An Act to provide a job development investment credit, to reduce individual income taxes, to reduce certain excise taxes, and for other purposes
PL 92-178 (H.R.10947), enacted 12/10/1971

85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
497 
Public Law 92-178 
A N A C T 
December 10,1971 
To provide a job development investment credit, to reduce individual income 
[H, R, 10947] 
taxes, to reduce certain excise taxes, and for other purposes. 
Be it emxicted hy the Senate and House of Representatives 
of the 
United States of America in Congress a^semhled^ 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the "Revenue Act of 
1971". 
(b) 
TABLE OF CONTENTS.— 
TITLE I—JOB DEVELOPMENT INVESTMENT CREDIT; DEPRECIATION 
REVISION 
Sec. 101. Restoration of investment credit. 
Sec. 102. Determination of qualified investment. 
Sec. 103. Limitation of credit to domestic products. 
Sec. 104. Definition of section 38 property. 
Sec. 105. Regulated companies. 
Sec. 1(J6. Investment credit carryovers and carrybacks. 
Sec. 107. Treatment of casualties and certain replacements. 
Sec. 108. Availability of credit to certain lessors. 
Sec. 109. Reasonable allowance for depreciation ; repair allowance. 
TITLE II—CHANGES IN PERSONAL EXEMPTIONS, MINIMUM 
STANDARD DEDUCTION, WITHHOLDING, ETC. 
Sec. 201. Increase in personal exemption. 
Sec. 202. Increase in percentage standard deduction. 
Sec. 203. Low income allowance. 
Sec. 204. Filing requirements. 
Sec. 205. Certain fiscal year taxpayers. 
Sec. 206. Election of standard deduction. 
Sec. 207. Waiver of penalty for underpayment of 1971 estimated income tax. 
Sec. 208. Adjustment of withholding. 
Sec. 209. Changes in requirements of declaration of estimated income tax by 
individuals. 
Sec. 210. Expenses to enable individuals to be gainfully employed. 
Sec. 211. Levies on salaries and wages. 
TITLE 
III—STRUCTURAL IMPROVEMENTS 
Sec. 301. Unearned income of taxpayers who are dependents of other taxpayers. 
Sec. 302. Limitation on carryovers of unused credits and capital losses. 
Sec. 303. Amortization of certain expenditures for on-the-job training and for 
child care centers. 
Sec. 304. Excess investment interest. 
Sec. 305. Farm losses of electing small business corporations. 
Sec. 306. Capital gain distributions of certain trusts. 
Sec. 307. Application of Western Hemisphere Trade Corporation 
provision 
under the Virgin Islands tax laws. 
Sec. 308. Capital gains and stock options. 
Sec. 309. Certain treaty cases. 
Sec. 310. Bribes, kickbacks, medical referral payments, etc. 
Sec. 311. Activities not engaged in for profit. 
Sec. 312. Certain distributions to foreign corporations. 
Sec. 313. Original issue discount. 
Sec. 314. Income from certain aircraft and vessels. 
Sec. 315. Industrial development bonds. 
Sec. 316. Disclosure or use of information by preparers of income tax returns. 
TITLE IV—EXCISE TAX 
Sec. 401. Repeal or suspension of manufacturers excise tax on passenger auto-
mobiles, light-duty trucks, etc. 
Sec. 402. Credit against tax on coin-operated gaming devices. 
Revenue Act 
of 1971. 
498 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
TITLE V—DOMESTIC INTERNATIONAL SALES CORPORATIONS 
Sec. 501. Domestic international sales corporations. 
Sec. 502. Deductions, credits, etc. 
Sec. 503. Source of Income. 
Sec. 504. Procedure and administration. 
Sec. 505. Export trade corporations. 
Sec. 506. Submission of annual reports to Congress. 
Sec. 507. General effective date of title. 
TITLE VI—JOB DEVELOPMENT RELATED TO WORK INCENTIVE 
PROGRAM 
Sec. 601. Tax credit for certain expenses incurred in work incentive program. 
TITLE VII—TAX INCENTIVES FOR CONTRIBUTIONS TO CANDIDATES 
FOR PUBLIC OFFICE 
Sec. 701. Allowance of credit. 
Sec. 702. Deduction in lieu of credit. 
Sec. 703. Effective date. 
TITLE VIII—FINANCING OF PRESIDENTIAL ELECTION CAMPAIGNS 
Sec. 801. Presidential Election Campaign Fund Act. 
Sec. 802. Miscellaneous amendments. 
(c) A M E N D M E N T OF 1954 CODE.—Except as otherwise 
expressly 
provided, whenever in this Act an amendment is expressed in terms 
of an amendment to a section or other provision, the reference is to a 
section or other provision of the Internal Revenue Code of 1954. 
68A Stat. 3. 
26 u s e 1 etseq. 
76 Stat, 963. 
26 u s e 46. 
83 Stat. 660. 
TITLE I—JOB DEVELOPMENT INVEST-
MENT CREDIT; DEPRECIATION REVI-
SION 
SEC. 101. RESTORATION OF INVESTMENT CREDIT. 
(a) Subpart B of part I V of subchapter A of chapter 1 (relating 
to rules for computing credit for investment in certain depreciable 
property) is amended by adding at the end thereof the following new 
section: 
"SEC. 50. RESTORATION OF CREDIT. 
" ( a ) 
GENERAL RULE.—Section 49(a) 
(relating to termination of 
credit) shall not apply to property— 
" (1) the construction, reconstruction, or erection of which— 
" ( A ) is completed by the taxpayer after August 15, 1971, 
or 
" ( B ) is begun by the taxpayer after March 31,1971, or 
" (2) which is acquired by the taxpayer— 
" (A) after August 15,1971, or 
" ( B ) after March 31, 1971, and before August 16, 1971, 
pursuant to an order which the taxpayer establishes was 
placed after March 31,1971. 
" ( b ) 
TRANSITIONAL R U L E . — I n applying section 4 6 ( c ) ( 1 ) ( A ) 
in 
the case of property described in subsection ( a ) ( 1 ) ( A ) the construc-
tion, reconstruction, or erection of which is begun before April 1,1971, 
there shall be taken into account only that portion of the basis which is 
properly attributable to construction, reconstruction, or erection after 
August 15, 1971. This subsection shall not apply to pre-termination 
property (within the meaning of section 4 9 ( b ) ) . " 
(b) 
CONFORMING A M E N D M E N T S . — 
(1) 
Section 49(a) (relating to termination of credit) is 
amended b ^ adding at the end thereof the following new sen-
tence : "This subsection shall not apply to property described in 
section 50." 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
499 
(2) Section 49(b) (defining pre-termination property) is 
26 use 49.°' 
amended by striking out "For purposes of this section" and insert-
ing in lieu thereof'^'For purposes of this subpart". 
(3) Section 49(d) (relating to property placed in service after 
Repeal. 
1975) is hereby repealed. 
(4) The heading for section 49 is amended to read as follows: 
"SEC. 49. TERMINATION FOR PERIOD BEGINNING APRIL 19, 1969, AND 
ENDING DURING 1971." 
(5) The table of sections for subpart B of part IV of subchap-
ter A of chapter 1 is amended by striking out the item relating to 
section 49 and inserting in lieu thereof the following: 
"Sec. 49, Termination for period beginning April 19, 1969, and 
ending during 1971. 
''Sec 50. Restoration of credit." 
(c) ACCOUNTING FOR INVESTMENT CREDIT IN CERTAIN FINANCIAL 
REPORTS AND REPORTS TO FEDERAL AGENCIES.— 
(1) I N GENERAL.—It was the intent of the Congress in enact-
ing, in the Revenue Act of 1962, the investment credit allowed by 
section 38 of the Internal Revenue Code of 1954, and it is the 
76 stat. 962. 
intent of the Congress in restoring that credit in this Act, to pro-
vide an incentive for modernization and growth of private indus-
try. Accordingly, notwithstanding any other provision of law, 
on and after the date of the enactment of this Act— 
(A) no taxpayer shall be required to use, for purposes of 
financial reports subject to the jurisdiction of any Federal 
agency or reports made to any Federal agency, any particu-
lar method of accounting for the credit allowed by such sec-
tion 38, 
(B) a taxpayer shall disclose, in any such report, the 
method of accounting for such credit used by him for pur-
poses of such report, and 
(C) a taxpayer shall use the same method of accounting 
for such credit in all such reports made by him, unless the 
Secretary of the Treasury or his delegate consents to a change 
to another method. 
(2) EXCEPTIONS.—Paragraph (1) shall not apply to taxpayers 
who are subject to the provisions of section 46(e) of the Internal 
Revenue Code of 1954 (as added by section 105(c) of this Act) or 
^o«'» p* 503. 
to section 203(e) of the Revenue Act of 1964 (as modified by sec-
tion 105 (e) of this Act). 
^°st, p. soe. 
SEC. 102. DETERMINATION OF QUALIFIED INVESTMENT. 
(a) CHANGE IN USEP^UL LIFE BRACKETS.— 
(1) Section 46(c)(2) (relating to applicable percentage for 
purposes of determining qualified investment) is amended— 
(A) by striking out "4 years" and inserting in lieu thereof 
"3 years", 
(B) by striking out "6 years" each place it appears and 
inserting in lieu thereof "5 years", and 
(C) by striking out "8 years" each place it appears and 
inserting in lieu thereof "7 years". 
(2) The second sentence of section 48(a) (1) (defining section 
38 property) is amended by striking out "4 years" and inserting 
in lieu thereof "3 years". 
(b) USEFUL LIFE FOR INVESTMENT CREDIT PURPOSES.—The second 
sentence of section 46 (c) (2) is amended to read as follows: 
"For purposes of this subpart, the useful life of any property 
shall be the useful life used in computing the allowance for depre-
ciation under section 167 for the taxable year in w^hich the prop- 
^°«'' P* SOS, 
erty is placed in service." 
76 Stat. 96 3. 
75-432 O - 72 - 34 
SOO 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
84 Stat. 2060. 
26 u s e 47. 
Post, p. 507. 
Ante, p. 499. 
(c) TECHNICAL AMENDMENT.—Section 47(a) (6) (A) (relating to 
aircraft used outside the United States after April 18, 1969) is 
amended by striking out "4 years" and inserting in lieu thereof "31/^ 
years". 
(d) EFFECTIVE DATES.— 
(1) The amendments made by subsections (a) and (b) shall 
apply to property described in section 50 of the Internal Eeve-
Ante, p. 498. 
nue Code of 1954. 
(2) In redetermining qualified investment for purposes of 
76 Stat.^966; 
sectiou 47(a) of the Internal Kevenue Code of 1954 in the case 
of any property which ceases to be section 38 property with 
respect to the taxpayer after August 16, 1971, or which becomes 
public utility property after such date, section 46(c) (2) of such 
Code shall be applied as amended by subsection (a). 
(3) The amendment made by subsection (c) shall apply to 
leases executed after April 18,1969. 
SEC. 103. LIMITATION OF CREDIT TO DOMESTIC PRODUCTS. 
Post^^V'soiJ' 
Section 48(a) (relating to definition of section 38 property) is 
amended by adding after paragraph (6) the following new para-
graph : 
"(7) 
PROPERTY COMPLETED ABROAD OR PREDOMINANTLY or FOR-
EIGN ORIGIN.— 
"(A) I N GENERAL.—Property (other than pre-termina-
tion property) shall not be treated as section 38 property if— 
"(i) such property was completed outside the United 
States, or 
"(ii) less than 50 percent of the basis of such prop-
erty is attributable to value added within the United 
States. 
"United 
Por purposes of this subparagraph, the term 'L^nited States' 
includes the Commonwealth of Puerto Rico and the posses-
sions of the United States. 
"(B) 
PERIOD OF APPLICATION OF PARAGRAPH.—Except as 
provided in subparagraph (D), subparagraph (A) shall 
apply only with respect to property described in section 50— 
"(i) the construction, reconstruction, or erection of 
which by the taxpayer is begun after August 15, 1971, 
and on or before the date of termination of Proclamation 
Post, p. 925. 
4074, or 
"(ii) which is acquired j)ursuant to an order placed on 
or before the date of termination of Proclamation 4074, 
unless acquired pursuant to an order which the taxpayer 
establishes was placed before August 16, 1971. 
"(C) PRESIDENT MAY EXEMPT ARTICLES.—If the President 
of the United States shall at any time determine that the 
application of subparagraph (A) to any article or class of 
articles is not in the public interest, he may by Executive order 
specify that subparagraph (A) shall not apply to such arti-
cle or class of articles. Subparagraph (A) shall not apply to 
an article or class of articles for the period specified in such 
Executive order. Any period specified under the preceding 
sentence shall not apply to property ordered before (or to 
property the construction, reconstruction, or erection of which 
began before) the date of the Executive order specifying 
such period, except that, if the President determines it to be 
in the public interest, such period shall apply to property 
ordered (or property the construction, reconstruction, or erec-
tion of which began) after a date (before the date of the 
Executive order) specified in the Executive order. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
501 
"(D) COUNTRIES 
MAINTAINING 
TRADE 
RESTRICTIONS OR 
ENGAGING IN DISCRIMINATORY ACTS.—If, Oil O
F after the date 
of the termination of Proclamation 4074, the President deter- 
Post, p. 92s,, 
mines that a foreign country— 
"(i) maintains nontariff trade restrictions, including 
variable import fees, which substantially burden United 
States commerce in a manner inconsistent with provisions 
of trade agreements, or 
"(ii) engages in discriminatory or other acts (includ-
ing tolerance of international cartels) or policies unjusti-
fiably restricting United States commerce, 
he may provide by Executive order for the application of sub-
paragraph (A) to any article or class of articles manufac-
tured or produced in such foreign country for such period 
as may be provided by Executive order." 
SEC. 104. DEFINITION OF SECTION 38 PROPERTY. 
(a) STORAGE FACILITIES.— 
(1) I N GENERAL.—Section 48(a)(1)(B) 
(relating to other 
76 stat. 967. 
tangible property constituting section 38 property) is amended 
^^ "^^ "
*
*
* 
by striking out clause (ii) and inserting in lieu thereof the foUow-
" (ii) constitutes a research facility used in connection with 
any of the activities referred to in clause (i), or 
"(iii) constitutes a facility used in connection with any of 
the activities referred to in clause (i) for the bulk storage of 
fungible commodities (including commodities in a liquid or 
gaseous state), or". 
(2) CONFORMING AMENDMENT.—Section 1245 (a) (3) (B) (relat- 
76 stat. 1032. 
ing to other property constituting section 1245 property) is 
amended by striking out "or" at the end of clause (i), and by 
striking out clause (ii) and inserting in lieu thereof the follow-
"(ii) constituted a research facility used in connection 
with any of the activities referred to in clause (i), or 
" (iii) constituted a facility used in connection with any of 
the activities referred to in clause (i) for the bulk storage of 
fungible commodities (including commodities in a liquid or 
gaseous state),". 
(b) COIN-OPERATED MACHINES IN APARTMENT BUILDINGS.—Section 
48(a) (3) (relating to property used for lodging) is amended— 
76 stat, 968. 
(1) by striking out "and" at the end of subparagraph (A), 
(2) by striking out the period at the end of subparagraph (B) 
and inserting in lieu thereof ", and", and 
(3) by adding after subparagraph (B) the following new sub-
paragraph : 
"(C) coin-operated vending machines and coin-operated 
washing machines and dryers." 
(c) 
CERTAIN PROPERTY USED IN FURNISHING COMMUNICATION 
SERVICES.— 
(1) Section 48(a)(5) 
(relating to property used by gov-
ernmental units) is amended by inserting after "international 
organization" the following: "(other than the International 
Telecommunications 
Satellite Consortium or any successor 
organization)". 
(2) Section 48(a)(2)(B) (relating to exceptions from rule 
so stat. 1575. 
for property used outside the United States) is amended by 
striking out "and" at the end of clause (vi), by striking out the 
period at the end of clause (vii) and inserting in lieu thereof a 
semicolon, and by adding at the end thereof the following new 
clause: 
502 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(viii) any communications satellite (as defined in 
section 103(3) of the Communications Satellite Act of 
76 Stat. 419. 
1962, 47 U.S.C, sec. 702(3)), or any interest therein, of a 
United States person;". 
Ante, p. 501, 
(3) Scctiou 48(a) (2) (B) (relating to exceptions from rule for 
property used outside the United States) is amended by inserting 
after clause (viii) (as added by paragraph (2)) the following new 
clause: 
"(ix) any cable, or any interest therein, of a domestic 
corporation engaged in furnishing telephone service to 
Post, p. 503. 
which section 46(c) (3) (B) (iii) applies (or of a wholly 
owned domestic subsidiary of such a corporation), if 
such cable is part of a submarine cable system which con-
stitutes part of a communication link exclusively between 
the United States and one or more foreign countries; 
and", 
(d) 
CERTAIN PROPERTY USED To EXPLORE FOR, DEVELOP, KEMOVE, 
A
N
D TRANSPORT RESOURCES FROM OCEAN WATERS AND SUBMARINE 
DEPOSITS.—Section 48(a)(2)(B) (relating to exceptions from rule for 
property used outside the United States) is amended by inserting after 
clause (ix) (as added by subsection (c) (3)) the following new clause: 
" (x) any property (other than a vessel or an aircraft) 
of a United States person which is used in international 
or territorial waters for the purpose of exploring for, 
developing, removing, or transporting resources from 
ocean waters or deposits under such waters." 
26 use 4^8.^' 
(^) I^ivESTOCK.—Sectiou 48(a)(6) 
(relating to livestock) 
is 
amended to read as follows: 
"(6) LIVESTOCK.—Livestock (other than horses) acquired by 
the taxpayer shall be treated as section 38 property, except that if 
substantially identical livestock is sold or otherwise disposed of 
by the taxpayer during the one-year period beginning 6 months 
84 Stat. 2060. 
bcforc the date of such acquisition and if section 47(a) (relating 
to certain dispositions, etc., of section 38 property) does not apply 
to such sale or other disposition, then, unless such sale or other 
disposition constitutes an involuntary conversion (within the 
68A Stat. 303. 
meaning of section 1033), the cost of the livestock acquired shall, 
for purposes of this subpart, be reduced by an amount equal to 
the amount realized on such sale or other disposition. Horses shall 
not be treated as section 38 property." 
(f) 
AMORTIZED PROPERTY.— 
(1) I N GENERAL.—Section 48(a) (relating to definition of sec-
tion 38 property) is amended by adding after paragraph (7) (as 
added by section 103 of this Act) the following new paragraph: 
"'(8) AMORTIZED PROPERTY.—Any property with respect to 
>.f,V!^T\VI.' 
which an election under section 167(k), 169, 184, 187, or 188 
Post,p, 521. 
applies shall not be treated as section 38 property. In the case 
of any property to which section 169 applies, the preceding sen-
tence shall apply only to so much of the adjusted basis of the 
property as (after the application of section 169(f)) constitutes 
the amortizable basis for purposes of section 169." 
(2) CONFORMING AMENDMENT.—Section 169 (relating to amor-
tization of pollution control facilities) is amended by striking 
out subsection (h). 
(g) EAILROAD TRACK.—Section 48(a) (relating to definition of 
section 38 property) is amended by inserting after paragraph (8) (as 
added by subsection (f)) the following new paragraph: 
"(9) RAILROAD TRACK.—In the case of a railroad (including a 
railroad switching or terminal company) which uses the retire-
ment-replacement method of accounting for depreciation of its 
"Track mate-
rial." 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
503 
railroad track, the term 'section 38 property' includes replace- 
"section 38 
ment track material, if— 
proper y. 
"(A) the replacement is made pursuant to a scheduled 
program for replacement, 
"(B) the replacement is made pursuant to observations by 
maintenance-of-way personnel of specific track material 
needing replacement, 
"(C) the replacement is made pursuant to the detection 
by a rail-test car of specific track material needing replace-
ment, or 
"(D) the replacement is made as a result of a casualty. 
Replacements made as a result of a casualty shall be section 38 
property only to the extent that, in the case of each casualty, the 
qualified investment with respect to the replacement track material 
exceeds $5(),()()0. For purposes of this paragraph, the term 'track 
material' includes ties, rail, other track material, and ballast." 
(h) EFFECTIVE DATES.—The amendments made by this section 
(other than by subsections (c)(1), (c)(2), and (g)) shall apply to 
property described in section 50 of the Internal Revenue Code of 
1954. The amendments made by subsections (c) (1), (c) (2), and (g) 
^"'®' P* ^SS. 
shall apply to taxable years ending after December 31,1961. 
SEC. 105. REGULATED COMPANIES. 
(a) INCREASE IN QUALIFIED INVESTMENT FOR PUBLIC UTILITY PROP-
ERTY.—Section 46(c) (3) (A) (relating to qualified investment in case 
^^ ^^^^ 963. 
of public utility property) is amended by striking out "3/7" and 
inserting in lieu thereof "4/7". 
(b) 
DEFINITION 
OF PUBLIC 
UTILITY 
PROPERTY, ETC.—Section 
46(c) (3) (relating to public utility property) is amended— 
(1) by inserting "or" at the end of clause (ii) of subpara-
graph (B), and by striking out clauses (iii) and (iv) of such 
subparagraph and inserting in lieu thereof the following: 
"(iii) telephone service, telegraph service by means of 
domestic telegraph operations (as defined in section 222(a) 
(5) of the Communications Act of 1934, as amended; 47 
U.S.C., sec. 222(a)(5)), or other communication services 
s? stat. s. 
(other than international telegraph service),"; 
(2) by adding at the end of subparagraph (B) the following 
new sentence: "Such term also means communication property of 
the type used by persons engaged in providing telephone or micro-
wave communication services to which clause (iii) applies, if such supra. 
property is used predominantly for communication purposes."; 
and 
(3) by adding after subparagraph (B) the following new 
subparagraph: 
"(C) In the case of any interest in a submarine cable circuit 
used to furnish telegraph service between the United States 
and a point outside the United States of a taxpayer engaged in 
furnishing international telegraph service (if the rates for 
such furnishing have been established or approved by a gov-
ernmental unit, agency, instrumentality, commission, or 
similar body described in subparagraph (B)), the qualified 
investment shall not exceed the qualified investment attrib-
utable to so much of the interest of the taxpayer in the circuit 
as does not exceed 50 percent of all interests in the circuit." 
(c) CREDIT NOT AVAILABLE IN CERTAIN CASES.—Section 46 (relat- 
^^ ^
*
^
*
* ^^^* 
ing to amount of credit) is amended by adding at the end thereof the 
following new subsection: 
504 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(e) 
LIMITATION IN CASE OF CERTAIN EEGULATED COMPANIES.— 
"(1) GENERAL RUI^E.—Except as otherwise provided in this 
26 us^c 3^8.^' 
subsection, no credit shall be allowed by section 38 with respect 
Ante, p. 498. 
to any property described in section 50 which is public utility 
property (as defined in paragraph (5)) of the taxpayer— 
"(A) COST OF SERVICE REDUCTION.—If the taxpayer's cost 
of service for ratemaking purposes is reduced by reason of 
any portion of the credit allowable by section 38 (determined 
without regard to this subsection); or 
"(B) RATE BASE REDUCTION.—If the base to w^hich the tax-
payer's rate of return for ratemaking purposes is applied is 
reduced by reason of any portion of the credit allowable by 
section 38 (determined without regard to this subsection). 
Subparagraph (B) shall not apply if the reduction in the rate 
base is restored not less rapidly than ratably. If the taxpayer 
makes an election under this sentence within 90 days after the 
date of the enactment of this paragraph in the manner pre-
scribed by the Secretary or his delegate, the immediately pre-
ceding sentence shall not apply to property described in para-
graph (5) (B) if any agency or instrumentality of the United 
States having jurisdiction for ratemaking purppses with respect 
to such taxpayer's trade or business referred to in paragraph 
(5) (B) determines that the natural domestic supply of the prod-
uct furnished by the taxpayer in the course of such trade or busi-
ness is insufficient to meet the present and future requirements 
of the domestic economy. 
"(2) SPECIAL RULE FOR RATABLE FLOW-THROUGH.—If the tax-
payer makes an election under this paragraph within 90 days 
after the date of the enactment of this paragraph in the manner 
prescribed by the Secretary or his delegate, paragraph (1) shall 
not apply, but no credit shall be allow^ed by section 38 with 
respect to any property described in section 50 Avhich is public 
utility property (as defined in paragraph (5)) of the taxpayer— 
"(A) COST OF SERVICE REDUCTION.—If the taxpayer's cost 
of service for ratemaking purposes or in its regulated books 
of account is reduced hj more than a ratable portion of the 
credit allowable by section 38 (determined without regard to 
this subsection), or 
"(B) RATE BASE REDUCTION.—If the base to which the tax-
payer's rate of return for ratemaking purposes is applied is 
reduced by reason of any portion of the credit allowable by 
section 38 (determined without regard to this subsection). 
"(3) 
SPECIAL RULE FOR IMMEDIATE FLOW-THROUGH IN CERTAIN 
83 Stat. 625. 
CASES.—lu the casc of property to which section 167(1) (2) (C) 
applies, if the taxpayer makes an election under this paragraph 
within 90 days after the date of the enactment of this paragraph 
in the manner prescribed by the Secretary or his delegate, para-
graphs (1) and (2) shall not apply to such property. 
"(4) 
LIMITATION.— 
"(A) I N GENERAL.—The requirements of paragraphs (1) 
and (2) regarding cost of service and rate base adjustments 
shall not be applied to public utility property of the taxpayer 
to disallow the credit with respect to such property before 
the first final determination which is inconsistent with para-
graph (1) or (2) (as the case may be) is put into effect with 
respect to public utility property (to which this subsection 
applies) of the taxpayer. Thereupon, paragraph (1) or (2) 
shall apply to disallow the credit with respect to public utility 
property (to which this subsection applies) placed in service 
by the taxpayer— 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
505 
"(i) before the date that the jfirst final determination, 
or a subsequent determination, which is inconsistent with 
paragraph (1) or (2) (as the case may be) is put into 
effect, and 
"(ii) on or after the date that a determination referred 
to in clause (i) is put into effect and before the date that 
a subsequent determination thereafter which is consistent 
with paragraph (1) or (2) (as the case may be) is put 
into effect. 
"(B) DETERMINXVTIONS.—For purposes of this paragraph, 
a determination is a determination made with respect to 
public utility property (to which this subsection applies) by 
a governmental unit, agency, instrumentality, or commission 
or similar body described in subsection (c)(3)(B) which 
Ante, P, 503. 
determines the effect of the credit allowed by section 38 
26u'sc3^8^' 
(determined without regard to this subsection)— 
"(i) on the taxpayer's cost of service or rate base for 
ratemaking purposes, or 
"(ii) in the case of a taxpayer which made an elec-
tion under paragraph (2), on the taxpayer's cost of serv-
ice for ratemaking purposes or in its regulated books of 
account or rate base for ratemaking purposes. 
"(C) SPECIAL RULES.—For purposes of this paragraph— 
"(i) a determination is final if all rights to appeal or 
to request a review, a rehearing, or a redetermination, 
have been exhausted or have lapsed, 
"(ii) the first final determination is the first final 
determination made after the date of the enactment of 
this subsection, and 
"(iii) a subsequent determination is a determination 
subsequent to a final determination. 
"(5) PUBLIC UTILITY PROPERTY.—For purposes of this subsec-
tion, the term 'public utility property' means— 
"(A) property which is public utility property within the 
meaning of subsection (c) (3) (B), and 
"(B) property used predominantly in the trade or busi-
ness of the furnishing or sale of (i) steam through a local 
distribution system or (ii) the transportation of gas or steam 
by pipeline, if the rates for such furnishing or sale are estab-
lished or approved by a governmental unit, agency, instru-
mentality, or commission described in subsection (c)(3)(B). 
"(6) RATABLE PORTION.—For purposes of determining ratable 
restorations to base under paragraph (1) and for purposes of 
determining ratable portions under paragraph (2) (A), the 
Ante, P. 504. 
period of time used in computing depreciation expense for pur-
poses of reflecting operating results in the taxpayer's regulated 
books of account shall be used. 
"(7) REORGANIZATIONS, ASSETS ACQUISITIONS, ETC.—If by rea-
son of a corporate reorganization, by reason of any other acquisi-
tion of the assets of one taxpayer by another taxpayer, by reason 
of the fact that any trade or business of the taxpayer is subject to 
ratemaking by more than one body, or by reason of other circum-
stances, the application of any provisions of this subsection to 
any public utility property does not carry out the purposes of 
this subsection, the Secretary or his delegate shall provide by 
regulations for the application of such provisions in a manner 
consistent with the purposes of this subsection." 
(d) EFFECTIVE DATE.—The amendments made by this section shall 
apply to property described in section 50 of the Internal Revenue 
Code of 1954. 
Ante, P. 498. 
506 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
26 u s e 38 note. 
Ante, p. 503. 
(e) APPLICATION OF SECTION 203(e) OF REVENUE ACT OF 1964.— 
II f/cA' ,\^1„.. 
Section 203(e) of the Revenue Act of 1964 shall not apply to public 
utility property to which section 46(e) of the Internal Revenue Code 
of 1954 (as added by subsection (c)) applies. 
SEC. 
1
0
6
. 
