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savings bonds have a minimum investment yield of four percent per
year. Thus, the proposal would permit the Treasury to set
investment yields for savings bonds according to market
conditions, without the constraint of a statutory minimum.

This repeal would be effective only for bonds issued
prospectively.

17. Pension Benefit Guaranty Corporation (PBGC) reform

The proposal generally would adopt the Retirement Protection
Act of 1993, with modifications to better target underfunded
plans and provide more gradual transition rules. The proposal
would require greater contributions to underfunded plans, modify
certain rules relating to participant protections, phase out the
cap on the variable rate PBGC premium, and make related changes
to the Internal Revenue Code and ERISA provisions relating to the
PBGC. The proposal would not include the language in the House
Ways and Means Committee report of July 29, 1994, relating to
cross testing under defined contribution plans. The
modifications to the minimum funding rules generally would be
effective for years beginning after December 31, 1994. The
phaseout of the cap on the variable rate premium generally would
be effective for plan years beginning on or after July 1, 1994.
Other provisions in the proposal would have various effective
dates.

18. Modification of customs merchandise processing fee

The proposal would modify the current customs merchandise
processing fee by setting the current rate at 0.21 percent of
value for formally-entered merchandise and by increasing the
upper end of the range of the fee to that level. The proposal
also would raise the minimum fee to $25 and the maximum fee to
$485. Flat rates for informal entries also would be adjusted
from $5 to $6 for those n not prepared by Customs and from $8 to
$9 for those prepared by Customs. The proposal would be
effective January 1, 1995.



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of measuring gain. A partner would recognize gain to the extent
the fair market value of the marketable securities exceeds the
partner’s adjusted basis in its partnership interest.

Exceptions would be provided: (1) if the distributed
security was contributed by the distributee partner; (2) to the
extent provided in regulations, if the distributed security was
not a marketable security when acquired by the partnership; (3)
if the partnership is an investment partnership and the
distributee partner did not contribute any property to the
partnership other than money or securities or certain similar
property; or (4) to the extent of the distributee partner’s share
of the partnership’s built-in gain (if any) with respect to the
type (class and issuer) of securities distributed (e.g., pro-rata
distributions).

The proposal generally would apply to partnership
distributions of marketable securities after the date of
enactment, except that the proposal would not apply to a
distribution of a marketable security before January 1, 1995, by
the partnership that held the security on July 27, 1994.
Additional transition rules would be provided.

13. Taxpayer identification numbers (TINs) required at birth

Taxpayers claiming dependents would be required to provide a
TIN for each dependent, regardless of the dependent’s age. A
parallel requirement would apply to taxpayers with qualifying
children claiming the earned income tax credit. The proposal
would be phased in for tax years 1995 and 1996 and would be fully
effective for taxable year 1997.

14. Extension of Internal Revenue Service (IRS) user fees

The IRS user fee program would be extended for five years,
applicable to requests made after September 30, 1995, and before
October 1, 2000.

15. Modification of substantial understatement penalty for
corporations participating in tax shelters

Under the proposal, if a corporate taxpayer has a
substantial understatement that is attributable to a tax shelter
item, the substantial understatement. penalty would. apply with
respect to the understatement, unless the "reasonable cause
exception" applies. The proposal would apply to transactions
occurring after the date of enactment.

16. Modification of authority to set terms and conditions for
savings bonds

The proposal would repeal the present-law requirement that



Joint Committee on Taxation
September 27, 1994
JCX-21-94

SUMMARY OF THE PROVISIONS FOR
FINANCING THE IMPLEMENTATION OF THE URUGUAY ROUND OF THE
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

The following is a brief summary of certain of the financing
provisions relating to the implementation of the Uruguay Round of
the General Agreement on Tariffs and Trade (GATT) .!

1. Withholding on distributions of Indian casino profits to
tribal members

Under the proposal, an Indian tribe that distributes net
revenues from certain gaming activities to its members would be
required to withhold on such payments in accordance with a
schedule of graduated withholding rates or in accordance with
such tables or computational procedures as the Secretary of the
Treasury may prescribe. The proposal would be effective for
payments made after December 31, 1994.

2. Voluntary withholding on certain Federal payments and on
unemployment compensation

The proposal would give taxpayers who receive specified
Federal payments and unemployment compensation the option of
requesting that the agency making the payments withhold Federal
income taxes from the payments. The proposal would be effective
for payments made after December 31, 1996.

