ITEM

HOUSE BILL

SENATE AMENDMENT

I. TRAINING AND INVESTMENT
PROVISIONS

A. Training and Education Provisions

1, Extension of employer-provided
educational assistance (sec. 14101
of the House bill and sec. 8101
of the Senate amendment)

Length of extension.—The House bill
retroactively and permanently extends the

exclusion for employer-provided educational
assistance.

Treatment of educational assistance
provided in the last half of 1992.—The House
bill includes a number of transition rules to
deal with cases in which employers provided
educational assistance to employees between
July 1, 1992, and December 31, 1992.

First, no interest, penalty, or addition to
tax is imposed on employers or employees
who continued to exclude from income
educational assistance payments made after
June 30, 1992,

Second, if an employer included
educational assistance payments made after
June 30, 1992, in its employees’ income and
wages, the amount included is deducted from

Length of extension.—The Senate
amendment retroactively extends the

exclusion for employer-provided educational
assistance for 24 months (through June 30,
1994). In the case of a taxable year
beginning in 1994, only amounts paid before
July 1, 1994, by the employer for educational
assistance for the employee can be taken into
account in determining the amount excludable
under section 127 for the taxable year.

Treatment of educational assistance

provided in the last half of 1992.—The
legislative history states that it is intended
that the Secretary of the Treasury use his
existing authority to alleviate administrative
problems associated with the retroactive
extension and to facilitate recovery of excess
taxes paid.



ITEM

HOUSE BILL

SENATE AMENDMENT

G. Indian Investment and Employment
Tax Credits (secs. 8181-8182 of the
Senate amendment)

No provision.

-22-

The following two tax incentives are
provided for all Indian reservations:

(1) An Indian reservation investment tax
credit (ITC) is allowed, at a rate up to 10
Percent for reservation personal Property used
in the active conduct of a reservation
business, or at a rate up to 15 percent for
certain real property used in a reservation
business and certain infrastructure investment
placed in service in connection with a trade
or business and benefiting the tribal
community. Property does not qualify for
the credit if acquired from a related person or
if used to conduct or house certain gaming
activities. The full amount of the credit is
allowed only if the Indian unemployment rate
on the applicable reservation exceeds 300
percent of the national average unemployment
rate at any time during the calendar year in
which the property is Placed in service or
during either of the immediately preceding
two calendar years. If the Indian
unemployment rate is between 150 percent
and 300 percent of the national average
unemployment rate, then only half of the
otherwise allowable credit may be claimed
(ie., the credit rates are 5 Percent and 7.5
percent). Recapture rules apply if, prior to
the end of the applicable recovery period,
property ceases to be used in a trade of
business on the reservation. The taxpayer's
basis in real property eligible for the credit is



ITEM HOUSE BILL SENATE AMENDMENT

Effective date.--The provision is effective

Effective date.--The provision is effective
after December 31, 1993,

after December 31, 1993, and before January
1, 2000.

- 18 -


ITEM HOUSE BILL SENATE AMENDMENT

Il. REVENUE-RAISING PROVISIONS

A. Individual Income Tax Provisions

1. Increased tax rates for higher- 36-percent tax bracket 36-percent tax bracket
income individuals (secs. 14201-
14203 of the House bill and secs. Imposes a new 36-percent marginal tax Same as the House bill except that for
8201-8203A of the Senate rate on taxable income in excess of the taxable years beginning in 1993, a blended
amendment) following thresholds: tax rate of 33.5 percent applies.
Filing status Applicable threshold
Married individuals _ $140,000

filing joint returns

Unmarried individuals $127,500
filing as head of household

Unmarried individuals $115,000
filing single returns

Married individuals $ 70,000
filing separate returns

Estates and trusts $ 5,500
Indexing of income thresholds for the 36-

percent rate applies to taxable years
beginning after December 31 > 1994,

-27-



LIST OF IDENTICAL PROVISIONS

ing And Investment Provisions

Real Estate Property Acquired by a’ Qualified
Organization (sec. 14144 of the House bill and sec.
8144 of the Senate amendment)

Repeal of Special Treatment of Publicly Treated
Partnerships (sec. 14145 of the House bill and sec.
8145 of the Senate amendment)

Title-Holding Companies Permitted to Receive
Small Amounts of Unrelated Business Taxable
Income (sec. 14146 of the House bill and sec. 8146
of the Senate amendment)

Exclusion From Unrelated Business Tax of Gains
From Certain Property (sec. 14147 of the House
bill and sec. 8147 of the Senate amendment)

Exclusion From Unrelated Business Tax of Certain

Fees and Option Premiums (sec. 14148 of the
House bill and sec. 8148 of the Senate amendment)

xiii



ITEM

HOUSE BILL

SENATE AMENDMENT

70-135 0 - 93 - 10

d. Eliminates the reasonable cause and
good faith exception for fraud,

Effective date.--Applies to tax returns due
(without regard to extensions) after December
31, 1993.

-55-

d. No provision.

(Provision was stricken under Budget Act
upon a point of order raised by Senator
Packwood.)

Effective date.--Same as the House bill,



ITEM

HOUSE BILL

SENATE AMENDMENT

B. Business Provisions
1. Disallowance of deduction for
lobbying expenses (sec. 14222 of
the House bill and sec. 8222 of
the Senate amendment)

a. General rule

b. Scope of general rule

c. Exceptions

a. Attempts to influence legislation are
nondeductible,

b. Applies to lobbying with respect to
Federal, State, or local "legislation" (as
defined in present-law section 491 I(e)(2)).

c, Deduction allowed for technical advice

given by taxpayer pursuant to specific written
request from governmental body.

-37-

a. Contacts by "lobbyists" with legislative
branch Members or employees or certain
Federal executive branch officials are
nondeductible.

In the case of non-lobbyists, attempts to
influence legislation or actions of certain
Federal executive branch officials are
nondeductible.

b. Same as the House bill, except also
applies to lobbying with respect to certain
Federal executive branch actions,

c. With respect to legislation, deduction
allowed for responses by a taxpayer pursuant
to a subpoena (or if otherwise compelled by
law).

With respect to Federal executive branch
actions, deduction allowed under various
exceptions from the Lobbying Disclosure Act
of 1993 (S. 349), including exceptions for
comments made on the record in public
Proceedings, filings required by statute or
regulation, and communications made in



ITEM

HOUSE BILL

SENATE AMENDMENT

8. Increase taxable portion of Social
Security and Railroad
Retirement Tier 1 benefits (sec.
14215 of the House bill and sec.
8215 of the Senate amendment)

For taxpayers with provisional incomes
above the applicable thresholds, the portion
of Social Security or Railroad Retirement
Tier 1 benefits included in gross income is
increased. For these taxpayers, gross income
includes the lesser of: (1) 85 percent of the
taxpayer’s Social Security or Railroad
Retirement Tier 1 benefit, or (2) 85 percent
of the excess of the taxpayer’s provisional
income over the applicable threshold
amounts. The applicable thresholds are the
same as those used under present law for
Social Security benefit inclusion ($25,000 for
unmarried taxpayers, $32,000 for married
taxpayers filing joint returns, and $0 for
married taxpayers filing Separate returns).

- 35 -

Creates a second tier of Social Security or
Railroad Retirement Tier | benefit inclusion
in gross income. Present-law inclusion rules
apply to taxpayers with provisional income
below $32,000 for unmarried taxpayers or
$40,000 for married taxpayers filing joint
returns,

For taxpayers with provisional incomes
above these higher thresholds, gross income
includes the lesser of:

(1) 85 percent of the taxpayer's Social
Security or Railroad Retirement Tier |
benefit or

(2) the sum of:

(a) the smaller of (i) the amount
included under present law; or (ii) $3,500
(for unmarried taxpayers) or $4,000 (for
married taxpayers filing joint returns),

plus,

(b) 85 percent of the excess of the
taxpayer's provisional income over the
applicable new threshold amounts,

For married taxpayers filing separate
returns, gross income includes the lesser of
85 percent of the taxpayer's Social Security



ITEM

HOUSE BILL

SENATE AMENDMENT

4. Treatment of passive a

minimum tax credits in certa’
discharges of indebtedness (sec.
8226(b) of the Senate
amendment)

No provision.

-41-

Adds (1) minimum tax credits and (2)
passive activity loss and credit carryovers to
the attributes that are reduced in the case of a
discharge of indebtedness of the taxpayer that
is excludable under Code section 108(a).

Effective date.--Taxable years beginning
after December 31, 1993.



ITEM

HOUSE BILL

SENATE AMENDMENT

C. Foreign Provisions

1. Current taxation of certain
earnings of controlled foreign
corporations (secs. 14231-14233
of the House bill and secs. 8231-
8233 of the Senate amendment)

The House bill limits the availability of
deferral of U.S. tax on certain earnings of
controlled foreign corporations that hold
excess passive assets, and makes certain other
modifications to the rules governing deferral
of U.S. tax on earnings of controlled foreign
corporations,

a. The House bill applies to all
accumulated earnings and profits of the
foreign corporation.

b. No provision.

c. The House bill requires the Treasury
department to study the tax treatment of
investments by controlled foreign
Corporations in obligations of U.S. persons
other than corporations.

Effective date. --The provision generally is
effective for taxable years of foreign
corporations beginning after September 30,

~ 45 -

The Senate amendment is generally the
same as the House bill, with the following
modifications:

a. The Senate amendment applies only to
earnings and profits of the controlled foreign
corporation that are attributable to taxable
years beginning after September 30, 1993,
and includes certain aggregation and anti-
abuse rules.

b. The Senate amendment includes
special rules to increase the basis of assets
(for purposes of this Provision) to reflect
certain research and experimental
expenditures and certain payments with
Fespect to licensed intangible property.

c. No provision.

Effective date.--Same general effective date
as the House bill, but effective immediately
rather than phased in,



ITEM

HOUSE BILL

SENATE AMENDMENT

The legislative history provides that, ‘in
the case of compensation paid pursuant to a
plan, the shareholder approval requirement is
satisfied if the shareholders approve the
general terms of the plan and the class of
executives to which it applies.

Compensation payable under a written
binding contract.--The $1 million cap does
not apply to amounts paid pursuant to written
binding contracts in effect on February 17,
1993, and at all times thereafter before the
compensation is paid. The exception ceases
to apply if there is a material modification to
the contract.

Effective date.--Compensation that is
otherwise deductible by the corporation in a
taxable year beginning after December 31,
1993,

-33-

of compensation payable under the plan is not
subject to discretion.

Compensation payable under a written
binding contract,--The Senate amendment is
the same as the House bill, except that the
legislative history provides examples of
contracts that are considered to be contracts
entered into after February 17, 1993,

Effective date.--Same as the House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

B. Investment Incentives

1. Extension of research tax credit
(sec. 14111 of the House bill and
secs. 8111 and 8113 of the Senate
amendment)

2. Capital gains exclusion for
certain small business stock (sec.
14113 of the House bill)

The research tax credit is permanently
and retroactively extended.

Effective date.--Expenditures paid or
incurred after June 30, 1992.

The House bill generally permits a
noncorporate taxpayer who holds qualified
small business stock for more than five years
to exclude 50 percent of any gain on the sale
or exchange of the stock. The amount of
gain eligible for the 50-percent exclusion is
limited to the greater of (1) 10 times the
taxpayer’s basis in the stock or (2) $10
million of gain from stock in that
corporation. A specialized small business
investment company is deemed to satisfy the
active business test necessary to be a
qualified small business.

Effective date.--The provision applies to
stock issued after December 31, 1992.

-5-°

The research tax credit is extended for 12
months (i.e., for expenditures paid or
incurred during the period July 1, 1993,
through June 30, 1994).

(A Sense of the Senate resolution by
Senator Feinstein, adopted by voice vote,
provides that it is the sense of the Senate that
the research tax credit be permanently
extended.)

