**DESCRIPTION OF TAX TECHNICAL CORRECTIONSCONTAINED IN H.R. 4738**
**Scheduled for Markup**

**before the**

**House Committee on Ways and Means**

**on**

**October 9, 1998**

**Prepared by the Staff**

**of the**

**JOINT COMMITTEE ON TAXATION**

**October 9, 1998**

**JCX-67-98**

**CONTENTS**

INTRODUCTION		

DESCRIPTION OF TAX TECHNICAL CORRECTIONS		

	A.	Technical Corrections to the 1998 Act		

		1.	Burden of proof		

		2.	Relief for innocent spouses		

		3.	Interest netting		

		4.	Effective date for elimination of 18-month holding period			for capital gains		

	B.	Technical Corrections to the 1997 Act		

		1.	Treatment of interest on qualified education loans		

		2.	Capital gains distributions of charitable remainder trusts		

		3.	Gifts may not be revalued for estate tax purposes after			expiration of limitations		

		4.	Coordinate Vaccine Injury Compensation Trust Fund			expenditure purposes with list of taxable vaccines		

		5.	Abatement of interest by reason of Presidentially declared			disasters		

		6.	Treatment of certain corporate distributions		

		7.	Treatment of affiliated group including formerly tax-exempt			organization		

		8.	Treatment of net operating losses arising from certain			eligible losses		

		9.	Determination of unborrowed cash value under COLI pro rata interest disallowance rules		

		10.	Payment of taxes by commercially acceptable means		

	C.	Technical Corrections to the 1984 Act		

		1.	Casualty loss deduction		

	D.	Disclosure of Tax Return Information to Department of		Agriculture		

	E.	Technical Corrections to the Transportation Equity Act for the		21st Century		

**INTRODUCTION**

	The House Committee on Ways and Means has scheduled a markup on October 9, 1998,on the provisions of H.R. 4738, introduced by Chairman Bill Archer on October 8, 1998.  Thisdocument,(1) prepared by the staff of the Joint Committee on Taxation, provides a description oftax technical corrections provisions contained in H.R. 4738. 

	References to the "1998 Act" are to the Internal Revenue Service Restructuring andReform Act of 1998 (P.L. 105-206); references to the "1997 Act" are to the Taxpayer Relief Actof 1997 (P.L. 105-34); and references to the "1984 Act" are to the Tax Reform Act of 1984 (P.L.99-514).   Except as otherwise provided, the provisions described in this document generally areeffective as if included in the originally enacted related legislation.

**DESCRIPTION OF TAX TECHNICAL CORRECTIONS**

**A.  Technical Corrections to the 1998 Act**

**1.  Burden of proof**

**Present Law**

	The Treasury Secretary has the burden of proof in any court proceeding with respect to afactual issue if the taxpayer introduces credible evidence with respect to any factual issuerelevant to ascertaining the taxpayer's tax liability, provided specified conditions are satisfied(sec. 7491).  One of these conditions is that corporations, trusts, and partnerships must meetcertain net worth limitations.  These net worth limitations do not apply to individuals or toestates.

**Explanation of Provision**

	The provision removes the net worth limitation from certain revocable trusts for the sameperiod of time that the trust would have been treated as part of the estate had the trust made theelection under section 645 to be treated as part of the estate.

**2.  Relief for innocent spouses**

**Present Law**

	A taxpayer who is no longer married to, is separated from, or has been living apart for atleast 12 months from the person with whom he or she originally joined in filing a joint Federalincome tax return may elect to limit his or her liability for a deficiency arising from such jointreturn to the amount of the deficiency that is attributable to items that are allocable to suchelecting spouse.  The election is limited to deficiency situations and only affects the amount ofthe deficiency for which the electing spouse is liable.  Thus, the election cannot be used togenerate a refund, to direct a refund to one spouse or the other, or to allocate responsibility forpayment where a balance due is reported on, but not paid with, a joint return.

	In addition to the election to limit the liability for deficiencies, a taxpayer may be eligiblefor innocent spouse relief.  Innocent spouse relief allows certain taxpayers who joined in thefiling of a joint return to be relieved of liability for an understatement of tax that is attributable toitems of the other spouse to the extent that the taxpayer did not know or have reason to know ofthe understatement.  The Secretary is also authorized to provide equitable relief in situationswhere, taking into account all of the facts and circumstances, it is inequitable to hold anindividual responsible for all or a part of any unpaid tax or deficiency arising from a joint return. Under certain circumstances, it is possible that a refund could be obtained under this authority.