INVESTMENT 
CREDIT 
CARRYOVERS 
AND 
CARRYBACKS. 
i^starVa^i"' 
^^) PRIORITY OF APPLICATION.—Section 46(b) (relating to carry-
3 Stat! 666^ 
baclv and carryover of unused credits) is amended by inserting after 
paragraph (2) the following new paragraph: 
"(3) 
SPECIAL RULES FOR CARRYOVERS FROM PRE-I9 7I 
UNUSED 
CREDIT YEARS.—The extent to which an investment credit carry-
over from an unused credit year ending before January 1, 1971, 
may be added under paragraph (1) for a taxable year beginning 
after December 31, 1970, shall be determined without regard to 
paragraph (2) (A). In determining the excess under paragraph 
(1) for any taxable year beginning after December 31, 1970, the 
limitation provided by subsection (a) (2) for such taxable year 
shall be reduced by the investment credit carryovers from such 
unused credit years (to the extent such unused credit may not be 
added for a prior taxable year)." 
80 Stat. 1514. 
(|3^ EXTENSION OF C
A
R
R
Y
O
V
E
R PERIOD.—Sectioii 46(b) (1) (relating 
to allowance of carryback and carryover of unused credits) is amended 
by adding at the end thereof the following new sentence: "In the case 
of an unused credit for an unused credit year ending before January 1, 
1971, which is an investment credit carryover to a taxable year begin-
ning after December 31, 1970 (determined without regard to this 
sentence), this paragraph shall be applied by substituting '10 taxable 
years' for '7 taxable years' in subparagraph (B) and by substituting 
'13 taxable years' for '10 taxable years' and '12 taxable years' for '9 
taxable years' in the preceding sentence." 
(c) 
REMOVAL OF 20-PERCENT LIMITATION 
ON L^SE OF CARRYOVERS 
AND CARRYBACKS.— 
(1) REMOVAL OF LIMITATION.—Section 46(b)(5) (relating to 
carryback and carryover of unused credits to taxable years begin-
ning after December 31,1968, and ending after April 18,1969) is 
amended— 
(A) by striking out the heading and inserting: 
"(5) 
CERTAIN TAXABLE YEARS ENDING I N I 9 6 9 , IOTO, OR I Q T I . — " , 
and 
(B) by striking out "ending after April 18, 1969," and 
inserting in lieu thereof "ending after April 18, 1969, and 
before January 1,1972,", and 
(C) by adding at the end thereof the following new sen-
tence : 
"In the case of a taxable year ending after August 15, 1971, and 
before January 1,1972, the percentage contained in the preceding 
sentence shall be increased by 6 percentage points for each month 
(or portion thereof) in the taxable year after August 15, 1971." 
(2) 
CONFORMING AMENDMENT TO ADDITIONAL 3-YEAR CARRYOVER 
PROVISION.—Section 46(b)(6) 
(relating to additional 
3-year 
carryover period in certain cases) is amended— 
(A) by striking out "ending after April 18, 1969," and 
inserting in lieu thereof "ending after April 18, 1969, and 
before January 1,1971,", and 
(B) by striking out "following the last taxable year for 
which such portion may be added under paragraph (1)" and 
inserting in lieu thereof "following the 7th taxable year after 
the unused credit year". 
(d) EFFECTIVE DATES.—The amendments made by subsections (a), 
(b), and (c) (2) shall apply to taxable years beginning after Decern-
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
507 
ber 31, 1970. The amendments made by subsection (c) (1) shall apply 
to taxable years ending after August 15,1971. 
SEC. 107. TREATMENT OF CASUALTIES AND CERTAIN REPLACEMENTS. 
(a) 
CASUALTIES TREATED AS DISPOSITIONS.— 
(1) Sections 46(c)(4) 
(relating to certain replacements of 
Repeals. 
section 38 property) and 47 (a) (4) (relating to property destroyed 
76 stau 9
^
6
3
.
^
^ 
by casualty, etc.) are hereby repealed. 
' 
(2) The repeals made by paragraph (1) shall apply to casual- 
Effective date, 
ties and thefts occurring after August 15, 1971. 
(b) 
CERTAIN REPLACEMENTS DURING TERMINATION PERIOD.— 
(1) Section 47(a)(5) (relating to certain property replaced 
Repeal. 
after April 18,1969) is hereby repealed. 
(2) The repeal made by paragraph (1) shall not apply if 
replacement property described in subparagraph (B) of such sec-
tion 47(a) (5) is not property described in section 50 of the Inter-
nal Revenue Code of 1954. 
^nte. p. 498. 
SEC. 108. AVAILABILITY OF CREDIT TO CERTAIN LESSORS. 
(a) I N GENERAL.—Section 46(d) (relating to limitations with 
^^ ^'^** ^^^' 
respect to certain persons) is amended by adding at the end thereof the 
following new paragraph: 
"(3) NONCORPORATE LESSORS.—^A credit shall be allowed by sec-
tion 38 to a person which is not a corporation with respect to 
property of which such person is the lessor only if— 
"(A) the property subject to the lease has been manu-
factured or produced by the lessor, or 
"(B) the term of the lease (taking into account options 
to renew) is less than 50 percent of the useful life of the 
property, and for the period consisting of the first 12 months 
after the date on which the property is transferred to the 
lessee the sum of the deductions with respect to such prop-
erty which are allowable to the lessor solely by reason of 
section 162 (other than rents and reimbursed amounts with ^^^ 
^*7i'o^^' 
respect to such property) exceeds 15 percent of the rental 
income produced by such property. 
In the case of property of which a partnership is the lessor, the 
credit otherwise allowable under section 38 with respect to such 
property to any partner which is a corporation shall be allowed 
notwithstanding the first sentence of this paragraph. For pur-
poses of this paragraph, an electing small business corj^oration 
(as defined in section 1371) shall be treated as a person which is 
^2 stat. leso; 
j_ 
,' 
*^ 
78 Stat* 112« 
not a corporation. 
(b) CREDIT MAY B E USED BY LESSEE.—Section 48(d) (relating to 
i^fra. 
certain leased property) is amended by striking out "section 46(d)" 
and inserting in lieu thereof "section 46 (d) (1)". 
(c) CERTAIN PROPERTY LEASED FOR SHORT TERM.—Section 48(d) 
7 6 stat. 967; 
(relating to investment credit for certain leased property) is amended 
to read as follow^s: 
"(d) CERTAIN LEASED PROPERTY.— 
"(1) GENERAL RULE.—A person (other than a person referred 
to in section 46(d) (1)) who is a lessor of property may (at such 
time, in such manner, and subject to such conditions as are pro-
vided by regulations prescribed by the Secretary or his delegate) 
elect with respect to any new section 38 property (other than prop-
erty described in paragraph (4)) to treat the lessee as having 
acquired such property for an amount equal to— 
"(A) except as provided in subparagraph (B), the fair 
market value of such property, or 
"(B) if the property is leased by a corporation which is a 
component member of a controlled group (within the meaning 
508 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
26 u*sc'4^6°/' 
^f section 46(a) (5)) to another corporation which is a com-
ponent member of the same controlled group, the basis of such 
property to the lessor. 
" (2) SPECIAL RULE FOR CERTAUST SHORT TERM LEASES.— 
" (A) I N GENERAL.—A person (other than a person referred 
76 Stat. 965. 
^^ jj^ scctlon 46(d) (1)) who is a lessor of property described 
in paragraph (4) may (at such time, in such manner, and 
subject to such conditions as are provided by regulations 
prescribed by the Secretary or his delegate) elect with respect 
to such property to treat the lessee as having acquired a por-
tion of such property for the amount determined under sub-
paragraph (B). 
"(B) DETERMINATION 
or 
LESSEE'S 
INVESTMENT.—The 
amount for which a lessee of property described in paragraph 
(4) shall be treated as having acquired a portion of such 
property is an amount equal to a fraction, the numerator of 
which is the term of the lease and the denominator of which 
is the class life of the property leased (determined under 
^"^'•a- 
section 167(m)), of the amount for which the lessee would 
be treated as having acquired the property under paragraph 
(1). 
"(C) DETERMINATION OF LESSOR'S QUALIFIED INVESTMENT.— 
The qualified investment of a lessor of property described in 
paragraph (4) in any such property with respect to which 
he has made an election under this paragraph is an amount 
equal to his qualified investment in such property (as deter-
Ante, p. 499, 
mined under section 46(c)) multiplied by a fraction equal to 
' 
' 
the excess of one over the fraction used under subparagraph 
(B) to determine the lessee's investment in such property. 
"(3) LIMITATIONS.—The elections provided by paragraphs (1) 
and (2) may be made with respect to property which would be 
new section 38 property if acquired by the lessee. For purposes of 
the preceding sentence and section 46(c), the useful life of prop-
erty in the hands of the lessee is the useful life of such property m 
the hands of the lessor. If a lessor makes the election provided by 
paragraph (1) with respect to any property, the lessee shall be 
treated for all purposes of this subpart as having acquired such 
property. If a lessor makes the election provided by paragraph 
(2) with respect to any property, the lessee shall be treated for 
all purposes of this subpart as having acquired a fractional por-
tion of such property equal to the fraction determined under 
paragraph (2)(B) w^ith respect to such property. 
"(4) PROPERTY TO WHICH PARAGRAPH (2) APPLIES.—Paragraph 
(2) shall apply only to property which— 
" (A) is new section 38 property, 
"(B) has a class life (determined under section 167(m)) in 
excess of 14 years, 
"(C) is leased for a period which is less than 80 percent of 
its class life, and 
"(D) is not leased subject to a net lease (within the mean-
post, p. 522. 
ing of section 57(c) (2))." 
(d) EFFECTIVE DATES.—The amendments made by subsections (a) 
and (b) shall apply to leases entered into after September 22, 1971. 
The amendment made by subsection (c) shall apply to leases entered 
into after November 8,1971. 
SEC. 109. REASONABLE ALLOWANCE FOR DEPRECIATION; REPAIR 
ALLOWANCE. 
^I^st^t* 51; 
(a) Section 167 (relating to depreciation) is amended by redesignat-
ing subsection (m) as subsection (n) and by inserting after subsection 
(1) the following new subsection: 
85 STAT.] 
PUBLIC LAW 92-178-DEC. 10, 1971 
509 
"(m) CLASS LIVES.— 
"(1) I N GENERAL.—In the case of a taxpayer who has made an 
election under this subsection for the taxable year, the term 
"Reasonable 
'reasonable allowance' as used in subsection (a) means (with ^"°^^"'=^'" 
respect to property which is placed in service during the taxable 
year and which is included in any class for which a class life has 
Deen prescribed) only an allowance based on the class life pre-
scribed by the Secretary or his delegate which reasonably renects 
the anticipated useful life of that class of property to the industry 
or other group. The allowance so prescribed may (under regula-
tions prescribed by the Secretary or his delegate) permit a var-
iance from any class life by not more than 20 percent (rounded to 
the nearest half year) of such life. 
"(2) 
CERTAIN FIRST-YEAR CONVENTIONS NOT PERMITTED.—No 
convention with respect to the time at which assets are deemed 
placed in service shall be permitted under this section which gen-
erally would provide greater depreciation allowances during the 
taxable year in which the assets are placed in service than would 
be permitted if all assets were placed m service ratably throughout 
the year and if depreciation allowances were computed without 
regard to any convention. 
"(3) MAKING OF ELECTION.—An election under this subsection 
for any taxable year shall be made at such time, in such manner, 
and subject to such conditions as may be prescribed by the Sec-
retary or his delegate by regulations." 
(b) 
REASONABLE REPAIR ALI 
^ANCE.—Section 263 (relating to ssstat^Tr^'''^' 
capital expenditures) is amendea by adding at the end thereof the 
26 use 26*3. 
following new subsection: 
"(f) REASONABLE REPAIR ALLOWANCE.—The Secretary or his dele-
gate may by regulations provide that che taxpayer may make an 
election under which amounts representing either repair expenses or 
specified repair, rehabilitation, or improvement expenditures for any 
class of depreciable property— 
"(1) are allowable as a deduction under section 162(a) or 212 
^SA stat. 4s,69. 
(whichever is appropriate) to the extent of the repair allowance 
for that class, and 
"(2) to the extent such amounts exceed for the taxable year 
such repair allowance, are chargeable to capital account. 
Any allowance prescribed under this subsection shall reasonably reflect 
the anticipated repair experience of the class of property in the 
industry or other group." 
(c) RAILROAD ROLLING STOCK.—Section 263 (e) (relating to expendi-
tures in connection with certain railroad rolling stock) is amended— 
(1) by striking out "shall be treated" and inserting in lieu 
thereof "shall, at the election of the taxpayer, be treated", and 
(2) by adding at the end thereof the following new sentences: 
"An election under this subsection shall be made for any taxable 
year at such time and in such manner as the Secretary or his 
delegate prescribes by regulations. An election may not be made 
under this subsection for any taxable year to which an election 
under subsection (f) applies to railroad rolling stock (other than 
locomotives)." 
(d) EFFECTIVE DATES.— 
(1) The amendments made by subsection (a) shall apply to 
property placed in service after December 31, 1970. 
(2) The amendment made by subsection (b) shall apply to 
taxable years ending after December 31,1970. 
(3) The amendments made by subsection (c) shall apply to 
taxable years beginning after December 31, 1969. 
510 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(e) 
TKANSITIONAL, RULES,— 
(1) REAL PROPERTY.—In the case of buildings and other items 
of section 1250 property for which a separate guideline life is pre-
scribed in Revenue Procedure 62-21 (as amended and supple-
mented), the class lives first prescribed by the Secretary of the 
Treasury or his delegate under section 167(m) of the Internal 
Ante, p. 508. 
RevBuue Code of 1954 shall be the same as the guideline lives for 
such property in effect on December 31, 1970. Any such property 
which is placed in service by the taxpayer during the period begin-
ning on January 1, 1971, and ending on December 31, 1973 (or 
such earlier date on which a class life subsequently prescribed by 
the Secretary of the Treasury or his delegate under such section 
becomes effective for such property) may, in accordance with 
regulations prescribed by the Secretary of the Treasury or his 
delegate, be excluded by the taxpayer from an election under such 
section if a life for such property shorter than the class life pre-
scribed in accordance with the preceding sentence is justified under 
Revenue Procedure 62-21 (as amended and supplemented). 
(2) SUBSIDIARY ASSETS.—If a significant portion of a class of 
property first prescribed by the Secretary of the Treasury or his 
delegate under section 167(m) of the Internal Revenue Code of 
1954 consists of subsidiary assets, all such subsidiary assets in such 
class placed in service by the taxpayer during the period begin-
ning on January 1,1971, and ending on December 31,1973 (or such 
earlier date on which a class which includes such subsidiary ass^ets 
subsequently prescribed by the Secretary of the Treasury or his 
delegate under such section becomes effective), may, in accordance 
with regulations prescribed by the Secretary of the Treasury or 
his delegate, be excluded by the taxpayer from an election under 
such section. 
TITLE 
II—CHANGES 
IN 
PERSONAL 
EXEMPTIONS, 
MINIMUM STANDARD 
DEDUCTION, WITHHOLDING, ETC. 
SEC. 201. INCREASE IN PERSONAL EXEMPTION. 
(a) INCREASE IN PERSONAL EXEMPTION TO $675 FOR 1971.—Effective 
with respect to taxable years beginning after December 31, 1970, and 
before January 1, 1972— 
ssstat^Tvel^' 
^^^ section 151 (relating to allowance of deductions for per-
26 use 15*1. 
sonal exemptions) is amended by striking out "$650" each place 
it appears and inserting in lieu thereof "$675"; and 
(2) section 6013(b) (3) (A) (relating to assessment and collec-
tion in case of certain returns of husband and wife) is amended 
by striking out "$650" each place it appears and inserting in lieu 
thereof "$675"; and by striking out "$1,300" each place it appears 
and inserting in lieu thereof "$1,350". 
(b) INCREASE IN PERSONAL EXEMPTION TO $750 FOR 1972 AND SUB-
SEQUENT YEARS.—Effective with respect to taxable years beginning 
after December 31,1971— 
(1) section 151 (relating to allowance of deductions for per-
sonal exemptions) is amended by striking out "$675" each place 
it appears and inserting in lieu thereof 
$750"; and 
(2) section 6013(b)(3)(A) (relating to assessment and col-
lection in the case of certain returns of husband and wife) is 
amended by striking out "$675" each place it appears and insert-
ing in lieu thereof "$750"; and by striking out "$1,350" each 
place it appears and inserting in lieu thereof "$1,500". 
26 u s e 141. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
511 
(c) TECHNICAL AMENDMENT.—Subsections (c) and (d) of section 
Repeal. 
801 of the Tax Reform Act of 1969 are hereby repealed. 
83 st^«^- f^s. 
SEC. 202. INCREASE IN PERCENTAGE STANDARD DEDUCTION. 
6013. 
Effective with respect to taxable years beginning after December 31, 
1971, the last two lines in the table in section 141(b) (relating to per- 
^^ stat. 67«5. 
centage standard deduction) are amended to read as follows: 
"1972 and thereafter 
15 
2, 000". 
SEC. 203. LOW INCOME ALLOWANCE. 
(a) ELIMINATION OF PHASEOUT FOR 1971.—Effective with respect to 
taxable years beginning after December 31,1970, and before January 
1,1972, section 141(c) (relating to low income allowance) is amended 
to read as follows: 
"(c) Low INCOME ALLOWANCE.—The low income allowance is 
$1,050 ($525 in the case of a married individual filing a separate 
return)." 
(b) 
INCREASE OF Low INCOME ALLOWANCE FOR 1972 AND THERE-
AFTER.—Effective with respect to taxable years beginning after Decem-
ber 31, 1971, section 141(c) (relating to low income allowance) is 
amended to read as follows: 
"(c) Low INCOME ALLOWANCE.—The low income allowance is 
$1,300 ($650 in the case of a married individual filing a separate 
return)." 
(c) TECHNICAL AMENDMENT.—Section 802(e) of the Tax Reform 
^^^fsp' 
Act of 1969 is hereby repealed. 
SEC. 204. FILING REQUIREMENTS. 
(a) I N GENERAL.—Effective with respect to taxable years beginning 
after December 31, 1971, section 6012(a)(1) 
(relating to persons 
s3 stat. 726. 
required to make returns of income) is amended— 
(1) by striking out "$600" each place it appears and inserting 
in lieu thereof "$750"; 
(2) by striking out "$1,700" each place it appears and insert-
ing in lieu thereof "$2,050"; 
(3) by striking out "$2,300" each place it appears and insert-
ing in lieu thereof "$2,800"; and 
(4) by inserting after subparagraph (B) the following new 
subparagraph: 
"(C) Every individual having for the taxable year a 
gross income of $750 or more and to whom section 141(e) 
P°^^' P* ^20. 
(relating to limitations in case of certain dependent tax-
payers) applies;". 
(b) TECHNICAL AMENDMENT.—Section 941(d) of the Tax Reform 
ga^^^a^* 72,-
Act of 1969 is hereby repealed. 
26 usV 60]'2 
SEC. 205. CERTAIN FISCAL YEAR TAXPAYERS. 
"°'*-
Section 21 (relating to effect of changes) is amended by adding at g,^!'^ ^*^*' ^^' 
the end thereof the following new subsection: 
"(e) CHANGES MADE BY REVENUE ACT OF 1971.—In applying sub-
section (a) to a taxable year of an individual which is not a calendar 
year, each change made by the Revenue Act of 1971 in section 141 
Supra; Poat, 
(relating to the standard deduction) and section 151 (relating to per- ^'^nte p. sio. 
sonal exemptions) shall be treated as a change in a rate of tax." 
SEC. 206. ELECTION OF STANDARD DEDUCTION. 
Effective with respect to taxable years beginning after December 31, 
1970, section 144 (relating to election of standard deduction) is 
^^A stat. AU 
amended by striking out "$5,000" each place it appears and inserting 
in lieu thereof "$10,000". 
78 Stat. 24, 110. 
512 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
68A Stat. 823. 
26 u s e 6654. 
83 Stat. 682. 
68A Stat. 733; 
84 Stat. 2063. 
69 Stat. 616; 
79 Stat. 383. 
83 Stat. 686. 
SEC. 207. WAIVER OF PENALTY FOR UNDERPAYMENT OF 1
&
7
1 ESTI-
MATED INCOME TAX. 
(a) WAIVER OF PENALTY.—Notwithstanding any other provision of 
law, section 6654(a) of the Internal Revenue Code of 1954 (relating to 
addition to tax for failure by individual to pay estimated income tax) 
shall not apply to any taxable year beginning after December 31,1970, 
and ending before January 1,1972— 
(1) if gross income for the taxable year does not exceed $10,000 
in the case of— 
(A) a single individual other than a head of a household 
(as defined in section 2(b) of such Code) or a surviving 
spouse (as defined in section 2(a) of such Code) ; or 
(B) a married individual not entitled under section 6013 
of such Code to file a joint return for the taxable year; or 
(2) if gross income for the taxable year does not exceed $20,000 
in the case of— 
(A) a head of a household (as defined in section 2(b) of 
such Code); or 
(B) a surviving spouse (as defined in section 2(a) of such 
Code) ; or 
(3) in the case of a married individual entitled under section 
6013 of such Code to file a joint return for the taxable year, if 
the aggregate gross income of such individual and his spouse lor 
the taxable year does not exceed $20,000. 
(b) LIMITATION.—Subsection (a) shall not apply if the taxpayer 
has income from sources other than wages (as defined in section 3401 
(a) of such Code) in excess of $200 for the taxable year ($400 in the 
case of a husband and wife entitled to file a joint return under section 
6013 of such Code for the taxable year). 
SEC. 208. ADJUSTMENT OF WITHHOLDING. 
(a) REQUIREMENT OF WITHHOLDING.—Section 3402(a) 
(relating 
to requirement of withholding) is amended by striking out para-
graphs (1) through (5) and inserting in lieu thereof the following: 
'Table 1.—If the payroll period with respect to an employee is WEEKLY 
"(a) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $11 
0. 
Over $11 but not over $35 
14% of excess over $11. 
Over $35 but not over $73 
$3.36 plus 18% of excess over $35. 
Over $73 but not over $202 
$10.20 plus 21% of excess over $73. 
Over .$202 but not over $231 
$37.29 plus 23% of excess over $202. 
Over $231 but not over $269 
$43.96 plus 27% of excess over $231. 
Over $269 but not over $333 
$54.22 plus 31% of excess over $269. 
Over $333 
$74.06 plus 35% of excess over .$333. 
"(b) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $11 
0. 
Over $11 but not over $39 
14% of excess over $11. 
Over $39 but not over $167 
$3.92 plus 16% of excess over $39. 
Over $167 but not over $207 
$24.40 plus 20% of excess over $167. 
Over $207 but not over $324 
$32.40 plus 24% of excess over $207. 
Over $324 but not over $409 
$60.48 plus 28% of excess over $324. 
Over $409 but not over $486 
$84.28 plus 32% of excess over $409. 
Over $486 
$108.92 plus 36% of excess over $486. 
85 STAT.] 
PUBLIC LAW 92-178-DEC. 10, 1971 
513 
"Table 2.—If the payroll period with respect to an employee is BIWEEKLY 
" ( a ) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $21 
0. 
Over $21 but not over $69 
14% of excess over $21. 
Over $69 but not over $146 
$6.72 plus 18% of excess over $69. 
Over $146 but not over $404 
$20.58 plus 21% of excess over $146. 
Over $404 but not over $462 
$74.76 plus 23% of excess over $404. 
Over $462 but not over $538 
$88.10 plus 27% of excess over $462. 
Over $538 but not over $665 
$108.62 plus 31% of excess over $538. 
Over $665 
$147.99 plus 35% of excess over $665. 
" ( b ) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $21 
0. 
Over $21 but not over $79 
14% of excess over $21. 
Over $79 but not over $335 
$8.12 plus 16% of excess over $79. 
Over $335 but not over $413 
$49.08 plus 20% of excess over $335. 
Over $413 but not over $648 
$64.68 plus 24% of excess over $413. 
Over $648 but not over $817 
$121.08 plus 28% of excess over $648. 
Over $817 but not over $971 
$168.40 plus 32% of excess over $817. 
Over $971 
$217.68 plus 36% of excess over $971. 
"Table 3.—If the payroll period with respect to an employee is SEMIMONTHLY 
"(a) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $23 
0. 
Over $23 but not over $75 
14% of excess over $23. 
Over $75 but not over $158 
$7.28 plus 18% of excess over $75. 
Over $158 but not over $438 
$22.22 plus 21% of excess over $158. 
Over $438 but not over $500 
$81.02 plus 23%, of excess over $438. 
Over $500 but not over $583 
$95.28 plus 27% of excess over $500. 
Over $583 but not over $721 
$117.69 plus 31% of excess over $583. 
Over $721 
$160.47 plus 35% of excess over $721. 
"(b) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $23 
0. 
Over $23 but not over $85 
14% of excess over $23. 
Over $85 but not over $363 
$8.68 plus 16% of excess over $85. 
Over $363 but not over $448 
$53.16 plus 20% of excess over $363. 
Over $448 but not over $702 
$70.16 plus 24% of excess over $448. 
Over $702 but not over $885 
$131.12 plus 28% of excess over $702. 
Over $885 but not over $1,052 
$182.36 plus 32% of excess over $885. 
Over $1,052 
$235.80 plus 36% of excess over $1,052. 
"Table 4.—If the payroll period with respect to an employee is MONTHLY 
"(a) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $46 
0. 
Over $46 but not over $150 
14% of excess over $46. 
Over $150 but not over $317 
$14.56 plus 18% of excess over $150. 
Over $317 but not over $875 
$44.62 plus 21% of excess over $317. 
Over $875 but not over $1,000 
$161.80 plus 23% of excess over $875. 
Over $1,000 but not over $1,167 
$190.55 plus 27% of excess over $1,000. 
Over $1,167 but not over $1,442 
$235.64 plus 31% of excess over $1,167. 
Over $1,442 
$320.89 plus 35% of excess over $1,442. 
514 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"Table 4.—If the payroll period with respect to an employee is MONTHLY— 
Continued 
" ( b ) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Nat over $46 
0. 
Over $46 but not over $171 
14% of excess over $46. 
Over $171 but not over $725 
$17.50 plus 16% of excess over $171. 
Over $725 but not over $896 
$106.14 plus 20% of excess over $725. 
Over $896 but not over $1,404 
$140.34 plus 24% of excess over $896. 
Over $1,404 but not over $1,771 
$262.26 plus 28% of excess over $1,404. 
Over $1,771 but not over $2,104 
$365.02 plus 32% of excess over $1,771. 
Over $2,104 
$471.58 plus 36% of excess over $2,104. 
"Table 5.—If the payroll period with respect to an employee is QUARTERLY 
" ( a ) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $138 
0. 
Over $138 but not over $450 
14% of excess over $138. 
Over $450 but not over $950 
$43.68 plus 18% of excess over $450. 
Over $950 but not over $2,625 
$133.68 plus 21% of excess over $950. 
Over $2,625 but not over $3,000 
$485.43 plus 23% of excess over $2,625. 
Over $3,000 but not over $3,500 
$571.68 plus 27% of excess over $3,000. 
Over $3,500 but not over $4,325 
$706.68 plus 31% of excess over $3,500. 
Over $4,325 
$962.43 plus 35% of excess over $4,325. 
"(b) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $138 
0. 
Over $138 but not over $513 
14% of excess over $138. 
Over $513 but not over $2,175 
$52.50 plus 16% of excess over $513. 
Over $2,175 but not over $2,688 
$318.42 plus 20% of excess over $2,175. 
Over $2,688 but not over $4,213 
$421.02 plus 24% of excess over $2,688. 
Over $4,213 but not over $5,313 
$787.02 plus 28% of excess over $4,213. 
Over $5,313 but not over $6,313 
$1,095.02 plus 32% of excess over 
$5,313. 
Over $6,313 
$1,415.02 plus 36% of excess over 
$6,313. 
"Table 6.—If the payroll period with respect to an employee is SEMIANNUAL 
" (a) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $275 
0. 
Over $275 but not over $900 
14% of excess over $275. 
Over $900 but not over $1,900 
$87.50 plus 18% of excess over $900. 
Over $1,900 but not over $5,250 
$267.50 plus 21% of excess over $1,900. 
Over $5,250 but not over $6,000 
$971.00 plus 23% of excess over $5,250. 
Over $6,000 but not over $7,000 
$1,143.50 plus 27% of excess over $6,000. 
Over $7,000 but not over $8,650 
$1,413.50 plus 31% of excess over $7,000. 
Over $8,650 
$1,925.00 plus 35% of excess over $8,650. 
" (b) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $275 
0. 
Over $275 but not over $1,025 
14% of excess over $275. 
Over $1,025 but not over $4,350 
$105.00 plus 16% of excess over $1,025. 
Over $4,350 but not over $5,375 
$637.00 plus 20% of excess over $4,350. 
Over $5,375 but not over $8,425 
$842.00 plus 24% of excess over $5,375. 
Over $8,425 but not over $10,625— 
$1,574.00 plus 28% of excess over 
$8,425. 
Over $10,625 but not over $12,625__ 
$2,190.00 plus 32% of excess over 
$10,625. 
Over $12,625 
$2,830.00 plus 36% of excess over 
$12,625. 
85 STAT. ] 
PUBLIC L
A
W 92-178-DEC. 10, 1971 
"Table 7.—If the payroll period with respect to an employee is ANNUAL 
" (a) Single Person—Including Head of Household: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $550 
0. 
Over $550 but not over $1,800 
14% of excess over $550. 
Over $1,800 but not over $3,800 
$175.00 plus 18% of excess over $1,800. 
Over $3,800 but not over $10,500 
$535.00 plus 21% of excess over $3,800. 
Over $10,500 but not over $12,000— 
$1,942.00 plus 23% of excess over 
$10,500. 