Effective date.--Expenditures paid or
incurred during the period July 1, 1993,
through June 30, 1994,

No provision.



ITEM

HOUSE BILL

SENATE AMENDMENT

70-135 0- 93 - 6

-23-

reduced by the full amount of the credit. The
taxpayer's basis in personal property (or
infrastructure investment) is reduced by 50
percent of the credit allowed.

(2) An Indian employment tax credit is
allowed for 10 percent of certain wages and
health insurance costs paid by an employer.
(The credit rate will be 30 percent if at least
85 percent of the employees of the employer
are enrolled members of an Indian tribe or
spouses of enrolled members.) Wages and
health insurance costs are eligible for the
credit only if paid to a "qualified employee,"
meaning an employee who (a) is hired after
1993, (b) is an enrolled member or a spouse
of an enrolled member of an Indian tribe, (c)
performs substantially all services on the
reservation, (d) lives on (or near) the
reservation, (e) receives total wages during
the taxable year not exceeding $30,000, (f) is
not a relative of the employer, (g) does not
own more than 5 percent of the stock of the
employer corporation, and (h) does not
perform services that involve gaming
activities. An employee may-be treated as a
qualified employee for up to seven years after
first being hired. The credit is available to
an employer only to the extent its qualified
wages and health insurance costs during the
current year exceed such wages and costs
incurred by the employer during 1993. An
employer’s deduction otherwise allowed for



ITEM

HOUSE BILL

SENATE AMENDMENT

E. Compliance Provisions

1. Reporting rule for service
payments to corpora:
14251 of the House bill)

(sec.

2. Modifications to substantial
understatement and return-
preparer penalties (sec. 14252 of
the House bill and sec. 8252(a) of
the Senate amendment)

Provides that payments for services
purchased in the course of the payor’s trade
or business will not be exempt from
information reporting requirements merely
because the payments are made to a
corporation.

Effective date.--Applies to payments for

services made by a payor after December 31,

1993,

a. Replaces the "not frivolous" standard
with a “reasonable basis" standard for
purposes of the accuracy-related penalty.

b. Replaces the "not frivolous" standard
with a “reasonable basis" standard for
purposes of the tax return preparer penalty.

c. Adds an additional requirement for
reducing an understatement attributable to a
tax shelter item (i.e., the taxpayer must be
able to show that the reasonably anticipated
after-tax benefits from his or her investment
in the shelter do not significantly exceed the
net pre-tax economic profit from such
investment).

- 54 -

No provision.
(Provision was deleted in floor

amendment by Senator Pressler, adopted by
voice vote.)

a. Same as the House bill.

b. No provision.

(Provision was stricken under Budget Act
upon a point of order raised by Senator
Packwood.)

c. No provision.
(Provision was stricken under Budget Act

upon a point of order raised by Senator
Packwood.)



E. Diesel Fuel Tax for Motorboats 2.0.2... eee eee

1. Impose excise tax on diesel fuel used in
noncommercial motorboats (sec. 14163 of the House
bill and sec. 8163 of the Senate amendment) .................,

F. Empowerment Zones and Enterprise Communities ..................

1. Empowerment zones and enterprise communities
(secs. 14301-14304 of the House bill and
sec. 15001 of the Senate amendment) .....................,

2. Tax credit for contributions to certain community
development corporations (sec. 14311 of the
House bill) ©... eee eee

G. Indian Investment and Employment Tax Credits
(secs. 8181-8182 of the Senate amendment)... 0... ...0.0.0.....00..

H. Other Provisions... 2... eee ec eee ee.

1. Alternative minimum tax treatment for
contributions of appreciated property
(sec. 14171 of the House bill and sec. 8171 of
the Senate amendment) .... 0... 0...0.0..0000. 000000000,



ITEM HOUSE BILL SENATE AMENDMENT

to submit annual reports to the House Ways
and Means Committee and the Senate Finance
Committee on the implementation and effects
of the intangibles legislation, including the
effects of such legislation on merger and
acquisition activity.

Effective date.--The bill generally applies to Effective date.--Same as the House bill,
Property acquired after the date of enactment.
Taxpayers may elect not to apply the bill to
Property acquired pursuant to a binding
written contract in effect on the date of
enactment. Alternatively, taxpayers may elect
to apply the bill to all Property acquired after
July 25, 1991.

A provision modifying the treatment of
certain partnership distributions is effective
for payments to partners retiring or dying on
or after January 5, 1993 unless pursuant to a
binding written contract in effect before that
date,

-57-



ITEM

HOUSE BILL

SENATE AMENDMENT

F. Intangibles

1. Amortization of goodwill and
certain other intangibles (secs.
14261 and 14262 of the House
bill and secs. 8261 and 8262 of
the Senate amendment)

a. Provides straight line amortization of
goodwill and other "amortizable section 197
intangibles" over 14 years.

b. Purchased mortgage servicing rights
are included in the definition of "amortizable
section 197 intangibles".

c. Separately acquired computer software
(not involving the acquisition of assets that
constitute a trade or business or substantial
portion thereof) is excluded from the
definition of “amortizable section 197
intangibles". Also excluded, even if acquired
with a trade or business, is computer
software that (1) is readily available for
purchase by the general public, (2) is subject
to a nonexclusive license, and (3) has not
been substantially modified. Software
excluded under either of these rules must be
amortized on a straight-line basis over 36
months. There is no other special rule for
software or software related businesses.

d. The Treasury Department is required

- 56 -

a. Provides straight line amortization of
75 percent of goodwill and other
“amortizable section 197 intangibles" over 14
years. The remaining 25 percent is not
amortizable.

b. Purchased mortgage servicing rights
hot acquired with a trade or business or
substantial portion thereof are excluded from
the definition of "amortizable section 197
intangibles". Such excluded rights must be
amortized over 9 years on a straight-line
basis.

c. In addition to the provisions of the
House bill regarding computer software,
special allocation and amortization rules
apply to acquisitions of certain businesses that
have made certain computer software
expenditures. Fifty percent of the
amortizable portion of “amortizable section
197 intangibles" (i.e., 50 percent of 75
percent of the cost of such assets) is
amortized on a straight-line basis over 5
years. The remaining 50 percent of 75
percent is amortized over 14 years under the
general rule of the provision.

d. No requirement of reports,



ITEM

HOUSE BILL

SENATE AMENDMENT

b. Childhood immunization
program (secs. 14432-14433
of the House bill)

70-135 0 - 93 - 11

i. The failure by health plans that provide
coverage for the cost of pediatric vaccinés as
of May I, 1993, to continue that coverage is
subject to an excise tax penalty (under sec.
4980B(f)) applicable to plans that fail to
provide COBRA continuation coverage.

ii. A new Childhood Immunization Trust
Fund is established in the Internal Revenue
Code. Monies in the Trust Fund are to be
available, subject to appropriations, for the
childhood immunization entitlement program
(under Part A of Subtitle 3 of Title XXI of
the Public Health Service Act) adopted by the
House Committee on Energy and Commerce
as part of its reconciliation provisions (Title
V of H.R. 2264, as passed by the House).

Effective date.--The maintenance-of-effort
requirement for the cost of pediatric vaccines
applies to plan years beginning after the date
of enactment. The establishment of the
Childhood Immunization Trust Fund is
effective upon enactment.

- 59 -

i. No tax provision. (However, secs.
12303 and 12321 of the Senate amendment
provide for continued coverage of pediatric
vaccine costs under group health plans so that
the plan may not reduce its coverage below
that in effect as of May 1, 1993, along with a
civil penalty.)

ii. No Trust Fund provision for the
childhood immunization program. (However,
secs. 12201-12205 of the Senate amendment
provide for a childhood immunization
program under Title XXI of the Public Health
Service Act. Also, sec. 12203(d) of the
Senate amendment authorizes $9 million per
year for 1994-1996 out of the Vaccine Trust
Fund for administrative expense for the
program: $3 million each for the Secretary of
Health and Human Services, the Attorney
General, and the Federal Court of Claims.)



ITEM

HOUSE BILL

SENATE AMENDMENT

5. Increase recovery period for
depreciation of nonresidential
real property (sec. 14151 of the
House bill and sec. 8151 of the
Senate amendment)

does not exceed the amount of debt being
refinanced.

Effective date.--Discharges after December
31, 1992 in taxable years ending after that
date.

Provides that the depreciation deduction
for nonresidential real property for regular
tax purposes is determined using a recovery
period of 39 years.

Effective date.--Generally, property placed
in service on or after February 25, 1993.
The provision does not apply to property that
a taxpayer places in service before January 1,
1994, if (1) the taxpayer or a qualified person
entered into a binding written contract to
purchase or construct the property before
February 25, 1993, or (2) construction of the
property was commenced by or for the
taxpayer or a qualified person before
February 25, 1993.

Provides that the depreciation deduction
for nonresidental real property for regular tax
purposes is determined using a recovery
period of 38 years.

Effective date.--Same as the House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

wages paid in 1993 rather than requiring the
taxpayers to file a request for refund for
1992. If the employee does not receive
income and wages from that employer
between the date of enactment and December
31, 1993, at least equal to the amount of such
educational assistance included in income in
1992, then the employee may seek refund of
excess income taxes and employment taxes in
accordance with existing rules. In such a
case, the employer is required to provide a
corrected Form W-2 to the employee.
Amounts reduced from income and wages
under this rule do not affect other provisions.
For example, the amount that could otherwise
be excluded from income as educational
assistance in 1993 is not reduced, nor is the
amount of compensation used in determining
whether retirement plans of the employer
satisfy the tax-qualification requirements of
the Code.

If an employee does not receive either a
refund or an offset of excess employment
taxes paid as a result of the retroactive
extension of the exclusion, the employee will
not suffer a reduction in social security
benefits.

Treatment _of educational assistance that

does not satisfy section 127.—The House bill

clarifies the rule under which educational
assistance that does not satisfy section 127

-2-

Treatment_of educational assistance that

does not satisfy section 127.—Same as the
House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

C. Expansion and Simplification of the
Earned Income Tax Credit (sec.
14131 of the House bill and sec.
8131 of the Senate amendment)

Taxpayers with one qualifying child .--
The earned income tax credit (EITC) is
increased to 26.60 percent of the first $7,750
of eared income in 1994. The maximum
credit is $2,062 which is reduced by 16.16
percent of earned income (or adjusted gross
income, if greater) in excess of $11,000.
The credit is completely phased out for
taxpayers with earned income (or adjusted
gross income, if greater) over $23,760.

In 1995 and thereafter, the credit rate
increases to 34.37 percent while the
maximum amount of earned income on which
the credit can be claimed is reduced to (a
projected) $6,170. Thus, the maximum
credit in 1995 is expected to be
approximately $2,120 (which equals the
maximum credit available in 1994, adjusted
for projected inflation). The phase-out rate
remains the same as for 1994. The phase-out
range also remains the same as for 1994
(adjusted for inflation).

Taxpayers with two or more qualifying
children.--The EITC is increased to 31.59
percent of the first $8,500 of earned income
in 1994, The maximum credit is $2,685
which is reduced by 15.79 percent of earned
income (or adjusted gross income, if greater)
in excess of $11,000. The credit is
completely phased out for taxpayers with

-8-

Taxpayers with one qualifying child. --
The EITC is increased to 26.0 percent of the
first $7,750 of earned income in 1994, The
maximum credit is $2,015 which is reduced
by 16.16 percent of earned income (or
adjusted gross income, if greater) in excess of
$11,000. The credit is completely phased out
for taxpayers with earned income (or adjusted
gross income, if greater) over $23,470.

In 1995 and thereafter, the credit rate
increases to 34.0 percent while the maximum
amount of earned income on which the credit
can be claimed is reduced to (a projected)
$6,170. Thus, the maximum credit in 1995
will be approximately $2,098. The phase-out
rate remains the same as for 1994. The
phaseout range-will extend to approximately
$24,280 (which is $23,620 in 1994 dollars). |
The maximum amount of income on which
the credit may be claimed and the range over
which the credit is phased out are adjusted
for inflation.