**Explanation of Provision**

	The provision clarifies that the ability to obtain a credit or refund of Federal income tax islimited to situations where the taxpayer qualifies for innocent spouse relief or where theSecretary exercises his authority to provide equitable relief. 

**3.  Interest netting**

**Present Law**

	For calendar quarters beginning after July 22, 1998, a net interest rate of zero applieswhere interest is payable and allowable on equivalent amounts of overpayment andunderpayment of any tax imposed by the Internal Revenue Code.  In addition, the net interest rateof zero applies to periods on or before July 22, 1998, providing (1) the statute of limitations hasnot expired with respect to either the underpayment or overpayment, (2) the taxpayer identifiesthe periods of underpayment and overpayment where interest is payable and allowable for whichthe net interest rate of zero would apply, and (3) on or before December 31, 1999, the taxpayerasks the Secretary to apply the net zero rate. 

**Explanation of Provision**

	The provision restores language originally included in the Senate amendment thatclarifies that the applicability of the zero net interest rate for periods on or before July 22, 1998 issubject to any applicable statute of limitations not having expired with regard to either a taxunderpayment or overpayment.

**4.  Effective date for elimination of 18-month holding period for capital gains**

**Present Law
	The 1998 Act repealed the provision in the 1997 Act providing a maximum 28-percentrate for the long-term capital gain attributable to property held more than one year but not morethan 18 months.  Instead, the 1998 Act treated this gain in the same manner as gain from propertyheld more than 18 months.  The provision in the 1998 Act is effective for amounts properly takeninto account after December 31, 1997.  For gains taken into account by a pass-thru entity, such asa partnership, S corporation, trust, estate, RIC or REIT, the date that the entity properly took thegain into account is the appropriate date in applying this provision.  Thus, for example, amountsproperly taken into account by a pass-thru entity after July 28, 1997, and before January 1, 1998,with respect to property held more than one year but not more than 18 months which areincluded in income on an individual's 1998 return are taken into account in computing 28-percent rate gain.

**Explanation of Provision**
	Under the provision, in the case of a capital gain dividend made by a RIC or REIT after1997, no amount will be taken into account in computing the net gain or loss in the 28-percentrate gain category by reason of property being held more than one year but not more than 18months, other than amounts taken into account by the RIC or REIT from other pass-thru entities(other than in structures, such as a "master-feeder structure", in which the RIC invests asubstantial portion of its assets in one or more partnerships holding portfolio securities andhaving the same taxable year as the RIC).  A similar rule applies to amounts properly taken intoaccount by a RIC or REIT by reason of holding, directly or indirectly, an interest in another RICor REIT to which the rule in the preceding sentence applies.  

	For example, if a RIC sold stock held more than one year but not more than 18 months onNovember 15, 1997, for a gain, and makes a capital gain dividend in 1998, the gain is not takeninto account in computing 28-percent rate gain for purposes of determining the taxation of the1998 dividend.  (Thus, all the netting and computations made by the RIC need to be redone withrespect to all post-1997 capital gain dividends, whether or not dividends of 28-percent rate gain.) If, however, the gain was taken into account by a RIC by reason of holding an interest in acalendar year 1997 partnership which itself sold the stock, the gain will not be recharacterized byreason of this provision (unless the RIC's investment in the partnership satisfies the exception formaster-feeder structures).  If the gain was taken into account by a RIC by reason of holding aninterest in a REIT and the gain was excluded from 28-percent rate gain by reason of theapplication of this provision to the REIT, the gain will be excluded from 28-percent rate gain indetermining the tax of the RIC shareholders.

	The provision also corrects a cross reference.