3. Treatment of Subpart F and section 936 income of taxpayers
using annualized method for estimated tax

The proposal generally would require estimated tax payments
to be made throughout the year for subpart F inclusions and
certain amounts includible under section 936 for the year,

' The GATT legislative language will be submitted by the
President to the..Congress under. the current "fast track" trade
legislative procedures. Once submitted by the President, the
GATT legislative provisions may not be amended and are to be
considered by the Congress on an expedited basis. Technical
explanations of the trade and tax provisions of the GATT
legislation will be included in the President’s Statement of
Administrative Action as well as official committee reports to be
filed by the House Committee on Ways and Means and the Senate
Committee on Finance.



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generally effective for taxable years of shareholders beginning
after December 31, 1994. To minimize administrative
difficulties, certain safe harbors would be provided.

4. Time for payments and deposits of certain excise taxes

The proposal generally would accelerate to September 29
(rather than the subsequent fiscal year) the due date for deposit
(or payment) of all excise taxes that must be remitted to the
Federal Government on a semi-monthly basis for the period
September 16 through September 26. Special rules would apply to
the taxes on ozone-depleting chemicals, communications services,
and air transportation. In addition, safe harbors would be
provided with respect to the payment of certain excise taxes.
The proposal would be effective on January 1, 1995, for taxes
other than the taxes on air transportation, and on January 1,
1997, for the air transportation excise taxes.

5. Reduction in rate of interest paid on certain corporate
overpayments of tax

The rate of interest paid on overpayments of tax would be
reduced to the sum of the Federal short-term rate plus one-half
percentage point for any portion of an overpayment of any Federal
tax by a corporation for a taxable period that exceeds $10,000.
The proposal would apply for purposes of determining interest for
periods after December 31, 1994.

6. Extension of the earned income tax credit to military
personnel stationed outside the United States

The proposal would require that members of the Armed Forces
receive annual reports from the Department of Defense of earned
income (which includes nontaxable earned income such as amounts
received as basic allowances for housing and subsistence). This
proposal would be effective for remuneration paid after December
31, 1994.

The proposal would permit members of the Armed Forces
stationed outside the United States on extended active duty to
claim the earned income tax credit. This proposal would be
effective for taxable years beginning after December 31, 1994.

7. Certain nonresident aliens-ineligible for earned income tax
credit

The proposal would make individuals who are nonresident
aliens for any portion of the taxable year ineligible to claim
the earned income tax credit unless an election under Code
section 6013(g) or (h) is in effect for the taxable year. The
proposal would be effective for taxable years beginning after
December 31, 1994.



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8. Income of prisoners disregarded in determining earned income
tax credit

For purposes of computing the earned income tax credit, the
proposal would remove from the definition of earned income any
amount received for services provided while an individual is an
inmate in a penal institution. The proposal would be effective
for taxable years beginning after December 31, 1993.

9. Treatment of excess pension assets used for retiree health
benefits

The proposal generally would extend for 5 years, for 1996
through 2000, the present-law provision permitting excess defined
benefit pension plan assets to be used to provide retiree health
benefits under a section 401(h) account, with a modification to
the maintenance of effort requirement and a clarification of the
allocation rule for amounts previously set aside for retiree
health benefits.

10. Rounding rules for cost-of-living adjustments

The proposal would provide that the dollar limits on
contributions and benefits under qualified pension plans are
indexed in $5,000 increments, the dollar limit on elective
deferrals is indexed in $500 increments, and the dollar limit on
compensation taken into account for simplified employee pensions
is indexed in $50 increments, effective for years beginning after
December 31, 1994. However, under the proposal, no dollar limit
would be reduced below the limit in effect for years beginning in
1994,

11. Increase in inclusion of Social Security benefits paid to
nonresidents

The proposal would increase from 50 percent to 85 percent
the amount of Social Security or Railroad Retirement Tier 1
benefits included in the gross income of a nonresident alien
individual that is subject to withholding tax, effective for
benefits paid after December 31, 1994. The effect of the
proposal is to more nearly conform the maximum effective rate of
U.S. tax on these benefits to the corresponding rate applicable
to similar benefits paid to U.S. citizens and residents. The
proposal would.not impose.tax. contrary to any.treaty obligation
of the United States. Thus, if taxation of such a benefit would
conflict with an existing treaty, the treaty would continue to
prevail.

12. Partnership distributions of marketable securities

The proposal would treat the distribution by a partnership
of marketable securities like a distribution of cash for purposes