Taxpayers with two or more qualifying
children.-- The EITC is increased to 30.0
percent of the first $8,500 of earned income
in 1994. The maximum credit is $2,550
which is reduced by 15.94 percent of earned
income (or adjusted gross income, if greater)
in excess of $11,000. Thus, in 1994, the
credit is completely phased out for taxpayers



ITEM

HOUSE BILL

SENATE AMENDMENT

2. Extension of targeted jobs tax
credit and expansion to include
approved school-to-work
program (sec. 14102 of the
Tlouse bill and sec. 8102 of the
Senate amendment)

The House bill permanently extends the
targeted jobs tax credit and expands the
targeted jobs tax credit to include qualified
participants in an approved school-to-work
program,

Effective date.--The extension of the targeted
jobs tax credit is effective for individuals who
begin work for the employer after June 30,
1992. The expansion of the credit to
qualified participants in an approved school-
to-work program is effective for such
individuals who begin work for the employer
after December 31, 1993.

Same as the House bill, except:

(1) The targeted jobs tax credit is
extended for 24 months through June 30,
1994; and

(2) There is no expansion of the credit to
approved school-to-work program
participants.

Effective date.--Same as the House bill with
Tespect to the extension of the targeted jobs
tax credit.



ITEM

HOUSE BILL

SENATE AMENDMENT

E. Diesel Fuel Tax for Motorboats

1. Impose excise tax on diesel fuel
used in noncommercial
motorboats (sec. 14163 of the
House bill and sec. 8163 of the
Senate amendment)

Imposes the current 20. 1-cents-per-gallon
diesel fuel excise taxes on diesel fuel used by
noncommercial motorboats. Fuel used by
boats for commercial fishing, transportation
for compensation or hire, or for business use
other than predominantly for entertainment,
amusement, or recreation, remains exempt.

A separate provision imposes a Btu tax
beginning July 1, 1994. Diesel fuel used by
noncommercial motorboats also is subject to
the Btu tax beginning at that time. (See
section 14241 of the House bill, Item II.D.1.,
below.)

The tax is collected at the same point in
the distribution chain as the highway diesel
fuel tax. A separate provision modifies the
point of collection for highway diesel fuel.
(See sections 14242-14243 of the House bill,
Item I.D.3., below.)

Revenues from the 20. 1-cents-per-gallon

tax on diesel fuel used by motorboats are
retained in the General Fund.

-17-

Same as the House bill, except for
effective date.

In addition, a separate provision imposes
a 4.3-cents-per-gallon transportation fuels tax
effective October 1, 1993. Diesel fuel used
by noncommercial motorboats also is subject
to the transportation fuels tax beginning at
that time. (See section 8241 of the Senate
amendment, Item II.D.2., below.)

Also, a separate provision modifies the
point of collection for highway diesel fuel.
(See section 8242 of the Senate amendment,
Item II.D.3., below.)

Revenues from 17.5 cents-per-gallon of
the tax are transferred to the Aquatic
Resources Trust Fund. (A floor amendment
by Senator Brown, adopted by a vote of
66-32, transferred the revenues from this new
tax to this trust fund, rather than retaining
them in the General Fund.)


70-135 0 - 93 - 3

Modifications of Accuracy-Related Penalty (sec.
14236 of the House bill and sec. 8236 of the Senate
amendment)

Denial of Portfolio Interest Exemption for
Contingent Interest’ (sec. 14237 of the Hotise bill
and sec., 8237 of the Senate amendment)

Regulations Dealing with Conduit Arrangements
(sec. 14238 of the House bill and sec. 8238 of the
Senate amendment)

Returns Relating to the Cancellation of Indebtedness
by Certain Financial Entities (sec. 14253 of the
House bill and sec. 8253 of the Senate amendment)

Denial of Deduction Relating to Travel Expenses of
Spouse, Dependent, or Others (sec. 14274 of the
House bill and sec. 8271 of the Senate amendment)

Increase in Withholding from Supplemental Wage
Payments (sec. 14275 of the House bill and sec.
8273 of the Senate amendment)

Other Revenue Provisions
Disallowance of Interest on Certain Overpayments

of Tax (sec. 14273 of the House bill and sec. 7950
of the Senate amendment)

xvii



ITEM

HOUSE BILL

SENATE AMENDMENT

G. Other Revenue-Ra jing Provisions
1. Vaccine provisions

a. Extension of vaccine excise
tax (sec. 14431 of the House
bill and sec. 8273 of the
Senate amendment)

i. The excise taxes on certain vaccines
(that expired after December 31 » 1992) are
permanently extended. Authorization for
compensation to be paid from the Vaccine
Injury Compensation Trust Fund (Vaccine
Trust Fund) under the National Compensation
Program also is permanently extended.

ii. In addition, the Secretary of the
Treasury, in consultation with the Secretary
of Health and Human Services, is directed to
conduct a study of the Vaccine Trust Fund,
taxes and expenditures, and related matters,

Effective date.--The extension of the vaccine
excise taxes is effective on the date of
enactment (with a floor stocks tax imposed on
vaccines purchased after 1992 that are held
for sale or use on the date of enactment).

The extension of authorization for
compensation to be paid from the Vaccine
Trust Fund is effective for vaccines
administered on or after October 1, 1992.
The study to be conducted by the Secretary of
the Treasury must be reported to Congress
within one year after date of enactment.

- 58 -

i. Same as the House bill.

ii, No provision in Title VIII. (However,
sec. 12203 of the Senate amendment provides
for recommendations under the National
Vaccine Injury Compensation Program
concerning the appropriate amount of the
specific vaccine excise tax per dose.)

Effective date.--Same as the House bill
(except no requirement that the Secretary of
the Treasury submit to Congress a study
within one year after enactment),



ITEM

HOUSE BILL

SENATE AMENDMENT

expanded operations in a possession will not
result in a decrease in employment at an
existing business operation of the corporation
or a related person in the United States.
Failure to so certify will cause the wages paid
and the tangible business property used by
the possession corporation with respect to the
new operation to be disregarded in computing
the above limitations on the section 936
credit.

d. Creates a new separate foreign tax
credit limitation category for purposes of
computing the AMT foreign tax credit. The
new category includes the portion of
dividends received from a possession
corporation for which the dividends received
deduction is disallowed, and thus is included
in alternative minimum taxable income.

e. No provision.

Effective date.--The provision is effective for
taxable years beginning after December 31,

- 43 -

d. Same as the House bill.

e. Temporarily increases the cover over
of rum excise taxes to Puerto Rico and the
Virgin Islands from $10.50 per proof gallon
to $11.30 per proof gallon. This increased
cover over rate applies for excise taxes
imposed on distilled spirits brought into the
United States during the 5-year period
beginning on July 1, 1995, (As modified by
floor amendment by Senators McCain and
Inouye, adopted by voice vote.)

Effective date.--Same as the House bill, but
with a five-year phase in for taxpayers that


F. Intangibles... 6 eee eee 56

1. Amortization of goodwill and certain other
intangibles (secs. 14261 and 14262 of the
House bill and secs. 8261 and 8262 of the

Senate amendment) 2.2... 0. ee es 56
G. Other Revenue-Raising Provisions ..........0.0.0.00.000 0000 cee 58
1. Vaccine provisions 2... 6... eee 58

a. Extension of vaccine excise tax (sec. 14431
of the House bill and sec. 8273 of the
Senate amendment) ... . . Tce eee eee 58

b. Childhood immunization program (secs. 14432-
14433 of the House bill) 2... .............000000004 59

2. Aircraft registration fees (sec. 11001 of the
House bill) 2. ee eee eee 60



HOUSE BILL

SENATE AMENDMENT

3. Modification of passive loss rules
for certain real estate persons
(sec. 14143 of the House bill and
sec. 8143 of the Senate
amendment)

Developmental and operation costs

No provision.

Allocation between buyer and seller in month

Developmental_and operational costs

The Senate amendment requires housing
credit agencies to consider the reasonableness
of the developmental and operational costs of
Projects as an additional factor in making
determinations as to the proper amount of
low-income housing tax credits to allocate to
a project.

Effective date.--Credit authority originating
after June 30, 1992.

Allocation between buyer and seller in month

of disposition

No provision.

General rule.--An eligible taxpayer’s
rental real estate activities in which he
materially participates are not subject to
limitation under the passive loss rule.

-14-

of disposition

The Senate amendment provides that a
buyer and seller of a low-income housing tax
credit project may agree to use either the
exact number of days or the mid-month
convention to determine the division of the
credit in the month of disposition.

Effective date.--Date of enactment.

General_rule.--An eligible taxpayer's net
loss from rental real estate activities in which
he materially participates generally is allowed
to offset income from real property trade or
business activities. A similar rule applies
with respect to passive activity credits.



ITEM

HOUSE BILL

SENATE AMENDMENT

- 50 -

liquefied petroleum gases currently taxable as
special motor fuels; and (3) diesel fuel used
in noncommercial motorboats. Taxable fuels
include motor fuels (gasoline, diesel fuel and
special motor fuels) used for highway
transportation or in motorboats; gasoline used
in aviation; gasoline used in off-highway non-
business uses (e.g., small engines and
recreational trail uses); diesel fuel used in
trains; and fuels used in inland waterways
transportation. (A floor amendment by
Senator Gorton, adopted by voice vote,
exempted aviation jet fuel from the tax.)

Point of collection.--The new 4.3-cents-
per-gallon excise tax generally is collected in
the same manner as the existing excise taxes
on these fuels (i.e., the tax on gasoline and
diesel fuel (see item II.D.3., below) is
collected on removal of these fuels from
registered terminal facilities, the tax on
special motor fuels is collected upon the retail
sale of these fuels, and the tax on fuels used
in inland waterways is collected on the use of
these fuels).

Exemptions. --Fuel uses that are exempt
from the LUST tax generally are exempt
from the new tax. These uses include, for
example, number 2 distillate (diesel) fuel
used as heating oil; gasoline and diesel fuel
used on farms for farming Purposes; off-
highway business uses (such as to operate



ITEM

HOUSE BILL

SENATE AMENDMENT

3. Modification of the collection of
the diesel fuel excise tax (secs.
14242-14243 of the House bill
and sec. 8242 of the Senate
amendment)

14244 of the Ilouse bill and sec.
8244 of the Senate amendment)

The House bill provides that the 20. 1-
cents-per-gallon diesel fuel excise tax will be
collected on removal from a terminal (i.e., at
the terminal rack) under generally the same
tules as the gasoline tax currently is
collected. However, unlike the gasoline tax,
diesel fuel that is destined for an exempt use
will not be taxed as the fuel is removed from
the terminal if certain dyeing (and marking)
requirements are met.

Refunds are allowed as paid fuel used in
an exempt use.

Effective date.--The provision applics to
diesel fuel removed from terminals after
March 30, 1994,

The House bill extends the current 2.5-
cents-per-gallon deficit reduction rate on
motor fuels from October 1, 1995, through
September 30, 1999. The revenues from this
rate generally are to be transferred to the
Highway Trust Fund (2 cents per gallon to
the Highway Account and 0.5 cents per
gallon to the Mass Transit Account of the
highway motor fuel tax revenues). However,
revenues from the 2.5 cents-per-gallon tax on
diesel used in trains are retained in the
General Fund as are revenues from 2.5 cents
per gallon of the tax on motorboat, small-
engine, and nonhighway recreational fuels.

Generally the same as the House bill,
except that marking is not permitted. In
addition, vendors to farmers and State and
local governments are required to apply for
refunds for these exempt users, if the vendors
sold tax-paid fuel to these persons for use in
an exempt use.

Effective date.--The provision applies to
diesel fuel removed from terminals after
December 31, 1993.