**B. Technical Corrections to the 1997 Act**

**1.  Treatment of interest on qualified education loans**

**Present Law
	Present law, as modified by the 1997 Act, provides that certain individuals who have paidinterest on qualified education loans may claim an above-the-line deduction for such interestexpense, up to a maximum dollar amount per year ($1,000 for taxable years beginning in 1998),subject to certain requirements (sec. 221).  The maximum deduction is phased out ratably forindividual taxpayers with modified AGI between $40,000 and $55,000 ($60,000 and $75,000 forjoint returns).  Present law also provides that in the case of a taxpayer other than a corporation,no deduction is allowed for personal interest (sec. 163(h)).  For this purpose, personal interestmeans any interest allowable as a deduction, other than certain types of interest listed in thestatute.  This provision does not specifically provide that otherwise deductible qualifiededucation loan interest is not treated as personal interest.

	Present law provides that a qualified education loan does not include any indebtednessowed to a person who is related (within the meaning of sec. 267(b) or 707(b)) to the taxpayer(sec. 221(e)(1)).

**Explanation of Provision
	The provision clarifies that otherwise deductible qualified education loan interest is nottreated as nondeductible personal interest.

	The provision also clarifies that, for purposes of section 221, modified AGI is determinedafter application of section 135 (relating to income from certain U.S. saving bonds) and section137 (relating to adoption assistance programs).

	The provision also provides that a qualified education loan does not include anyindebtedness owed to any person by reason of a loan under any qualified employer plan (asdefined in section 72(p)(4)) or under any contract purchased under a qualified employer plan (asdescribed in sec. 72(p)(5)).

**2.  Capital gain distributions of charitable remainder trusts**

**Present Law**

	Under present law, the income beneficiary of a charitable remainder trust ("CRT")includes the trust's capital gain in income when the gains are distributed to the beneficiary (sec.664(b)(2)).  Internal Revenue Service Notice 98-20 provides guidance with respect to thecategorization of long-term capital gain distributions from a CRT under the capital gain rulesenacted by the 1997 Act.  Under the Notice, long-term capital gains properly taken into accountby the trust before January 1, 1997, are treated as falling in the 20-percent group of gain (i.e.,gain not in the 28-percent rate gain or unrecaptured sec. 1250 gain).  Long-term capital gains properly taken into account by the trust after December 31, 1996, and before May 7, 1997, areincluded in 28-percent rate gain.  Long-term capital gains properly taken into account by the trustafter May 6, 1997, are treated as falling into the category which would apply if the trust itselfwere subject to tax. 

**Explanation of Provision**

	The provision provides that, in the case of  a capital gain distribution by a CRT afterDecember 31, 1997,  with respect to amounts properly taken into account by the trust during1997, amounts will not be included in the 28-percent rate gain category solely by reason of being properly taken into account by the trust before May 7, 1997, or by reason of the propertybeing held not more than 18 months.  Thus, for example, gain on the sale of stock by a CRT onFebruary 1, 1997, will not be taken into account in determining 28-percent rate gain where thegain is distributed after 1997.(2)

**Effective Date**
	The provision applies to taxable years beginning after December  31, 1997.					

**3.  Gifts may not be revalued for estate tax purposes after expiration of statute oflimitations**

**Present Law**

Basic structure of Federal estate and gift taxes.--The Federal estate and gift taxes areunified so that a single progressive rate schedule is applied to an individual's cumulative gifts andbequests.  The tax on gifts made in a particular year is computed by determining the tax on thesum of the taxable gifts made in that year and in all prior years and then subtracting the tax on theprior years taxable gifts and the unified credit.  Similarly, the estate tax is computed bydetermining the tax on the sum of the taxable estate and prior taxable gifts and then subtractingthe tax on taxable gifts, the unified credit, and certain other credits.

	This structure raises two different, but related, issues: (1) what is the period beyondwhich additional gift taxes cannot be assessed or collected -- generically referred to as the"statute of limitations" -- and (2) what is the period beyond which the amount of prior transferscannot be revalued for the purpose of determining the amount of tax on subsequent transfers.

Gift and estate tax period of limitations.--Section 6501(a) provides the general rule thatany tax (including gift and estate tax) must be assessed, or a proceeding begun in a court for thecollection of such tax without assessment, within three years after the return is filed by thetaxpayer. Under section 6501(e)(2), the period for assessments of gift or estate tax is increased tosix years where there is more than a 25 percent omission in the amount of the total gifts or grossestate disclosed on the gift or estate tax return.  Section 6501(c)(9) provides an exception to theserules under which gift tax may be assessed, or a proceeding in a court for collection of gift taxmay be begun, at any time unless the gift is disclosed on a gift tax return or a statement attachedto a gift tax return.

