**DESCRIPTION OF REVENUE PROVISIONS INCLUDED INTHE TRADE ADJUSTMENT ASSISTANCE REAUTHORIZATION ACT**

Scheduled for Markup

By the

SENATE COMMITTEE ON FINANCE

on June 22, 1999

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

June 18, 1999

JCX-35-99

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**CONTENTS**

**INTRODUCTION**

**DESCRIPTION OF REVENUE PROVISIONS**

A.  Increase Elective Withholding Rate for Nonperiodic Distributions from Deferred Compensation Plans

B.  Add Certain Vaccines Against Streptococcus Pneumonia to the List of Taxable Vaccines

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**INTRODUCTION**

	This document,(1) prepared by the staff of the Joint Committee on Taxation, provides adescription of revenue provisions included in the "Trade Adjustment Assistance ReauthorizationAct."  The Act is an original bill is to be considered by the Senate Committee on Finance on June22, 1999.

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**DESCRIPTION OF REVENUE PROVISIONS**

	The following revenue provisions would be included in the "Trade AdjustmentAssistance Reauthorization Act."

**A. Increase Elective Withholding Rate for Nonperiodic Distributions from Deferred Compensation Plans**

**Present Law**

	Present law provides that income tax withholding is required on designated distributionsfrom employer compensation plans (whether or not such plans are tax qualified), individualretirement arrangements ("IRAs"), and commercial annuities unless the payee elects not to havewithholding apply. A designated distribution does not include any payment (1) that is wages, (2)the portion of which it is reasonable to believe is not includible in gross income,(2) (3) that issubject to withholding of tax on nonresident aliens and foreign corporations (or would be subjectto such withholding but for a tax treaty), or (4) that is a dividend paid on certain employersecurities (as defined in sec. 404(k)(2)).

	Tax is generally withheld on the taxable portion of any periodic payment as if thepayment is wages to the payee. A periodic payment is a designated distribution that is an annuityor similar periodic payment.

	In the case of a nonperiodic distribution, tax generally is withheld at a flat 10-percent rateunless the payee makes an election not to have withholding apply. A nonperiodic distribution isany distribution that is not a periodic distribution. Under current administrative rules, anindividual receiving a nonperiodic distribution can designate an amount to be withheld inaddition to the 10-percent otherwise required to be withheld.

	Under present law, in the case of a nonperiodic distribution that is an eligible rolloverdistribution, tax is withheld at a 20-percent rate unless the payee elects to have the distributionrolled directly over to an eligible retirement plan (i.e., an IRA, a qualified plan (sec. 401(a)) thatis a defined contribution plan permitting direct deposits of rollover contributions, or a qualifiedannuity plan (sec. 403(a)). In general, an eligible rollover distribution includes any distribution toan employee of all or any portion of the balance to the credit of the employee in a qualified planor qualified annuity plan. An eligible rollover distribution does not include any distribution thatis part of a series of substantially equal periodic payments made (1) for the life (or lifeexpectancy) of the employee or for the joint lives (or joint life expectancies) of the employee andthe employee's designated beneficiary, or (2) over the a specified period of 10 years or more. Aneligible rollover distribution also does not include any distribution required under the minimumdistribution rules of section 401(a)(9), hardship distributions from section 401(k) plans, or theportion of a distribution that is not includible in income. The payee of an eligible rolloverdistribution can only elect not to have withholding apply by making the direct rollover election.

**Description of Proposal**

	Under the proposal, the withholding rate for nonperiodic distributions would be increasedfrom 10 percent to 15 percent. As under present law, unless the distribution was an eligiblerollover distribution, the payee could elect not to have withholding apply. The proposal wouldnot modify the 20-percent withholding rate that applies to any distribution that is an eligiblerollover distribution.

**Effective Date**

	The proposal would be effective for distributions made after August 31, 1999.

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**B.  Add Certain Vaccines Against Streptococcus Pneumonia to the List of Taxable Vaccines**

**Present Law**

	A manufacturer's excise tax is imposed at the rate of 75 cents per dose (sec. 4131) on thefollowing vaccines routinely recommended for administration to children:  diphtheria, pertussis,tetanus, measles, mumps, rubella, polio, HIB (haemophilus influenza type B),  hepatitis B,varicella (chicken pox), and rotavirus gastroenteritis.  The tax applies to any vaccine that is acombination of vaccine components equals 75 cents times the number of components in thecombined vaccine.

	Amounts equal to net revenues from this excise tax are deposited in the Vaccine InjuryCompensation Trust Fund to finance compensation awards under the Federal Vaccine InjuryCompensation Program for individuals who suffer certain injuries following administration ofthe taxable vaccines.  This program provides a substitute Federal "no fault" insurance system forthe State-law tort and private liability insurance systems otherwise applicable to vaccinemanufacturers.  All persons immunized after September 30, 1988, with covered vaccines mustseek compensation under this Federal program before pursuing civil tort actions under State law.

**Description of Proposal**

	The proposal would add conjugated streptococcus pneumonia vaccines to the list oftaxable vaccines.

**Effective Date**

	The proposal would be effective for vaccine purchases beginning on the day after the dateon which the Centers for Disease Control make final recommendation for routine administrationof conjugated streptococcus pneumonia vaccines to children.  No floor stocks tax would becollected for amounts held for sale on that date.

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****FOOTNOTES****

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1.   This document may be cited as follows:  Joint Committee on Taxation, *Description ofRevenue Provisions Included in the Trade Adjustment Assistance Reauthorization Act* (JCX-35-99), June 18, 1999.
2.   All IRA distributions are treated as if includible in income for purposes of this rule.