Same as the House bill, except that the
revenues from the taxes on motorboat fuels
and small-engine gasoline are to be
transferred to the Aquatic Resources Trust
Fund. (Floor amendment by Senators Breaux
and Wallop, adopted by voice vote,
transferred the motorboat and smnall-engine
fuel revenues to the Aquatic Resources Trust
Fund.)



ITEM

HOUSE BILL

SENATE AMENDMENT

5. Increase inland waterways fuel
excise tax (secs. 14413 and 8002
of the House bill)

Effective date.--The extension of the 2.5-
Cents-per-gallon rate applies after September
30, 1995.

The House bill increases the Federal
inland waterways fuel tax by 50 cents per
gallon in a series of steps. Under the House
bill, inland waterways fucl will be taxed at a
rate of 24 cents per gallon in 1994, 40 cents
per gallon in 1995, 55 cents per gallon in
1996, and 70 cents per gallon in 1997 and
thereafter,

Effective date.--The Provision is effective
beginning January 1, 1994,

(In addition, sec. 8002 of the House bill
includes a Sense of the Congress resolution
that the inland waterways fuel tax should not
be further increased beyond those increases
already scheduled under Present law.)

- 53 -

Effective date.--Same as the House bill.

No provision.



ITEM

HOUSE BILL

SENATE AMENDMENT

individuals having incomes of 50 percent or
less of the area median.

Effective date.--Date of enactment.
Full-time students

No provision.

Deep-rent_ skewing

No provision.

-ll-

Full-time students

The Senate amendment provides that a
housing unit occupied entirely by full-time
students may qualify for the credit if the full-
time students are a single parent and his or
her minor children and none of the tenants is
a dependent of a third party. The Senate
amendment also codifies the present-law
exception regarding married students filing '
joint returns.

Effective date.--Credit authority originating
after June 30, 1992.

Deep-rent_ skewing

The Senate amendment allows an
irrevocable election by the owner of a low-
income building receiving a credit allocation
before 1990 to qualify under this rule if
market rate tenant rents bear a 2:1 ratio to
low-income tenant rents rather than a 3:1
ratio. The election is available only to
taxpayers who enter into a compliance
monitoring agreement with a housing credit
agency. Further, the election applies only
with respect to tenants first occupying any


ITEM

HOUSE BILL

SENATE AMENDMENT

3. Access to tax information by the
Department of Housing and
Urban Development (sec. 14403
of the House bill and secs. 7903
and 3003 of the Senate
amendment)

a. Grants the Department of Housing and
Urban Development (HUD) access to certain
tax information with respect to applicants for,
and participants in, certain HUD programs.
This authority expires after September 30,
1998.

b. Requires the Treasury Department to
conduct a study regarding the disclosure of
tax information to HUD.

Effective date.--The provision is effective on
the date of enactment.

- 63 -

a. Contains two provisions:
i. Same as the House bill (sec. 7903);
ii. Similar to House bill, except that:

(A) Requests for information need
not be written, and

(B) Participants must sign consent
form under the Stewart B.
McKinney Homeless
Assistance Act (sec. 3003).
b. No study is required.

Effective date.--Same as the House bill.



5. Deny deduction for executive pay over $1 million
(sec. 14211 of the House bill and sec. 8211 of
the Senate amendment) .... 2.0.0.0... 00000000 cece eee 31

6, Reduce compensation taken into account for
qualified retirement plan purposes (sec. 14212 of
the House bill and sec. 8212 of the Senate
amendment)... eee cee eee 34

7. Deduction for moving expenses (sec. 14213 of the
House bill and sec. 8213 of the Senate
amendment)... 1... eee ee 34

8. Increase taxable portion of Social Security
and Railroad Retirement Tier | benefits
(sec. 14215 of the House bill and sec. 8215 of the
Senate amendment) ............00000 0.0.00. cc eee eee ee 35

B. Business Provisions ©... 2.6... ec ee ee eeee 37

1, Disallowance of deduction for lobbying expenses
(sec. 14222 of the House bill and sec. 8222 of the
Senate amendment) .. 2.2... eee eae 37

2. Mark-to-market accounting method for dealers in

securities (sec. 14223 of the House bill and
sec, 8223 of the Senate amendment) ....................04, 39

vi


2. Substantiation and disclosure requirements for
charitable contributions (secs. 14271-14272 of
the House bill and secs. 8172-8173 of the
Senate amendment) 2.0.0.0... ee eee 25

Il, REVENUE-RAISING PROVISIONS
A. Individual Income Tax Provisions .. 0... 0.00.00. 00 c ec ee ee eee 27

1. Increased tax rates for higher-income
individuals (secs. 14201-14203 of the House bill
and secs. 8201-8203A of the Senate amendment)

2. Provisions to prevent conversion
of ordinary income to capital gain
(sec. 14206(a) of the House bill and sec.
8206(a) of the Senate amendment)

3. Reduce deductible portion of business meals and
entertainment expenses (sec. 14209 of the House
bill and secs. 8209 and 8209A of the Senate
amendment)

4. Deny deduction for club dues (sec. 14210 of the
House bill and sec. 8210 of the Senate
amendment)


Fees for Applications for Alcohol Labeling and
Formulae Reviews (sec. 14411 of the House bill
and sec. 7951 of the Senate amendment)

Increase in Public Debt Limit (sec. 14421 of the
House bill and sec. 7954 of the Senate amendment)

XViii



2. Transportation fuels tax (sec. 8241 of the
Senate amendment) .. 2.0.0... 0... eee eee ee 49

3. Modification of the collection of the diesel
fuel excise tax (secs. 14242-14243 of the House
bill and sec. 8242 of the Senate amendment) ................., 52

4. Extend the current 2.5 cents-per-gallon motor
fuels excise tax rate; Transfer of revenues
(sec. 14244 of the House bill and sec. 8244 of
the Senate amendment) ............00.00. 0.000 c cece 52

5. Increase inland waterways fuel excise tax
(secs. 14413 and 8002 of the House bill) .................0.. 53

E. Compliance Provisions ............. 0.000000. cece cece e eee 54

1, Reporting rule for service payments to
corporations (sec. 14251 of the House bill) ................., 54

2. Modifications to substantial understatement and
return-preparer penalties (sec. 14252 of the
House bill and sec. 8252(a) of the Senate
amendment)... eee eee 54

viii


ITEM

HOUSE BILL

SENATE AMENDMENT

B. Other Revenue-Related Provisions

1. Use of Harbor Maintenance
Trust Fund for administrative
expenses (sec. 14412 of the
House bill and sec. 7952 of the
Senate amendment)

2. Increase amount of Presidential
Election Campaign Fund
checkoff (sec. 7953 of the Senate
amendment)

3. Annual report on Federal
finances to taxpayers (sec. 15002
of the Senate amendment)

The House bill authorizes up to $5
million per fiscal year, subject to
appropriations Acts, from the Harbor
Maintenance Trust Fund for administrative
expenses of the Treasury Department related
to harbor maintenance tax collection and
enforcement. The bill removes the current
restriction against such use while the Customs
processing fee is in effect.

Effective date.--Fiscal years beginning after
the date of enactment.

No provision.

No provision.

- 65 -

Same as the House bill, except the Senate
amendment specifies that the monies from the
Harbor Maintenance Trust Fund ($5 million)
for administrative expenses also are available
for reimbursement of the Army Corps of
Engineers and the Department of Commerce
for their administrative expenses related to
the harbor maintenance tax.

Effective date.--Same as the House bill.

Increases the amount of the checkoff from
$1 to $3.

Effective date.—Effective for tax returns
required to be filed after December 31, 1993.

The Secretary of the Treasury is required
each year to include in the instruction
booklets for individual income tax returns a
summary of a financial report of the Federal
Government. The complete annual financial
report, to be prepared under the supervision
of the Director of the Office of Management
and Budget (OMB), would be made available
to taxpayers upon request (subject to a
possible processing fee). There are provided
authorizations of appropriations of $10
million for fiscal year 1994 and such sums as



ITEM

HOUSE BILL

SENATE AMENDMENT

3.

Rollover of gain from sale of
publicly-traded securities into
specialized small business
investment companies (sec. 14114
of the House bill)

Modification to minimum tax
depreciation rules (sec. 14115 of
the House bill and sec. 8115 of
the Senate amendment)

The House bill permits any corporation or
individual to elect to defer the recognition of
any capital gain realized upon the sale of
publicly traded securities to the extent that
the proceeds from the sale are used to buy an
equity interest in a specialized small business
investment company within 60 days of the
sale of the securities. For individuals, the
provision is limited to $50,000 of gain per
taxable year and $500,000 of gain over a
lifetime. For corporations, these limits are
$250,000 and $1,000,000.

Effective date.--The provision is effective for
sales of publicly-traded securities on or after
the date of enactment.

a. Eliminates the depreciation component
of the adjusted current earnings adjustment in
computing the corporate alternative minimum
tax (AMT).

b. Corporate and individual taxpayers will
compute AMT depreciation for tangible
personal property by using the 120-percent
declining-balance method over the recovery
periods applicable for regular tax purposes.

Effective date.--The provision is effective for
property placed in service after December 31,
1993.

No provision.

a. Same as the House bill.

b. Retains present law computation of
AMT depreciation (generally, for tangible
personal property, the 150-percent declining-
balance method over the class life, which
generally is a longer period than the recovery
period allowed for regular tax purposes).

Effective date.--Same as the House bill.


[JOINT COMMITTEE PRINT]

COMPARISON OF REVENUE PROVISIONS OF H.R. 2264
(OMNIBUS BUDGET RECONCILIATION ACT OF 1993)
AS PASSED BY THE HOUSE AND THE SENATE

i Prepared by the Staff
of the

Joint Committee on Taxation

ICS-9-93

July 14, 1993



ITEM

HOUSE BILL

SENATE AMENDMENT

2. Provisions to prevent conversion
of ordinary income to capital
gain

a. Recharacterization of capital
gain as ordinary income for
certain financial transactions
(sec. 14206(a) of the House
bill and sec. 8206(a) of the
Senate amendment)

Effective date,--Taxable years beginning
after December 31, 1992,

The House bill provides that a portion of
the income derived from certain “conversion
transactions" must be treated as ordinary
income rather than as capital gain. A
conversion transaction generally is a
transaction where substantially all of the
taxpayer's return is attributable to the time
value of the taxpayer’s net investment in the
transaction,

Effective date.--The Provision is effective for
Conversion transactions entered into after
April 30, 1993.

-29-

Effective date.--Same as the House bill.

Same as the House bill, except that
transactions of options dealers and
commodities traders in the normal course of
their trade or business of dealing in options
and commodities, respectively, generally
would not be considered to be conversion
transactions.

Effective date.--Same as the House bill.



2. Increase amount of Presidential Election Campaign.
Fund checkoff (sec. 7953 of the Senate

amendment)... 0... eee cece e eee 65
3. Annual report on Federal finances to taxpayers

(sec. 15002 of the Senate amendment)... ................0.., 65
4, Federal and State income tax refund offset for

medical assistance (sec. 7433 of the Senate

amendment)... 2... cece eee eee 66

xi


il.