Over $12,000 but not over $14,000— 
$2,287.00 plus 27% of excess over 
$12,000. 
Over $14,000 but not over $17,300— 
$2,827.00 plus 31% of excess over 
$14,000. 
Over $17,300 
$3,850.00 plus 35% of excess over 
$17,300. 
" ( b ) Married Person: 
"If the amount of wages is: 
The amount of income tax to be with-
held shall be: 
Not over $550 
0. 
Over $550 but not over $2,050 
14% of excess over $550. 
Over $2,050 but not over $8,700 
$210.00 plus 16% of excess over $2,050. 
Over $8,700 but not over $10,750 
$1,274.00 plus 20% of excess over 
Over $10,750 but not over $16,850 
$8,700. 
$1,684.00 plus 24% of excess over 
Over $16,850 but not over $21,250 
$10,750. 
$3,148.00 plus 28% of excess over 
Over $21,250 but not over $25,250 
$16,850. 
$4,380.00 plus 32% of excess over 
Over $25,250 
$21,250. 
$5,660.00 plus 36% of excess over 
$25,250. 
"Table 8.—If the payroll period with respect to an employee is a DAILY payroll 
period or a miscellaneous payroll period 
" ( a ) Single Person—Including Head of Household: 
"If the amount of wages divided by the 
The amount of income tax to be with-
number of days in the payroll pe- 
held shall be: 
riod is: 
Not over $1.50 
0. 
Over $1.50 but not over $4.90 
14% of excess over $1.50. 
Over $4.90 but not over $10.40 
$0.48 plus 18% of excess over $4.90. 
Over $10.40 but not over $28.80 
$1.47 plus 21% of excess over $10.40. 
Over $28.80 but not over $32.90 
$5.33 plus 23% of excess over $28.80. 
Over $32.90 but not over $38.40 
$6.27 plus 277o of excess over $32.90. 
Over $38.40 but not over $47.40 
$7.76 plus 31% of excess over $38.40. 
Over $47.40 
$10.55 plus 35% of excess over $47.40. 
"(b) Married Person: 
"If the amount of wages divided by the 
The amount of income tax to be with-
number of days in the payroll pe- 
held shall be: 
riod is: 
Not over $1.50 
0. 
Over $1.50 but not over $5.60 
14% of excess over $1.50. 
Over $5.60 but not over $23.80 
$0.57 plus 16% of excess over $5.60. 
Over $23.80 but not over $29.50 
$3.48 plus 20% of excess over $23.80. 
Over $29.50 but not over $46.20 
$4.62 plus 24% of excess over $29.50. 
Over $46.20 but not over $58.20 
$8.63 plus 28% of excess over $46.20. 
Over $58.20 but not over $69.20 
$11.99 plus 32% of excess over $58.20. 
Over $69.20 
$15.51 plus 36%, of excess over $69.20." 
515 
75-432 O - 72 - 35 
516 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(b) PERCENTAGE METHOD OF WITHHOLDING.— 
26?sc3'4o^2and 
S^^ Sectioii 3402(b) (1) (relating to percentage method of 
note. 
withholding) is amended to read as follows: 
"(1) The table referred to in subsection (a) is as follows: 
"Percentage Method Withholding Table 
Amount of one 
. 
withholding 
Payroll period: 
exemption 
Weekly 
$14. 40 
Biweekly 
28.80 
Semimonthly 
31. 30 
Monthly 
62.50 
Quarterly 
187. 50 
Semiannual 
375. 00 
Annual 
750. 00 
Daily or miscellaneous (per day of such period) 
2.10." 
^^p^^^- 
(2) Paragraphs (3) and (4) of section 805(b) of the Tax 
73 Stat. 118. 
Reform Act of 1969 are hereby repealed. 
(c) 
WITHHOLDING ALLOWANCE FOR STANDARD DEDUCTION.— 
8o^st^at!*59*.^^^' 
(1) Section 3402(f)(1) (relating to withholding exemptions) 
is amended— 
(A) by striking out "and" at the end of subparagraph (E), 
(B) by striking out the period at the end of subparagraph 
(F) and inserting in lieu thereof "; and", and 
(C) by adding at the end thereof the following: 
"(G) a standard deduction allowance which shall be an 
amount equal to one exemption unless (i) he is married (as 
sa^sut^'e?'?^^' 
determined under section 143) and his spouse is an employee 
receiving wages subject to withholding or (ii) he has with-
holding exemption certificates in effect with respect to more 
than one employer. 
For purposes of this title, any standard deduction allowance 
under subparagraph (G) shall be treated as if it were denomi-
nated a withholding exemption." 
(d) WITHHOLDING EXEMPTIONS WHERE EMPLOYEE HAS MORE THAN 
75 Stat. 537. 
ONE EMPLOYER.—Section 3402(f) (relating to withholding exemp-
tions) is amended by adding at the end thereof the following new 
paragraph: 
"(7) 
EXEMPTION WHERE CERTIFICATE WITH ANOTHER EMPLOYER 
IS IN EFFECT.—If a withholding exemption certificate is in effect 
with respect to one employer, an employee shall not be entitled 
under a certificate in effect with any other employer to any with-
holding exemption which he has claimed under such first certifi-
cate." 
(e) 
DETERMINATION OF AMOUNT OF WITHHOLDING ALLOWANCE.— 
83 Stat. 707. 
Scction 3402(m) (1) (B) (relating to withholding allowances based 
on itemized deductions) is amended to read as follows: 
"(B) an amount equal to the lesser of (i) $2,000 or (ii) 
15 percent of his estimated wages." 
(f) WITHHOLDING ALLOWANCE BASED ON PRECEDING YEAR IN CER-
TAIN CASES.—Section 3402 (m) is amended— 
(1) by striking out in the second sentence of paragraph (2) (A) 
"for the taxable year preceding the estimation year" and insert-
ing in lieu thereof "for the taxable year preceding the estimation 
year or (if such a return has not been filed for such preceding 
taxable year at the time the withholding exemption certificate is 
furnished the employer) the second taxable year preceding the 
estimation year", 
83*statr 70?.' 
(2) ^y amending the first sentence of paragraph (2) (D) to 
read as follows: "In the case of an employee who nles his return 
on the basis of a calendar year, the term 'estimation year' means 
the calendar year in which the wages are paid.", and 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
517 
80 Stat. 59, 
26 u s e 3402, 
83 Stat. 693; 
Ante, p. 512. 
83 Stat. 70 4. 
(3) by striking out subparagraphs (B) and (C) of paragraph 
(3), and redesignating subparagraphs (D) and (E) as subpara-
graphs (B) and (C),respectively, 
(g) CONFORMING AMENDMENT.—Section 3402(c)(6) (relating to 83 stat. 705. 
wage bracket withholding) is amended hj striking out "paragraph 
(1), (2), (3), (4), or (5) (whichever is applicable) of". 
(h) FIFTEEN-DAY EXTENSION OF EXISTING WITHHOLDING PROVI-
SIONS.— 
(1) Paragraph (3) of section 3402(a) (relating to requirement 
of withholding) is amended by striking out "January 1,1972" and 
inserting in lieu thereof "January 16,1972". 
(2) Paragraph (2) of section 805(b) of the Tax Reform Act 
of 1969 (relating to percentage method of withholding) is amended 
by striking out "January 1, 1972" and inserting in lieu thereof 
"January 16, 1972". 
(i) EFFECTIVE DATE.— 
(1) The amendments made by this section (other than subsec-
tion (h)) shall apply with respect to wages paid after Jan-
uary 15, 1972. 
(2) The amendments made by subsection (h) shall apply with 
respect to wages paid after December 31, 1971, and before Jan-
uary 16,1972. 
SEC. 209. CHANGES IN REQUIREMENTS OF DECLARATION OF ESTI-
MATED INCOME TAX BY INDIVIDUALS. 
(a) GENERAL RULE.—Section 6015(a) (relating to the requirement 
74 stat. 1000, 
of declaration of estimated income tax by individuals) is amended to 
read as follows: 
" (a) REQUIREMENT OF DECLARATION.—Except as otherwise provided 
in this section, every individual shall make a declaration of his esti-
mated tax for the taxable year if— 
"(1) the gross income for the taxable year can reasonably be 
expected to exceed— 
" (A) $20,000, in the .case of— 
"(i) a single individual, including a head of a house-
hold (as defined in section 2(b)) or a surviving spouse 
(as defined in section 2 (a)) ; or 
"(ii) a married individual entitled under subsection 
(b) to file a joint declaration with his spouse, but only 
if his spouse has not received wages (as defined in sec-
tion 3401 (a)) f 
or the taxable year; or 
7/stalr sssl^' 
"(B) $10,000, in the case of a married individual entitled 
under subsection (b) to file a joint declaration with his spouse, 
but only if both he and his spouse have received wages (as 
defined in section 3401(a)) for the taxable year; or 
"(C) $5,000, in the case of a married individual not 
entitled under subsection (b) to file a joint declaration with 
his spouse; or 
"(2) the gross income can reasonably be expected to include 
more than $500 from sources other than wages (as defined in sec-
tion 3401 (a)). 
Notwithstanding the provisions of this subsection, no declaration is 
required if the estimated tax (as defined in subsection (c)) can rea- 
^° ^
*
^
*
* ^^' 
sonably be expected to be less than $100." 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply with respect to estimated tax for taxable years beginning after 
December 31, 1971. 
83 Stat, 682. 
68A Stat. 737. 
518 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
SEC. 210. CERTAIN EXPENSES TO ENABLE INDIVIDUALS TO BE GAIN-
FULLY EMPLOYED. 
78 Stat. 49. 
(a) I N GENERAL.—Sectioii 214 (relating to expenses for care of cer-
tain dependents) is amended to read as follows: 
"SEC. 
2
1
4
. 
EXPENSES 
FOR 
HOUSEHOLD 
AND 
DEPENDENT 
CARE 
SERV-
ICES 
NECESSARY 
FOR 
GAINFUL 
EMPLOYMENT. 
"(a) ALLOWANCE or DEDUCTION.—In the case of an individual who 
maintains a household which includes as a member one or more quali-
fying individuals (as defined in subsection (b)(1)), there shall be 
allowed as a deduction the employment-related expenses (as defined in 
subsection (b)(2)) paid by him during the taxable year. 
"(b) DEFINITIONS, ETC.—For purposes of this section— 
"(1) QuALiFYixcx INDIVIDUAL.—The term 'qualifying individ-
ual' means— 
"(A) a dependent of the taxpayer who is under the age of 
15 and with respect to whom the taxpayer is entitled to a 
Ante, p. 510. 
deductlou under section 151(e), 
"(B) a dependent of the taxpayer who is physically or men-
tally incapable of caring for himself, or 
"(C) the spouse of the taxpayer, if he is physically or 
mentally incapable of caring for himself. 
"(2) EMPLOYMENT-RELATED EXPENSES.—The term 'employment-
related expenses' means amounts paid for the following expenses, 
but only if such expenses are incurred to enable the taxpayer to 
be gainfully employed: 
" (A) expenses for household services, and 
"(B) expenses for the care of a qualifying individual. 
"(3) MAINTAINING A HOUSEHOLD.—An individual shall be 
treated as maintaining a household for any period only if over 
half of the cost of maintaining the household during such period 
is furnished by such individual (or if such individual is married 
during such period, is furnished by such individual and his 
spouse). 
"(c) 
LIMITATIONS ON AMOUNTS DEDUCTIBLE.— 
"(1) I N GENERAL.—A deduction shall be allowed under sub-
section (a) for employment-related expenses incurred during any 
month only to the extent such expenses do not exceed $400. 
"(2) 
EXPENSES MUST BE FOR SERVICES IN THE HOUSEHOLD.— 
"(A) I N GENERAL.—Except as provided in subparagraph 
(B), a deduction shall be allowed under subsection (a) for 
employment-related expenses only if they are incurred for 
services in the taxpayer's household. 
"(B) EXCEPTION.—Employment-related expenses described 
in subsection (b)(2)(B) which are incurred for services 
outside the taxpayer's household shall be taken into account 
only if incurred for the care of a qualifying individual 
described in subsection (b) (1) (A) and onh^ to the extent 
such expenses incurred during any month do not exceed— 
" (i) $200, in the case of one such individual, 
" (ii) $300, in the case of two such individuals, and 
"(iii) $400, in the case of three or more such 
individuals. 
"(d) INCOME LIMITATION.—If the adjusted gross income of the tax-
payer exceeds $18,000 for the taxable year during which the expenses 
are incurred, the amount of the employment-related expenses incurred 
during any month of such year which may be taken into account under 
this section shall (after the application of subsections (e) (5) and (c)) 
be further reduced by that portion of one-half of the excess of the 
adjusted gross income over $18,000 which is properly allocable to such 
85 STAT.] 
PUBLIC LAW 92-178--DEC. 10, 1971 
519 
month. For purposes of the preceding sentence, if the taxpayer is 
married during any period of the taxable year, there shall be taken 
into account the combined adjusted gross income of the taxpayer and 
his spouse for such period. 
"(e) SPECIAL RULES.—For purposes of this section— 
"(1) MARRIED COUPLES MUST FILE JOINT RETURN.—If the tax-
payer is married at the close of the taxable year, the deduction 
provided by subsection (a) shall be allowed only if the taxpayer 
and his spouse file a single return jointly for the taxable year. 
"(2) 
GAINFUL EMPLOYMENT REQUIREMENT.—If the taxpayer is 
married for any period during the taxable year, there shall be 
taken into account employment-related expenses incurred during 
any month of such period only if— 
"(A) both spouses are gainfully employed on a substan- 
^ 
tially lull-time basis, or 
"(B) the spouse is a qualifying individual described in 
subsection (b) (1) (C). 
"(3) CERTAIN MARRIED INDIVIDUALS LIVING APART.—An indi-
vidual who for the taxable year would be treated as not married 
under section 143(b) if paragraph (1) of such section referred to 
^^ ^*|^* ^^• 
any dependent, shall be treated as not married for such taxable 
year. 
"(4) PAYMENTS TO RELATED INDIVIDUALS.—No deduction shall 
be allowed under subsection (a) for any amount paid by the tax-
payer to an individual bearing a relationship to the taxpayer 
described in paragraphs (1) through (8) of section 152 (a) (relat- 
^SA stat. 43. 
ing to definition of dependent) or to a dependent described in 
paragraph (9) of such section. 
'^^ ^*^*' ^6°''« 
" (5) KEDUCTION FOR CERTAIN PAYMENTS.—In the case of employ-
ment-related expenses incurred during any taxable year solely 
with respect to a qualifying individual (other than an individual 
who is also described in subsection (b) (1) (A)), the amount of 
such expenses whicli may be taken into account for purposes of 
this section shall (before the application of subr^^ction (c)) be 
reduced— 
"(A) if such individual is described in subsection (b) (1) 
(B), by the amount by which the sum of— 
"(i) such individual's adjusted gross income for such 
taxable year, and 
"(ii) the disability payments received by such indi-
vidual during such year, 
exceeds $750, or 
"(B) in the case of a qualifying individual described in 
subsection (b) (1) (C), by the amount of disability payments 
received by such individual during the taxable year. 
For purposes of this paragraph, the term 'disability payment' pa'ymlm!'"'*^ 
means a payment (other than a gift) which is made on account of 
the physical or mental condition of an individual and which is not 
included in gross income. 
"(f) REGULATIONS.—The Secretary or his delegate shall prescribe 
such regulations as may ])e necessary to carry out the purj)oses of this 
section." 
520 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(b) CLERICAL AMENDMENT.—The table of sections for part V I I of 
subchapter B of chapter 1 is amended by striking out the item relating 
to section 214 and inserting in lieu thereof the following: 
"Sec. 214. Expenses for household and dependent care services 
necessary for gainful employment." 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply to taxable years beginning after December 31, 1971. 
SEC. 211. LEVIES ON SALARIES AND WAGES. 
ae'usc^ea?!!* 
(^) .WRITTEN NOTICE REQUIRED.—Section 6331 (relating to levy and 
distraint) is amended by redesignating subsection (d) as (e) and by 
inserting after subsection (c) the following new subsection: 
" ( d ) SALARY AND W A G E S . — 
"(1) I N GENERAL.—Levy may be made under subsection (a) 
upon the salary or wages of an individual with respect to any 
unpaid tax only after the Secretary or his delegate has notified 
such individual in writing of his intention to make such levy. 
Such notice shall be given in person, left at the dwelling or usual 
place of business of such individual, or shall be sent by mail to 
such individual's last known address, no less than 10 days before 
the day of levy. No additional notice shall be required in the case 
of successive levies with respect to such tax. 
" (2) JEOPARDY.—Paragraph (1) shall not apply to a levy if the 
Secretary or his delegate has made a finding under the last sen-
tence of subsection (a) that the collection of tax is in jeopardy." 
(b) EFFECTIVI: DATE.—The amendments made by this section shall 
apply with respect to levies made after March 31,1972. 
TITLE III—STRUCTURAL IMPROVEMENTS 
SEC. 301. UNEARNED INCOME OF TAXPAYERS WHO ARE DEPENDENTS 
OF OTHER TAXPAYERS. 
83^stat^676^' 
(^) LIMITATION OF STANDAED DEDUCTION.—Sectiou 141 (relating 
to the standard deduction) is amended by adding at the end thereof 
the following new subsection: 
"(e) LIMITATIONS IN CASE OF CERTXVIN DEPENDENT TAXPAYERS.—In 
the case of a taxpayer with respect to whom a deduction under section 
Ante, p. 510. 
151(e) is allowaole to another taxpayer for the taxable year— 
"(1) the percentage standard deduction shall be computed 
only with reference to so much of his adjusted gross income as is 
76 Stat. 1003. 
attributable to his earned income (as defined in section 911(b)), 
and 
"(2) the low income allowance shall not exceed his earned 
income for the taxable year." 
68A Stat. 10. 
(|3^ OPTIONAL TAX.—Section 4(d) (relating to taxpayers ineligible 
for optional tax) is amended— 
(1) by striking out "or" at the end of paragraph (3) ; 
(2) by striking out the period at the end of paragraph (4) and 
inserting in lieu thereof "; or "; and 
(3) by adding at the end thereof the following new paragraph: 
"(5) an individual if the amount of the standard deduction 
otherwise allowable to such individual is reduced under section 
Supra. 
141(e)." 
(c) ELECTION OF STANDARD DEDUCTION.—Section 144(a) (relating 
to election of standard deduction) is amended by adding at the end 
thereof the following new paragraj)h: 
"(4) If the adjusted gross income shown on the return is less 
than $10,000, and if the taxpayer cannot elect to pay the tax 
imposed by section 3 by reason of section 4(d) (5), the standard 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
521 
deduction 
(after the application of section 141(e)) shall be 
Ante, p, 520. 
allowed, notwithstanding paragraph (2), if the taxpayer so elects 
in his return.'' 
(d) EFFECTIVE DATE.—The amendments made by this section shall 
apply to taxable years beginning after December 31, 1971. 
SEC. 302. LIMITATION ON CARRYOVERS OF UNUSED CREDITS AND 
CAPITAL LOSSES. 
(a) LiMrrATiox ox CARRYOVERS.—Part V of subchapter C of chap-
ter 1 (relating to carryovers) is amended by adding at the end thereof 
26'uscf*38\^^' 
the following new section: 
"SEC. 383. SPECIAL LIMITATIONS ON CARRYOVERS OF UNUSED IN-
VESTMENT CREDITS, WORK INCENTIVE PROGRAM CRED-
ITS, FOREIGN TAXES, AND CAPITAL LOSSES. 
"If— 
"(1) the ownership and business of a corporation are changed 
in the manner described in section 382 (a) (1), or 
"'(2) in the case of a reorganization specified in paragraph 
(2) of section 381(a), there is a change in ownership described 
in section 3 8 2 ( b ) ( 1 ) ( B ) , 
then the limitations provided in section 382 in such cases with respect 
to the carryover of net operating losses shall apply in the same manner, 
as provided under regulations prescribed by the Secretary or his dele-
gate, with respect to any unused investment credit of the corporation 
which can otherwise be carried forward under section 46(b), to any 
^"'®' P* 5°^* 
unused work incentive program credit of the corporation which can 
otherwise be carried forward under section 50A(b), to any excess 
Post, p. 554. 
foreign taxes of the corporation which can otherwise be carried for-
ward under section 904(d), and to any net capital loss of the corpora- y/stat^Von^'^' 
tion which can otherwise be carried forward under section 1212." 
73 stat. 99,'36o; 
(b) CLERICAL AMENDMENT.—The table of sections of such part V ^^ ^*^'' ^^^> ^'^^' 
is amended by adding at the end thereof the following new item: 
"Sec. 3S3. Special limitations on carryovers of unused investment credits, 
work incentive program credits, foreign taxes, and capital losses." 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
be applicable only with respect to reorganizations and other changes 
in ownership occurring after the date of enactment of this Act pur-
suant to a plan of reorganization or contract entered into on or after 
September 29,1971. 
SEC. 303. AMORTIZATION OF CERTAIN EXPENDITURES FOR ON-THE-
JOB TRAINING AND FOR CHILD CARE CENTERS. 
(a) 
AMORTIZATION DEDUCTION.—Part 
V I 
of 
subchapter 
B 
of 
chapter 1 (relating to itemized deductions for individuals and cor- ga^sttf'erV'^^' 
porations) is amended by adding at the end thereof the following 
new section: 
"SEC. 188. AMORTIZATION OF CERTAIN EXPENDITURES FOR ON-THE-
JOB TRAINING AND CHILD CARE FACILITIES. 
" ( a ) ALLOWANCE or DEDUCTION.—At the election of the taxpayer, 
made in accordance with regulations prescribed by the Secretary or 
his delegate, any expenditure chargeable to capital account made by 
an employer to acquire, construct, reconstruct, or rehabilitate section 
188 property (as defined in subsection ( b ) ) shall be allowable as a 
deduction ratably over a period of 60 months, beginning with the 
month in which the property is placed in service. The deduction pro-
vided by this section with respect to such expenditure shall be in lieu 
of any depreciation deduction otherwise allowable on account of such 
expenditure. 
522 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(b) SECTION 188 PROPERTY.—For purposes of this section, the term 
'section 188 property' means tangible property which qualifies under 
regulations prescribed hj the Secretary or his delegate as a facility 
for on-the-job training of employees (or prospective employees) of 
the taxpayer, or as a child care center facility primarily for the chil-
dren of employees of the taxpayer; except that such term shall not 
include— 
"(1) any property which is not of a character subject to depre-
ciation; or 
" (2) property located outside the United States. 
Effective date. 
"(c) APPLICATION" OF SECTION.—Tliis sectiou sliall apply only with 
respect to expenditures made after December 31, 1971, and before 
January 1, 1977." 
26 u*sc 5^*^* 
^"^^ MINIMUM TAX.—Section 57(a) (relating to items of tax pref-
erence) is amended by inserting after paragraph (9) the following 
new paragraph: 
"(10) 
AMORTIZATION OF ON-THE-JOB TRAINING AND CHILD CARE 
Ante, p. 521. 
FACILITIES.—With respcct to eacli item of section 188 property 
for which an election is in effect under section 188, the amount by 
which the deduction allowable for the taxable year under such 
section exceeds the depreciation deduction which would otherwise 
Ante, p. 508. 
^ allowable under section 167." 
(c) TECHNICAL AMENDMENTS.— 
83 Stat. 670. 
(1) Sectlou 1245(a)(2) is amended by striking out "or 187" 
each place it appears and inserting in lieu thereof "187, or 188". 
(2) Section 1245(a)(3)(D) is amended by striking out "or 
185" and inserting in lieu thereof ", 185, or 188". 
(3) Section 1250(b)(3) is amended by striking out "or 185" 
and inserting in lieu thereof ", 185, or 188". 
83 Stat. 669. 
(4) Scctlou 642(f) is amended by striking out "and 187" and 
inserting in lieu thereof "187, and 188". 
(5) Section 1082(a)(2)(B) is amended by striking out "or 
187" and inserting in lieu thereof "187, or 188". 
(6) The table of sections for part VI of subchapter B of chap-
ter 1 is amended by adding at the end thereof the following new 
item: 
"Sec. 188. Amortization of certain expenditures for on-the-job 
training and child care facilities." 
(d) EFFECTIVE DATE.—The amendments made by this section shall 
apply to taxable years ending after December 31, 1971. 
SEC. 304. EXCESS INVESTMENT INTEREST. 
(a) DEFINITION OF NET LEASE.— 
83 Stat. 581. 
^ ^ Section57(c) (relating to definition of net lease) is amended 
to read as follows: 
"(c) NET LEASES.— 
"(1) I N GENERAL.—For purposes of this section, property shall 
be considered to be subject to a net lease for a taxable year if— 
"(A) for such taxable year the sum of the deductions of 
the lessor with respect to such property which are allowable 
Post, p. 525. 
solely by reason of section 162 (other than rents and reim-
bursed amounts with respect to such property) is less than 15 
percent of the rental income produced by such property, or 
"(B) the lessor is either guaranteed a specified return or is 
guaranteed in whole or in part against loss of income. 
" (2) MULTIPLE LEASES OF SINGLE PARCEL OF REAL PROPERTY.—If 
a parcel of real property of the taxpayer is leased under two or 
more leases, paragraph (1) (A) shall, at the election of the tax-
payer, be applied by treating all leased portions of such prop-
erty as subject to a single lease. 
85 STAT.] 
PUBLIC LAW 92-178-DEC. 10, 1971 
523 
"(3) ELIMINATION OF 15-PERCENT TEST AFTER 5 YEARS IN CASE OF 
REAL PROPERTY.—^At the election of the taxpayer, paragraph (1) 
(A) shall not apply with respect to real property of the tax-
payer which has been in use for more than 5 years. 
"(4) ELECTIONS.—An election under paragraph (2) or (3) shall 
be made at such time and in such manner as the Secretary or his 
delegate prescribes by regulations." 
(2) Secti6n 163(d) 
(relating to limitation on interest on 26us^ciY3l' 
investment indebtedness) is amended— 
(A) by striking out clause (i) of paragraph (4) (A) and 
inserting in lieu thereof the following: 
"(i) for such taxable year the sum of the deductions 
of the lessor with respect to such property which are 
allowable solely by reason of section 162 (other than 
^°*'» P* ^^^' 
rents and reimbursed amounts with respect to such 
property) is less than 15 percent of the rental income 
produced by such property, or", and 
(B) by adding at the end thereof the following new 
paragraph: 
"(7) REAL PROPERTY LEASES.—For purposes of paragraph (4) 
"(A) if a parcel of real property of the taxpayer is leased 
under two or more leases, paragraph (4) (A) (1) shall, at the 
^"P'^-
election of the taxpayer, be applied by treating all leased por-
tions of such property as subject to a single lease; and 
"(B) at the election of the taxpayer, paragraph (4) (A) (i) 
shall not apply with respect to real property of the taxpayer 
which has been in use for more than 5 years. 
An election under subparagraph (A) or (B) shall be made at 
such time and in such manner as the Secretary or his delegate pre-
scribes by regulations." 
(b) DEFINITION OF EXCESS INVESTMENT INTEREST.— 
(1) Section 57(b)(1) (relating to definition of excess investment 
^^ ^*^'* ^^^* 
interest) is amended by striking out "exceeds the net investment 
income for the taxable year" and inserting in lieu thereof "exceeds the 
sum of— 
" (A) the net investment income for the taxable year, and 
"(B) the amount (if any) by which the deductions allowable 
under sections 162,163,164(a) (1) or (2), and 212 attributable to 78^sfat!'4o/^' 
property of the taxpayer subject to a net lease exceeds the gross 
rental income produced by such property for the taxable year". 
(2) Section 163(d)(1)(B) (relating to limitation on interest on ss stat. s74. 
investment indebtedness) is amended to read as follows: 
"(B) the amount of the net investment income (as defined 
in paragraph (3) (A)), plus the amount (if any) by which 
the deductions allowable under this section (determined with-
out regard to this subsection) and sections 162,164(a) (1) or 
(2), or 212 attributable to property of the taxpayer subject 
to a net lease exceeds the rental income produced by such 
property for the taxable year, plus". 
(c) ELECTION BY MEMBERS OF PARTNERSHIP—Section 703(b) (re- ^^^ ^tat. 240; 
lating to elections of a partnership) is amended by— 
^^ ^*°'' ^^^* 
(1) striking out "or" after "(relating to pre-1970 exploration 
expenditures)" and inserting in lieu thereof a comma; and 
(2) inserting after "(relating to deduction and recapture of 
certain mining exploration expenditures)" the following: "under 
section 57(c) (relating to definition of net lease), or under section 
^"'^' P* ^22. 
163 (d) (relating to limitation on interest on investment indebted- ^'^pr^-
ness)". 
524 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(d) 
ELECTING SMALL BUSINESS CORPORATIONS.—Section 57(b) 
(2) 
^^83 Stat. 581, 
((]) (relating to items of tax preference) and section 163(d) (3) (C) 
26 use 57, 163. (relating to interest on investment indebtedness) are each amended 
by striking out "sections 164:(a)(l) or (2)" and inserting in lieu 
thereof "sections 162,164(a) (1) or (2)". 
(e) EFFECTIVE DATES.—The amendments made by this section to 
section 57 of the Internal Revenue Code of 1954 shall apply to tax-
able years beginning after December 31, 1969. The amendments made 
by this section to section 163 of such Code shall apply to taxable years 
beginning after December 31,1971. 
SEC. 305. FARM LOSSES OF ELECTING SMALL BUSINESS CORPORA-
TIONS. 
