 

of 18 months. 
Section of 

Senate Bill 

Sec. 18 

Sec. 19 

Sec. 20 

7 

Description of amendment 

. The surcharge in the case of individual:; does not apply 

III the case of the first two tax brackets, or up to the leyel of 

$1,000 of taxable i:ncome i~ the case of a single person and 

$2,000 of taxable lllcome III the case of u married couple. 

For those ,,-i th taxable incomes slightly abO\·e these le,·els, 

a so-ealled "antinotch" provision is applied ,,-hich hns the 

effect of gradually removing this exemption for those ,,-ith 

ineomes of larger amounts. 

The withholding ill the case of individuals begins the 10th 

day after da te of enactmen t. 

Th1~s was a part oj the llilliams-Smathers substitute. 

Ii\IPORT QUOTAS FOR TEXTILE ARTICLES 

This section imposes quotas on imports of textiles effective 

180 days after date of enactnlent. The qnotas apply to natural 

and nlan-made fibers but not to unprocessed natural fibers 

(such as raw cotton or raw "-001). The quotas are to be based 

on the average amount of inlports of various categories of 

textiles during the 6-year period 1961 through 1966, inclusive. The quotas would be acljnsted in proportion to the 

increase in donlestic consumption in each category pro,·ided 

the allnual increase or decrease in the quota is ~ more than 

5 percent. The quotas are not to apply if the President is 

able to obtain agreements ,,-ith the foreign countries from 

which the imports originate and, if established, the quotas 

would be superseded by any such agreement. 

This was a floor amendment offered by Senator Hollings. 

FOREIGN NATIONS INDEBTED TO THE UNITED STATES 

This section requires the Secretary of the Treasury to 

demand payment of arrears from all countries that are 

Inore than 90 days in arrears in the payment of principal 

or interest on debts owed the IT nited States (including debts 

from World "Tars I and II). The amendment further provides that dollars presented to the Trensnry by a country 

that is in arrears are not to be redeemed in gold but instead 

eredited against the debts o,,-ed by them to this cou.n~ry. 

This was a floor amendment offered by Senator Domm~ck. 

SUBl\IISSION OF PROPOSALS FOR TAX REFOIt1\1 

This section requires the President, not Inter than December :)1, 1968, to submit to Congress pl'opnsnls for a ('ompl'ehensi,Tc reform of the Internal Reycnlle Code of 1954. 

This was a .floor amendment o..tfered by SP1WtOJ' Jacits. 

o