OUTLAY-RELATED REVENUE PROVISIONS .................0.... 61
A. Disclosure Provisions... 2.0.2... eeeeee 61

1. Disclosure of return information for administration
of certain Department of Veterans Affairs programs
(sec. 14401 of the House bill and secs. 7901 and 13008
of the Senate amendment) .. 2... ...00.000 0.000.000 0000, 6l

2. Access to tax information by the Department of Education
(sec. 14402 of the House bill and secs. 7902, 1201 1, and
12055 of the Senate amendment) ..................00000-. 6l

3. Access to tax information by the Department of
Housing and Urban Development (sec. 14403 of the
House bill and secs. 7903 and 3003 of the Senate
amendment)... 1... eee ce eee 63

4. Use of return information for health coverage
clearinghouse (sec. 5117 of the House bill and
secs. 7904 and 12101 of the Senate amendment) .............., 64

B. Other Revenue-Related Provisions ................000000--0 00 65
1. Use of Harbor Maintenance Trust Fund for

administrative expenses (sec. 14412 of the House
bill and sec. 7952 of the Senate amendment) .................4 65


ITEM

HOUSE BILL

SENATE AMENDMENT

5. Limitation on section 936 credit
(sec. 14226 of the House bill and
sec. 8227 of the Senate
amendment)

a. Limits the section 936 credit allowed
to a possession corporation for a taxable year
against U.S. tax on active business income to
60 percent of the qualified Possession wages

it pays during the year to its employees,

b. Also limits the section 936 credit
allowed to a possession corporation for a
taxable year against U.S. tax on qualified
Possession source investment income (QPSII)
in cases where the possession corporation's
assets that generate QPSII exceed 80 percent
of its qualified tangible business investment
in the possessions. In such a case, no section
936 credit is allowed against U.S. tax on the
portion (determined on a pro-rata basis) of its
QPSII attributable to QPSII assets which
exceed that 80-percent threshold.

c. Requires possession corporations to
certify that the establishment of new or

-42-

a. The section 936 credit allowed to a
possession corporation for a taxable year
against U.S. tax on its active business income
is equal to 97.5 percent of the credit
determined under either of two alternative
limitations. The option of which limitation to
apply is left to the taxpayer. One limitation
is based on factors that reflect the
corporation’s economic activity in the
Possessions (i.e., compensation (including
certain employer-provided employee fringe
benefits), depreciation, and taxes paid). The
other limitation is based on a statutorily
defined percentage of the credit that would be
allowable under present-law rules. (As
modified by floor amendment by Senators
McCain and Inouye, adopted by voice vote.)

b. The section 936 credit allowed toa
Possession corporation for a taxable year
against U.S. tax on QPSII is equal to 97.5
percent of the credit that would be allowable
under present-law rules. (As modified by
floor amendment by Senators McCain and
Inouye, adopted by voice vote.)

c. No provision,


ITEM

HOUSE BILL

SENATE AMENDMENT

H. Other Provisions

1.

x

Alternative minimum tax
treatment for contributions of
appreciated property (sec. 14171
of the House bill and sec. 8171
of the Senate amendment)

Substantiation and disclosure
requirements for charitable
contributions (secs. 14271-14272
of the House bill and secs. 8172-
8173 of the Senate amendment)

a, Contributions of all types of
appreciated property will not be treated as a
tax preference item for AMT Purposes.
Thus, donors of appreciated property may
claim the same charitable contribution
deduction for both regular tax and AMT.

purposes.

b. The Treasury Department is directed to
report to Congress within one year on the
development of a procedure under which
taxpayers may seek an advance valuation
from the IRS for certain Property prior to its
donation to charity.

Effective date.--Contributions of tangible
personal property made after June 30, 1992,
and contributions of other Property made
after December 31, 1992.

Taxpayers who claim a separate
contribution of $750 or more are required to
obtain written substantiation from the donee,
rather than relying solely on a canceled
check.

In addition, charities that receive quid pro
quo contributions (meaning Payments made
Partly as a gift and partly as consideration for
goods or services furnished by the charity)
are required to inform their contributors of

-25-

a. Same as the House bill.

b. No provision.

Effective date.--Same as the House bill.

Generally, the same as the House bill,
with the following modifications:

(1) Substantiation requirement applies to
separate contributions of $250 or more.

(2) Senate amendment specifically
Provides that, in cases where a taxpayer
makes a noncash contribution claimed by the
taxpayer to be worth $250 or more, the



ITEM

HOUSE BILL

SENATE AMENDMENT

4, Federal and State income tax
refund offset for medical

\s ice (sec. 7433 of the

Senate amendment)

No provision,

- 66 -

may be necessary for 1995-1998. (Floor
amendment by Senator Jeffords, adopted by
voice vote.)

Effective date.--Date of enactment.

Permits States to request that IRS offset a
Federal income tax refund by the amount of a
legally enforceable debt to the State for
specified medical assistance. A State may
request a refund offset only if it has in place
a parallel State refund offset program.

Effective date.--The provision is effective for
taxable years beginning after December 31,
1993,



ITEM

HOUSE BILL

SENATE AMENDMENT

Tenant _occupancy

No provision.

Income recertification

No provision.

Tenant protection

No provision.

-13-

Tenant occupancy

The Senate amendment authorizes the
Treasury Department to provide a waiver of
penalties for de minimis errors in the
application of the low-income tenant
occupancy requirement.

Effective date.--Date of enactment.
Income recertification

The Senate amendment authorizes the
Treasury Department to grant a waiver from
the annual recertification of tenant income for
tenants in buildings that are occupied entirely
by low-income tenants.

Effective date.--Date of enactment.

Tenant protection

The Senate amendment provides that an
applicant may not be denied admission to a
low-income rental housing tax credit project
because the applicant holds a voucher or
certificate of eligibility under Section 8 of the
Housing Act of 1937.

Effective date.--Date of enactment.



ITEM

HOUSE BILL

SENATE AMENDMENT

3. Reduce deductible portion of
business meals and
entertainment expenses (sec,
14209 of the House bill and secs.
8209 and 8209A of the Senate
amendment)

4. Deny deduction for club dues
(sec. 14210 of the House bill and
sec. 8210 of the Senate
amendment)

The deductible portion of otherwise
allowable business meals and entertainment
expenses is reduced from 80 percent to 50
percent.

Effective date.--Effective for taxable years
beginning after December 31, 1993.

No deduction is permitted for club dues.
Specific business expenses (e.g., meals)
incurred at a club are deductible only to the
extent they otherwise satisfy the standards for
deductibility.

Dues for airline and hotel clubs are not
subject to the deduction disallowance.

Effective date.--Effective for taxable years
beginning after December 31, 1993.

- 30 -

Same as the House bill.

In addition, the substantiation threshold
for business meals is reduced from $25 to
$20.

The Senate amendment includes a sense
of the Senate resolution that the conferees
should reduce or eliminate the Proposed
reduction in the deductible portion of
otherwise allowable business meals and
entertainment expenses. (Floor amendment
by Senator Inouye, adopted by voice vote.)

Effective date.--Same as the House bill.

Same as the House bill, except that airline
and hotel clubs are subject to the deduction
disallowance.

Effective date.--Same as the House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

Maximum rent

No provision.

-2-

unit in the building after the date of the
election.

Effective date.--The election must be made
within 180 days after the date of enactment.

Maximum rent

The Senate amendment allows an
irrevocable election by the owner of a low-
income building placed in-service before
1990 to use either apartment size or family
size in determining maximum allowable rent.
The election is available only to taxpayers
who enter into a compliance monitoring
agreement with a housing credit agency.
Further, the election applies only with respect
to tenants first occupying any unit in the
building after the date of the election.

Effective date.--The election must be made
within 180 days after the date of enactment.



ITEM

HOUSE BILL

SENATE AMENDMENT

2. Transportation fuels tax (sec.
8241 of the Senate amendment)

use occurs before the point at which tax .
normally is imposed.

Exemptions.--Number 2 distillate fuel oil
used for the heating of any building and
gasoline and diesel fuel used on farms are
exempt from the supplemental petroleum rate.
Full exemptions are provided for: electricity
generated from renewable sources or
biomass; direct energy exports; feedstocks
(including electricity used in electrolytic
production processes); certain fuels used to
produce taxable energy Products; fuels used
in international commercial transportation; a
portion of coal used in certain coke
production; and methane recovered from
biomass or certain coal mining operations,

Effective date.--Effective on July 1, 1994,
with the full tax rates being phased in ratably
over a three-year period. After that period,
the tax rates are indexed for inflation, Floor
stocks taxes are imposed on taxable products
held beyond the point of collection on July I,
1994, and on the date of each subsequent rate
change,

No provision.

- 49 -

In general.--The Senate amendment
imposes a permanent excise tax of 4.3 cents
per gallon on: (1) all transportation fuels
currently subject to the Leaking Underground
Storage Tank Trust Fund ("LUST") excise
tax, except jet fuels used in aviation; (2)



3. Repeal stock-for-debt exception to cancellation
of indebtedness income (sec. 8226(a) of the
Senate amendment) .......00.00.0.0000 000000 cece eee eae 40

4. Treatment of passive activity losses and credits
and alternative minimum tax credits in certain
discharges of indebtedness (sec. 8226(b) of the
Senate amendment) ... 00.02.0020... 00000 cece eee e ee eae 41

3. Limitation on section 936 credit (sec. 14226 of
the House bill and sec. 8227 of the Senate
amendment) 2... 22... eens 42

C. Foreign Provisions... 2... 6... ee eee 45
1. Current taxation of certain earnings of controlled foreign
corporations (secs. 14231-14233 of the House bill and
secs. 8231-8233 of the Senate amendment) ................... 45
2. Allocation of research expenditures (sec. 14234 of
the House bill and sec. 8234 of the Senate

amendment) 2... ee eee eee eee 46

3. Treatment of export of certain softwood timber

(sec. 8239 of the Senate amendment) ...................0.. 46
D. Energy and Motor Fuels Tax Provisions ..............0.0 000000 48
1. Energy Btu tax (sec. 14241 of the House bill)... 2... ...0000000, 48

vii


ITEM HOUSE BILL SENATE AMENDMENT

may be excluded from income if and only if
it meets the requirements of a working
condition fringe benefit.

Effective date.—The extension of the Effective date.—Same as the House bill.
exclusion is effective for taxable years ending
after June 30, 1992. The clarification to the
working condition fringe benefit rule is
effective for taxable years beginning after
December 31, 1988.



ITEM

HOUSE BILL

SENATE AMENDMENT

3. Repeal stock-for-debt exception
to cancellation of indebtedness
income (sec. 8226(a) of the
Senate amendment)

been used for that security (but no less than 5
years) or (2) 20 years.

No provision.

- 40 -

The Senate amendment repeals the stock-
for-debt exception to the recognition of
cancellation of indebtedness income for
Corporations that are insolvent or in
bankruptcy. Thus, the transfer of stock bya
bankrupt or insolvent corporation to a
creditor will give rise to cancellation of
indebtedness income to the extent the amount
of debt forgiven exceeds the fair market value
of the stock. The corporation may defer the
recognition of such income by reducing its
tax attributes.

Effective date.--Applies to stock transferred
in satisfaction of any indebtedness after June
17, 1993, unless (1) the transfer is in a title
II or similar case filed on or before June 17,
1993; (2) the transfer occurs on or before
December 31, 1993, and the transfer is
pursuant to a binding contract in effect on
June 17, 1993; or (3) the transfer occurs on
or before December 31, 1993, and the
taxpayer had filed with the SEC on or before
June 17, 1993, a registration statement which
Proposed a stock-for-debt exchange with
Tespect to such indebtedness, and which
discussed the possible application of the
stock-for-debt exception to such exchange.



ITEM

HOUSE BILL

SENATE AMENDMENT

4. Use of return information for
heal
(si

secs. 7904 and 12101 of the
Senate amendment)

Establishes a health coverage
clearinghouse in HHS. The clearinghouse
may require employers to provide detailed
information on specified employees’ health
coverage. The clearinghouse may also
require IRS and SSA to provide taxpayer
identity information on specified individuals.
The clearinghouse may disclose this
information to agents and to group health
plans,

Effective date.--The provision is effective on
April 1, 1995. Employers are not required to
provide information to the clearinghonse 2fter
September 30, 1998.

Contains two provisions:

a. Generally similar to the House bill,
except requires each W-2 issued by an
employer to an employee to state whether a
group health plan is available to the employee
and the plan coverage (single or family)
elected by the employee (if any). (This
replaces direct requests for information from
the clearinghouse to employers.) (sec. 7904).