(a) COMPUTATION or NONFARM ADJUSTED GROSS INCOME.—Section 
83 Stat. 566. 
]^251 (b) (2) (B) is amended by striking out the last sentence and insert-
ing in lieu thereof the following new sentences: 
"This subparagraph shall not apply to an electing small 
business corporation for a taxable year if on any day of such 
year a shareholder of such corporation is an individual who, 
for his taxable year with which or within which the taxable 
year of the corporation ends, has a farm net loss or is a 
shareholder of another electing small business corporation 
which has a farm net loss for its taxable year ending within 
such taxable year of the individual. For purposes of clause 
(i), in the case of an electing small business corporation the 
nonfarm adjusted gross income of the corporation shall be 
increased by the amount of the nonfarm adjusted gross income 
of that shareholder (on any day of the corporation's taxable 
year) who has the highest amount of all such shareholders of 
nonfarm adjusted gross income for his taxable year with 
which or Avithin which the taxable year of the corporation 
ends."' 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act. 
SEC. 306. CAPITAL GAIN DISTRIBUTIONS OF CERTAIN TRUSTS. 
8 3 Stat, 592. 
(^^^ AMENDMENT T
O SECTION 665 (g).—Effective with respect to tax-
able years beginning after December 31,1968, subsection (g) of section 
665 (relating to definition of capital gain distribution) is amended by 
striking out "for such taxable year" the first place it appears therein, 
(b) 
APPLICATION TO TRUSTS IN EXISTENCE ON DECEMBER 31,1969.— 
83 Stat. 599. 
Sectiou 331 (d) (2) (C) of the Tax Reform Act of 1969 is amended by 
note. 
striking out "January 1,1972" each place it appears therein and insert-
ing in lieu thereof "January 1,1973". 
SEC. 307. APPLICATION OF WESTERN HEMISPHERE TRADE CORPORA-
TION PROVISION UNDER THE VIRGIN ISLANDS TAX LAWS. 
For purposes of applying the income tax laws of the United States 
with respect to the Virgin Islands under the Act of July 12, 1921 
(42 Stat. 123; 48 U.S.C. 1397), subpart C of part I I I of subchapter 
26^80*92^1^°' 
^ ^^ chapter 1 of the Internal Revenue Code of 1954 (relating to 
Western Hemisphere Trade Corporations) shall be treated as having 
been repealed effective with respect to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 308. CAPITAL GAINS AND STOCK OPTIONS. 
83 Stat. 583. 
^j^) j ^ GENERAL.—Scctiou 58(g)(2) (relating to tax preferences 
attributable to foreign sources) is amended by adding at the end 
thereof the following new sentence: 
"For purposes of this paragraph, preferential treatment is 
accorded such items which are attributable to a foreign country 
or possession of the United States if such country or possession 
80 Stat. 1108. 
26 u s e 7422. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
525 
imposes no significant amount of tax with respect to such items.", 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to taxable years beginning after December 31, 1969. 
SEC. 309. CERTAIN TREATY CASES. 
(a) I N GENERAL.—The second sentence of section 7422(f) (1) (relat-
ing to limitation on right of action for refund) is amended by insert-
ing before the period at the end thereof "and notwithstanding the 
provisions of section 1502 of such title 28 (relating to certain treaty 
^^ ^*^*' ^'^^• 
cases)". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to suits or proceedings which are instituted after January 
30,1967. 
SEC. 310. BRIBES, KICKBACKS, MEDICAL REFERRAL PAYMENTS, ETC. 
(a) AMENDMENTS TO SECTION 162(C).—Section 162(c) (relating to ^^ stat. 7io. 
bribes and illegal kickbacks) is amended— 
(1) by striking out paragraphs (2) and (3) and inserting in 
lieu thereof the following new paragraphs: 
" (2) OTHER ILLEGAL PAYMENTS.—No deduction shall be allowed 
under subsection (a) for any payment (other than a payment 
described in paragraph (1)) made, directly or indirectly, to any 
person, if the payment constitutes an illegal bribe, illegal kick-
back, or other illegal payment under any law of the United States, 
or under any law of a State (but only if such State law is generally 
enforced), Avhicli subjects the payor to a criminal penalty or the 
loss of license or privilege to engage in a trade or business. For 
purposes of this paragraph, a kickback includes a payment in 
consideration of the referral of a client, patient, or customer. The 
burden of proof in respect of the issue, for purposes of this para-
graph, as to whether a payment constitutes an illegal bribe, illegal 
kickback, or other illegal payment shall be upon the Secretary or 
his delegate to the same extent as he bears the burden of proof 
under section 7454 (concerning the burden of proof when the a^^l^f'^Vo^^'* 
issue relates to fraud). 
"(3) KICKBACKS, REBATES, AND BKIBES UNDER MEDICARE AND 
MEDICAID.—No deduction shall be allowed under subsection (a) for 
any kickback, rebate, or bribe made by any provider of services, 
supplier, physician, or other person who furnishes items or serv-
ices for which payment is or may be made under the Social Secu-
rity Act, or in whole or in part out of Federal funds under a State 
plan approved under such Act, if such kickback, rebate, or bribe 
is made in connection with the furnishing of such items or services 
or the making or receipt of such payments. For purposes of this 
paragraph, a kickback includes a payment in consideration of the 
referral of a client, patient, or customer."; and 
(2) by striking out "Bribes and Illegal Kickbacks." in the 
heading of such section and inserting in lieu thereof "Illegal 
Bribes, Kickbacks, and Other Payments.". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply with respect to payments after December 30, 1969, except 
that section 162(c) (3) of the Internal Revenue Act of 1954 (as added 
by subsection (a)) shall apply only with respect to kickbacks, rebates, 
and bribes payment of which is made on or after the date of the enact-
ment of this Act. 
SEC. 311. ACTIVITIES NOT ENGAGED IN FOR PROFIT. 
(a) APPLICATION OF STATUTORY PRESUMPTION.—Section 183 (relat-
ing to activities not engaged in for profit) is amended by adding at the 
end thereof the following new subsection: 
"(e) SPECIAL RULE.— 
" (1) I N GENERAL.—A determination as to whether the presump-
83 Stat. 532. 
8 3 Stat. 571. 
526 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
tion provided by subsection (d) applies with respect to any activ-
ity shall, if the taxpayer so elects, not be made before the close of 
the fourth taxable year (sixth taxable year, in the case of an 
activity described in the last sentence of such subsection) follow-
ing the taxable year in which the taxpayer first engages in the 
activity. For purposes of the preceding sentence, a taxpayer shall 
be treated as not having engaged in an activity during any taxable 
year beginning before January 1,1970. 
" (2) INITIAL PERIOD.—If the taxpayer makes an election under 
paragraph (1), the presumption provided by subsection (d) shall 
apply to each taxable year in the 5-taxable year (or 7-taxable 
year) period beginning with the taxable year in which the tax-
payer first engages in the activity, if the gross income derived from 
the activity for 2 or more of the taxable years in such period 
exceeds the deductions attributable to the activity (determined 
without regard to whether or not the activity is engaged in for 
profit). 
"(3) ELECTION.—An election under paragraph (1) shall be 
made at such time and manner, and subject to such terms and 
conditions, as the Secretary or his delegate may prescribe." 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 1969. 
SEC. 312. CERTAIN DISTRIBUTIONS TO FOREIGN CORPORATIONS. 
76^st^f'97*7^'*' 
(^) ^^ GENERAL.—Section 301 (relating to corporate distributions 
26 use 30*1. 
of property) is amended by— 
(1) inserting in subsection (b) (1) (B), after "corporation" the 
first time it appears, a comma and "unless subparagraph (D) 
applies"; 
(2) adding at the end of subsection (b) (1) the following new 
subparagraph: 
"(D) FOREIGN CORPORATE DISTRIBUTEES.—In the case of a 
distribution to a shareholder which is a foreign corporation, 
if the amount received by the foreign corporation is not 
eft'ectively connected with the conduct by it of a trade or 
business within the United States, the amount of the money 
received, plus the fair market value of the other property 
received."; 
(3) inserting in subsection (d) (2), after "corporation" the first 
time it appears, a comma and "unless paragraph (3) applies"; and 
(4) redesignating paragraph (3) of subsection (d) as (4) and 
inserting after 
paragraph (2) thereof the following new 
paragraph: 
"(3) FOREIGN CORPORATE DISTRIBUTEES.—In the case of a dis-
tribution of property to a shareholder which is a foreign corpo-
ration, if the amount received by the foreign corporation is not 
effectively connected with the conduct by it of a trade or business 
within the United States, the fair market value of the property 
received." 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply with respect to distributions made after November 8, 
1971. 
SEC. 313. ORIGINAL ISSUE DISCOUNT. 
(a) SEPARATE TREATMENT OF ORIGINAL ISSUE DISCOUNT.—Sections 
1555-^68Asm' 
8T1(^)(1)(^)' 881(a)(1), and 1441(b) (relating to taxation and 
357.' 
^* 
withholding on noneffectively connected income of nonresident alien 
individuals and foreign corporations) are each amended by inserting 
after the word "interest" the following: "(other than original issue 
83 Stat. 611. 
discount as defined in section 1232(b))". 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
527 
(b) NONRESIDENT ALIENS.—Section 871 (a) (1) (C) (relating to tax 
\l ^^^'^^^^J-
on noneffectively connected income of nonresident alien individuals) 
is amended to read as follows: 
"(C) in the case of— 
"(i) bonds or other evidences of indebtedness issued 
after September 28, 1965, and before April 1, 1972, 
amounts which under section 1232(a)(2)(B) are con- 83 stat. 609. 
sidered as gain from the sale or exchange of property 
which is not a capital asset, and, in the case of corporate 
obligations issued after May 27, 1969, and before April 
1, 1972, amounts which would be so considered but for 
the fact the obligations were issued after May 27, 1969, 
"(ii) bonds or other evidences of indebtedness issued 
after March 31, 1972, and payable more than 6 months 
from the date of original issue (without regard to the 
period held by the taxpayer), amounts which under 
section 1232(a) (2) (B) would be considered as gain from 
the sale or exchange of property which is not a capital 
asset but for the fact such obligations were issued after 
May 27,1969, and 
"(iii) the payment of interest on an obligation 
described in clause (ii), an amount equal to the original 
issue discount (but not in excess of such interest less the 
tax imposed by subparagraph (A) thereon) accrued on 
such obligation since the last payment of interest thereon, 
and". 
(c) FOREIGN CORPORATIONS.—Section 881(a) (3) (relating to income 
^o s*^'* ^ss;;. 
of foreign corporations) is amended to read as follows: 
"(3) in the case of— 
"(A) bonds or other evidences of indebtedness issued after 
September 28,1965, and before April 1, 1972, amounts which 
under section 1232(a)(2)(B) are considered as gain from 
the sale or exchange of property which is not a capital asset, 
and, in the case of corporate obligations issued after May 27, 
1969, and before April 1, 1972, amounts which would be so 
considered but for the fact the obligations were issued after 
May 27,1969, 
"(B) bonds or other evidences of indebtedness issued after 
March 31, 1972, and payable more than 6 months from the 
date of original issue (without regard to the period held by 
the taxpayer), amounts which under section 1232(a) (2) (B) 
would be considered as gain from the sale or exchange of 
property which is not a capital asset but for the fact such 
obligations were issued after May 27,1969, and 
"(C) the payment of interest on an obligation described in 
subparagraph (B), an amount equal to the original issue dis-
count (but not in excess of such interest less the tax imposed 
by paragraph (1) thereon) accrued on such obligation since 
the last payment of interest thereon, and". 
(d) 
WITHHOLDING ON NONRESIDENT ALIENS.—Section 1441(c) so^stttf^^ssa^^'' 
(relating to withholding of tax on nonresident aliens) is amended by 
adding at the end thereof the following new paragraph: 
"(8) ORIGINAL ISSUE DISCOUNT.—The Secretary or his delegate 
may prescribe such regulations as may be necessary for the deduc-
tion and withholding of the tax on original issue discount subject 
to tax under section 871 (a) (1) (C) including rules for the deduc- 
'^"^'•^• 
tion and withholding of the tax on original issue discount from 
payments of interest." 
528 
PUBLIC L
A
W 92-178-DEC. 10, 1971 
[85 STAT. 
80 Stat. 1557. 
(e) 
WITHHOLDING ON FOREIGN CORPORATIONS. 
Sectioil 
1 4 4 2 ( a ) 
26 use 1442. 
(relating to withholding of tax on foreign corporations) is amended— 
(1) by striking out "and" the last time it appears, and 
(2) by inserting before the period at the end thereof ", and the 
Anfe, p. 527. 
reference in section 1441(c)(8) to section 871(a)(1)(C) shall 
be treated as referring to section 881(a) (3)". 
(f) EFFECTIVE DATES.—The amendments to sections 871 and 881 of 
the Internal Revenue Code of 1954 made by this section shall apply 
with respect to taxable years beginning after December 31, 1966. The 
amendments to sections 1441 and 1442 of such Code made by this sec-
tion shall apply with respect to payments occurring on or after April 
1, 1972. 
SEC. 314. INCOME FROM CERTAIN AIRCRAFT AND VESSELS. 
68A Stat. 275; 
(a) ELECTION.—Sectiou 861 (relating to iucomc from sources witMu 
the United States) is amended by adding at the end thereof the follow-
ing new subsection: 
"(e) 
ELECTION T O TREAT INCOME F R O M CERTAIN AIRCRAFT AND 
VESSELS AS INCOME F R O M SOURCES W I T H I N T H E UNITED 
STATES.— 
"(1) I N GENERAL.—For purposes of subsection (a) and section 
862(a), if a taxpayer owning an aircraft or vessel which is section 
38 property (or would be section 38 property but for section 48 (a) 
Ante, p. 501. 
(^5)) leases such aircraft or vessel to a United States person, other 
than a member of the same controlled group of corporations (as 
78 Stat. 120. 
defined in section 1563) as the taxpayer, and if such aircraft or 
vessel is manufactured or constructed in the United States, the 
taxpayer may elect, for any taxable year ending after the com-
mencement of such lease, to treat all amounts includible in gross 
income with respect to such aircraft or vessel (whether during 
or after the period of any such lease), including gain from sale or 
other disposition of such aircraft or vessel, as income from sources 
within the United States. 
"(2) EFFECT OF ELECTION.—An election under paragraph (1) 
made with respect to any aircraft or vessel shall apply to the tax-
able year for which made and to all subsequent taxable years. 
Such election may not be revoked except with the consent of the 
Secretary or his delegate. 
"(3) 
MANNER AND TIME OF ELECTION AND REVOCATION.—An 
election under paragraph (1), and any revocation of such election, 
shall be made in such manner and at such time as the Secretary or 
his delegate prescribes by regulations. 
"(4) 
CERTAIN TR.VNSFER8 INVOLVING CARRYOVER BASIS.—If 
the 
taxpayer transfers or distributes an aircraft or vessel which is 
subject to an election under paragraph (1) and the basis of such, 
aircraft, or vessel in the hands of the transferee or distributee is 
detei'mined by reference to its basis in the hands of the transferor 
or distributor, the transferee or distributee shall, for purposes of 
paragraph (1), be treated as having made an election with 
respect to such aircraft or vessel." 
68A Stat. 276. 
^j^^ CLERICAL AMENDMENT.—Sectiou 862 (relating to income from 
sources without the United States) is amended by adding at the end 
thereof the following new subsection : 
"(c) 
CROSS REFERENCE— 
"For source of amounts attributable to certain aircraft and 
vessels, see section 861(e)." 
(c) EFFECTIVE DATE,—The amendments made by this section shall 
apply to taxable years ending after August 15, 1971, but only with 
respect to leases entered into after such date. 
85 STAT.] 
PUBLIC LAW 92-178-DEC. 10, 1971 
529 
82 Stat. 266. 
26 u s e 103. 
68A Stat. 851. 
26 u s e 7201. 
SEC. 315. INDUSTRIAL DEVELOPMENT BONDS. 
(a) ISSUES FOR WATER FACILITIES.—Section 103(c)(4) 
(relating 
to certain exempt activities) is amended— 
(1) by striking out in subparagraph (E) "energy, gas, or 
water, or" and by inserting in lieu thereof "energy or gas,"; 
(2) by striking out the period at the end of subparagraph (F) 
and inserting in lieu thereof ", or"; and 
(3) by adding at the end thereof the following: 
"(G) facilities for the furnishing of water, if available on 
reasonable demand to members of the general public." 
(b) CERTAIN CAPITAL EXPENDITURES.—Section 103(c) (6) (F) (iii) 
«2 stat. 1349 
(relating to exception of certain capital expenditures for purposes of 
the $5,000,000 limit) is amended by striking out "$250,000" and 
inserting in lieu thereof "$1,000,000". 
(c) EFFECTIVE DATES.—The amendments made by subsection (a) 
shall apply with respect to obligations issued after January 1, 1969. 
The amendment made by subsection (b) shall apply with respect to 
expenditures incurred after the date of the enactment of this Act. 
SEC. 316. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF 
RETURNS. 
(a) CRIMINAL PENALTY.—Part I of subchapter A of chapter 75 
(relating to crimes) is amended by adding at the end thereof the 
following new section: 
"SEC. 7216. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF 
RETURNS. 
" (a) GENERAL RULE.—Any person who is engaged in the business of 
P^^aity 
preparing, or providing services in connection with the preparation of, 
returns of the tax imposed by chapter 1, or declarations or amended 
declarations of estimated tax under section 6015, or any person who for 
compensation prepares any such return or declaration for any other 
person, and who— 
"(1) discloses any information furnished to him for, or in 
connection with, the preparation of any such return or declaration, 
or 
"(2) uses any such information for any purpose other than to 
prepare, or assist in preparing, any such return or declaration, 
shall be guilty of a misdemeanor, and, upon conviction thereof, shall be 
fined not more than $1,000, or imprisoned not more than 1 year, or both, 
together with the costs of prosecution. 
"(b) EXCEPTIONS.— 
"(1) DISCLOSURE.—Subsection (a) shall not apply to a dis-
closure of information if such disclosure is made— 
" (A) pursuant to any other provision of this title, or 
"(B) pursuant to an order of a court. 
"(2) USE.—Subsection (a) shall not apply to the use of infor-
mation in the preparation of, or in connection with the prepara-
tion of. State and local tax returns and declarations of estimated 
tax of the person to whom the information relates. 
"(3) REGULATIONS.—Subsection (a) shall not apply to a dis-
closure or use of information which is permitted by regulations 
prescribed by the Secretary or his delegate under this section." 
(b) CLERICAL AMENDMENT.—The table of contents for part I of sub-
chapter A of chapter 75 is amended by adding at the end thereof the 
following new item: 
"Sec. 7216. Disclosure or use of information by preparers of 
returns." 
Ante, p . 517, 
530 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
take effect on the first day of the first month which begins after the 
date of the enactment of this Act. 
TITLE IV—EXCISE TAX 
SEC. 401. REPEAL OF MANUFACTURERS EXCISE TAX ON PASSENGER 
AUTOMOBILES, LIGHT-DUTY TRUCKS, ETC. 
(a) EEPEAL OF AND EXEMPTIONS FROM TAX.— 
68A Stat. 481; 
(^i^ EEPEAL.—Section 4061(a) (relating to tax on automobiles, 
84 Stat! 1843. 
etc.) is amended to read as follows: 
2
6 use 4061. 
"(a) 
TRUCKS,BUSES,TRACTORS,ETC.— 
"(1) TAX IMPOSED.—There is hereby imposed upon the follow-
ing articles (including in each case parts or accessories therefor 
sold on or in connection therewith or with the sale thereof) sold 
by the manufacturer, producer, or importer a tax of 10 percent of 
the price for which so sold, except that on and after October 1, 
1977, the rate shall be 5 percent— 
"Automobile truck chassis. 
"Automobile truck bodies. 
"Automobile bus chassis. 
"Automobile bus bodies. 
"Truck and bus trailer and semitrailer chassis. 
"Truck and bus trailer and semitrailer bodies. 
"Tractors of the kind chiefly used for highway transporta-
tion in combination with a trailer or semitrailer. 
A sale of an automobile truck, bus, truck or bus trailer or semi-
trailer shall, for the purposes of this subsection, be considered to 
be a sale of a chassis and of a body enumerated in this subsection. 
" (2) Exci.usiON F
O
R LIGHT-DUTY TRUCKS, ETC.—The tax imposed 
by paragraph (1) shall not apply to a sale by the manufacturer, 
producer, or importer of the following articles suitable for use 
with a vehicle having a gross vehicle weight of 10,000 pounds or 
less (as determined under regulations prescribed by the Secre-
tary or his delegate)— 
"Automobile truck chassis. 
"Automobile truck bodies. 
"Automobile bus chassis. 
"Automobile bus bodies. 
"Truck trailer and semitrailer chassis and bodies, suit-
able for use with a trailer or semitrailer having a gross vehi-
cle weight of 10,000 pounds or less (as so determined)." 
(2) EXEMPTIONS FOR LOCAL TRANSIT BUSES, AND FOR TRASH CON-
79 Stat. 157; 
TAiNERS, ETC.—Scction 4063(a) (relating to exemptions for spec-
83 Stat. 724; 
[fied articles) is amended by adding at the end thereof the 
Post, p. 533. 
e
n
- 
' 
i 
"
^ 
^ 
Tollowmg new paragraphs: 
"(6) LOCAL TRANSIT BUSES.—The tax imposed under section 
Supra, 
4061(a) shall not apply in the case of automobile bus chassis or 
automobile bus bodies which are to be used predominantly by the 
purchaser in mass transportation service in urban areas. 
"(7) TRASH CONTAINERS, ETC.—The tax imposed under section 
4061(a) shall not apply in the case of any box, container, recep-
tacle, bin, or other similar article which is to be used as a trash 
container and is not designed for the transportation of freight 
other than trash, and which is not designed to be permanently 
mounted on or permanently affixed to an automobile truck chassis 
or body, or in the case of parts or accessories designed primarily 
for use on, in connection with, or as a component part of any such 
article." 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
531 
72 Stat. 1282. 
26 u s e 4221. 
(3) TECHNICAL AMENDMENTS.— 
(A) Section 4221(c) (relating to relief of manufacturer 
from liability in certain cases) is amended by striking out 
"section 4063(b)," and inserting in lieu thereof "section 4063 
(a) (6) or (7), 4063(b),". 
Ante, p, 530. 
(B) Section 4222 (d) (relating to registration in the case of 
certain exemptions) is amended by striking out "sections 
4063(b)," and inserting in lieu thereof "sections 4063(a) (6) 
and (7), 4063(b),". 
(C) Section 6416(b)(2) (relating to specified uses and y/statTi'ssf ^' 
resales in case of which tax payments are considered overpay-
ments) is amended— 
(i) by striking out "described in section 4221(e) (5)." 
in subparagraph (R) and inserting in lieu thereof 
"described in section4063(a) (6) or4221(e) (5); or"; and 
(ii) by adding at the end thereof the following new^ 
subparagraph: 
" (S) in the case of a box, container, receptacle, bin, or other 
similar article taxable under section 4061(a), sold to any 
person for use as described in section 4063(a) (7)." 
(b) FLOOR STOCKS REFUNDS.— 
(1) I N GENERAL.—^Where, before the day after the date of the 
enactment of this Act, any tax-repealed article (as defined in sub-
section (e)) has been sold by the manufacturer, producer, or 
importer and on such day is held by a dealer and has not been used 
and is intended for sale, there shall be credited or refunded (with-
out interest) to the manufacturer, producer, or importer an amount 
equal to the tax paid by such manufacturer, producer, or importer 
on his sale of the article, if— 
(A) claim for such credit or refund is filed with the Secre-
tary of the Treasury or his delegate before the first day of the 
10th calendar month beginning after the day after the date 
of the enactment of this Act based upon a request submitted 
to the manufacturer, producer, or importer before the first 
day of the 7th calendar month beginning after the day after 
the date of the enactment of this Act by the dealer who held 
the article in respect of which the credit or refund is claimed; 
and 
(B) on or before the first day of such 10th calendar month 
reimbursement has been made to the dealer by the manufac-
turer, producer, or importer in an amount equal to the tax 
paid on the article or written consent has been obtained from 
the dealer to allowance of the credit or refund. 
(2) LIMITATION ON ELIGIBILITY FOR CREDIT OR REFUND.—No 
manufacturer, producer, or importer shall be entitled to credit or 
refund under paragraph (1) unless he has in his possession such 
evidence of the inventories with respect to which the credit or 
refund is claimed as may be required by regulations prescribed 
by the Secretary of the Treasurj^ or his delegate under this sub-
section. 
(3) OTHER LAWS APPLICABLE.—All provisions of law, including 
penalties, applicable with respect to the taxes imposed by section 
4061(a) of the Internal Revenue Code of 1954 shall, insofar as ^"'e* ?• S30. 
applicable and not inconsistent with paragraphs (1) and (2) 
of this subsection, apply in respect of the credits and refunds 
provided for in paragraph (1) to the same extent as if the credits 
or refunds constituted overpayments of the tax. 
75-432 O - 72 - 36 
532 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(c) REFUNDS W I T H EESPECT TO CERTAIN CONSUMER PURCHASES.— 
(1) I N GENERAL.—Except as otherwise provided in paragraph 
(2), where— 
(A) after August 15,1971, with respect to any article which 
was subject to the tax imposed by section 4061(a) (2) of the 
Ante, p, 530. 
Internal Revenue Code of 1954 (as in effect on the day before 
the date of the enactment of this Act), or 
(B) after September 22, 1971, with respect to any article 
which was subject to the tax imposed by section 4061(a) (1) 
of such Code (as in effect on the day before tlie date of the 
enactment of this Act), 
and on or before such date of enactment, a tax-repealed article 
(as defined in subsection (e)) has been sold to an ultimate pur-
chaser, there shall be credited or refunded (without interest) to 
the manufacturer, producer, or importer of such article an 
amount equal to the tax paid by such manufacturer, producer, or 
importer on his sale of the article. 
(2) LIMITATION ON ELIGIBILITY FOR CREDIT OR REFUND.—No 
manufacturer, producer, or importer shall be entitled to a credit 
or refund under paragraph (1) with respect to an article unless— 
(A) he has in his possession such evidence of the sale of 
the article to an ultimate purchaser, and of the reimburse-
ment of the tax to such purchaser, as may be required by 
regulations prescribed by the Secretary of the Treasury or 
his delegate under this subsection; 
(B) claim for such credit or refund is filed with the Secre-
tary of the Treasury or his delegate before the first day of 
the 10th calendar month beginning after the day after the 
date of the enactment of this Act based upon information sub-
mitted to the manufacturer, producer, or importer before the 
first day of the 7th calendar month beginning after the day 
after the date of the enactment of this Act by the person who 
sold the article (in respect of which the credit or refund is 
claimed) to the ultimate purchaser; and 
(C) on or before the first day of such 10th calendar month 
reimbursement has been made to the ultimate purchaser in an 
amount equal to the tax paid on the article. 
(3) OTHER LAWS APPLICABLE.—All provisions of law, including 
penalties, applicable with respect to the taxes imposed by section 
4061(a) of the Internal Revenue Code of 1954 shall, insofar as 
applicable and not inconsistent with paragraph (1) or (2) of this 
subsection, apply in respect of the credits and refunds provided 
for in paragraph (1) to the same extent as if the credits or refunds 
constituted overpayments of the tax. 
(d) CERTAIN USES BY MANUFACTURER, ETC.—Any tax paid by rea-
7 2 Stat. 1281; 
gQ^ of scction 4218(a) of the Internal Revenue Code of 1954 (relating 
26 use 42*18. 
to use by manufacturer or importer considered sale) shall be deemed 
an overpayment of such tax with respect to— 
(1) any article which was subject to the tax imposed by section 
4061(a) (2) of such Code as in effect on the day before the date 
of the enactment of this Act if tax was imposed on such article 
by reason of such section 4218(a) after August 15, 1971, and 
(2) any article which was subject to the tax imposed by section 
4061 (a) (1) of such Code as in effect on the day before the date of 
the enactment of this Act and on which such tax is no longer 
imposed (by reason of subsection (a) of this section) if tax was 
imposed on such article by reason of such section 4218(a) after 
September 22,1971. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
533 
(e) DEFINITIONS.—For purposes of this section— 
(1) T h e term "dealer" includes a wholesaler, jobber, distrib-
utor, or retailer. 
(2) A n article shall be considered as "held by a dealer" if title 
thereto has passed to such dealer (whether or not delivery to him 
lias been made) and if for purposes of consumption title to such 
article or possession thereof has not at any time been transferred 
to any person other than a dealer. 
(3) The term "tax-repealed article" means an article on which 
a tax was imposed by section 4061(a) of the Internal Revenue 
Code of 1954 as in effect on the day before the date of the enact- 
^"*^' ^' ^^°' 
ment of this Act and is not imposed (without regard to the amend-
ment made by paragraph (2) of subsection (a) of this section) 
under such section 4061(a) as in effect on the day after the date 
of the enactment of this Act. 
(f) 
ORIGINAL E Q U I P M E N T TIRES ON IMPORTED ARTICLES.—Section 
4071 (relating to tax on tires and tubes) is amended by adding at so'^statraal!^' 
the end thereof the following new subsection: 
26 use 40*71. 