	Revaluation of gifts for estate tax purposes.--The value of a gift is its value as finallydetermined under the rules for purposes of determining the applicable estate tax bracket andavailable unified credit.  The value of a gift is finally determined if (1) the value of the gift isshown on a gift tax return for that gift and that value is not contested by the Treasury Secretarybefore the expiration of the period of limitations on assessment of gift tax even where the valueof the gift as shown on the return does not result in any gift tax being owed (e.g., through use ofthe unified credit), (2) the value is specified by the Treasury Secretary pursuant to a final noticeof redetermination of value (a "final notice") within the period of limitations applicable to the giftfor gift tax purposes (generally, three years) and the taxpayer does not timely contest that value,or (3) the value is determined by a court or pursuant of a settlement agreement between thetaxpayer and the Treasury Secretary under an administrative appeals process whereby a taxpayercan challenge a redetermination of value by the IRS prior to issuance of a final notice.  In theevent the taxpayer and the IRS cannot agree on the value of a gift, the 1997 Act provided theU.S. Tax Court with jurisdiction to issue a declaratory judgment on the value of a gift (section7477).  A taxpayer who is mailed a final notice may challenge the redetermined value of the gift(as contained in the final notice) by filing a motion for a declaratory judgment with the U.S. TaxCourt.  The motion must be filed on or before 90 days from the date that the final notice wasmailed.  The statute of limitations is tolled during the pendency of the Tax Court proceeding.

	Revaluation of gifts for gift tax purposes.--Similarly, under a rule applicable to thecomputation of the gift tax (sec. 2504(c)), the value of gifts made in prior years is its value asfinally determined if the period of limitations for assessment of gift tax on the prior gifts hasexpired.

**Explanation of Provision**

	The bill clarifies the rules relating to revaluations of prior transfers for computation of theestate or gift tax to provide that the value of a prior transfer cannot be redetermined after theperiod of limitations if the transfer was disclosed in a statement attached to the gift tax return, aswell as on a gift tax return, in a manner to adequately apprise the Treasury Secretary of the naturethe transfer, even if there was no gift tax imposed on that transfer.

**4.  Coordinate Vaccine Injury Compensation Trust Fund expenditure purposes with list oftaxable vaccines**

**Present Law**

	A manufacturer's excise tax is imposed on certain vaccines routinely recommended foradministration to children (sec. 4131).  The tax is imposed at a rate of $0.75 per dose on anylisted vaccine component.  Taxable vaccine components are vaccines against diphtheria, tetanus,pertussis, measles, mumps, rubella,  polio, HIB (haemophilus influenza type B), hepatitis B, andvaricella (chicken pox).   Tax was imposed on vaccines against diphtheria, tetanus, pertussis,measles, mumps, rubella, and polio by the Omnibus Budget Reconciliation Act of 1987.  Taxwas imposed on vaccines against HIB, hepatitis B, and varicella by the 1997 Act.

	Amounts equal to net revenues from this excise tax are deposited in the Vaccine InjuryCompensation Trust Fund ("Vaccine Trust Fund") to finance compensation awards under theFederal Vaccine Injury Compensation Program for individuals who suffer certain injuriesfollowing administration of the taxable vaccines.  Present law provides that payments from theVaccine Trust Fund may be made only for vaccines eligible under the program as of December22, 1987 (sec. 9510(c)(1)).  Thus, payments may not be made for injuries related to the HIB,hepatitis B or varicella vaccines.

**Explanation of Provision**

	The provision provides that payments are permitted from the Vaccine Trust Fund forinjuries related to the administration of the HIB, hepatitis B, and varicella vaccines.  Theprovision also clarifies that expenditures from the Vaccine Trust Fund may occur only asprovided in the Code and makes conforming amendments.

**5.  Abatement of interest by reason of Presidentially declared disaster**

**Present Law
	The Taxpayer Relief Act of 1997 ("1997 Act") provided that, if the Secretary of theTreasury extends the filing date of an individual tax return for 1997 for individuals living in anarea that has been declared a disaster area by the President during 1997, no interest shall becharged as a result of the failure of an individual taxpayer to file an individual tax return, or paythe taxes shown on such return, during the extension.