Effective date.--The provision is effective on
April 1, 1995,

b. Generally same as the House bill,
except the beneficiaries affected differ (sec.
12101).

Effective

--Same as above.



ITEM

HOUSE BILL

SENATE AMENDMENT

70-135 0 - 93-9

-47-

The Senate amendment excludes from the
definition of "export Property" for purposes
of the FSC rules any such timber. Similarly,
the provision excludes from the definition of
“export property" for Purposes of the DISC
tules any such timber,

The Senate amendment Provides that any
income from the sale of any such timber
which was cut in the United States is
domestic source income.

The Senate amendment treats as subpart F
income any income derived by a controlled
foreign corporation in connection with the
sale of any such timber cut in the United
States, and any income derived bya
controlled foreign corporation from the
milling of any such timber outside the United
States. Income treated as subpart F income
under the amendment, and earned by an
export trade corporation, is not subject to
reduction by the export trade income of the
corporation.

Effective date.--The amendment is effective
for transactions occurring after date of
enactment.



ITEM

HOUSE BILL

SENATE AMENDMENT

c. Tax incentives for enterprise
communities

2. Tax credit for contributions to
certain community development
corporations (sec. 14311 of the
House bill)

zone residents who work outside the zone; (3)
an empowerment savin, § credit for 50
Percent of certain ‘contributions to defined
contribution plans on behalf of zone
employees who are zone residents; (4)
increased section 179 expensing (up to
$75,000) for certain zone business property;
(5) accelerated depreciation for certain zone
business property; (6) expanded tax-exempt
financing for certain zone facilities; and (7)
expanded low-income housing tax credit
benefits for certain buildings located in
zones,

c. Enterprise communities are eligible for
expanded tax-exempt financing benefits
(although not as generous as for
empowerment communities) and expanded
low-income housing tax credit benefits, but
not the other tax incentives available in
empowerment zones.

Effective date.--Tax incentives for
empowerment zones and enterprise
communities will be available during the
period that the designation remains in effect,
which generally will be for 10 years after
designation.

Taxpayers who make qualified cash
contributions to one of 10 community
development corporations (CDCs) selected by
the Secretary of HUD will be allowed to

- 20 -

No provision.



ITEM

HOUSE BILL

SENATE AMENDMENT

2. Aircraft registration fees (sec.
11001 of the House bill

The House bill provides new annual
registration fees (in sec. 313(f) of the Federal
Aviation Act of 1958) for general aviation
aircraft, graduated by aircraft weight:

3,500 Ibs. and under $40

Over 3,500-6,500 Ibs. $175
Over 6,500-10,000 Ibs. $500
Over 10,000-100,000 Ibs. $1,500
Over 100,000 Ibs. $2,000

Also, an aircraft recording and title fee is
imposed on aircraft transfers; this fee is to be
set by FAA based upon aircraft weight and is
to average approximately $200. Further, a
fee of $500 is imposed on an aviation medical
examiner’s certificate. Finally, a triennial fee
of $12 is imposed on a pilot’s certificate.

The fees do not apply to (1) air carrier
aircraft, (2) U.S. Government aircraft, (3)
dealers’ aircraft, (4) aircraft not having an
engine-driven electrical system, and (5)
balloons and gliders,

Revenues from the fees are to be
deposited in the Airport and Airway Trust
Fund.

Effective date. --Beginning on October 1,
1993.

- 60 -

No provision.



ITEM

HOUSE BILL

SENATE AMENDMENT

claim a credit for each taxable year during
the 10-year period beginning with the year
the contribution is made. The credit that may
be claimed for each year will be equal to five
Percent of the amount of the contribution to
the CDC.

CDCs eligible to participate in the
program must be tax-exempt charities that
promote employment and business
Opportunities for residents of certain
economically distressed areas. The aggregate
amount of contributions which may be
designated by each selected CDC as eligible
for the credit may not exceed $4 million.

Effective date.--Date of enactment.

-21-



ITEM

HOUSE BILL

SENATE AMENDMENT

Provisional income for Purposes of this
computation is calculated the same as under
Present law (modified adjusted gross income
plus one-half of the taxpayer's Social Security
or Railroad Retirement Tier | benefit).

Revenues from the income taxation of
Social Security and Railroad Retirement Tier
| benefits attributable to the increased portion
of benefits included in gross income are to be
retained in the General Fund.

Effective date.-- Taxable years beginning
after December 31, 1993,

- 36 -

or Railroad Retirement Tier 1 benefit or 85
Percent of the taxpayer’s provisional income.

Provisional income is calculated the same
as under present law and the House bill,

Revenues from the income taxation of
Social Security and Railroad Retirement Tier
| benefits attributable to the increased portion
of benefits included in gross income will be
transferred to the Medicare Hospital
Insurance (HI) Trust Fund,

Effective date.--Same as the House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

earned income (or adjusted gross income, if
greater) over $28,000.

In 1995 and thereafter, the credit rate
increases to 39.66 percent. The phase-out
rate for 1995 and thereafter is 19.83 percent.
The phase-out range remains the same as for
1994 (adjusted for inflation).

Taxpayers with no qualifying children. --
The EITC is extended to low-income workers
who: (1) do not have any qualifying children;
(2) are age 22 or older; and (3) may not be
claimed as a dependent on another taxpayer’s
return. For these taxpayers, the EITC is
7.65 percent of the first $4,000 of earned
income (for a maximum credit of $306 in
1994). The maximum credit is reduced by
7.65 percent of earned income (or adjusted
gross income, if greater) above $5,000. In
1994 the credit is completely phased out for
taxpayers with earned income (or adjusted
gross income, if greater) over $9,000. This
credit is not available on an advance payment
basis.

Supplemental credits.--The supplemental
young child credit and the supplemental

health insurance credit are repealed.

Effective date.--Taxable years beginning
after December 31, 1993.

-9-

with earned income (or adjusted gross
income, if greater) over $27,000.

The credit rate increases to 34.0 percent
in 1995 and 39.0 percent in 1996 and
thereafter. The phase-out rate is 18.06
percent in 1995 and 20.72 percent in 1996
and thereafter. The phase-out range remains
the same as for 1994 (adjusted for inflation).

Taxpayers with no qualifying children. --
No provision.

Supplemental credits.--Same as the House
bill.

Effective date.--Same as the House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

g. Meals, entertainment, or
travel

2. Mark-to-market accounting
method for dealers in securities
(sec. 14223 of the House bill and
sec. 8223 of the Senate
amendment)

70-135 0 - 93 - 8

g. No special rule.

Effective date.--Amounts paid or incurred
after December 31, 1993.

A security held by a taxpayer in its
capacity as a dealer in securities generally is
to be taken into account by the taxpayer by
marking the security to its fair market value
at year-end. Gain or loss taken into account
under the mark-to-market rules generally is
treated as ordinary gain or loss.

. Effective date.--Applies to taxable years

ending on or after December 31, 1993. The
net amount of the section 481(a) adjustment
that arises from this change in a taxpayer's
method of accounting is taken into account
ratably over a 5-taxable year period
beginning with the first taxable year ending
on or after December 31, 1993. Certain
floor specialists and market makers that had
used the LIFO method of accounting for their
inventories of securities would be allowed to
take the portion of the section 481 (a)
adjustment attributable to the use of that
method into account over the lesser of: (0)
the number of years the LIFO method had

- 39 -

g. Per se rule disallowing deductions for
Costs of meals, entertainment, or travel
provided to legislative branch Members or
employees or to certain Federal executive
branch officials.

Effective date.--Same as the House bill,

The Senate amendment generally is the
same as the House bill.

Effective date.--Same as the House bill,
except that certain floor specialists and
market makers that had used the LIFO
method of accounting for their inventories of
securities would be allowed to take the
portion of the section 481(a) adjustment
attributable to the use of that method into
account over a 15-year period if the LIFO
method had been used for 5 years or more
years for that security.



ITEM

HOUSE BILL

SENATE AMENDMENT

D. Energy and Motor Fuels
Provisions

1. Energy Btu tax (sec. 14241 of the
House bill)

In_general.--The House bill imposes
permanent excise taxes on petroleum
Products, natural gas, coal, alcohol fuels, and
electricity. The taxes are imposed at a base
rate of 26.8 cents per million Btus on all
fuels; an additional (supplemental) rate of
34.2 cents per million Btus is imposed on
most petroleum products and on alcohol
fuels. The electricity tax rate is calculated
separately by each seller based on the Blu
content of the fuels used in generating its
electricity, and on Statutorily assumed Btu
contents for hydro- and nuclear-generated
electricity.

The House bill imposes an imputed Btu
tax on imported products that the Treasury
Department designates as “energy intensive."
The tax applies only to products of industries
classified, or individual products classified,
as having direct energy inputs, measured as a
percentage of the value of the finished
product, in excess of two percent.

Points of collection. --The petroleum and
alcohol fuels taxes are collected on removal
of those fuels from registered terminal
facilities. The natural gas, coal, and
electricity taxes are collected at the retail
level. Use of these products is taxable if the

- 48 -

No provision.



C. Expansion and Simplification of the Earned Income
Tax Credit (sec. 14131 of the House bill and sec. 8131
of the Senate amendment)... 2. eee 8

D. Real Estate Provisions ©... 2... cece eee 10

1. Extension of qualified mortgage bonds and
mortgage credit certificates (sec. 14141 of the
House bill and secs. 8141 and 8141A of the
Senate amendment) 2.2... cece eee 10

2. Extension of the tax credit for low-income
rental housing (sec. 14142 of the House bill
and sec. 8142 of the Senate amendment) .................004 10

3. Modification of passive loss rules for certain
real estate persons (sec. 14143 of the House
bill and sec. 8143 of the Senate amendment).................. 14

4. Treatment of certain real property business debt
of individuals (sec. 14150 of the House bi) 15

5. Increase recovery period for depreciation of
nonresidential real property (sec. 14151 of the
House bill and sec. 8151 of the Senate
amendment) 2.0... eee cece eee eee nee 16

iii



ITEM

HOUSE BILL

SENATE AMENDMENT

Surtax on higher-income taxpayers

Imposes a 10-percent surtax on
individuals with taxable income in excess of
$250,000, computed by applying a 39.6-
percent rate to taxable income in excess of
that amount. Net capital gain is not subject
to the surtax. The $250,000 threshold for the
surtax will be indexed for inflation for
taxable years beginning after December 31,
1994,

Alternative minimum tax
Alternative minimum tax

Provides a two-tiered graduated rate
schedule for the alternative minimum tax for
taxpayers other than corporations. A 26-
percent rate applies to the first $175,000 of a
taxpayer's alternative minimum taxable
income (AMTI) in excess of the exemption
amount, and a 28-percent rate applies to
AMTI more than $175,000 above the
exemption amount. The exemption amount is
increased to $45,000 for married individuals
filing joint returns, $33,750 for unmarried
individuals, and $22,500 for married
individuals filing separate returns, estates,
and trusts.

- 28 -

Surtax_on higher-income taxpayers: surtax on

net capital gain

Same as the House bill, except an
individual's net capital gain is subject to the
surtax by applying a maximum rate of 30.8
Percent (instead of the present-law maximum
tate of 28 percent) to net capital gain to the
extent an individual's taxable income exceeds
$250,000.

For taxable years beginning in 1993, the
surtax would be applied using a blended rate
of 35.3 percent for ordinary income and 29,4
percent for net capital gain.

Alternative minimum tax
Alfemative minimum tax _

Same as the House bill, except that for
taxable years beginning in 1993, blended tax
rales of 25 and 26 percent (instead of 26 and
28 percent) apply.



ITEM

HOUSE BILL

SENATE AMENDMENT

the value of the goods or services furnished
by the charity and that only the excess.
amount of the payment is deductible as a
charitable contribution. Penalties may be
imposed upon a charity failing to make
disclosure for quid pro quo contributions.