" ( e ) TIRES ON IMPORTED ARTICLES.—For the purposes of subsection 
(a), if an article imported into the United States is equipped with 
tires or inner tubes (other than bicycle tires and inner tubes) — 
"(1) the importer of the article shall be treated as the im-
porter of the tires and inner tubes with which such article is 
equipped, and 
"(2) the sale of the article by the importer thereof shall be 
treated as the sale of the tires and inner tubes with which such 
article is equipped. 
This subsection shall not apply with respect to the sale' of an article 
if a tax on such sale is imposed under section 4061." 
(g) 
TECHNICAL AND CONFORMING A M E N D M E N T S . — 
(1) Section 4061(b)(2) (relating to parts and accessories) is 
^^ ^*^** ^^^* 
amended by striking out "any article enumerated in subsection 
(a) (2) or a house trailer" and inserting in lieu thereof "any 
chassis or body for a passenger automobile, any chassis or body 
for a trailer or semitrailer suitable for use in connection with 
a passenger automobile, or a house trailer". 
(2) (A) Section 4062 (relating to definitions applicable to tax 
^° ^*^** ^^^''• 
on motor vehicles) is amended by striking out subsection ( b ) . 
(B) The heading of section 4062 is amended to read as follows: 
"SEC. 4062. ARTICLES CLASSIFIED AS PARTS." 
(C) Section 4062 is amended by striking out 
" (a) 
CERTAIN ARTICLES CONSIDERED AS P A R T S . — " . 
(D) The item relating to section 4062 in the table of sections 
for part I of subchapter A of chapter 32 is amended to read as 
follows: 
"Sec. 4062. Articles classified as parts." 
(3) Section 4063(a)(4) (relating to exemptions for specified 
^^ stat. 157. 
articles) is amended to read as follows: 
" ( 4 ) 
AMBULANCES, HEARSES, ETC.—The tax imposed by section 
4061(a) shall not apply in the case of an ambulance, hearse, or 
combination ambulance-hearse." 
(4) Section 4216 (relating to definition of price) is amended— s/stat^^isV/ *' 
(A) in subsections (b) (2) (C) and (b) (5) by striking out 
"(relating to automobiles, trucks, etc.)," and inserting in lieii 
thereof "(relating to trucks, buses, tractors, etc.),"; and 
(B) in subsection (g) by inserting "tractors," immediately 
^^ ^^^^'' ^^^' 
after "buses,". 
(5) Section 6412(a) 
(relating to floor stocks refunds) 
is ^ 79 stat. 141; 
amended by striking out paragraph (1). 
a . 
. 
534 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
26u*sc64iV' 
(^^ '^l^® heading of section 6416(g) 
(relating to certain 
exports) is amended to read as follows: 
"(g) 
TRUCKS, BUSES, TRACTORS, ETC.—". 
^^p^^^' 
(7) (A) Section 304 of the Excise, Estate, and Gift Tax Adjust-
?5 use Ust, 
V^^^^ ^^^ ^* 1^'^^' Public Law 91-614 (relating to new car labels), 
is hereby repealed. 
Effective date. 
(B) Subparagraph (A) shall apply to acts (or failures to 
act) after the date of the enactment of this Act. 
(h) EFFECTIVE DATE.— 
(1) Except as otherwise provided in this section, the amend-
ments made by subsections (a), (f), and (g) of this section shall 
apply with respect to articles sold on or after the day after the 
date of the enactment of this Act. 
(2) For purposes of paragraph (1), an article shall not be 
considered sold before the day after the date of the enactment 
of this Act unless possession or right to possession passes to the 
purchaser before such day. 
(3) In the case of— 
(A) a lease, 
(B) a contract for the sale of an article where it is pro-
vided that the price shall be paid by installments and title to 
the article sold does not pass until a future date notwith-
standing partial payment by installments, 
(C) a conditional sale, or 
(D) a chattel mortgage arrangement wherein it i s provided 
that the sale price shall be paid in installments, 
entered into on or before the date of the enactment of this Act, 
payments made after such date with respect to the article leased 
or sold shall, for purposes of this subsection, be considered as pay-
ments made with respect to an article sold after such date, if the 
lessor or vendor establishes that the amount of payments payable 
after such date with respect to such article has been reduced by 
an amount equal to that portion of the tax applicable with respect 
to the lease or sale of such article which is due and payable after 
such date. If the lessor or vendor does not establish that the pay-
ments have been so reduced, they shall be treated as payments 
made in respect of an article sold before the day after the date of 
the enactment of this Act. 
SEC. 402. CREDIT AGAINST TAX ON COIN-OPERATED GAMING DEVICES. 
(a) ALLOWANCE OF CREDIT FOR STATE TAXES.—Subchapter B of chap-
26^sc^446V' 
^^^ ^^ (relating to occupational tax on coin-operated devices) is 
amended by adding at the end thereof the following new section: 
"SEC. 4464. CREDIT FOR STATE-IMPOSED TAXES. 
"(a) I N GENERAL.—There shall be allowed as a credit against the 
79sttT\4^^'' 
^^^ imposed by section 4461 with respect to any coin-operated gaming 
device for any j^ear an amount equal to the amount of State tax paid 
for such year with respect to such device by the person liable for the 
tax imposed by section 4461, if such State tax (1) is paid under a law 
of the State in which the place or premises on which such device is 
maintained or used is located, and (2) is similar to the tax imposed by 
section 4461 (including a tax, other than a general personal property 
tax, imposed on such device). 
"(b) LIMITATIONS.— 
"(1) DEVICES MUST BE LEGAL UNDER STATE LAW.—Credit shall 
be allowed under subsection (a) for a tax imposed by a State only 
if the maintenance of the coin-operated gaming device by the per-
son liable for the tax imposed by section 4461 on the place or prem-
ises occupied by him does not violate any law of such State. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
535 
"(£) CREDIT NOT TO EXCEED SO PERCENT OF TAX.—The credit 
under subsection (a) with respect to any coin-operated gaming 
device shall not exceed 80 percent of the tax imposed by section 
4461 with respect to such device. 
73 stat. 620; 
"(c) SPECIAL PROVISIONS FOR PAYMENT OF TAX.—Under regulations ^^2rusc 446i,. 
prescribed by the Secretary or his delegate, a person who believes he 
will be entitled to a credit under subsection (a) with respect to any 
coin-operated gaming device for any year shall, for purposes of this 
subtitle and subtitle F, satisfy his liability for the tax imposed by ^oo^i^^^ ^°'*^" 
section 4461 with respect to such device for such year if— 
"(1) on or before the date prescribed by law for payment of 
the tax imposed by section 4461 with respect to such device for 
such year, he has paid the amount of such tax reduced by the 
amount of the credit which he estimates will be allowable under 
subsection (a) with respect to such device for such year, and 
"(2) on or before the last day of such year, pays the amount 
(if any) by which the credit for such year is less than the credit 
estimated under paragraph (1)." 
(b) CLERICAL AMENDMENT.—The table of sections for subchapter 
B of chapter 36 is amended by adding at the end thereof the following 
new item: 
"Sec. 4464. Credit for State-imposed taxes." 
(c) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (b) shall apply on and after July 1, 1972. 
TITLE V—DOMESTIC INTERNATIONAL 
SALES CORPORATIONS 
SEC. 501. DOMESTIC INTERNATIONAL SALES CORPORATIONS. 
Subchapter N of chapter 1 (relating to income from sources without 76^|^t!'ioo6^^' 
the United States) is amended by adding at the end thereof the fol- so stat! ises! 
lowing new part: 
^e use sei. 
"PART 
IV—DOMESTIC 
INTERNATIONAL 
SALES 
CORPORATIONS 
"Subpart A. Treatment of qualifying corporations. 
"Subpart B. Treatment of distributions to shareholders. 
"Subpart A—Treatment of Qualifying Corporations 
"Sec. 991. Taxation of a domestic international sales corporation. 
"See. 992. Requirements of a domestic international sales corpo-
ration. 
"Sec. 993. Definitions and special rules. 
"Sec. 994. Inter-company pricing rules. 
"SEC. 991. TAXATION OF A DOMESTIC INTERNATIONAL SALES CORPO-
RATION. 
"For purposes of the taxes imposed by this subtitle upon a DISC (as 
defined in section 992(a)), a DISC shall not be subject to the taxes 
^""•^' 
imposed by this subtitle except for the tax imposed by chapter 5. 
sfi^isr^^idQ^i^' 
"SEC. 992. REQUIREMENTS OF A DOMESTIC INTERNATIONAL SALES 
CORPORATION. 
"(a) DEFINITION of ' D I S C and 'FORMER D I S C — 
"(1) DISC—For purposes of this title, the term ' D I S C 
means, with respect to any taxable year, a corporation which is 
incorporated under the laws of any State and satisfies the follow-
ing conditions for the taxable year: 
"(A) 95 percent or more of the gross receipts (as defined 
26 use 1491. 
536 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
Post, p. 538. 
ijj section 993(f)) of such corporation consist of qualified 
export receipts (as defined in section 993 (a)), 
"(B) the adjusted basis of the qualified export assets (as 
defined in section 993(b)) of the corporation at the close of 
of the taxable year equals or exceeds 95 percent of the sum 
of the adjusted basis of all assets of the corporation at the 
close of the taxable year, 
"(C) such corporation does not have more than one class 
of stock and the par or stated value of its outstanding stock 
is at least $2,500 on each day of the taxable year, and 
"(D) the corporation has made an election pursuant to 
subsection (b) to be treated as a DISC and such election is in 
effect for the taxable year, 
"(2) 
STATUS AS DISC AFTER HAVING FILED A EETURN AS A 
DISC.—The Secretary or his delegate shall prescribe regulations 
setting forth the conditions under and the extent to which a 
corporation which has filed a return as a DISC for a taxable year 
shall be treated as a DISC for such taxable year for all purposes 
of this title, notwithstanding the fact that the corporation has 
failed to satisfy the conditions of paragraph (1). 
"(3) 'FORMER DISC.—For purposes of this title, the term 
'former D I S C means, with respect to any taxable year, a cor-
poration which is not a DISC for such year but was a DISC in 
a preceding taxable year and at the beginning of the taxable year 
has undistributed previously taxed income or accumulated DISC 
income. 
"(b) 
ELECTION.— 
"(1) 
ELECTION.— 
"(A) An election by a corporation to be treated as a DISC 
shall be made by such corporation for a taxable year at any 
time during the 90-day period immediately preceding the 
beginning of the taxable year, except that the Secretary or 
his delegate may give his consent to the making of an election 
at such other times as he may designate. 
"(B) Such election shall be made in such manner as the 
Secretary or his delegate shall prescribe and shall be valid 
only if all persons who are shareholders in such corporation 
on the first day of the first taxable year for which such elec-
tion is effective consent to such election. 
"(2) EFFECT OF ELECTION.—If a corporation makes an election 
under paragraph (1), then the provisions of this part shall apply 
to such corporation for the taxable year of the corporation for 
which made and for all succeeding taxable years and shall apply 
to each person who at any time is a shareholder of such corpora-
tion for all periods on or after the first day of the first taxable 
year of the corporation for which the election is effective. 
"(S) TERMINATION OF ELECTION.— 
" (A) REVOCATION.—An election under this subsection made 
by any corporation may be terminated by revocation of such 
election for any taxable year of the corporation after the 
first taxable year of the corporation for which the election 
is effective. A termination under this paragraph shall be 
effective with respect to such election— 
"(i) for the taxable year in which made, if made at 
any time during the first 90 days of such taxable year, or 
"(ii) for the taxable year following the taxable year 
in which made, if made after the close of such 90 days, 
and for all succeeding taxable years of the corporation. Such 
termination shall be made in such manner as the Secretary or 
his delegate shall prescribe by regulations. 
85 STAT. ] 
PUBLIC LAW 92-178~DEC. 10, 1971 
537 
"(B) CONTINUED FAILURE TO BE DISC.—If a corporation 
is not a DISC for each of any 5 consecutive taxable years 
of the corporation for which an election under this subsection 
is effective, the election shall be terminated and not be in 
effect for any taxable year of the corporation after such 5th 
year. 
"(c) DISTRIBUTIONS TO MEET QUALIFICATION KEQUIREMENTS.— 
"(1) I N GENERAL.—Subject to the conditions provided by 
paragraph (2), a corporation which for a taxable year does not 
satisfy a condition specified in paragraph (1)(A) (relating to 
gross receipts) or (1) (B) (relating to assets) of subsection (a) 
shall nevertheless be deemed to satisfy such condition for such 
year if it makes a pro rata distribution of property after the close 
of the taxable year to its shareholders (designated at the time of 
such distribution as a distribution to meet qualification require-
ments) with respect to their stock in an amount which is equal 
to— 
"(A) if the condition of subsection (a)(1)(A) is not 
satisfied, the portion of such corporation's taxable income 
attributable to its gross receipts which are not qualified 
export receipts for such year, 
"(B) if the condition of subsection (a)(1)(B) is not 
satisfied, the fair market value of those assets which are not 
qualified export assets on the last day of such taxable year, 
or 
"(C) if neither of such conditions is satisfied, the sum of 
the amounts required by subparagraphs (A) and (B). 
"(2) REASONABLE CAUSE FOR FAILURE.—The conditions under 
paragraph (1) shall be deemed satisfied in the case of a distribu-
tion made under such paragraph— 
"(A) if the failure to meet the requirements of subsection 
(a) (1) (A) or (B), and the failure to make such distribution 
prior to the date on which made, are due to reasonable cause; 
and 
"(B) the corporation pays, within the 30-day period 
beginning with the day on which such distribution is made, 
to the Secretary or his delegate, if such corporation makes 
such distribution after the 15th day of the 9th month after 
the close of the taxable year, an amount determined by multi-
plying (i) the amount equal to 4i/4 percent of such distribu-
tion, by (ii) the number of its taxable years which begin 
after the taxable year with respect to which such distribution 
is made and before such distribution is made. For purposes 
of this title, any payment made pursuant to this paragraph 
shall be treated as interest. 
"(3) CERTAIN DISTRIBUTIONS MADE WITHIN 8i MONTHS AFTER 
C
L
O
S
E OF TAXABLE Y
E
A
R DEEMED F
O
R REASONABLE CAUSE.—A distri-
bution made on or before the 15th day of the 9th month after the 
close of the taxable year shall be deemed for reasonable cause for 
purposes of paragraph (2) (A) if— 
" (A) at least 70 percent of the gross receipts of such corpo-
ration for such taxable year consist of qualified export 
receipts, and 
"(B) the adjusted basis of the qualified export assets held 
by the corporation on the last day of each month of the tax-
able year equals or exceeds 70 percent of the sum of the 
adjusted basis of all assets held by the corporation on such 
day. 
73 Stat. 112. 
26 u s e 801. 
72 Stat. 1650. 
78 Stat. 81. 
538 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(d) INELIGIBLE CORPORATIONS.—The following corporations shall 
not be eligible to be treated as a DISC— 
26^scr'so\^^* 
"( ) ^ corporation exempt from tax by reason of section 501, 
"(2) a personal holding company (as defined in section 542), 
76 Stat. 977. 
"^3^ g^ financial institution to which section 581 or 593 applies, 
"(4) an insurance company subject to the tax imposed by 
subchapter L, 
"(5) a regulated investment company (as defined in section 
68A Stat. 268. 
8 5 1 ( a ) ) , 
" (6) a China Trade Act corporation receiving the special deduc-
tion provided in section 941 (a), or 
"(7) an electing small business corporation (as defined in sec-
tion 1371(b)). 
"(e) COORDINATION W I T H PERSONAL HOLDING COMPANY PROVISIONS 
IN CASE or CERTAIN PRODUCED FILM EENTS.—If— 
"(1) a corporation (hereinafter in this subsection referred to 
as 'subsidiary') was established to take advantage of the provisions 
of this part, and 
"(2) a second corporation (hereinafter in this subsection 
referred to as 'parent') throughout the taxable year owns directly 
at least 80 percent of the stock of the subsidiary, 
then, for purposes of applying subsection (d) (2) and section 541 
(relating to personal holding company tax) to the subsidiary for the 
taxable year, there shall be taken into account under section 543(a) (5) 
(relating to produced film rents) any interest in a film acquired by the 
parent and transferred to the subsidiary as if such interest were 
acquired by the subsidiary at the time it was acquired by the parent. 
"SEC. 993. DEFINITIONS. 
" (a) QUALIFIED EXPORT RECEIPTS.— 
" (1) GENERAL RULE.—For purposes of this part, except as pro-
vided by regulations under paragraph (2), the qualified export 
receipts of a corporation are— 
"(A) gross receipts from the sale, exchange, or other dis-
position of export property, 
"(B) ^ross receipts from the lease or rental of export prop-
erty, which is used by the lessee of such property outside the 
United States, 
"(C) gross receipts for services which are related and sub-
sidiary to any qualified sale, exchange, lease, rental, or other 
disposition of export property by such corporation, 
"(D) gross receipts from the sale, exchange, or other dis-
position of qualified export assets 
(other than 
export 
property), 
"(E) dividends (or amounts includible in gross income 
76 Stat. 1006. 
uuder section 951) with respect to stock of a related foreign 
export corporation (as defined in subsection (e)), 
"(F) interest on any obligation which is a qualified export 
asset, 
"(G) gross receipts for engineering or architectural serv-
ices for construction projects located (or proposed for loca-
tion) outside the United States, and 
"(H) gross receipts for the performance of managerial 
services in furtherance of the production of other qualified 
export receipts of a DISC. 
"(2) EXCLUDED RECEIPTS.—The Secretary or his delegate may 
under regulations designate receipts from the sale, exchange, lease, 
rental, or other disposition of export property, and from services, 
as not being receipts described in paragraph (1) if he determines 
"Qualified ex-
port receipts." 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
539 
that such sale, exchange, lease, rental, or other disposition, or 
furnishing of services— 
"(A) is for ultimate use in the United States; 
"(B) is accomplished by a subsidy granted by the United 
States or any instrumentality thereof; 
"(C) is for use by the United States or any instrumentality 
thereof where the use of such export property or services is 
required by law or regulation. 
For purposes of this part, the term 'q[ualified export receipts' does 
not include receipts from a corporation which is a DISC for its 
taxable year in which the receipts arise and which is a member 
of a controlled group (as defined in paragraph (3)) which 
includes the recipient corporation. 
"(3) DEFINITION OF CONTROLLED GROUP.—For purposes of this 
part, the term 'controlled group' has the meaning assigned to such 
term by section 1563(a), except that the phrase 'more than 50 
^^ stat. 120. 
percent' shall be substituted for the phrase 'at least 80 percent' 
each place it appears therein, and section 1563 (b) shall not. apply. 
"(b) QUALIFIED EXPORT ASSETS.—For purposes of this part, the 
qualified export assets of a corporation are— 
" (1) export property (as defined in subsection (c)) ; 
"(2) assets used primarily in connection with the sale, lease, 
rental, storage, handling, transportation, packaging, assembly, 
or servicing of export property, or the performance of engineering 
or architectural services described in subparagraph (G) of sub-
section (a) (1) or managerial services in furtherance of the pro-
duction of qualified export receipts described in subparagraphs 
(A), (B), (C),and (G) of subsection (a) (1); 
"(3) accounts receivable and evidences of indebtedness which 
arise by reason of transactions of such corporation described in 
subparagraph (A), (B), (C), (D), (G), or (H), of subsection 
(a)(1); 
"(4) money, bank deposits, and other similar temporary 
investments, which are reasonably necessary to meet the working 
^ 
capital requirements of such corporation; 
"(5) obligations arising in connection with a producer's loan 
(as defined in subsection ( d ) ) ; 
" (6) stock or securities of a related foreign export corporation 
(as defined in subsection (e)); 
"(7) obligations issued, guaranteed, or insured, in whole or 
in part, by the Export-Import Bank of the United States or the 
Foreign Credit Insurance Association in those cases where such 
obligations are acquired from such Bank or Association or from 
the seller or purchaser of the goods or services with respect to 
which such obligations arose; 
"(8) obligations issued by a domestic corporation organized 
solely for the purpose of financing sales of export jDroperty 
pursuant to an agreement with the Export-Import Bank of the 
United States under which such corporation makes export loans 
guaranteed by such bank; and 
"(9) amounts (other than reasonable working capital) on 
deposit in the United States that are utilized during the period 
provided for in, and otherwise in accordance with, regulations 
prescribed by the Secretary or his delegate to acquire other 
qualified export assets. 
" (c) EXPORT PROPERTY.— 
"(1) I N GENERAL.—For purposes of this part, the term 'export 
property' means property— 
"(A) manufactured, produced, grown, or extracted in the 
United States by a person other than a DISC, 
540 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(B) held primarily for sale, lease, or rental, in the ordi-
nary course of trade or business, by, or to, a DISC, for direct 
use, consumption, or disposition outside the United States, 
and 
"(C) not more than 50 percent of the fair market value of 
which is attributable to articles imported into the United 
States. 
In applying subparagraph (C), the fair market value of any 
article imported into the United States shall be its appraised 
value, as determined by the Secretary or his delegate under section 
402 or 402a of the Tariff Act of 1930 (19 U.S.C, sec. 1401a or 
7o'*stat^943°^' 
1402) iucomiectiou withitsimportation. 
"(2) EXCLUDED PROPERTY.-—For purposes of this part, the term 
'export property' does not include— 
" (A) property leased or rented by a DISC for use by any 
member of a controlled group (as defined in subsection 
(a) (3)) which includes the DISC, or 
"(B) patents, inventions, models, designs, formulas, or 
processes, whether or not patented, copyrights (other than 
films, tapes, records, or similar reproductions, for commercial 
or home use), good will, trademarks, trade brands, franchises, 
or other like property. 
"(3) PROPERTY IN SHORT SUPPLY.—If the President determines 
that the supply of any property described in paragraph (1) is 
insufficient to meet the requirements of the domestic economy, he 
may by Executive order designate the property as in short supply. 
Any property so designated shall be treated as property not 
described in paragraph (1) during the period beginning with the 
date specified in the Executive order and ending with the date 
specified in an Executive order setting forth the President's deter-
mination that the property is no longer in short supply. 
"(d) 
PRODUCER'S LOANS.— 
" (1) I N GENERAL.—An obligation, subject to the rules provided 
in paragraphs (2) and (3), shall be treated as arising out of a 
producer's loan if— 
"(A) the loan, when added to the unpaid balance of all 
other producer's loans made by the DISC, does not exceed the 
accumulated DISC income at the beginning of the month in 
which the loan is made; 
"(B) the obligation is evidenced by a note (or other evi-
dence of indebtedness) with a stated maturity date not more 
than 5 years from the date of the loan; 
"(C) the loan is made to a person engaged in the United 
States in the manufacturing, production, growing, or extrac-
tion of export property (referred to hereinafter as the 'bor-
rower') ; and 
"(D) at the time of such loan.it is designated as a pro-
ducer's loan. 
"(2) LIMITATION.—An obligation shall be treated as arising 
out of a producer's loan only to the extent that such loan, when 
added to the unpaid balance of all other producer's loans to the 
borrower outstanding at the time such loan is made, does not 
exceed an amount determined by multiplying the sum of— 
"(A) the amount of the iDorrower's adjusted basis deter-
mined at the beginning of the borrower's taxable year in 
which the loan is made, in plant, machinery, and equipment, 
and supporting production facilities in the United States; 
"(B) the amount of the borrower's property held primarily 
for sale, lease, or rental, to customers in the ordinary course 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
541 
of trade or business, at the beginning of such taxable year; 
and 
"(C) the aggregate amount of the borrower's research and 
experimental expenditures (within the meaning of section 
174) in the United States during all preceding taxable years 
se'us^c \*74^' 
beginning after December 31, 1971, 
by the percentage which the borrower's receipts, during the 3 
taxable years immediately preceding the taxable year (but not 
including any taxable year commencing prior to 1972) in which 
the loan is made, from the sale, lease, or rental outside the United 
States of property which would be export property if held by 
a DISC is of the gross receipts during such 3 taxable years from 
the sale, lease, or rental of property held by such borrower pri-
marily for sale, lease, or rental to customers in the ordinary course 
of the trade or business of such borrower. 
"(3) INCREASED INVESTMENT REQUIREMENT.—An 
obligation 
shall be treated as arising out of a producer's loan in a taxable 
year only to the extent that such loan, when added to the unpaid 
balance of all other producer's loans to the borrower made during 
such taxable year, does not exceed an amount equal to— 
" (A) the amount by which the sum of the adjusted basis of 
assets described in paragraph (2) (A) and (B) on the last 
day of the taxable year in which the loan is made exceeds the 
sum of the adjusted basis of such assets on the first day of 
such taxable year; plus 
"(B) the aggregate amount of the borrower's research and 
experimental expenditures (within the meaning of section 
174) in the United States during such taxable year. 
" (4) SPECIAL LIMITATION IN THE CASE or DOMESTIC FILM MAKER.— 
"(A) I N GENERAL.—In the case of a borrower who is a 
domestic film maker and who incurs an obligation to a DISC 
for the making of a film, and such DISC is engaged in the 
trade or business of selling, leasing, or renting films which 
are export property, the limitation described in paragraph 
(2) may be determined (to the extent provided under regu-
lations prescribed by the Secretary or his delegate) on the 
basis of— 
"(i) the sum of the amounts described in subpara-
graphs (A), (B), and (C) thereof plus reasonable esti-
mates of all such amounts to be incurred at any time by 
the borrower with respect to films which are commenced 
within the taxable year in which the loan is made, and 
"(ii) the percentage which, based on the experience 
of producers of similar films, the annual receipts of such 
producers from the sale, lease, or rental of such films 
outside the United States is of the annual gross receipts 
of such producers from the sale, lease, or rental of such 
films. 
"(B) DOMESTIC FILM MAKER.—For purposes of this para-
graph, a borrower is a domestic film maker with respect to 
a film if— 
"(i) such borrower is a United States person within 
the meaning of section 7701(a) (30), except that with 
76 stat. 988. 
respect to a partnership, all of the partners must be 
United States persons, and with respect to a corporation, 
all of its officers and at least a majority of its directors 
must be United States persons; 
"(ii) such borrower is engaged in the trade or busi-
ness of making the film with respect to which the loan 
is made; 
542 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
" (iii) the studio, if any, used or to be used for the tak-
ing of photographs and the recording of sound incor-
porated into such film is located in the United States; 
"(iv) the aggregate playing time of portions of such 
film photographed outside the United States does not 
or will not exceed 20 percent of the playing time of such 
film; and 
"(v) not less than 80 percent of the total amount paid 
or to be paid for services performed in the making of 
such film IS paid or to be paid to persons who are United 
States persons at the time such services are performed 
or consists of amounts which are fully taxable by the 
United States. 
"(C) 
SPECIAL RULES FOR APPLICATION OF SUBPARAGRAPH 
(B) (v).—For purposes of clause (v) of subparagraph (B) — 
"(i) there shall not be taken into account any amount 
which is contingent upon receipts or profits of the film 
and which is fully taxable by the United States (within 
the meaning of clause (ii)); and 
"(ii) any amount paid or to be paid to a United States 
person, to a non-resident alien individual, or to a cor-
poration which furnishes the services of an officer or 
employee to the borrower with respect to the making of 
a film, shall be treated as fully taxable by the United 
States only if the total amount received by such person, 
individual, officer, or employee for services performed 
in the making of such film is fully included in gross 
income for purposes of this chapter. 
"(e) RELATED FOREIGN 
EXPORT CORPORATION.—In determining 
whether a corporation (hereinafter in this subsection referred to as 
'the domestic corporation') is a DISC— 
"(1) 
FOREIGN INTERNATIONAL SALES CORPORATION.—A foreign 
corporation is a related foreign export corporation if— 
"(A) stock possessing more than 50 percent of the total 
combined voting power of all classes of stock entitled to 
vote is owned directly by the domestic corporation, 
"(B) 95 percent or more of such foreign corporation's 
gross receipts for its taxable year ending with or within the 
taxable year of the domestic corporation consists of qualified 
export receipts described in subparagraphs (A), (B), (C), 
and (D) of subsection (a) (1) and interest on any obligation 
described in paragraphs (3) and (4) of subsection (b), and 
"(C) the adjusted basis of the qualified export assets 
(described in paragraphs (1), (2), (3), and (4) of subsection 
(b)) held by such foreign corporation at the close of such 
taxable year equals or exceeds 95 percent of the sum of the 
adjusted basis of all assets held by it at the close of such 
taxable year. 
"(2) REAL PROPERTY HOLDING COMPANY.—A foreign corporation 
is a related foreign export corporation if— 
"(A) stock possessing more than 50 percent of the total 
combined voting power of all classes of stock entitled to vote 
is owned directly by the domestic corporation, and 
"(B) its exclusive function is to hold real property for 
the exclusive use (under a lease or otherwise) of the domestic 
corporation. 
"(3) ASSOCIATED FOREIGN CORPORATION.—A foreign corporation 
is a related foreign export corporation if— 
78 Stat. 120, 
26 u s e 1563, 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
543 
"(A) less than 10 percent of the total combined voting 
power of all classes of stock entitled to vote of such foreign 
corporation is owned (within the meaning of section 1563 
(d) and (e)) by the domestic corporation or by a controlled 
group of corporations (within the meaning of section 1563) 
of which the domestic corporation is a member, and 
"(B) the ownership of stock or securities in such foreign 
corporation by the domestic corporation is determined (under 
regulations prescribed by the Secretary or his delegate) 
to be reasonably in furtherance of a transaction or transac-
tions giving rise to qualified export receipts of the domestic 
corporation. 