	The Internal Revenue Service Restructuring and Reform Act of 1998 ("1998 Act")contains a similar rule applicable to all taxpayers for tax years beginning after 1997 for disastersdeclared after 1997.  The status of disasters declared in 1998 but that relate to the 1997 tax yearis unclear.

**Explanation of Provision**

	The provision amends the 1997 Act rule so that it is available for disasters declared in1997 or in 1998 with respect to the 1997 tax year.

**6.  Treatment of certain corporate distributions**

**Present Law**

	The 1997 Act (sec. 1012(a)) requires a distributing corporation to recognize corporatelevel gain on the distribution of stock of a controlled corporation under section 355 of  the Codeif, pursuant to a plan or series of related transactions, one or more persons acquire a 50-percent orgreater interest (defined as 50 percent or more of the voting power or value of the stock) of eitherthe distributing or controlled corporation (Code sec. 355(e)).  Certain transactions are exceptedfrom the definition of acquisition for this purpose.  Under the technical corrections included inthe Internal Revenue Service Restructuring and Reform Act of 1998,  in the case of acquisitionsunder section 355(e)(3)(A)(iv), the acquisition of stock in the distributing corporation or anycontrolled corporation is disregarded to the extent that the percentage of stock owned directly orindirectly in such corporation by each person owning stock in such corporation immediatelybefore the acquisition does not decrease. (3)

	In the case of a 50-percent or more acquisition of either the distributing corporation or thecontrolled corporation, the amount of gain recognized is the amount that the distributingcorporation would have recognized had the stock of the controlled corporation been sold for fairmarket value on the date of the distribution.  No adjustment to the basis of the stock or assets ofeither corporation is allowed by reason of the recognition of the gain.(4)****

	The 1997 Act (as amended by the technical corrections contained in the Internal RevenueService Restructuring and Reform Act of 1998) also modified certain rules for determiningcontrol immediately after a distribution in the case of certain divisive transactions in which acontrolled corporation is distributed and the transaction meets the requirements of section 355. In such cases, under section 351 and modified section 368(a)(2)(H) with respect toreorganizations under section 368(a)(1)(D), the fact that the shareholders of the distributingcorporation dispose of part or all of the distributed stock shall not be taken into account.

	The effective date (Act section 1012(d)(1)) states that the relevant  provisions of the 1997Act apply to distributions after April 16, 1997, pursuant to a plan (or series of relatedtransactions) which involves an acquisition occurring after such date (unless certain transitionprovisions apply).

**Explanation of Provision**

	The provision clarifies the "control immediately after" requirement of section 351(c) andsection 368(a)(2)(H)  in the case of certain divisive transactions in which a corporationcontributes assets to a controlled corporation and then distributes the stock of the controlledcorporation in a transaction that meets the requirements of section 355 (or so much of section356 as relates to section 355).  In such cases, not only the fact that the shareholders of thedistributing corporation dispose of part or all of the distributed stock,  but also the fact that thecorporation whose stock was distributed issues additional stock, shall not be taken into account.

**7.  Treatment of affiliated group including formerly tax-exempt organization**

**Present Law
	Present law provides that an organization described in sections 501(c)(3) or (4) of theCode is exempt from tax only if no substantial part of its activities consists of providingcommercial-type insurance.  When this rule was enacted in 1986, certain treatment applied toBlue Cross and Blue Shield organizations providing health insurance that were subject to thisrule and that met certain requirements.  Treasury regulations were promulgated providing rulesfor filing consolidated returns for affiliated groups including such organizations (Treas. Reg. sec.1.1502-75(d)(5)).

	The 1997 Act repealed the grandfather rules provided in 1986 (permitting the retention oftax-exempt status) that were applicable to that portion of the business of the Teachers InsuranceAnnuity Association and College Retirement Equities Fund which is attributable to pensionbusiness and to the portion of the business of Mutual of America which is attributable to pensionbusiness.  The 1997 Act did not specifically provide rules for filing consolidated returns foraffiliated groups including such organizations.

	Present law with respect to consolidated returns provides for an election to treat a lifeinsurance company as an includible corporation, and also provides that a life insurance companymay not be treated as an includible corporation  for the 5 taxable years immediately precedingthe taxable year for which the consolidated return is filed (sec. 1504(c)(2)).  Present law alsoprovides that a corporation that is exempt from taxation under Code section 501 is not anincludible corporation (sec. 1504(b)(1)).