Effective date.--Contributions made after
December 31, 1993.

- 26 -

charity is not required to value the donated
Property

(3) Quid pro quo disclosure requirement
applies only to quid pro quo contributions in
excess of $75.

(4) Disclosure must be made in writing
for quid pro quo contributions in excess of
$75.

(5) Senate amendment specifically
Provides that the quid pro quo disclosure
provision does not apply to contributions toa
religious organization, in return for which the
donor receives solely an intangible religious
benefit generally not sold in a commercial
context. Such intangible religious benefits
also need not be indicated on the
substantiation that donors must obtain for
Separate contributions of $250 or more.

Effective date,--Same as the House bill,



ITEM

HOUSE BILL

SENATE AMENDMENT

-51-

stationary pumps or compressors or in
construction vehicles or vessels operated by
fisheries); fuels used by State and local
governments and nonprofit schools; exported
fuels; fuels used in international aviation;
and, fuels used in international and domestic
shipping (other than shipping on the inland
waterways system).

Disposition of revenues. --The 4.3-cents-

per-gallon highway and rail fuel revenues are
to be transferred to the Highway Trust Fund;
aviation gasoline revenues are to be
transferred to the Airport and Airway Trust
Fund; inland waterways transportation fuel
revenues are to be transferred to the Inland
Waterways Trust Fund; motorboat fuels and
small-engine gasoline revenues are to be
transferred to the Aquatic Resources Trust
Fund; and non-highway recreational vehicle
fuels revenues are to be transferred to the
National Recreational Trails Trust Fund, (A
floor amendment by Senator Brown, adopted
by a vote of 66-32, transferred the revenues
from the new excise taxes to these trust
funds, rather than retaining them in the
General Fund.)

Effective date.--Effective on October 1,
1993, with appropriate floor stocks being
imposed on that date.



Treatment of Pension Fund Investments in Real
Estate Investment Trusts (sec. 14149 of the House
bill and sec. 8149 of the Senate amendment)

Repeal of Luxury Excise Taxes Other Than on
Passenger Vehicles; Index Threshold for Passenger
Vehicles (sec. 14161 of the House bill and sec.
8161 of the Senate amendment)

Exemption from Luxury Excise Tax for Certain
Equipment Installed on Passenger Vehicles for Use
by Disabled Individuals (sec. 14162 of the House
bill and sec. 8162 of the Senate amendment)

Certain Transfers to Railroad Retirement Account
Made Permanent (sec. 14172 of the House bill and
sec. 8174 of the Senate amendment)

Temporary Extension of Deduction for Health
Insurance Costs of Self-Employed Individuals (sec.
14173 of the House bill and sec. 8175 of the Senate
amendment)

Revenue-Raising Provisions
Overall Limitations on Itemized Deductions for
High-Income Taxpayers Made Permanent (sec.

14204 of the House bill and sec. 8204 of the Senate
amendment)

xiv



ITEM

HOUSE BILL

SENATE AMENDMENT

d. Definition of "lobbyist"

e. Association dues

f. Charities

d. Not applicable, because no distinction
made between contacts by lobbyists and
contacts by others,

e. Flow-through of nondeductibility to
dues-paying members of tax-exempt
associations. Associations are required to
annually report to members and the IRS the
disallowed portion of dues paid that is
attributable to lobbying activities of the
association (unless reporting requirement
waived by Treasury regulation). Penalties
may be imposed on associations failing to
report disallowed lobbying amounts to
members (generally $50 for each failure to
report), and a special penalty applies if an
association materially underreports its
lobbying expenses.

f. No flow-through of nondeductibility

(i.e., contributions to charity are not affected
by the provision).

- 38 -

judicial proceedings or law enforcement
inquiries.

d. “Lobbyists” (who are subject to per se
disallowance mules) are defined as under the
Lobbying Disclosure Act of 1993,

e. Same as the House bill, except a
$2,000 de minimis exception to the reporting
requirement applies at the association level,
and there is no provision for imposition of a
special penalty if an association materially
underreports its lobbying expenses to its
members,

f. Flow-through of nondeductibility for
business donors who contribute more than
$2,000 to a charity (other than a church) but
only if the charity's lobbying is of direct
financial interest to the donor’s business.
Charities are required to teport to certain
business donors and the IRS the disallowed
portion of a contribution attributable to
lobbying.



ITEM

HOUSE BILL

SENATE AMENDMENT

1993. For taxable years beginning in 1994
and taxable years beginning in 1995, a
transition rule provides that an alterna ve
section 936 credit may be elected which is
equal to a fixed percentage of the present-law
credit.

- 44 -

elect to use the alternative credit limitation
based on a percentage of the section 936
credit determined under present-law rules.



Top Estate and Gift Tax Rates Made Permanent
(sec. 14208 of the House bill and sec. 8208 of the
Senate amendment)

Simplification of Individual Estimated Tax Safe
Harbor Based on Last Year’s Tax (sec. 14214 of
the House bill and sec. 8214 of the Senate
amendment)

Increase in Top Corporate Marginal Rate Under
Section 11 (sec. 14221 of the House bill and sec.
8221 of the Senate amendment)

Clarification of Treatment of Certain FSLIC
Financial Assistance (sec. 14224 of the House bill
and sec. 8224 of the Senate amendment)

Modification of Corporate Estimated Tax Rules
(sec. 14225 of the House bill and sec, 8225 of the
Senate amendment)

Modification to Limitation on Deduction for Certain
Interest (sec. 14227 of the House bill and sec.
8228 of the Senate amendment)

Repeal of Certain Exceptions for Working Capital

(sec. 14235 of the House bill and sec. 8235 of the
Senate amendment)

xvi



B. Investment Incentives... 00.0... eee eee eee eee
1. Extension of research tax credit

(sec. 14111 of the House bill and secs.

8111 and 8113 of the Senate amendment)..................06

2. Capital gains exclusion for
certain small business stock (sec. 14113 of the
House bill) 2... ee ee eee eae

3. Rollover of gain from sale of publicly-traded
securities into specialized small business
investment companies (sec. 14114 of the
House bill) 2... cece eae

4. Modification to minimum tax depreciation rules
(sec. 14115 of the House bill and sec. 8115 of
the Senate amendment) .....0.....0.000 0.000. e eee

5. Increase expensing for small business
(sec. 14116 of the House bill and sec. 8119 of
the Senate amendment) .........0....0.0 000000. ce cece eeee

6. Bonds for high-speed intercity rail facilities
(sec. 14121 of the House bill)... 2... eee

7. Extension of qualified small-issue bonds
(sec. 14122 of the House bill and sec. 8121 of
the Senate amendment) ............. 0000000 cece eee eae


ITEM

HOUSE BILL

SENATE AMENDMENT

F. Empowerment Zones and Enterprise
Communities

1. Empowerment zones and
enterprise communities (secs.
14301-14304 of the House bill
and sec. 15001 of the Senate
amendment)

a. Designation of areas

b. Tax incentives for
empowerment zones

a, The House bill provides 10
empowerment zones and 100 enterprise
communities meeting certain eligibility
criteria will be designated during 1994 and
1995. Secretary of HUD will designate in
urban areas 6 empowerment zones and 65
enterprise communities. Secretary of
Agriculture will designate in rural areas 3
empowerment zones and 30 enterprise
communities. Secretary of Interior will
designate on Indian reservations 1
empowerment zone and 5 enterprise
communities. Designations generally will
remain in effect for 10 years.

b. The following tax incentives will be
available in empowerment zones: (1) a 25-
percent wage credit for the first $20,000 of
wages paid to a zone resident who works in
the zone; (2) expansion of the targeted jobs
tax credit for economically disadvantaged

-19-

No provision.

(A Sense of the Senate resolution by
Senator Lieberman, adopted by voice vote,
States that it is the sense of the Senate that
Congress should adopt Federal enterprise
Zone legislation providing for the designation
of at least 75 empowerment zones.)


ITEM

HOUSE BILL

SENATE AMENDMENT

Tir,

OUTLAY-RELATED REVENUE
PROVISIONS

A. Disclosure Provisions

1.

Disclosure of return information
for administration of certain
Department of Veterans Affairs
programs (sec. 14401 of the
House bill and secs. 7901 and
13008 of the Senate amendment)

Access to tax information by the
Department of Education (sec.
14402 of the House bill and secs.
7902, 12011, and 12055 of the
Senate amendment)

Extends the authority to disclose tax
information to the Department of Veterans
Affairs (DVA) for one year, through
September 30, 1998.

a. Grants the Department of Education access
to certain tax return information in order to
implement a direct student loan program.
This authority expires after September 30,
1998.

b. Allows the Department of Education to
obtain the mailing address of any taxpayer
who owes an overpayment of a Federal Pell
Grant or who has defaulted with respect to
certain other student loans administered by
the Department of Education. This authority
is permanent.

c. Requires the Treasury Department to
conduct a study of the feasibility of student

- 61 -

Contains two provisions:
a. Same as the House bill (sec. 7901);
b. Extends authority permanently (sec.
13008).
a. Contains two provisions:
i. Same as the House bill (sec. 7902);
ii. Similar to House bill, except that

disclosure is permitted to agents of the
Department of Education (sec. 12055).

b. Contains two provisions:

i. Same as the House bill (sec. 7902);

ii. Similar to House bill, except authority
expires after September 30, 1998 (sec.
12055).

c. i. No study is required (sec. 7902);



ITEM

HOUSE BILL

SENATE AMENDMENT

5. Increase expensing for small
business (sec. 14116 of the House
bill and sec. 8119 of the Senate
amendment)

6. Bonds for high-speed intercity
rail facilities (sec. 14121 of the
House bill)

7. Extension of qualified small-issue
bonds (sec. 14122 of the House
bill and sec. 8121 of the Senate
amendment)

70-135 0- 93-4

Increases the maximum amount allowed
to be expensed annually under section 179
from $10,000 to $25,000.

Effective date.--The provision is effective for
property placed in service in taxable years
beginning after December 31, 1992.

The bili exempts private activity bonds to
provide high-speed rail facilities from State
private activity bond volume limitations.

Effective date.--Bonds issued after December
31, 1993.

The House bill permanently extends the
authority to issue qualified small-issue bonds.

Effective date.--Bonds issued after June 30,
1992.

Increases the maximum amount allowed
to be expensed annually under section 179
from $10,000 to $20,500. (Floor amendment
by Senator Mitchell, adopted by a vote of
93-5, increased the annual limit from $15,000
to $20,500.)

Effective date.--Same as the House bill.

No provision.

Authority to issue qualified small-issue
bonds is extended for 24 months, through
June 30, 1994.

Effective date.--Same as the House bill.



CONTENTS

Page

INTRODUCTION . 2... 111 eee xii
LIST OF IDENTICAL PROVISIONS ........... 00.0.0... 00 eee eee eee xiii
COMPARISON OF DIFFERING PROVISIONS .............0. 00000000 eee 1
I. TRAINING AND INVESTMENT PROVISIONS ..........0...000 0000000 1
A. Training and Education Provisions... 2.0.0... eee 1

1. Extension of employer-provided educational

assistance (sec. 14101 of the House bill and
sec. 8101 of the Senate amendment) ..................0000- 1

2. Extension of targeted jobs tax credit and
expansion to include approved school-to-work
program (sec. 14102 of the House bill and
sec. 8102 of the Senate amendment) ..................00005 4



ITEM

HOUSE BILL

SENATE AMENDMENT

5. Deny deduction for executive pay
over $1 million (sec. 14211 of the
House bill and sec. 8211 of the
Senate amendment)

70-135 0 - 93-7

In _general.--Under the House bill, for
purposes of the regular income tax and the
alternative minimum tax, the otherwise
allowable deduction for compensation paid or
accrued with respect to a covered employee
of a publicly held corporation is limited to no
more than $1 million per year. The
following types of compensation are not
subject to the cap and are not taken into
account in determining whether other
compensation exceeds the cap: (1)
remuneration payable on a commission basis;
(2) remuneration payable solely on account of
the attainment of one or more performance
goals if certain independent director and
shareholder approval requirements are met;
(3) payments to a tax-qualified retirement
plan; (4) amounts that are excludable from
the executive’s gross income; and (5) any
temuneration payable under a written binding
contract which was in effect on February 17,
1993, and all times thereafter before such
remuneration was paid and which was not
modified thereafter in any material respect
before such remuneration was paid.