"(f) 
GROSS RECEIPTS.—For purposes of this part, the term 'gross 
receipts' means the total receipts from the sale, lease, or rental of 
property held primarily for sale, lease, or rental in the ordinary course 
of trade or business, and gross income from all other sources. In the 
case of commissions on the sale, lease, or rental of property, the amount 
taken into account for purposes of this part as gross receipts shall 
be the gross receipts on the sale, lease, or rental of the property on 
M'hich such commissions arose. 
"(g) 
UNITED STATES DEFINED.—For purposes of this part, the 
term 'Laiited States' includes the Commonwealth of Puerto Rico 
and the possessions of the United States. 
"SEC. 994. INTER-COMPANY PRICING RULES. 
"(a) I N GENERAL.—In the case of a sale of export property to a 
DISC bv a person described in section 482, the taxable income of 
^^^ s*^'* ^^'^'•' 
such DISC and such person shall be based upon a transfer price which 
would allow such DISC to derive taxable income attributable to such 
sale (regardless of the sales price actually charged) in an amount 
which does not exceed the greatest of— 
"(1) 4 percent of the oualified export receipts on the sale of 
such property by the DISC plus 10 percent of the export pro-
motion expenses of such DISC attributable to such receipts, 
"(2) 50 percent of the combined taxable income of such DISC 
and such person which is attributable to the qualified export 
receipts on such property derived as the result of a sale by the 
DISC plus 10 percent of the export promotion expenses of such 
DISC attributable to such receipts, or 
"(3) taxable income based upon the sale price actually charged 
(but subject to the rules provided in section 482). 
"(b) 
RULES FOR COMMISSIONS, RENTALS, AND MARGINAL COSTING.— 
The Secretary or his delegate shall prescribe regulations setting 
forth— 
"(1) rules which are consistent with the rules set forth in sub-
section (a) for the application of this section in the case of com-
missions, rentals, and other income, and 
"(2) rules for the allocation of expenditures in computing 
combined taxable income under subsection (a) (2) in those cases 
where a DISC is seeking to establish or maintain a market for 
export property. 
"(c) EXPORT PROMOTION EXPENSES.—For purposes of this section, 
the term 'export promotion expenses' means those expenses incurred 
to advance the distribution or sale of export property for use, con-
sumption, or distribution outside of the United States, but does not 
include income taxes. Such expenses shall also include freight expenses 
to the extent of 50 percent of the cost of shipping export property 
aboard airplanes owned and operated by United States persons or 
ships documented under the laws of the United States in those cases 
where law or regulations does not require that such property be 
shipped aboard such airplanes or ships. 
544 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"Subpart B—Treatment of Distributions to Shareholders 
"Sec. 995. Taxation of DISC income to shareholders. 
"Sec. 996. Rules for allocation in the case of distributions and 
losses. 
"Sec. 997. Special subchapter C rules. 
"SEC. 995. TAXATION OF DISC INCOME TO SHAREHOLDERS. 
"(a) GENERAL EULE.—^A shareholder of a DISC or former DISC 
shall be subject to taxation on the earnings and profits of a DISC as 
provided in this chapter, but subject to the modifications of this 
subpart. 
"(b) DEEMED DiSTRiBTJTioisrs.— 
"(1) DISTRIBUTIONS IN QUALIFIED YEARS.—^A shareholder of a 
DISC shall be treated as having received a distribution taxable as 
a dividend with respect to his stock in an amount which is equal 
to his pro rata share of the sum (or, if smaller, the earnings and 
profits for the taxable year) of— 
"(A) the gross interest derived during the taxable year 
from producer's loans, 
"(B) the gain recognized by the DISC during the taxable 
year on the sale or exchange of property, other than property 
which in the hands of the DISC is a qualified export asset, 
previously transferred to it in a transaction in which gain 
was not recognized in whole or in part, but only to the extent 
that the transferor's gain on the previous transfer was not 
recognized, 
"(C) the gain (other than the gain described in subpara-
graph (B)) recognized by the DISC during the taxable year 
on the sale or exchange of property (other than property 
which in the hands of the DISC is stock in trade or other 
26^sc^*i 2^2^!' 
property described in section 1221 (1)) previously transferred 
to it in a transaction in which gain was not recognized in 
whole or in part, but only to the extent that the transferor's 
gain on the previous transfer was not recognized and would 
have been treated as gain from the sale or exchange of prop-
erty which is neither a capital asset nor property described 
6|A Stat. 325; 
jj^ scctiou 1231 if the property had been sold or exchanged 
rather than transferred to the DISC, 
"(D) one-half of the excess of the taxable income of the 
DISC for the taxable year, before reduction for any dis-
tributions during the year, over the sum of the amounts 
deemed distributed for the taxable year under subparagraphs 
(A), (B), and (C),and 
"(E) the amount of foreign investment attributable to 
producer's loans (as defined in subsection (d)) of a DISC for 
the taxable year. 
Distributions described in this paragraph shall be deemed to 
be received on the last day of the taxable year of the DISC in 
which the gross income (taxable income in the case of sub-
paragraph (D)) was derived. In the case of a distribution 
described in subparagraph (E), earnings and profits for the tax-
able year shall include accumulated earnings and profits. 
"(2) DISTRIBUTIONS UPON DISQUALIFICATION.— 
" (A) A shareholder of a corporation which revoked its elec-
tion to be treated as a DISC or failed to satisfy the conditions 
Ante, p. 535. 
^f scctlon 992(a) (1) for a taxable year shall be deemed to 
have received (at the time specified in subparagraph (B)) a 
distribution taxable as a dividend equal to his pro rata share 
of the DISC income of such corporation accumulated during 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
545 
the immediately preceding consecutive taxable years for 
which the corporation was a DISC. 
"(B) Distributions described in subparagraph (A) sliall 
be deemed to be received in equal installments on the last day 
of each of the 10 taxable years of the corporation following 
the year of the termination or disqualification described in 
subparagraph (A) (but in no case over more than the num-
ber of immediately preceding consecutive taxable years dur-
ing which the corporation was a DISC). 
"(c) GAIN ON DISPOSITION OF STOCK IN A DISC.—If a shareholder 
disposes of stock in a DISC or former DISC, any gain recognized on 
such disposition shall be included in gross income as a dividend to 
the extent of the accumulated DISC income of such DISC or former 
DISC which is attributable to such stock and which was accumulated 
in taxable years of such corporation during the period or periods 
the stock disposed of was held by such shareholder. If stock of the 
DISC or former DISC is disposed of in a transaction in which the 
separate corporate existence of the DISC or former DISC is termi-
nated other than by a mere change in place of organization, however 
ejffected, any gain realized on the disposition of such stock in the 
transaction shall be recognized notwithstanding any other provision 
of this title to the extent of the accumulated DISC income of such 
DISC or former DISC which is attributable to such stock and which 
was accumulated in taxable years of such corporation during the 
period or periods the stock disposed of was held by the stockholder 
which disposed of such stock, and such gain shall be included in 
gross income as a dividend. 
" (d) FOREIGN INVESTMENT ATTRIBUTABLE TO DISC.EARNINGS.—For 
the purposes of this part— 
"(1) I N GENERAL.—The amount of foreign investment attrib-
utable to producer's loans of a DISC for a taxable year shall be 
the smallest of— 
" (A) the net increase in foreign assets by members of the 
controlled group (as defined in section 993(a)(3)) which 
includes the DISC, 
"(B) the actual foreign investment by domestic members 
of such group, or 
"(C) the amount of outstanding producer's loans by such 
DISC to members of such controlled group. 
"(2) NET INCREASE IN FOREIGN ASSETS.—The term 'net increase 
in foreign assets' of a controlled group means the excess of— 
"(A) the amount incurred by such group to acquire assets 
(described in section 1231(b)) located outside the United 
68A stat. 325; 
otates over, 
26 use u'si. 
"(B) the sum of— 
"(i) the depreciation with respect to assets of such 
group located outside the United States; 
"(ii) the outstanding amount of stock or debt obliga-
tions of such group issued after December 31, 1971, to 
persons other than the United States persons or any 
member of such group; 
"(iii) one-half the earnings and profits of foreign 
members of such group and foreign branches of domestic 
members of such group; 
"(iv) one-half the royalties and fees paid by foreign 
members of such group to domestic members of such 
group; and 
"(v) the uncommitted transitional funds of the group 
as determined under paragraph (4). 
Ante, p. 538. 
member.' 
546 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
For purposes of this paragraph, assets which are qualified 
export assets of a DISC (or would be qualified export assets 
if owned by a DISC) shall not be taken into account. Amounts 
described in this paragraph (other than in subparagraphs 
(B) (ii) and (v)) shall be taken into account only to the 
extent they are attributable to taxable years beginning after 
December 31,1971. 
"(3) ACTUAL FOREIGN INVESTMENT,—The term 'actual foreign 
investment' by domestic members of a controlled group means 
the sum of— 
"(A) contributions to capital of foreign members of the 
group by domestic members of the group after December 31, 
1971, 
"(B) the outstanding amount of stock or debt obligations 
of foreign members of such group (other than normal trade 
indebtedness) issued after December 31, 1971, to domestic 
members of such group, 
"(C) amounts transferred by domestic members of the 
group after I>ecember 31, 1971, to foreign branches of such 
members, and 
"(D) one-half the earnings and profits of foreign mem-
bers of such group and foreign branches of domestic members 
of such group for taxable years beginning after December 31, 
1971. 
il°?M^*^'^ 
A s used in this subsection, the tei'm 'domestic member' means a 
domestic corporation which is a member of a controlled group (as 
Ante, p. 538, 
defined in section 993(a)(3)), and the term 'foreign member' 
ber,"°'^^^^" '"^"'' 
means a foreign corporation which is a member of such a con-
trolled group. 
"(4) UNCOMMITTED TRANSITIONAL FUNDS.—The uncommitted 
transitional funds of the group shall be an amount equal to the 
sum of— 
(A) the excess of— 
(i) the amount of stock or debt obligations of domestic 
members of such group outstanding on December 31, 
1971, and issued on or after January 1, 1968, to persons 
other than United States persons or any members of such 
group, but only to the extent the taxpayer establishes 
that such amount constitutes a long-term borrowing for 
purposes of the foreign direct investment program, over 
(ii) the net amount of actual foreign investment by 
domestic members of such group during the period that 
such stock or debt obligations have been outstanding; and 
"(B) the amount of liquid assets to the extent not 
included in subparagraph (A) held by foreign members of 
such group and foreign branches of domestic members of such 
group on October 31,1971, in excess of their reasonable work-
ing capital needs on such date. 
Lii",^'^ 
For purposes of this paragraph, the term 'liquid assets' means 
money, bank deposits (not including time deposits), and indebted-
ness of 2 years or less to maturity on the date of acquisition; and 
the actual foreign investment shall be determined under para-
graph (3) without regard to the date in subparagraph (A) of 
such paragraph and without regard to subparagraph (D) of 
such paragraph. 
"(5) SPECIAL RULE.—Under regulations prescribed by the Sec-
retary or his delegate the determinations under this subsection 
shall be made on a cumulative basis with proper adjustments for 
amounts previously taken into account. 
assets.' 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
547 
"SEC. 996. RULES FOR ALLOCATION IN THE CASE OF DISTRIBUTIONS 
AND LOSSES. 
"(a) RULES FOR ACTUAL DISTRIBUTIONS AND CERTAIN DEEMED 
DISTRIBUTIONS.— 
"(1) I N GENERAL.—Any actual distribution (other than a dis-
tribution described in paragraph (2) or to which section 995(c) 
^"'^' P* S'^'*-
applies) to a shareholder by a DISC (or former DISC) which 
is made out of earnings and profits shall be treated as made— 
"(A) first, out of previously taxed income, to the extent 
thereof, 
"(B) second, out of accumulated DISC income, to the 
extent thereof, and 
"(C) finally, out of other earnings and profits. 
"(2) QUALIFYING 
DISTRIBUTIONS.—Any 
actual 
distribution 
made pursuant to section 992(c) (relatmg to distributions to 
^n^e, p. 535. 
meet qualification requirements), and any deemed distribution 
pursuant to section 995(b)(1)(E) (relating to foreign invest-
ment attributable to producer's loans), shall be treated as made— 
" (A) first, out of accumulated DISC income, to the extent 
thereof, 
"(B) second, out of the earnings and profits described in 
paragraph (1) (C), to the extent thereof, and 
"(C) finally, out of previously taxed income. 
" (3) EXCLUSION FROM GROSS INCOME.—Amounts distributed out 
of previously taxed income shall be excluded by the distributee 
from gross income except for gains described in subsection (e) (2), 
and shall reduce the amount of the previously taxed income. 
" (b) ORDERING EULES FOR LOSSES.—If for any taxable year a DISC, 
or a former DISC, incurs a deficit in earnings and profits, such deficit 
shall be chargeable— 
"(1) first, to earnings and profits described in subsection 
(a) (1) (C), to the extent thereof, 
"(2) second, to accumulated DISC income, to the extent 
thereof, and 
"(3) finally, to previously taxed income, except that a deficit 
in earnings and profits shall not be applied against accumulated 
DISC income which has been determined is to be deemed dis-
tributed to the shareholders (pursuant to section 995(b) (2) (A)) 
as a result of a revocation of election or other disqualification. 
"(c) PRIORITY OF DISTRIBUTIONS.—Any actual distribution made 
during a taxable year shall be treated as being made subsequent to 
any deemed distribution made during such year. Any actual distri-
bution made pursuant to section 992(c) (relating to distributions 
to meet qualification requirements) shall be treated as being made 
before any other actual distributions during the taxable year. 
"(d) 
SUBSEQUENT EFFECT OF PREVIOUS DISPOSITION OF DISC 
STOCK.— 
"(1) SHAREHOLDER PREVIOUSLY TAXED INCOME ADJUSTMENT.— 
If— 
"(A) gain with respect to a share of stock of a DISC or 
former DISC is treated under section 995(c) as a dividend or 
as gain from the sale or exchange of property which is not a 
capital asset, and 
"(B) any person subsequently receives an actual distribu-
tion maide out of accumulated DISC income, or a deemed 
distribution made pursuant to section 995 (b) (2), with respect 
to such share, 
75-432 O - 72 - 37 
548 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
such person shall treat such distribution in the same manner as a 
distribution from previously taxed income to the extent that (i) 
the gain referred to in subparagraph (A), exceeds (ii) any other 
amounts with respect to such share which were treated under this 
paragraph as made from previously taxed income. In applying 
this paragraph with respect to a share of stock in a DISC or 
former DISC, gain on the acquisition of such share by the DISC 
or former DISC or gain on a transaction prior to such acquisi-
tion shall not be considered gain referred to in subparagraph (A). 
"(2) CORPORATE ADJUSTMENT UPON REDEMPTION.—If section 
Ante, p. 544. 
995(c) applies to a redemption of stock in a DISC or former 
DISC, the accumulated DISC income shall be reduced by an 
amount equal to the gain described in section 995(c) with respect 
to such stock which is (or has been) treated as gain from the 
sale or exchange of property which is not a capital asset, except 
to the extent distributions with respect to such stock have been 
treated under paragraph (1). 
"(e) 
ADJUSTMENT TO BASIS.— 
"(1) ADDITIONS TO BASIS.—Amounts representing deemed dis-
tributions as provided in section 995(b) shall increase the basis 
of the stock with respect to which the distribution is made. 
"(2) REDUCTIONS OF BASIS.—The portion of an actual distribu-
tion made out of previously taxed income shall reduce the basis 
of the stock with respect to which it is made, and to the extent 
that it exceeds the adjusted basis of such stock, shall be treated 
as gain from the sale or exchange of property. In the case of stock 
includible in the gross estate of a decedent for which an election 
84^s t ^^fsae^^^' 
^^ made under section 2032 (relating to alternate valuation), this 
2
6 u'sc 2032. 
paragraph shall not apply to any distribution made after the date 
of the decedent's death and before the alternate valuation date 
provided by section 2032. 
"(f) DEFINITIONS OF DIVISIONS OF EARNINGS AND PROFITS.—For pur-
poses of this part: 
"(1) DISC INCOME.—The earnings and profits derived by a 
corporation during a taxable year in which such corporation is a 
DISC, before reduction for any distributions during the year, but 
reduced by amounts deemed distributed under section 995(b) (1), 
shall constitute the DISC income for such year. The earnings 
and profits of a DISC for a taxable year include any amounts in-
cludible in such D I S C ' S gross income pursuant to section 951(a) 
for such year. Accumulated DISC income shall be reduced by 
deemed distributions under section 995(b) (2). 
"(2) PREVIOUSLY TAXED INCOME.—Earnings and profits deemed 
distributed under section 995(b) for a taxable year shall consti-
tute previously taxed income for such year. 
"(3) OTHER EARNINGS AND PROFITS.—The earnings and profits 
for a taxable year which are described in neither paragraph (1) 
nor (2) shall constitute the other earnings and profits for such 
year. 
"(g) EFFECTIVELY CONNECTED INCOME.—In the case of a share-
holder who is a nonresident alien individual or a foreign corporation, 
trust, or estate, gains referred to in section 995 (c) and all distributions 
out of accumulated DISC income including deemed distributions 
shall be treated as gains and distributions which are effectively con-
nected with the conduct of a trade or business conducted through a 
permanent establishment of such shareholder within the United 
States. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
549 
"SEC. 997. SPECIAL SUBCHAPTER C RULES. 
"For purposes of applying the provisions of subchapter C of chap-
ter 1, any distribution in property to a corporation by a DISC or 
former DISC which is made out of previously taxed income or accumu-
lated DISC income shall— 
" (1) be treated as a distribution in the same amount as if such 
distribution of property were made to an individual, and 
"(2) have a basis, in the hands of the recipient corporation, 
equal to the amount determined under paragraph (1)." 
SEC. 502. DEDUCTIONS, CREDITS, ETC. 
(a) DivnjENDS RECEIVED DEDUCTION.—Section 246 (relating to rules 
applying to deductions for dividends received) is amended by redesig-
nating subsection (d) as subsection (e) and by inserting after sub-
section (c) the following: 
"(d) DIVIDENDS FROM A DISC OR FORMER DISC.—No deduction 
shall be allowed under section 243 in respect of a dividend from a 
corporation which is a DISC or former DISC (as defined in section 
992(a)) to the extent such dividend is paid out of the corporation's 
accumulated DISC income or previously taxed income, or is a deemed 
distribution pursuant to section 995 (b) (1)." 
(b) FOREIGN TAX CREDIT.— 
(1) Section 901(d) (relating to corporations treated as foreign 
corporations) is amended by adding at the end thereof the 
following: 
"For purposes of this subpart, dividends from a DISC or former 
DISC (as defined in section 992(a)) shall be treated as dividends from 
a foreign corporation to the extent such dividends are treated under 
part I as income from sources without the United States." 
(2) The heading of section 904(f) and paragraph (1) of sec-
tion 904(f) (relating to limitation on foreign tax credit) are 
amended to read as follows: 
"(f) APPLICATION or SECTION IN CASE or CERTAIN INTEREST INCOME 
AND DIVIDENDS FROM A DISC OR FORMER DISC.— 
"(1) I N GENERAL.—The provisions of subsections (a), (c), (d), 
and (e) of this section shall be applied separately with respect 
to each of the following items of income— 
"(A) the interest income described in paragraph (2), 
"(B) dividends from a DISC or former DISC (as 
defined in section 992(a)) to the extent such dividends are 
treated as income from sources without the United States, 
and 
"(C) income other than the interest income described in 
paragraph (2) and dividends described in subparagraph 
(B)." 
(3) Section 904(f)(3) (relating to limitation on foreign tax 
credit) is amended to read as follows: 
"(3) OVERALL LIMITATION NOT TO APPLY.—The limitation pro-
vided by subsection (a) (2) shall not apply with respect to the 
interest income described in paragraph (2) or to dividends 
described in paragraph (1) (B). The Secretary or his delegate shall 
by regulations prescribe the manner of application of subsection 
(e) with respect to cases in which the limitation provided by sub-
section (a) (2) applies with respect to income described in para-
graph (1) (B) and (C)." 
(4) Section 904(f) is amended by adding at the end thereof the 
following new paragraph: 
" (5) DISC DIVIDENDS AGGREGATED FOR PURPOSES OF PER-COUNTRY 
LIMITATION.—In the case of a taxpayer who for the taxable year 
has dividends described in paragraph (1) (B) from more than 
68A Stat. 84. 
26 u s e 301. 
68A Stat. 74; 
83 Stat. 625. 
Ante, p . 535. 
Ante, p . 544. 
68A Stat. 285; 
80 Stat. 1569. 
76 Stat. 1002. 
26 u s e 922. 
Ante, p. 535. 
550 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
one corporation, the limitation provided by subsection (a) (1) 
shall be applied with respect to the aggregate of such dividends." 
ofi'^rln^Qo^o^^* 
(^) WESTER]sr 
H E M I S P H E R E 
T R A D E 
CORPORATIONS.—Section 
922 
(relating to special deduction for Western Hemisphere Trade Cor-
porations) is amended by adding at the end thereof the following: 
"No deduction shall be allowed under this section to a corporation for 
a taxable year for which it is a DISC or in which it owns at any time 
stock in a DISC or former DISC (as defined in section 992(a))." 
(d) 
INCOME FROM SOURCES W I T H I N POSSESSIONS or THE UNITED 
STATES.—Section 931(a) (relating to the general rule applicable to 
income from sources within possessions of the United States) is 
amended by adding at the end thereof the following: "This section 
shall not apply in the case of a corporation for a taxable year for 
which it is a DISC or in which it owns at any time stock in a DISC 
or former DISC (as defined in section 992(a)")." 
jAs^^^iool''^'' 
^®^ INCLUDIBLE CORPORATIONS.—Section 1504(b) (relating to defi-
nition of "includible corporations") is amended by adding at the end 
thereof the following new paragraph: 
" (7) A DISC or former DISC (as defined in section 992(a))." 
(f) BASIS or DISC STOCK ACQUIRED FROM DECEDENT.—Section 1014 
(relating to basis of property acquired from a decedent) is amended 
by adding at the end thereof the following new subsection: 
"(d) SPECIAL EULE W I T H RESPECT TO DISC STOCK.—If stock owned 
by a decedent in a DISC or former DISC (as defined in section 992 
(a)) acquires a new basis under subsection (a), such basis (determined 
before the application of this subsection) shall be reduced by the 
amount (if any) which would have been included in gross income 
Ante, p. 544. 
under section 995(c) as a dividend if the decedent had lived and sold 
the stock at its fair market value on the estate tax valuation date. In 
computing the gain the decedent would have had if he had lived and 
sold the stock, his basis shall be determined without regard to the last 
Ante, p. 547. 
Sentence of section 996(e) (2) (relating to reductions of basis of 
DISC stock). For purposes of this subsection, the estate tax valuation 
date is the date of the decedent's death or, in the case of an election 
84 Stat. 1836. 
nuder section 2032, the applicable valuation date prescribed by that 
section." 
SEC. 503. SOURCE OF INCOME. 
74 Stat. 998. 
Sectiou 861 (a) (2) (relating to dividends) is amended— 
(1) by deleting the period at the end of subparagraph (C) and 
inserting in lieu thereof ", or"; and 
(2) by inserting the following new subparagraph (D) imme-
diately after subparagraph (C) as amended: 
"(D) from a DISC or former DISC (as defined in section 
992(a)) except to the extent attributable (as determined 
under regulations prescribed by the Secretary or his delegate) 
Ante, p, 538, 
to Qualified export receipts described in section 993(a)(1) 
Ante, p. 544, 
(otlicr tliau lutercst and gains described in section 995(b) 
(1))." 
SEC. 504. PROCEDURE AND ADMINISTRATION. 
68A Stat. 732; 
(a) RETURNS.—Sectiou 6011 (relating to general requirement of 
return, statement, or list) is amended by redesignating subsection (e) 
as subsection (f) and by adding a new subsection (e) which reads as 
follows: 
"(e) RETURNS, ETC., or DISCS AND FORMER DISCS.— 
"(1) RECORDS AND INFORMATION.—A DISC or former DISC 
shall for the taxable year— 
"(A) furnish such information to persons who were share-
holders at any time during such taxable year, and to the 
Secretary or his delegate, and 
78 Stat. 843. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
551 
"(B) keep such records, as may be required by regulations 
prescribed by the Secretary or his delegate. 
"(2) RETURNS.—A DISC shall file for the taxable year such 
returns as may be prescribed by the Secretary or his delegate by 
forms or regulations." 
(b) 
RETURNS or CORPORATIONS.—Section 6072(b) 
(relating to 
26^^*^*V'*^' 
returns of corporations) is amended by adding at the end thereof the 
following: "Returns required for a taxable year by section 6011 (e) (2) 
^"^^' P* ^^°' 
(relating to returns of a DISC) shall be filedon or before the fifteenth 
clay of the ninth month f 
ollowmg the close of the taxable year." 
*(c) CERTAIN INCOME TAX RETURNS OF DISC.—Section 6501(g) 
^^ stat. 1662. 
(relating to certain income tax returns of corporations) is amended 
by adding at the end thereof the following new paragraph: 
"(3) DISC.—If a corporation determines in good faith that 
it is a DISC (as defined in section 992(a)) and files a return as 
^"'^' P* ^^^' 
such under section 6011(e) (2) and if such corporation is there-
after held to be a corporation which is not a DISC for the tax-
able year for which the return is filed, such return shall be deemed 
the return of a corporation which is not a DISC for purposes 
of this section." 
(d) FAILURE OF DISC To FILE RETURNS.—Subchapter B of chap-
ter 68 (relating; to assessable penalties) is amended by addins: at the 
^^ stat. 524. 
end thereof the following new section: 
* SEC. 6686. FAILURE OF DISC TO FILE RETURNS. 
"In addition to the penalty imposed by section 7203 (relating to wail-
ful failure to file return, supply information, or pay tax) any person 
required to supply information or to file a return under section 6011 (e) 
^"'®» P* SSO. 
who fails to supply such information or file such return at the time pre-
scribed by the Secretary or his delegate, or w^ho files a return which 
does not show the information required, shall pay a penalty of $100 for 
each failure to supply information (but the total amount imposed on 
the delinquent person for all such failures during any calendar year 
shall not exceed $25,000) or a penalty of $1,000 for each failure to 
file a return, unless it is shown that such failure is due to reasonable 
cause." 
SEC. 505. EXPORT TRADE CORPORATIONS. 
(a) USE OF TERMS.—Except as otherwise expressly provided, when-
ever in this section a reference is made to a section, chapter, or other 
provision, the reference shall be considered to be made to a section, 
chapter, or other provision of the Internal Revenue Code of 1954, and 
26'uscr\* ^* -
terms used in this section shall have the same meaning as when used in 
^ ^^'^' 
such Code. 
(b) TRANSFER TO A DISC OF ASSETS OF EXPORT TRADE CORPORA-
TION.— 
(1) I N GENERAL.—If a corporation (hereinafter in this section 
called "parent") owns all of the outstanding stock of an export 
trade corporation (as defined in section 971), and the export 
Post, p. 553. 
trade corporation, during a taxable year beginning before Jan-
uary 1, 1976, transfers property, without receiving consideration, 
to a DISC (as defined in section 992(a)) all of whose outstanding 
stock is owned by the parent, and if the amount transferred by 
the export .trade corporation is not less than the amount of its 
untaxed subpart F income (as defined in paragraph (2) of this 
subsection) at the time of such transfer, then— 
(A) notwithstanding section 367 or any other provision 
^'^ stat. 2065,, 
of chapter 1, no gain or loss to the export trade corporation, 
the parent, or the DISC shall be recognized by reason of such 
transfer; 
552 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(B) the earnings and profits of the DISC shall be increased 
by the amount transferred to it by the export trade corpo-
ration and such amount shall be included in accumulated 
Ante, p. 550, 
DISC iucome, and for purposes of section 861(a)(2)(D) 
shall be considered to be qualified export receipts; 
(C) the adjusted basis of the assets transferred to the 
DISC shall be the same in the hands of the DISC as in the 
hands of the export trade corporation; 
(D) the earnings and profits of the export trade corpora-
tion shall be reduced by the amount transferred to the DISC, 
to the extent thereof, with the reduction being applied first 
to the untaxed subpart F income and then to the other earn-
ings and profits in the order in which they were most recently 
accumulated; 
(E) the basis of the parent's stock in the export trade cor-
poration shall be decreased by the amount obtained by 
multiplying its basis in such stock by a fraction the numera-
tor of which is the amount transferred to the DISC and the 
denominator of which is the aggregate adjusted basis of all 
the assets of the export trade corporation immediately before 
such transfer; 
(F) the basis of the parent's stock in the DISC shall be 
increased by the amount of the reduction under subparagraph 
(E) of its basis in the stock of the export trade corporation; 
(G) the property transferred to the DISC shall not be 
considered to reduce the investments of the export trade cor-
poration in export trade assets for purposes of applying sec-
26 ulc 97T* 
ti«n 970 (b); and 
(H) any foreign income taxes which would have been 
84^s ^*^'o68^' 
deemed under section 902 to have been paid by the parent if 
the transfer had been made to the parent shall be treated 
as foreign income taxes paid by the DISC. 
For purposes of this section, the amount transferred by the export 
trade corporation to the DISC shall be the aggregate of the adjusted 
basis of the properties transferred, with proper adjustment for any 
indebtedness secured by such property or assumed by the DISC in 
connection with the transfer. For purposes of this section, a foreign 
corporation which qualified as an export trade corporation for any 
3 taxable years beginning before November 1, 1971, shall be treated 
as an export trade corporation. 