**Explanation of Provision
	The provision provides rules for filing consolidated returns for affiliated groups includingany organization with respect to which the grandfather rule under Code section 501(m) wasrepealed by section 1042 of the 1997 Act.  The provision provides that rules similar to the rulesof Treasury Regulation section 1.1502-75(d)(5) apply in the case of such an organization.  Thus,an affiliated group including such an organization may make the election described in section1504(c)(2) (relating to a 5-year period) without regard to whether the organization waspreviously exempt from tax under Code section 501.

**8.  Treatment of net operating losses arising from certain eligible losses**

**Present Law**

	The 1997 Act changed the general net operating loss ("NOL") carryback period of ataxpayer from three years to two years.  The three-year carryback period was retained in the caseof an NOL attributable to an eligible loss.  An eligible loss is defined as (1) a casualty or theftloss of an individual taxpayer, or (2) an NOL attributable to a Presidentially declared disasterarea by a taxpayer engaged in a farming business or a small business.  Other special rules applyto real estate investment trusts (REITs) (no carrybacks), specified liability losses (10-yearcarryback), and excess interest losses (no carrybacks). 

**Explanation of Provision**

	The provision coordinates the use of eligible losses with the general rule for NOLs in thesame manner as a loss arising from a specified liability loss.  Thus, an eligible loss for any year istreated as a separate net operating loss and is taken into account after the remaining portion of thenet operating loss for the taxable year.			

**9.  Determination of unborrowed policy cash value under COLI pro rata interestdisallowance rules**

**Present Law
	In the case of a taxpayer other than a natural person, no deduction is allowed for theportion of the taxpayer's interest expense that is allocable to unborrowed policy cash surrendervalues with respect to any life insurance policy or annuity or endowment contract issued afterJune 8, 1997.  Interest expense is allocable to unborrowed policy cash values based on the ratioof (1) the taxpayer's average unborrowed policy cash values of life insurance policies andannuity and endowment contracts, issued after June 8, 1997, to (2) the sum of (a) in the case ofassets that are life insurance policies or annuity or endowment contracts, the average unborrowedpolicy cash values and (b) in the case of other assets the average adjusted bases for all such otherassets of the taxpayer.  The unborrowed policy cash values means the cash surrender value of thepolicy or contract determined without regard to any surrender charge, reduced by the amount ofany loan with respect to the policy or contract.  The cash surrender value is to be determinedwithout regard to any other contractual or noncontractual arrangement that artificially depressesthe unborrowed policy cash value of a contract.

**Explanation of Provision**

	The provision clarifies the meaning of "unborrowed policy cash value" under section264(f)(3), with respect to any life insurance, annuity or endowment contract.  The technicalcorrection clarifies that under section 264(f)(3), if the cash surrender value (determined withoutregard to any surrender charges) with respect to any policy or contract does not reasonablyapproximate its actual value, then the amount taken into account for this purpose is the greater of(1) the amount of the insurance company's liability with respect to the policy or contract, asdetermined for purposes of the annual statement approved by the National Association orInsurance Commissioners, (2) the amount of the insurance company's reserve with respect to thepolicy or contract for purposes of such annual statement; or such other amount as is determinedby the Treasury Secretary.  No inference is intended that such amounts may not be taken intoaccount in determining the cash surrender value of a policy or contract in such circumstances forpurposes of any other provision of the Code.

**10.  Payment of taxes by commercially acceptable means**

**Present Law
	The Code generally permits the payment of taxes by commercially acceptable means(such as credit cards) (sec. 6311(d)).  The Treasury Secretary may not pay any fee or provide anyother consideration in connection with this provision.  This fee prohibition may have anunintended impact on Treasury contracts for the provision of services unrelated to the payment ofincome taxes by commercially acceptable means.

**Explanation of Provision**

	The provision clarifies that the prohibition on paying any fees or providing any otherconsideration applies to the use of credit, debit, or charge cards for the payment of income taxes.