Performance-based compensation.--
Compensation qualifies for the exception for
performance-based compensation only if (1) it
is paid solely on account of the attainment of
one or more performance goals, (2) the
performance goals are established bya

-31-

In general.--Same as the House bill.

Performance-based compensation.--The
Senate amendment is generally the same as
the House bill, except that the Senate
amendment refers to "outside directors"
rather than "independent directors,"



ITEM

HOUSE BILL

SENATE AMENDMENT

4, Treatment of certain real
property business debt of
individuals (sec. 14150 of the
House bill)

70-135 0 - 93-5

Scope.--The provision applies to eligible
individuals and eligible closely held C
corporations.

Effective date.--Taxable years beginning
after December 31, 1993.

Provides an election to taxpayers other
than C corporations to exclude from gross
income certain income from discharge of
qualified real property business debt. The
amount excluded cannot exceed the basis of
the taxpayer’s depreciable real property and
reduces the basis of such property. The
amount excluded also cannot exceed the
excess of (1) the principal amount of the debt
just before the discharge, over (2) the fair
market value of the business real property
that is security for the debt. For this
purpose, fair market value is reduced by
other qualified real property business
indebtedness secured by the property.
Qualified real property business debt
generally is debt (1) incurred or assumed in
connection with real property used in a trade
or business, and (2) secured by that real
property. Debt incurred or assumed after
January 1, 1993 must be to acquire, construct
or substantially improve real property secured
by the debt. Debt resulting from refinancing
of qualified real property business debt is
treated as qualified real property business
debt to the extent the amount of such debt

-15-

Scope.--Same as the House bill, except
the Senate amendment does not apply to
closely held C corporations.

Effective date.--Same as the House bill.

No provision.



ITEM

HOUSE BILL

SENATE AMENDMENT

-24-

wages is reduced by the amount of the credit
claimed. The credit is not refundable and is
subject to the general business credit
limitations of section 38.

Effective date. --Property placed in service,
and wages paid; after December 31, 1993,

(A floor amendment by Senators McCain
and Inouye, adopted by voice vote, provided
for the above tax incentives for Indian
reservations.)



ITEM

HOUSE BILL

SENATE AMENDMENT

D. Real Estate Provisions

1.

Extension of qualified mortgage
bonds and mortgage credit
certificates (sec. 14141 of the
House bill and secs. 8141 and
8141A of the Senate amendment)

Extension of the tax credit for

low-income rental housing (sec.
14142 of the House bill and sec.
8142 of the Senate amendment)

The House bill permanently extends the
authority to issue qualified mortgage bonds
and to elect to trade in authority to issue
qualified mortgage bonds for authority to
issue mortgage credit certificates.

Effective date.--Bonds issued after June 30,
1992.

Extension

The House bill permanently extends the
low-income rental housing credit.

Effective date.--Credit authority originating
after June 30, 1992.

HOME Funds

The House bill extends the 70 percent,
but not the 91 percent credit, to a property
receiving assistance under the National
Affordable Housing Act of 1990, but only if
40 percent or more of the residential rental
units in the project are occupied by

-10-

Authority to issue qualified mortgage
bonds and to elect to trade in that authority
for authority to issue mortgage credit
certificates is extended for 24 months,
through June 30, 1994,

Also, states the Sense of the Senate that
qualified mortgage bonds and mortgage credit
certificates be permanently extended. (Floor
amendment by Senators Lieberman and
Chafee, adopted by voice vote.)

Effective date.--Same as the House bill.

Extension

Same as the House bill.

Effective date.--Same as the House bill.

HOME Funds

No provision,



INTRODUCTION ,

This document,' prepared by the staff of the Joint Committee on Taxation, provides a
comparison of the revenue provisions of H.R. 2264 (Omnibus Budget Reconciliation Act of 1993) as
passed by the House of Representatives on May 27, 1993, and by the Senate on June 25, 1993.?

The first portion of the document is a listing of the identical revenue provisions. This is
followed by a comparative description of the differing revenue provisions. (A separate staff
document provides a comparison of the estimated budget effects of the revenue provisions of H.R.
2264 as passed by the House and the Senate.)

' This document may be cited as follows: Joint Committee on Taxation, Comparison of Revenue Provisions of H.R. 2264
(Omnibus Budget Reconciliation Act of 1993) as Passed by the House and the Senate (ICS-9-93), July 14, 1993.

? Title XIV and sections 11001 and 8002 of the House-passed bill and Title VII and sections 3003, 7433, 7901-7904,
7950-7954, 12011, 12055, 12101, 13008, and secs. 15001-15002 of the Senate amendment. ,

xii


ITEM

HOUSE BILL

SENATE AMENDMENT

2. Allocation of research
expenditures (sec. 14234 of the
House bill and sec. 8234 of the
Senate amendment)

3. Treatment of export of certain
softwood timber (sec. 8239 of the
Senate amendment)

1993. The application of the provision is
Phased in over the first five years following
the general effective date.

The House bill makes permanent the
research allocation rules of Code section
864(f), except that the portion of research
expense automatically allocated and
apportioned to income sourced in the place of
performance of the research is 50 percent,
rather than 64 percent.

The House bill also supplements section
864(f) with certain regulatory authority,
including authority regarding section 936
companies, the determination of the location
of research activities, cost sharing
arrangements and contract research.

Effective date.--The House bill applies to
taxable years ending after date of enactment,
except that it does not apply to any taxable
year to which Rev. Proc. 92-56 applies (that
Revenue Procedure generally applies, if
elected, to a taxpayer’s first two taxable years
beginning after August 1, 1991), or would
have applied had the taxpayer elected the
benefits of that Revenue Procedure,

No provision.

- 46 -

The Senate amendment temporarily adopts
for one year the research allocation
Provisions (including those providing
regulatory authority) adopted permanently in
the House bill.

Effective date.--The Senate amendment
applies to the first taxable year (beginning on
or before August 1, 1994) following the
taxpayer’s last taxable year to which Rev.
Proc. 92-56 applies, or would have applied
had the taxpayer elected the benefits of that
Revenue Procedure.

The Senate amendment modifies certain
provisions of the Code as they apply to
activities that generate income from
unprocessed softwood timber.



ITEM

HOUSE BILL

SENATE AMENDMENT

loan repayment through wage withholding or
other means involving the IRS.

d. No provision.

--The provision is effective on
the date of enactment,

-62-

ii. Requires Secretaries of Education and
Treasury to present to the President a plan
that provides for repayment of student loans
through wage witholding and evaluates the
feasibility of other wage witholding
repayment options for such lo; The study
must be submitted to the President within 6
months of date of enactment (sec. 1201 1).

d. i. No provision (sec. 7902);

ii. Upon a determination by the
President (pursuant to the study described
above) that repayment of student loans should
be done through wage witholding or other
means by the IRS, the Secretary of the
Treasury may enter into an agreement with
the Secretary of Education for IRS to collect
student loans as if they are taxes (without the
need for additional legislative authorization),
Also, authorizes this agreement to include an
alternate system of fees and penalties for
nonpayment of amounts due (sec. 12055).

Effective date.--Same as the House bill.



ITEM

HOUSE BILL

SENATE AMENDMENT

compensation committee consisting solely of
two or more independent directors, (3) the
material terms under which the compensation
is to be paid, including the performance
goals, are disclosed to and approved by the
shareholders in a separate vote prior to
Payment, and (4) prior to payment, the
compensation committee certifies that the
performance goals and any other material
terms were in fact satisfied by the executive.

The legislative history to the House bill
provides that the disclosure requirement
means that the terms under which the
compensation is to be paid must be disclosed
in such a manner so that a third party
unfamiliar with the compensation
arrangement could determine the maximum
potential amount of compensation that will be
paid or the formula under which such
compensation will be paid.

The legislative history provides that a
director is not considered independent for
purposes of the exception for performance-
based compensation if the director is a former
employee of the corporation (or related
entities) who is receiving compensation for
prior services, a former officer of the
corporation (or related entities), or is
receiving compensation in any capacity other
than as a director.

-32-

The legislative history to the Senate
amendment provides that compensation is not
treated as paid solely on account of the
attainment of one or more performance goals
unless it is paid pursuant to a preestablished
objective formula or standard that precludes
discretion. In general, this means that a third
party with knowledge of the relevant
performance results could calculate the
amount to be paid.

The legislative history to the Senate
amendment provides that, in developing
standards as to whether disclosure is
adequate, the Secretary of the Treasury is to

‘take into consideration the SEC rules

tegarding disclosure.

The legislative history to the Senate
amendment provides that, for purposes of
considering whether a director is an outside
director, benefits under a tax-qualified
pension plan are not considered current
compensation from the corporation.

The legislative history provides that, in
the case of compensation payable pursuant to
a plan (including a stock option plan), the
shareholder approval requirement generally is
satisfied if the shareholders approve the
specific terms of the plan and the class of
executives to which it applies and the amount



ITEM

HOUSE BILL

SENATE AMENDMENT

6.

Reduce compensation taken into
account for qualified retirement
plan purposes (sec. 14212 of the
House bill and sec. 8212 of the
Senate amendment)

Deduction for moving expenses
(sec. 14213 of the House bill and
sec. 8213 of the Senate
amendment)

The House bill reduces the limit on
compensation that can be taken into account
under a qualified retirement plan from
$235,840 to $150,000 (indexed).

Effective date.--The provision applies to
benefits accruing in plan years beginning
after December 31, 1993.

The House bill disallows the moving
expense deduction for certain types of
expenses. Expenses which will no longer be
deductible are (1) the costs of meals
consumed while traveling and while living in
temporary quarters near the new workplace,
and (2) the costs of selling (or setting an
unexpired lease on) the old residence and
buying (or acquiring a lease on) the new
residence.

Effective date.--Effective for expenses
incurred after December 31, 1993.

~ 34

Same as the House bill, except that the
$150,000 limit is indexed in $10,000
increments,

Effective date,--Same as the House bill,
except that the limit on compensation does
not apply to eligible participants in
governmental plans, and a delayed effective
date is provided for plans maintained
pursuant fo one or more collective bargaining
agreements.

Same as the House bill, except that the
Senate amendment also imposes an overall
cap on moving expenses of $10,000 per
move. The $10,000 overall cap is indexed
for inflation.

Effective date.--Same as the House bill.



Phaseout of Personal Exemption of High-Income
Taxpayers Made Permanent (sec. 14205 of the
House bill and sec. 8205 of the Senate amendment)

Provisions to Prevent Conversion of Ordinary
Income to Capital Gain:

(i)

(ii)

(ii)

(iv)

Repeal of certain exceptions to market
discount rules (sec. 14206(b) of the House
bill and sec. 8206(b) of the Senate
amendment)

Treatment of purchaser of stripped preferred
stock (sec. 14206(c) of the House bill and
sec. 8206(c) of the Senate amendment)

Treatment of capital gain under limitation on
investment interest (sec. 14206(d) of the
House bill and sec. 8206(d) of the Senaté
amendment)

Treatment of certain appreciated inventory
(sec. 14206(e) of the House bill and sec.
8206(e) of the Senate amendment)

Repeal of Limitation on Amount of Wages Subject
to Health Insurance Employment Tax (sec. 14207 of
the House bill and sec. 8207 of the Senate
amendment)

xv