(2) DEFINITION OF UNTAXED SUBPART F INCOME.—For purposes 
of this section, the term "untaxed subpart F income" means with 
respect to an export trade corporation the amount by which— 
(A) the sum of the amounts by which the subpart F 
income of such corporation was reduced for the taxable year 
and all prior taxable years under section 970(a) and the 
amounts not included in subpart F income (determined with-
26 use 970. 
out regard to subpart G of subchapter N of chapter 1) for 
all prior taxable years by reason of the application of section 
76 Stat. 1031. 
972, exceeds 
(B) the sum of the amounts which were included in the 
gross income of the shareholders of such corporation under 
section 951(a) (1) (A) (ii) and under the provision of section 
970(b) for all prior taxable years, 
determined without regard to the transfer of property described in 
paragraph (1) of this subsection. 
(3) SPECIAL CASES.—If the provisions of paragraph (1) of 
this subsection are not applicable solely because the export trade 
corporation or the DISC, or both, are not owned in the manner 
prescribed in such paragraph, the provisions shall nevertheless 
85 STAT.] 
PUBLIC LAW 92-1 7 8 - D E C . 10, 1971 
553 
be applicable in such cases to the extent, and in 9,ccordance with 
such rules, as may be prescribed by the Secretary or his delegate. 
(4) TREATMENT or EXPORT TRADE ASSETS.—If the provisions of 
this subsection are applicable, accounts receivable held by an 
export trade corporation and transferred to a DISC, to the extent 
such receivables were export trade assets in the hands of the 
export trade corporation, shall be treated as qualified export 
assets for purposes of section 993 (b). 
^"'^' "' ^^^• 
(c) LIMITATION OF APPLICATION or SUBPART G.—Section 971 (a) 
26u*sc97°i?* 
(relating to definition of export trade corporation) is amended by 
adding at the end thereof the following new paragraph: 
"(3) LIMITATION.—No controlled foreign corporation may 
qualify as an export trade corporation for any taxable year begin-
ning after October 31, 1971, unless it qualified as un export trade 
corporation for any taxable year beginning before suoh date. 
If a corporation fails to qualify as an export trade corporation 
for a period of any 3 consecutive taxable years beginning after 
such date, it may not qualify as an export trade corporation for 
amy taxable year beginning after such period." 
SEC. 506. SUBMISSION OF ANNUAL REPORTS TO CONGRESS. 
The Secretary of the Treasury shall, commencing for the calendar 
year 1972, submit an annual report to the Congress within 15i/^ months 
following the close of each calendar year setting forth an analysis of 
the operation and effect of the provisions of this title. 
SEC. 507. GENERAL EFFECTIVE DATE OF TITLE. 
Except as provided in section 505 of this title, the amendments made 
by sections 501 through 504 of this title shall apply with respect to 
taxable years ending after December 31, 1971, except that a corpora-
tion may not be a DISC (as defined in section 992(a) of the Internal 
Revenue Code of 1954, added by section 501 of this title) for any 
taxable year beginning before January 1, 1972. 
TITLE VI—JOB DEVELOPMENT RELATED 
TO WORK INCENTIVE PROGRAM 
SEC. 60L TAX CREDIT FOR CERTAIN EXPENSES INCURRED IN WORK 
INCENTIVE PROGRAM. 
(a) ALLOWANCE or CREDIT.—Subpart A of part IV of subchapter A 
of chapter 1 (relating to credits allowable) is amended by renumber- y/stlf'ieV^^' 
ing section 40 as section 42, and by inserting after section 39 the 
following new section: 
"SEC. 40. EXPENSES OF WORK INCENTIVE PROGRAMS. 
" (a) GENERAL RULE.—There shall be allowed, as a credit against the 
tax imposed by this chapter, the amount determined under subpart C 
of this part. 
"(b) REGULATIONS.—The Secretary or his delegate shall prescribe 
such regulations as may be necessary to carry out the purposes of this 
section and subpart C." 
(b) COMPUTATION OF CREDIT.—Part IV of subchapter A of chapter 
1 (relating to credits against tax) is amended by adding at the end 
thereof the following new subpart: 
"Subpart C—Rules for Computing Credit for Expenses of Work 
Incentive Programs 
"Sec. 50A. Amount of credit. 
"Sec. oOB. Definitions; special rules. 
Infra. 
83 Stat. 580. 
554 
PUBUC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"SEC. 50A. AMOUNT OF CREDIT. 
" (a) DETERMINATION OF AMOUNT.—• 
" (1) GENERAL RULE.—The amount of the credit allowed by sec-
Ante, p. 553. 
^JQJ^ 40 fQj. ^he taxable year shall be equal to 20 percent of the 
Post, p. 556. 
work incentive program expenses (as defined in section 50B(a)). 
"(2) LIMITATION BASED ON AMOUNT or TAX.—Notwithstanding 
paragraph (1), the credit allowed by section 40 for the taxable 
year shall not exceed— 
"(A) so much of the liability for tax for the taxable year 
as does not exceed $25,000, plus 
"(B) 50 percent of so much of the liability for tax for the 
taxable year as exceeds $25,000. 
"(3) LIABILITY FOR TAX.—For purposes of paragraph (2), the 
liability for tax for the taxable year shall be the tax imposed by 
this chapter for such year, reduced by the sum of the credits allow-
able under— 
ae'usc^ 33!^* 
" (^) section 33 (relating to foreign tax credit), 
"(B) section 35 (relating to partially tax exempt interest), 
78 Stat. 24, 33. 
"(C) scctiou 37 (relatingto retirement lucome), 
76 Stat. 962. 
"(D) scctiou 38 (relating to investment in certain depreci-
able property), and 
Post, p. 560. 
"(^-^ section 41 (relating to contributions to candidates for 
public office). 
For purposes of this paragraph, any tax imposed for the taxable 
year by section 56 (relating to minimum tax for tax preferences), 
^
^
6
^
8
A Stat. 179, 
scctiou 531 (relating to accumulated earnings tax), section 541 
80*Stat. 113. 
(relating to personal holding company tax), or section 1378 
(relating to tax on certain capital gains of subchapter S corpora-
tions), and any additional tax imposed for the taxable year by 
80 Stat. 99. 
section 1351(d) (1) (relating to recoveries of foreign expropria-
tion losses), shall not be considered tax imposed by this chapter 
for such year. 
"(4) MARRIED INDIVIDUALS.—In the case of a husband or wife 
who files a separate return, the amount specified under subpara-
graphs (A) and (B) of paragraph (2) shall be $12,500 in lieu of 
$25,000. This paragraph shall not apply if the spouse of the tax-
payer has no work incentive program expenses for, and no unused 
credit carryback or carryover to, the taxable year of such spouse 
which ends within or with the taxpayer's taxable year. 
"(5) CONTROLLED GROUPS.—In the case of a controlled group, 
the $25,000 amount specified under paragraph (2) shall be reduced 
for each component member of such group by apportioning 
$25,000 among the component members of such group in such man-
ner as the Secretary or his delegate shall by regulations prescribe. 
For purposes of the preceding sentence, the term 'controlled group' 
78 Stat. 120; 
has the meaning assigned to such term by section 1563(a). 
^ 
*^*' ^ ' 
"(b) CARRYBACK AND CARRYOVER OF UNUSED CREDIT.— 
"(1) ALLOWANCE OF CREDIT.—If the amount of the credit 
determined under subsection (a) (1) for any taxable year exceeds 
the limitation provided by subsection (a) (2) for such taxable 
year (hereinafter in this subsection referred to as 'unused credit 
year'), such excess shall be— 
"(A) a work incentive program credit carryback to each 
of the 3 taxable years preceding the unused credit year, and 
"(B) a work incentive program credit carryover to each 
of the 7 taxable years following the unused credit year, 
and shall be added to the amount allowable as a credit Sy section 
40 for such years, except that such excess may be a carryback only 
to a taxable year beginning after December 31, 1971. The entire 
amount of the unused credit for an unused credit year shall be 
Ante, p . 553. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
555 
carried to the earliest of the 10 taxable years to which (by reason 
of subparagraphs (A) and (B)) such credit may be carried, and 
then to each of the other 9 taxable years to the extent that, 
because of the limitation contained in paragraph (2), such unused 
credit may not be added for a prior taxable year to which such 
unused credit may be carried. 
" (2) LIMITATION.—The amount of the unused credit which may 
be added under paragraph (1) for any preceding or succeeding 
taxable year shall not exceed the amount by which the limitation 
provided by subsection (a) (2) for such taxable year exceeds the 
sum of— 
"(A) the credit allowable under subsection (a)(1) for 
such taxable year, and 
"(B) the amounts which, by reason of this subsection, are 
added to the amount allowable for such taxable year and 
attributable to taxable years preceding the unused credit year. 
"(c) 
EARLY TERMINATION OF EMPLOYMENT BY EMPLOYER, ETC.— 
"(1) 
GENERAL RULE.—Under regulations prescribed by the 
Secretary or his delegate— 
"(A) 
WORK 
INCENTIVE 
PROGRAM 
EXPENSES.—If 
the 
employment of any employee with respect to whom work 
incentive program expenses are taken into account under 
subsection (a) is terminated by the taxpayer at any time 
during the first 12 months of such employment (whether or 
not consecutive) or before the close of the 12th calendar 
month after the calendar month in which such employee 
completes 12 months of employment with the taxpayer, the 
tax under this chapter for the taxable year in which such 
employment is terminated shall be increased by an amount 
(determined under such regulations) equal to the credits 
allowed under section 40 for such taxable year and all prior 
'^"'®' ^' ^^^' 
taxable years attributable to work incentive 
program 
expenses paid or incurred with respect to such employee. 
"(B) CARRYBACKS AND CARRYOVERS ADJUSTED.—^^In the case 
of any termination of employment to which subparagraph 
(A) applies, the carrybacks and carryovers under subsection 
(b) shall be properly adjusted. 
"(2) 
SUBSECTION NOT TO APPLY IN CERTAIN CASES.— 
"(A) I N GENERAL.—Paragraph (1) shall not apply to— 
"(i) a termination of employment of an employee who 
voluntarily leaves the employment of the taxpayer, 
"(ii) a termination of employment of an individual 
who, before the close of the period referred to in para-
graph (1) (A), becomes disabled to perform the services 
of such employment, unless such disability is removed 
before the close of such period and the taxpayer fails to 
offer reemployment to such individual, or 
"(iii) a termination of employment of an individual, 
if it is determined under the applicable State unemploy-
ment compensation law that the termination was due to 
the misconduct of such individual. 
"(B) CHANGE IN FORM OF BUSINESS, ETC.—For purposes of 
paragraph (1), the employment relationship between the 
taxpayer and an employee shall not be treated as terminated— 
"(i) by a transaction to which section 381(a) applies, 
26^80^*38^*' 
if the employee continues to be employed by the acquir-
ing corporation, or 
"(ii) by reason of a mere change in the form of con-
ducting the trade or business of the taxpayer, if the 
employee continues to be employed in such trade or busi-
Ante, p. 553, 
556 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
ness and the taxpayer retains a substantial interest in 
such trade or business. 
" (3) SPECIAL RULE.—Any increase in tax under paragraph (1) 
shall not be treated as tax imposed by this chapter for purposes 
of determining the amount of any credit allowable under sub-
part A. 
"(d) FAILURE TO PAY COMPARABLE WAGES.— 
" (1) GENERAL RULE.—Under regulations prescribed by the Sec-
retary or his delegate, if during the period described in subsection 
(c) (1) (A), the taxpayer pays wages (as defined in section 50B 
^"^^^' 
(b)) to an employee with respect to whom work incentive pro-
gram expenses are taken into account under subsection (a) which 
are less than the wages paid to other employees who perform com-
parable services, the tax under this chapter for the taxable year 
in which such wages are so paid shall be increased by an amount 
(determined under such regulations) equal to the credits allowed 
under section 40 for such taxable year and all prior taxable years 
attributable to Avork incentive program expenses paid or incurred 
Avith respect to such employee, and the carrybacks and carryovers 
under subsection (b) shall be properly adjusted. 
" (2) SPECIAL RULE.—Any increase in tax under paragraph (1) 
shall not be treated as tax imposed by this chapter for purposes of 
26 use 31. 
determining the amount of any credit allowable under subpart A. 
"SEC. SOB. DEFINITIONS; SPECIAL RULES. 
"(a) WORK INCENTIVE PROGRAM EXPENSES.—For purposes of this 
subpart, the term 'work incentive program expenses' means the wages 
])aid or incurred by the taxpayer for services rendered during the first 
12 months of employment (whether or not consecutive) of employees 
Avho are certified by the Secretary of Labor as— 
" (1) having been placed in employment under a work incentive 
program established under section 432(b) (1) of the Social Secu-
?2 use 632'.* 
rityAct,and 
_ 
_ 
" (2) not having displaced any individual from employment. 
"(b) WAGES.—For purposes of subsection (a), the term 'wages' 
means only cash remuneration (including amounts deducted and 
withheld). 
"(c) LIMITATIONS.— 
"(1) TRADE OR BUSINESS EXPENSES.—No item shall be taken into 
account under subsection (a) unless such item is incurred in a trade 
or business of the taxpayer. 
"(2) REIMBURSED EXPENSES.—No item shall be taken into 
account under subsection (a) to the extent that the taxpayer is 
reimbursed for such item. 
"(3) GEOGRAPHICAL LIMITATION.—No item shall be taken into 
account under subsection (a) with respect to any expense paid or 
incurred by the taxpayer Avith respect to employment outside the 
United States. 
"(4) MAXIMUM PERIOD or TRAINING OR INSTRUCTION.—No item 
Avith respect to any employee shall be taken into account under 
subsection (a) after the end of the 24-month period beginning 
Avith the date of initial employment of such employee by the 
taxpayer. 
"(5) 
INELIGIBLE INDIVIDUALS.—No item shall be taken into 
account under subsection (a) with respect to an individual who— 
"(A) bears any of the relationships described in para-
68^|^at.^43. 
graphs (1) through (8) of section 152(a) to the taxpayer, 
or, if the taxpayer is a corporation, to an individual who owns, 
directly or indirectly, more than 50 percent in value of the 
outstanding stock of the corporation (determined with the 
application of section 267(c)), 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
557 
"(B) if the taxpayer is an estate or trust, is a grantor, 
beneficiary, or fiduciary of the estate or trust, or is an indi-
vidual who bears any of the relationships described in para-
graphs (1) through (8) of section 152(a) to a grantor, 
26'us*c\'5'2^' 
beneficiary, or fiduciary of the estate or trust, or 
"(C) is a dependent (described in section 152(a) (9)_) of 
72 stat. 1607. 
the taxpayer, or, if the taxpayer is a corporation, of an indi-
vidual described in subparagraph (A), or, if the taxpayer is 
an estate or trust, of a grantor, beneficiary, or fiduciary of 
the estate or trust. 
•*(d) SUBCHAPTER S CORPORATIONS.—In case of an electing small 
business corporation (as defined in section 1371)— 
78^stat^\*i2^^°' 
"(1) the work incentive program expenses for each taxable 
year shall be apportioned pro rata among the persons who are 
shareholders of such corporation on the last day of such taxable 
year, and 
"(2) any person to whom any expenses have been apportioned 
under paragraph (1) shall be treated (for purposes of this sub-
part) as the taxpayer with respect to such expenses. 
"(e) ESTATES AND TRUSTS.—In the case of an estate or trust— 
" (1) the work incentive program expenses for any taxable year 
shall be apportioned between the estate or trust and the bene-
ficiaries on the basis of the income of the estate or trust allocable 
to each, 
"(2) any beneficiary to whom any expenses have been appor-
tioned under paragraph (1) shall be treated (for purposes of this 
subpart) as the taxpayer with respect to such expenses, and 
"(3) the $25,000 amount specified under subparagraphs (A) and 
(B) of section 50A(a) (2) applicable to such estate or trust shall 
^"'^' ^' ^^'** 
be reduced to an amount which bears the same ratio to $25,000 as 
the amount of the expenses allocated to the trust under paragraph 
^1) bears to the entire amount of such expenses. 
" (i) LIMITATIONS W I T H RESPECT TO CERTAIN PERSONS.—In the case 
of— 
" (1) an organization to which section 593 applies, 
83^3181^6*20!^' 
"(2) a regulated investment company or a real estate invest-
ment trust subject to taxation under subchapter M (section 851 ga^sut!*?!*?.^^^' 
and following), and 
" (3) a cooperative organization described in section 1381 (a), 
rules similar to the rules provided in section 46(d) shall apply under 
regulations prescribed by the Secretary or his delegate. 
"(g) CROSS REFERENCE.— 
"For application of this subpart to certain acquiring corpora-
tions, see section 381(c) (24)." 
(c) TECHNICAL AND CLERICAL AMENDMENTS.— 
(1) The table of subparts for part IV of subchapter A of chapter 
1 is amended by adding at the end thereof the following: 
"Subpart C. Rules for computing credit for expenses of work 
incentive programs." 
(2) The table of sections of subpart A of part IV of subchapter A 
of chapter 1 is amended by striking out the last item and inserting in 
lieu thereof the following: 
"Sec. 40. Expenses of work incentive programs. 
"Sec. 41. Contributions to candidates for public office. 
"Sec. 42. Overpayments of tax. 
(3) Section 381(c) (relating to items taken into account in certain 
^!^ ^*^^' ^^4; 
corporate acquisitions) is amended by adding at the end thereof the ^^ *^*' ^''^' 
following new paragraph: 
76 Stat. 1045. 
Ante, p. 507. 
558 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(24) 
CREDIT UNDER SECTION 4O FOR WORK INCENTIVE PROGRAM 
EXPENSES.—The acquiring corporation shall take into account (to 
the extent proper to carry out the purposes of this section and 
Ante, p. 553. 
sectiou 40, and under such regulations as may be prescribed by the 
Secretary or his delegate) the items required to be taken into 
account for purposes of section 40 in respect of the distributor or 
transferor corporation." 
84 Stat, 1846. 
(4) Scctiou 56(a) (2) (relating to imposition of minimum tax 
for tax preferences) is amended— 
(A) by striking out "and" at the end of clause (ii), 
(B) by striking out "; and" at the end of clause (iii) and 
inserting in lieu thereof a comma, and 
(C) by inserting after clause (iii) the following new 
clauses: 
"(iv) section 40 (relating to expenses of work incen-
tive program), and 
Post, p. 560. 
"("^) section 41 (relating to contributions to candidates 
for public office); and". 
(5) Section 56(c) (1) (relating to tax carryovers) is amended— 
(A) by striking out "and" at the end of subparagraph (B), 
(B) by striking out "exceed" at the end of subparagraph 
(C), and 
(C) by inserting after subparagraph (C) the following 
neAv subparagraphs: 
"(D) section 40 (relating to expenses of work incentive 
program), and 
"(E) section 41 (relating to contributions to candidates for 
public office), exceed", 
(d) 
STATUTES OF LIMITATIONS AND INTEREST RELATING TO WORK 
INCENTIVE CREDIT CARRYBACKS.— 
^68A Stat^.^803; 
(1) 
ASSESSMENT AND COLLECTION. 
ScctioU 6501 ( r e l a t i n g tO 
" °'°' "^^ 
limitation on assessment and collection) is amended by adding 
at the end thereof the following new subsection: 
"(o) WORK INCENTIVE PROGRAM CREDIT CARRYBACKS.—In the case 
of a deficienc}^ attributable to the application to the taxpayer of a 
work incentive program credit carryback (including deficiencies 
which may be assessed pursuant to the provisions of section 6213(b) 
(2)), such deficiency may be assessed at any time before the expiration 
of the period withm which a deficiency for the taxable year of the 
unused work incentive program credit which results in such carryback 
may be assessed, or, with respect to any portion of a work incentive 
program credit carryback from a taxable year attributable to a net 
operating loss carryback or a capital loss carryback from a subse-
quent taxable year, at any time before the expiration of the period 
within which a deficiency for such subsequent taxable year may be 
assessed." 
78 Stat. 858. 
(^2) CREDIT O
R REFUND.—Sectiou 6511(d) (relating to limita-
tions on credit or refund) is amended by adding at the end 
thereof the following new paragraph: 
"(7) 
SPECIAL PERIOD OF LIMITATION WITH RESPECT TO WORK 
INCENTIVE PROGRAM CREDIT CARRYBACKS. 
"(A) PERIOD OF LIMITATION.—If the claim for credit or 
refund relates to an overpayment attributable to a work incen-
tive program credit carryback, in lieu of the 3-year period of 
limitation prescribed in subsection (a), the period shall be 
that period which ends with the expiration of the 15th day 
of the 40th month (or 39th month, in the case of a corpora-
tion) following the end of the taxable year of the unused 
work incentive program credit which results in such carry-
83 Stat. 525. 
68A Stat, 771. 
68A Stat. 849. 
26 u s e 7122. 
85 STAT.] 
PUBLIC LAW 92-1 7 8 - D E C . 10, 1971 
559 
back (or, with respect to any portion of a work incentive pro-
gram credit carryback from a taxable year attributable to a 
net operating loss carryback or a capital loss carryback from 
a subsequent taxable year, the period shall be that period 
which ends with the expiration of the 15th day of the 40th 
month, or 39th month, in the case of a corporation, following 
the year of such taxable year) or the period prescribed in 
subsection (c) in respect of such taxable year, whichever 
• expires later. In the case of such a claim, the amount of the 
credit or refund may exceed the portion of the tax paid within 
the period provided in subsection (b) (2) or (c), whichever 
is applicable, to the extent of the amount of the overpayment 
attributable to such carryback. 
"(B) APPLICABLE RULES.—If the allowance of a credit or 
refund of an overpayment of tax attributable to a work 
incentive program credit carryback is otherwise prevented by 
the operation of any law or rule of law other than section 
7122, relating to compromises, such credit or refund may be 
allowed or made, if claim therefor is filed within the period 
provided in subparagraph (A) of this paragraph. In the case 
of any such claim for credit or refund, the determination by 
any court, including the Tax Court, in any proceeding in 
which the decision of the court has become final, shall not 
be conclusive with respect to the work incentive program 
credit, and the effect of such credit, to the extent that such 
credit is affected by a carryback which was not in issue in 
such proceeding." 
(3) INTEREST ON UNDERPAYMENTS.—Section 6601(e) (relating ys^stausss!^' 
to income tax reduced by carryback or adjustment for certain 
unused deductions) is amended by adding at the end thereof the 
following new paragraph: 
" (4) WORK INCENTIVE PROGRAM CREDIT CARRYBACK.—If the credit 
allowed by section 40 for any taxable year is increased by reason 
of a work incentive program credit carryback, such increase shall 
not affect the computation of interest under this section for the 
period ending with the last day of the taxable year in which the 
work incentive program credit carryback arises, or, with respect 
to any portion of a work incentive program carryback from 
a taxable year attributable to a net operating loss carryback or 
a capital loss carryback from a subsequent taxable year, such 
increase shall not affect the computation of interest under this 
section for the period ending with the last day of such sub-
sequent taxable year." 
(4) INTEREST O
N OVERPAYMENTS.—Section 6611(f) (relating to 
refund of income tax caused by carryback or adjustment for cer-
tain unused deductions) is amended by adding at the end thereof 
the following new paragraph: 
"(4) WORK INCENTIVE PROGRAM CREDIT CARRYBACK.—For pur-
poses of subsection (a), if any overpayment of tax imposed by 
subtitle A results from a work incentive program credit carryback, 
such overpayment shall be deemed not to have been made prior 
to the close of the taxable year in which such work incentive pro-
gram credit carryback arises, or, with respect to any portion of a 
work incentive program credit carryback from a taxable year 
attributable to a net operating loss carryback or a capital loss 
carryback from a subsequent taxable year, such overpayment shall 
be deemed not to have been made prior to the close of such sub-
sequent taxable year." 
560 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
(e) TENTATIVE CARRYBACK ADJUSTMENTS.— 
8 3^stt^*^39^^^' 
(1) APPLICATION FOR ADJUSTMENT.—Section 6411 (relating to 
26 use 6411. 
quick refunds in respect of tentative carryback adjustments) is 
amended— 
(A) by striking out "or unused investment credit" each 
place it ajppears in such section and inserting in lieu thereof 
"unused investment credit, or unused work incentive program 
credit", 
(B) by inserting after "section 46(b)," in the first sentence 
of subsection (a) "by a work incentive program carryback 
Ante. p. 554. 
providcd iu section oOA (b),", and 
(C) by inserting after "investment credit carryback" in the 
second sentence of subsection (a) "or a work incentive pro-
gram carryback". 
(2) TENTATIVE CARRYBACK ADJUSTMENT ASSESSMENT PERIOD.— 
80 Stat. 1151. 
Section 6501 (m) (relating to tentative carryback adjustment 
period) is amended— 
(A) by striking out "or an investment credit carryback" 
and inserting in lieu thereof "an investment credit carryback, 
or a work incentive program carryback", and 
(B) by striking out "(h) or (j)" each place it appears and 
inserting in lieu thereof " (h), (j), or (o)". 
(f) EFFECTIVE DATE.—The amendments made by this section shall 
apply to taxable years beginning after December 31,1971. 
TITLE VII—TAX INCENTIVES FOR CONTRI-
BUTIONS TO CANDIDATES FOR PUBLIC 
OFFICE 
SEC. 701. ALLOWANCE OF CREDIT. 
7/sfat^*i67^^' 
(^) Subpart A of part IV of subchapter A of chapter 1 (relating 
to credits against tax) is amended by inserting after section 40 (as 
added by section 601 of this Act) the following new section: 
"SEC. 41. CONTRIBUTIONS TO CANDIDATES FOR PUBLIC OFFICE. 
"(a) GENERAL RULE.—In the case of an individual, there shall be 
allowed, subject to the limitations of subsection (b), as a credit against 
the tax imposed by this chapter for the taxable year, an afmount equal 
to one-half of all political contributions, payment of which is made 
by the taxpayer within the taxable year. 
"(b) LIMITATIONS.— 
"(1) MAXIMUM CREDIT.—The credit allowed by subsection (a) 
for a taxable year shall be limited to $12.50 ($25 in the case of 
84 Stat. 2063. 
^ joiut rctum under section 6013). 
" (2) APPLICATION WITH OTHER CREDITS.—The credit allowed by 
subsection (a) shall not exceed the amount of the tax imposed by 
this chapter for the taxable year reduced by the sum of the 
credits allowable under section 33 (relating to foreign tax credit), 
section 35 (relating to partially tax-exempt interest), section 37 
76 Stat. 962. 
(relating to retirement income), and section 38 (relating to invest-
ment in certain depreciable property). 
"(3) VERIFICATION.—The credit allowed by subsection (a) shall 
be allowed, with respect to any political contribution, only if 
such political contribution is verified in such manner as the 
Secretary or his delegate shall prescribe by regulations. 
" (c) DEFINITIONS.—For purposes of this section— 
"(1) POLITICAL CONTRIBUTION.—The term 'political contribu-
tion' means a contribution or gift of money to— 
85 STAT.] 
PUBLIC LAW 92-178-DEC. 10, 1971 
561 
" (A) an individual who is a candidate for nomination or 
election to any Federal, State, or local elective public office 
in any primary, general, or special election, for use by such 
individual to further his candidacy for nomination or election 
to such office; 
"(B) any committee, association, or organization (whether 
or not incorporated) organized and operated exclusively for 
the purpose of influencing, or attempting to influence, the 
nomination or election of one or more individuals who are 
candidates for nomination or election to any Federal, State, 
or local elective public office, for use by such committee, 
association, or organization to further the candidacy of such 
individual or individuals for nomination or election to such 
office; 
"(C) the national committee of a national political party; 
"(D) the State committee of a national political party as 
designated by the national committee of such party; or 
"(E) a local committee of a national political party as 
designated by the State committee of such party designated 
under subparagraph (D), 
"(2) CANDIDATE.—The term 'candidate' means, with respect to 
any Federal, State, or local elective public office, an individual 
Avho— 
"(A) has publicly announced that he is a candidate for 
nomination or election to such office; and 
"(B) meets the qualifications prescribed by law to hold 
such office. 
"(3) NATIONAL POLITICAL PARTY.—The term 'national ix>litical 
party' means— 
"(A) in the case of contributions made during a taxable 
year of the taxpayer in which the electors of President and 
Vice President are chosen, a political party presenting can-
didates or electors for such offices on the official election ballot 
of ten or more States, or 
"(B) in the case of contributions made during any other 
taxable year of the taxpayer, a political party which met the 
qualifications described in subparagraph (A) in the last pre-
ceding election of a President and Vice President. 
"(4) STATE AND LOCAL.—The term 'State' means the various 
States and the District of Columbia; and the term 'local' means 
a political subdivision or part thereof, or two or more political 
subdivisions or parts thereof, of a State. 
"(d) 
CROSS REFERENCES.— 
"For disallowance of credits to estates and trusts, see section 
642(a)(3)." 
(b) Section 642(a) (relating to credits against tax for estates and 
^SA stat. 215; 
trusts) is amended by adding at the end thereof the following new '^^2rusc 6
*
4
2
. 
paragraph: 
" (3) POLITICAL CONTRIBUTIONS.—An estate or trust shall not be 
allowed the credit against tax for political contributions provided 
by section 41." 
^"'^' ?• seo. 
SEC. 702. DEDUCTION IN LIEU OF CREDIT. 
(a) Part VII of subchapter B of chapter 1 (relating to additional j^lti^^o 
^^' 
itemized deductions for individuals) is amended by redesignating sec-
tion 218 as 219, and by inserting after section 217 the following new 
section: 
"SEC. 218. CONTRIBUTIONS TO CANDIDATES FOR PUBLIC OFFICE. 