**C.  Technical Corrections to the 1984 Act**

**1.  Casualty loss deduction**

**Present Law**

	The Tax Reform Act of 1984 ("1984 Act") deleted casualty and theft losses from propertyconnected with a nonbusiness transaction entered into for profit from the list of losses set forth insection 165(c)(3).  This amendment was made in order to provide that these losses weredeductible in full and not subject to the $100 per casualty limitation or the 10-percent adjustedgross income floor applicable to personal casualty losses.  However, the amendmentinadvertently eliminated the deduction for these losses from the computation of the net operatingloss.  Also, the Tax Reform Act of 1986 provided that casualty losses described in section165(c)(3) are not  miscellaneous itemized deductions subject to the 2-percent adjusted grossincome floor, and the Revenue Reconciliation Act of 1990 provided that these losses are nottreated as itemized deductions in computing the overall limitation on itemized deductions.  Thelosses of  nonresident aliens are limited to deductions described in section 165(c)(3).  Because ofthe change made by the 1984 Act, the reference to section 165(c)(3) does not include casualtyand theft losses from nonbusiness transactions entered into for profit.

**Explanation of Provision**
****The provision provides that all deductions for nonbusiness casualty and theft losses aretaken into account in computing the net operating loss.  Also, these deductions are not treated asmiscellaneous itemized deductions subject to the 2-percent adjusted gross income floor, or asitemized deductions subject to the overall limitation on itemized deductions, and are allowed tononresident aliens.

**Effective Dates**
	The provision relating to the net operating loss and the deduction for nonresident aliensapplies to taxable years beginning after December 31, 1983.

	The provision relating to miscellaneous itemized deductions applies to taxable yearsbeginning after December 31, 1986.

	The provision relating to the overall limitation on itemized deductions applies to taxableyears beginning after December 31, 1990.

**D.  Disclosure of Tax Return Information to the Department of Agriculture**

**Present Law**

	Tax return information generally may not be disclosed, except as specifically provided bystatute.  Disclosure is permitted to the Bureau of the Census for specified purposes, whichincluded the responsibility of structuring, conducting, and preparing the census of agriculture(sec. 6103(j)(1)).   The Census of Agriculture Act of 1997 (P.L. 105-113) transferred thisresponsibility from the Bureau of the Census to the Department of Agriculture.

**Explanation of Provision**

	The provision permits the continuation of disclosure of tax return information for thepurpose of structuring, conducting, and preparing the census of agriculture by authorizing theDepartment of Agriculture to receive this information.

**Effective Date**

	The provision is effective on the date of enactment of this technical correction.

**E.  Technical Corrections to the Transportation Equity Act for the 21st Century**

**Present Law
	The Transportation Equity Act for the 21st Century ("Transportation Equity Act") (P.L.105-178) extended the Highway Trust Fund and accompanying highway excise taxes.  TheTransportation Equity Act also changed the budgetary treatment of Highway Trust Fundexpenditures, including repeal of a provision that balances maintained in the Highway TrustFund pending expenditure earn interest from the General Fund of the Treasury.

**Explanation of Provision**
	The provision clarifies that the Secretary of the Treasury is not required to investHighway Trust Fund balances in interest-bearing obligations (because any interest paid to theTrust Fund by the General Fund would be immediately returned to the General Fund).

1.   This document may be cited as follows: Joint Committee on Taxation; *Description ofTax Technical Corrections Contained in H.R. 4738,* (JCX-67-98), October 9, 1998.
2.  The bill contains a similar amendment to section 1(h)(13), as amended by section 5001of the 1998 Act, to provide that, for purposes of taxing the recipient of a distribution made after1997 by a CRT, amounts will not be taken into account in computing 28-percent rate gain byreason of being properly taken into account before May 7, 1997, or by reason of the propertybeing held for not more than 18 months.  Thus, no amount distributed by a CRT after 1997 willbe treated as in the 28-percent category (other than by reason of the disposition of collectibles orsmall business stock).
3.   This exception (as certain other exceptions) does not apply if the stock held before theacquisition was acquired pursuant to a plan (or series of related transactions) to acquire a 50-percent or greater interest in the distributing or a controlled corporation.
4.   The 1997 Act does not limit the otherwise applicable Treasury regulatory authorityunder section 336(e) of the Code. Nor does it limit the otherwise applicable provisions of section1367 with respect to the effect on shareholder stock basis of gain recognized by an S corporationunder this provision.******************