" (a) ALLOWANCE or DEDUCTION.—In the case of an individual, there 
shall be allowed as a deduction any political contribution (as defined 
562 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
Ante, p. 560. 
'm sectioii 41(c) (1)) payment of which is made by such individual 
within the taxable year. 
"(b) LIMITATIONS.— 
"(1) AMOUNT.—The deduction under subsection (a) shall not 
8/stlf*2063^^' 
exceed $50 ($100 in the case of a joint return under section 6013). 
26 use 601*3. 
"(2) VERIFICATION.—The deduction under subsection (a) shall 
be allowed, with respect to any political contribution, only if such 
political contribution is verified in such manner as the Secretary 
or his delegate shall prescribe by regulations. 
"(c) ELECTION TO TAKE CREDIT IN LIEU OF DEDUCTION.—This 
section shall not apply in the case of any taxpayer who, for the taxable 
year, elects to take the credit against tax provided by section 41 (relat-
ing to credit against tax for contributions to candidates for public 
office). Such election shall be made in such manner and at such time as 
the Secretary or his delegate shall prescribe by regulations. 
"(d) CROSS EEFERENCE.— 
"For disallowance of deduction to estates and trusts, 
see section 642(i)." 
78 Stat. 32. 
^j^^ Scctiou 642 (relating to special rules for credits and deductions 
for estates and trusts) is amended by redesignating subsection (i) as 
subsection (j), and by inserting after subsection (h) a new subsection 
as follows: 
"(i) POLITICAL CONTRIBUTIONS.—An estate or trust shall not be 
allowed the deduction for contributions to candidates for public office 
Ante, p. 561. 
providcd by section 218." 
(c) The table of sections of part VII of subchapter B of chapter 1 is 
amended by striking out the last item and inserting in lieu thereof the 
following : 
"Sec. 218. Contributions to candidates for public office. 
"Sec. 219. Cross references." 
SEC. 703. EFFECTIVE DATE. 
The amendments made by this title shall apply to taxable years 
ending after December 31, 1971, but only with respect to political 
contributions, payment of which is made after such date. 
TITLE VIII—FINANCING OF PRESIDEN-
TIAL ELECTION CAMPAIGNS 
SEC. 801. PRESIDENTIAL ELECTION CAMPAIGN FUND ACT. 
The Internal Revenue Code of 1954 is amended by adding at the 
end thereof the following new subtitle: 
"Subtitle H—Financing of Presidential Election 
Campaigns 
"Chapter 95. Presidential election campaign fund. 
"Cliapter 96. Presidential election campaign fund advisory board. 
"CHAPTER 95—PRESIDENTIAL ELECTION CAMPAIGN 
FUND 
"Sec. 9001. Short title. 
"Sec. 9002. Definitions. 
"Sec. 9003. Condition for eligibility for payments. 
"Sec. 9004. Entitlement of eligible candidates to payments. 
"Sec. 9005. Certification by Comptroller General. 
"Sec. 9006. Payments to eligible candidates. 
"Sec. 9007. Examinations and audits; repayments. 
"Sec. 9008. Information on proposed expenses. 
Citation of title* 
85 STAT.] 
PUBLIC LAW 92-1 7 8 - D E C . 10, 1971 
563 
"Sec. 9009. Reports to Congress; regulations. 
"Sec. 9010. Participation by Comptroller General in judicial pro-
ceedings. 
"Sec. 9011. Judicial review. 
"Sec. 9012. Criminal penalties. 
"Sec. 9013. Effective date of chapter. 
"SEC. 9001. SHORT TITLE. 
"This chapter may be cited as the 'Presidential Election Campaign 
Fund Act'. 
"SEC. 9002. DEFINITIONS. 
"For purposes of this chapter— 
" (1) The term 'authorized committee' means, with respect to the 
candidates of a political party for President and Vice President of 
the United States, any political committee which is authorized in 
writing by such candidates to incur expenses to further the election 
of such candidates. Such authorization shall be addressed to the 
chairman of such political committee, and a copy of such authori-
zation shall be filed by such candidates with the Comptroller 
General. Any withdrawal of any authorization shall also be in 
writing and shall be addressed and filed in the same manner as the 
authorization. 
"(2) The term 'candidate' means, with respect to any presiden-
tial election, an individual who (A) has been nominated for elec-
tion to the office of President of the United States or the office of 
Vice President of the United States by a major party, or (B) has 
qualified to have his name on the election ballot (or to have the 
names of electors pledged to him on the election ballot) as the 
candidate of a political party for election to either such office 
in 10 or more States. For purposes of paragraphs (6) and (7) of 
this section and purposes of section 9004(a) (2), the term 'candi-
date' means, with respect to any preceding presidential election, 
an individual who received popular votes for the office of Pres-
ident in such election. 
"(3) The term 'Comptroller General' means the Comptroller 
General of the United States. 
"(4) The term 'eligible candidates' means the candidates of a 
political party for President and Vice President of the United 
States who have met all applicable conditions for eligibility to 
receive payments under this chapter set forth in sootion 9003. 
"(5) The term 'fund' means the Presidential Election Cam-
paign Fund established by section 9006(a). 
"(6) The term 'major party' means, with respect to any pres-
idential election, a political party whose candidate for the office 
of President in the preceding presidential election received, as 
the candidate of such party, 25 percent or more of the total number 
of popular votes received by all candidates for such office. 
"(7) The term 'minor party' means, with respect to any presi-
dential election, a political party whose candidate for the office of 
President in the preceding presidential election received, as the 
candidate of such party, 5 percent or more but less than 25 per-
cent of the total number of popular votes received by all candi-
dates for such office. 
"(8) The term 'new party' means, with respect to any presiden-
tial election, a political party which is neither a major party nor 
a minor party. 
" (9) The term 'political committee' means any committee, asso-
ciation, or organization (whether or not incorporated) which 
accepts contributions or makes expenditures for the purpose of 
influencing, or attempting to influence, the nomination or election 
of one or more individuals to Federal, State, or local elective 
public office. 
75-432 O - 72 - 38 
564 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(10) The term 'presidential election' means the election of 
presidential and vice-presidential electors. 
"(11) The term 
'qualified 
campaign expense' means an 
expense— 
"(A) incurred (i) by the candidate of a political party 
for the office of President to further his election to such office 
or to further the election of the candidate of such political 
party for the office of Vice President, or both (ii) by the 
candidate of a political party for the office of Vice President 
to further his election to such office or to further the election 
of the candidate of such political party for the office of Presi-
dent, or both, or (iii) by an authorized committee of the 
candidates of a political party for the offices of President and 
Vice President to further the election of either or both of 
such candidates to such offices, 
"(B) incurred within the expenditure report period (as 
defined in paragraph (12)), or incurred before the beginning 
of such period to the extent such expense is for property, 
services, or facilities used during such period, and 
"(C) neither the incurring nor payment of which con-
stitutes a violation of any law of the United States or of the 
State in which such expense is incurred or paid. 
An expense shall be considered as incurred by a candidate or an 
authorized committee if it is incurred by a person authorized by 
such candidate or such committee, as the case may be, to incur 
such expense on behalf of such candidate or such committee. If 
an authorized committee of the candidates of a political party 
for President and Vice President of the United States also incurs 
expenses to further the election of one or more other individuals 
to Federal, State, or local elective public office, expenses incurred 
by such committee which are not specifically to further the election 
of such other individual or individuals shall be considered as 
incurred to further the election of such candidates for President 
and Vice President in such proportion as the Comptroller General 
prescribes by rules or regulations. 
" (12) The term 'expenditure report period' with respect to any 
presidential election means— 
" (A) in the case of a major party, the period beginning with 
the first day of September before the election, or, if earlier, 
with the date on which such major party at its national con-
vention nominated its candidate for election to the office of 
President of the United States, and ending 30 days after the 
date of the presidential election; and 
" (B) in the case of a party which is not a major party, the 
same period as the expenditure report period of the major 
party which has the shortest expenditure report period for 
such presidential election under subparagraph (A). 
"SEC. 9003. CONDITION FOR ELIGIBILITY FOR PAYMENTS. 
" (a) I N GENERAL.—In order to be eligible to receive any payments 
under section 9006, the candidates of a political party in a presidential 
election shall, in writing— 
"(1) agree to ootain and furnish to the Comptroller General 
such evidence as he may request of the qualified campaign expenses 
with respect to which payment is sought, 
"(2) agree to keep and furnish to the Comptroller General 
such records, books, and other information as he may request, 
"(3) agree to an audit and examination by the Comptroller 
Greneral under section 9007 and to pay any amounts required to be 
paid under such section, and 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
565 
" (4) agree to furnish statements of qualified campaign expenses 
and proposed qualified campaign expenses required under section 
9008. 
"(b) MAJOR PARTIES.—In order to be eligible to receive any pay-
ments under section 9006, the candidates of a major party in a presi-
dential election shall certify to the Comptroller General, under penalty 
of perjury, that— 
"(1) such candidates and their authorized committees will not 
incur qualified campaign expenses in excess of the aggregate pay-
ments to which they will be entitled under section 9004, and 
"(2) no contributions to defray qualified campaign expenses 
have been or will be accepted by such candidates or any of their 
authorized committees except to the extent necessary to make up 
any deficiency in payments received out of the fund on account 
of the application of section 9006(c), and no contributions to 
defray expenses which would be qualified campaign expenses but 
for subparagraph (C) of section 9002(11) have been or will be 
accepted by such candidates or any of their authorized committees. 
Such certification shall be made within such time prior to the day of 
the presidential election as the Comptroller General shall prescribe by 
rules or regulations. 
"(c) MINOR AND NEW PARTIES.—In order to be eligible to receive 
any payments under section 9006, the candidates of a minor or new 
party in a presidential election shall certify to the Comptroller Gen-
eral, under penalty of perjury, that— 
"(1) such candidates and their authorized committees will not 
incur qualified campaign expenses in excess of the aggregate pay-
ments to which the eligible candidates of a major party are entitled 
under section 9004, and 
"(2) such candidates and their authorized committees will 
accept and expend or retain contributions to defray qualified cam-
paign expenses only to the extent that the qualified campaign 
expenses incurred by such candidates and their authorized com-
mittees certified to under paragraph (1) exceed the aggregate 
payments received by such candidates out of the fund pursuant 
to section 9006. 
Such certification shall be made within such time prior to the day of 
the presidential election as the Comptroller General shall prescribe by 
rules or regulations. 
"SEC. 9004. ENTITLEMENT OF ELIGIBLE CANDIDATES TO PAYMENTS. 
"(a) I N GENERAL.—Subject to the provisions of this (Chapter— 
" (1) The eligible candidates of a major party in a presidential 
election shall be entitled to payments under section 9006 equal in 
the aggresrate to 15 cents multiplied by the total number of resi-
dents within the United States who have attained the age of 18, as 
determined by the Bureau of the Census, as of the first day of 
June of the year preceding the year of the presidential election. 
"(2) (A) The eligible candidates of a minor party in a presi-
dential election shall be entitled to payments under section 9006 
equal in the aggregate to an amount which bears the same ratio to 
the amount computed under paragraph (1) for a major party as 
the number of popular votes received by the candidate for Presi-
dent of the minor party, as such candidate, in the preceding presi-
dential election bears to the average number of popular votes 
received by the candidates for President of the major parties in 
the preceding presidential election. 
"(B) If the candidate of one or more political parties (not 
including a major party) for the office of President was a candi-
date for such office in the preceding presidential election and 
566 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
received 5 percent or more but less than 25 percent of the total 
number of popular votes received by all candidates for such office, 
such candidate and his running mate for the office of Vice Presi-
dent, upon compliance with the provisions of section 9003 (a) and 
(c), shall be treated as eligible candidates entitled to payments 
under section 9006 in an amount computed as provided in subpara-
graph (A^ by taking into account all the popular votes received by 
such candidate for the office of President in the preceding presi-
dential election. If eligible candidates of a minor party are entitled 
to payments under this subparagraph, such entitlement shall be 
reduced by the amount of the entitlement allowed under subpara-
graph (A). 
" (3) The eligible candidates of a minor party or a new party in 
a presidential election whose candidate for President in such elec-
tion receives, as such candidate, 5 percent or more of the total num-
ber of popular votes cast for the office of President in such election 
shall be entitled to payments under section 9006 eqvial in the aggre-
gate to an amount which bears the same ratio to the amount com-
puted under paragraph (1) for a major party as the number of 
popular votes received by such candidate in such election bears to 
the average number of popular votes received in such election by 
the candidates for President of the major parties. In the case of eli-
gible candidates entitled to payments under paragraph (2), the 
amount allowable under this paragraph shall be limited to the 
amount, if any, by which the entitlement under the preceding 
sentence exceeds the amount of the entitlement under paragraph 
(2)-
"(b) LIMITATIONS.—The aggregate payments to which the eligible 
candidates of a political party shall be entitled under subsections (a) 
(2) and (3) with respect to a presidential election shall not exceed an 
amount equal to the lower of— 
"(1) the amount of qualified campaign expenses incurred by 
such eligible candidates and their authorized committees, reduced 
by the amount of contributions to defray qualified campaign 
expenses received and expended or retained b}^ such eligible candi-
dates and such committees, or 
" (2) the aggregate payments to which the eligible candidates of 
a major party are entitled under subsection (a) (1), reduced by 
the amount of contributions described in paragraph (1) of this 
subsection. 
'•(c) RESTRICTIONS.—The eligible candidates of a political party 
.shall be entitled to payments under subsection (a) only— 
"(1) to defray qualified campaign expenses incurred by such 
eligible candidates or their authorized committees, or 
"(2) to repay loans the proceeds of which were used to defray 
such qualified campaign expenses, or otherwise to restore funds 
(other than contributions to defray q^ualified campaign expenses 
received and expended by such candidates or such committees) 
used to defray such qualified campaign expenses. 
"SEC. 9005. CERTIFICATION BY COMPTROLLER GENERAL. 
"(a) INITIAL CERTIFICATIONS.—On the basis of the evidence, books, 
I'ccords, and information furnished by the eligible candidates of a 
political party and prior to examination and audit under section 9007, 
the Comptroller General shall certify from time to time to the Secre-
tary for payment to such candidates under section 9006 the payments 
to which such candidates are entitled under section 9004. 
"(b) FINALITY or CERTIEICATIONS AND DETERMINATIONS.—Initial 
certifications by the Comptroller General under subsection (a), and all 
determinations made by him under this chapter, shall be final and con-
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
567 
elusive, except to the extent that they are subject to examination and 
audit by the Comptroller General under section 9007 and judicial 
review under section 9011. 
"SEC. 9006. PAYMENTS TO ELIGIBLE CANDIDATES. 
"(a) ESTABLISHMENT OF CAMPAIGX FUND.—There is hereby estab-
lished on the books of the Treasury of the United States a special fund 
to be known as the 'Presidential Election Campaign Fund'. The 
Secretary shall maintain in the fund (1) a separate account for the 
candidates of each major party, each minor party, and each new party 
for which a specific designation is made under section 6096 for pay- 
^°^'' ^' ^^^' 
ment into an account in the fund and (2) a general account for which 
no specific designation is made. The Secretary shall, as provided by 
appropriation Acts, transfer to each account in the fund an amount 
not in excess of the sum of the amounts designated (subsequent to the 
previous presidential election) to such account by individuals under 
section 6096 for payment into such account of the fund. 
"(b) TRANSFP:R TO THE GENP:RAL FUND.—If, after a presidential 
election and after all eligible candidates have been paid the amount 
which they are entitled to receive under this chapter, there are moneys 
remaining in any account in the fund, the Secretary shall transfer the 
moneys so remaining to the general fund of the Treasury. 
"(c) PAYMENTS FROM THE FUND.—Upon receipt of a certification 
from the Comptroller General under section 9005 for payment to the 
eligible candidates of a political party, the Secretary shall pay to such 
candidates out of the specific account in the fund for such candidates 
the amount certified by the Comptroller General. Payments to eligible 
candidates from the account designated for them shall be limited to the 
amounts in such account at the time of payment. Amounts paid to any 
such candidates shall be under the control of such candidates. 
"(d) 
TRANSFERS FROM GENERAL ACCOUNT TO SEPARATE ACCOUNTS.— 
" (1) If, on the 60th day prior to the presidential election, the 
moneys in any separate account in the fund are less than the aggre-
gate entitlement under section 9004(a)(1) or (2) of the eli-
gible candidates to which such account relates, 80 percent of the 
amount in the general accoimt shall be transferred to the separate 
accounts (whether or not all the candidates to which such separate 
accounts relate are eligible candidates) in the ratio of the enti-
tlement under section 9004(a) (1) or (2) of the candidates to 
which such accounts relate. No amount shall be transferred to any 
separate account under the preceding sentence which, when added 
to the moneys in that separate account prior to any payment out 
of that account during the calendar year, would be in excess of 
the aggregate entitlement under section 9004(a) (1) or (2) of the 
candidates to whom such account relates. 
"(2) If, at the close of the expenditure report period, the mon-
eys in any separate account in the fund are not sufficient to satisfy 
any unpaid entitlement of the eligible candidates to which 
such account relates, the balance in the general account shall be 
transferred to the separate accounts in the following manner: 
" (A) For the separate account of the candidates of a major 
party, compute the percentage which the average number of 
popular A'otes recei^-ed by the candidates for President of the 
major parties is of the total number of popular votes cast for 
the office of President in the election. 
"(B) P^or the se])arate account of the candidates of a minor 
or new party, compute the percentage which the popular votes 
received for President by the candidate to which such account 
relates is of the total number of popular votes cast for the 
office of President in the election. 
568 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(C) In the case of each separate account, multiply the ap-
plicable percentage obtained under subparagraph (A) or (B) 
for such account by the amount of the money in the general 
account prior to any distribution made under paragraph (1), 
and transfer to such separate account an amount equal to the 
excess of the product of such multiplication over the amount 
of any distribution made under such paragraph to such 
account. 
"SEC. 9007. EXAMINATIONS AND AUDITS; REPAYMENTS. 
"(a) EXAMINATIONS AND AUDITS.—After each presidential election, 
the Comptroller General shall conduct a thorough examination and 
audit of the qualified campaign expenses of the candidates of each 
political party for President and Vice President. 
"(b) REPAYMENTS.— 
"(1) If the Comptroller General determines that any portion 
of the payments made to the eligible candidates of a political 
party under section 9006 was in excess of the aggregate payments 
to which candidates were entitled under section 9004, he shall so 
notify such candidates, and such candidates shall pay to the Sec-
retary an amount equal to such portion. 
"(2) If the Comptroller General determines that the eligible 
candidates of a political party and their authorized committees 
incurred qualified campaign expenses in excess of the aggregate 
payments to which the eligible candidates of a major party were 
entitled under section 9004, he shall notify such candidates of 
the amount of such excess and such candidates shall pay to the 
Secretary an amount equal to such amount. 
"(3) if the Comptroller General determines that the eligible 
candidates of a major party or any authorized committee of such 
candidates accepted contributions (other than contributions to 
make up deficiencies in payments out of the fund on account of 
the application of section 9006(c)) to defray qualified campaign 
expenses (other than qualified campaign expenses with respect 
to which payment is required under paragraph (2)), he shall 
notify such candidates of the amount of the contributions so 
accepted, and such candidates shall pay to the Secretary an 
amount equal to such amount. 
"(4) If the Comptroller General determines that any amount 
of any payment made to the eligible candidates of a political party 
under section 9006 was used for any purpose other than— 
"(A) to defray the qualified campaign expenses with 
respect to which such payment was made, or 
"(B) to repay loans the proceeds of which were used, or 
otherwise to restore funds (other than contributions to defray 
qualified campaign expenses which were received and 
expended) 
which were used, to defray 
such qualified 
campaign expenses, 
he shall notify such candidates of the amount so used, and such 
candidates shall pay to the Secretary an amount equal to such 
amount. 
"(5) No payment shall be required from the eligible candidates 
of a political party under this subsection to the extent that such 
payment, when added to other payments required from such 
candidates under this subsection, exceeds the amount of payments 
received by such candidates under section 9006. 
Time limitation. 
«^^^ NOTIFICATION.—No notification shall be made by the Comptrol-
ler General under subsection (b) with respect to a presidential election 
more than 3 years after the day of such election. 
Federal Regis(:ef, 
Post, p . 573. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
569 
"(d) DEPOSIT OF REPAYMENTS.—All payments received by the Sec-
retary under subsection (b) shall be deposited by him in tne general 
fund of the Treasury. 
"SEC. 9008. INFORMATION ON PROPOSED EXPENSES. 
"(a) REPORTS BY CANDIDATES.—^The candidates of a political party 
for President and Vice President in a presidential election shall, from 
time to time as the Comptroller General may require, furnish to the 
Comptroller General a detailed statement, in such form as the Comp-
troller General may prescribe, of— 
"(1) the qualified campaign expenses incurred by them and 
their authorized committees prior to the date of such statement 
(whether or not evidence of such expenses has been furnished 
for purposes of section 9005), and 
"(2) the qualified campaign expenses which they and their 
authorized committees propose to incur on or after the date of 
such statement. 
The Comptroller General shall require a statement under this sub-
section from such candidates of each political party at least once each 
week during the second, third, and fourth weeks preceding the day 
of the presidential election and at least twice during the week preced-
ing such day. 
"(b) PUBLICATION.—The Comptroller General shall, as soon as 
Publication in 
possible after he receives each statement under subsection (a), prepare 
and publish a summary of such statement, together with any other 
data or information which he deems advisable, in the Federal Register. 
Such summary shall not include any information which identifies any 
individual who made a designation under section 6096. 
"SEC. 9009. REPORTS TO CONGRESS; REGULATIONS. 
"(a) REPORTS.—The Comptroller General shall, as soon as practica-
ble after each presidential election, submit a full report to the Senate 
and House of Representatives setting forth— 
"(1) the qualified campaign expenses (shown in such detail as 
the Comptroller General determines necessary) incurred by the 
candidates of each political party and their authorized com-
mittees ; 
"(2) the amounts certified by him under section 9005 for pay-
ment to the eligible candidates of each political party; and 
"(3) the amount of payments, if any, required from such can-
didates under section 9007, and the reasons for each payment 
required. 
Each report submitted pursuant to this section shall be printed as a 
Senate document. 
"(b) REGULATIONS, ETC.—The Comptroller General is authorized to 
prescribe such rules and regulations, to conduct such examinations 
and audits (in addition to the examinations and audits required by sec-
tion 9007(a)), to conduct such investigations, and to require the keep-
ing and submission of such books, records, and information, as he 
deems necessary to carry out the functions and duties imposed on him 
by this chapter. 
"SEC. 9010. PARTICIPATION BY COMPTROLLER GENERAL IN JUDICIAL 
PROCEEDINGS. 
"(a) 
APPEARANCE BY COUNSEL.—The Comptroller 
General 
is 
authorized to appear in and defend against any action filed under sec-
tion 9011, either by attorneys employed in his office or by counsel whom 
he may appoint without regard to the provisions of title 5, United 
States Code, governing appointments in the competitive service, and ^ ^ "^^ loi e
< 
whose compensation he may fix without regard to the provisions of 
chapter 51 and subchapter I I I of chapter 53 of such title. 
5331^^*^ ^^°^' 
570 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(b) RECOVERY OF CERTAIX PAYMENTS.—The Comptroller General 
is autliorized through attorneys and counsel described in subsection 
(a) to appear in the district courts of the United States to seek recov-
ery of any amounts determined to be payable to the Secretary as a 
result of examination and audit made pursuant to section 9007. 
"(c) DECLARATORY AXD INJUNCTIVE RELIEF.—The 
Comptroller 
General is authorized through attorneys and counsel described in sub-
section (a) to petition the courts of the United States for declaratory 
or injunctive relief concerning any civil matter covered by the provi-
Post, p. 57 3. 
sions of this subtitle or section 6096. Upon application of the Comp-
troller General, an action brought pursuant to this subsection shall be 
heard and determined by a court of three judges in accordance with 
7/stat^*2o^i^^' 
^^^ provisions of section 2284 of title 28, United States Code, and any 
appeal shall lie to the Supreme Court. It shall be the duty of the 
judges designated to hear the case to assign the case for hearing at 
the earliest practicable date, to participate in the hearing and deter-
mination thereof, and to cause the case to be in every way expedited. 
"(d) APPEAL.—The Comptroller General is authorized on behalf of 
the United States to appeal from, and to petition the Supreme Court 
for certiorari to review, judgments or decrees entered with respect to 
actions in which he appears pursuant to the authority provided in this 
section. 
"SEC. 9011. JUDICIAL REVIEW. 
"(a) REVIEW OF CERTIFICATION, DETERMINATION, OR OTHER ACTION 
B
Y THE COMPTROLLER GENERAL.—Any certification, determination, or 
other action by the Comptroller General made or taken pursuant to the 
provisions of this chapter shall be subject to review by the United 
States Court of Appeals for the District of Columbia upon petition 
filed in such Court by any interested person. Any petition filed pur-
suant to this section shall be filed within thirty days after the certifica-
tion, determination, or other action by the Comptroller General for 
which review is sought. 
"(b) SUITS To IMPLEMENT CHAPTER.— 
"(1) The Comptroller General, the national committee of any 
political party, and individuals eligible to vote for President are 
authorized to institute such actions, including actions for declara-
tory judgment or injunctive relief, as may be appropriate to imple-
ment or contrue any provision of this chapter. 
"(2) The district courts of the United States shall have juris-
diction of proceedings instituted pursuant to this subsection and 
shall exercise the same without regard to whether a person 
asserting rights under provisions of this subsection shall have 
exhausted any administrative or other remedies that may be pro-
vided at law. Such proceedings shall be heard and determined 
by a court of three judges in accordance with the provisions of 
section 2284 of title 28, United States Code, and any appeal shall 
lie to the Supreme Court. It shall be the duty of the judges desig-
nated to hear the case to assign the case for hearing at the earliest 
practicable date, to participate in the hearing and determination 
thereof, and to cause the case to be in every way expedited. 
"SEC. 9012. CRIMINAL PENALTIES. 
" ( a ) EXCESS (1\MPAICTN 
EXPENSES.— 
" (1) It shall be unlawful for an eligible candidate of a political 
party for President and Vice President in a presidential election 
or any of his authorized committees knowingly and willfully to 
incur qualified campaign expenses in excess of the aggregate pay-
ments to which the eligible candidates of a major party are 
entitled under section 9004 with respect to such election. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
571 
"(2) Any person Avho violates paragraph (1) shall be fined not 
more than $5,000, or imprisoned not more than one year or both. 
In the case of a violation by an authorized committee, any officer or 
member of such committee who knowingly and willfully consents 
to such violation shall be fined not more than $5,000, or imprisoned 
not more than one year, or both. 
"(b) CONTRIBUTIONS.— 
"(1) It shall be unlawful for an eligible candidate of a major 
party in a presidential election or any of his authorized commit-
tees knowingly and willfully to accept any contribution to defray 
qualified campaign expenses, except to the extent necessary to 
make up any deficiency in payments received out of the fund on 
account of the application of section 9006(c), or to defray 
expenses which would be qualified campaign expenses but for sub-
paragraph (C) of section 9002 (11). 
"(2) It shall be unlawful for an eligible candidate of a political 
party (other than a major party) in a presidential election or any 
of his authorized committees knowingly and willfully to accept 
and expend or retain contributions to defray qualified campaign 
expenses in an amount which exceeds the qualified campaign 
expenses incurred with respect to such election by such eligible 
candidate and his authorized committees. 
"(3) Any person who violates paragraph (1) or (2) shall be 
fined not more than $5,000, or imprisoned not more than one year, 
or both. In the case of a violation by an authorized committee, 
any officer or member of such committee who knowingly and wdll-
fully consents to such violation shall be fined not more than 
$5,000, or imprisoned not more than one year, or both. 
"(c) 
UNLAWFUL USE OF PAYMENTS.— 
"(1) It shall be unlawful for any person who receives any pay-
ment under section 9006, or to whom any portion of any payment 
received under such section is transferred, knowingly and willfully 
to use, or authorize the use of, such payment or such portion for any 
purpose other than— 
"(A) to defray the qualified campaign expenses with 
respect to which such payment was made, or 
"(B) to repay loans the proceeds of which were used, or 
otherwise to restore funds (other than contributions to defray 
qualified campaign expenses which were received 
and 
expended) which were used, to defray such qualified cam-
paign expenses. 
"(2) Any person who violates paragraph (1) shall be fined not 
more than $10,000, or imprisoned not more than five years, or both. 
"(d) 
FALSE STATEMENTS, ETC.— 
"(1) It shall be unlawful for any person knowingly and will-
fully— 
" (A) to furnish any false, fictitious, or fraudulent evidence, 
books, or information to the Comptroller General under this 
subtitle, or to include in any evidence, books, or information 
so furnished any misrepresentation of a material fact, or to 
falsify or conceal any evidence, books, or information relevant 
to a certification by the Comptroller General or an examina-
tion and audit by the Comptroller General under this chap-
ter; or 
"(B) to fail to furnish to the Comptroller General any rec-
ords, books, or information requested by him for purposes of 
this chapter. 
"(2) Any person who violates paragraph (1) shall be fined not 
more than $10,000, or imprisoned not more than five years, or both. 
572 
PUBLIC LAW 92-178-DEC. 10, 1971 
[85 STAT. 
"(e) 
KICKBACKS AND ILLEGAL PAYMENTS.— 
"(1) It shall be unlawful for any person knowingly and will-
fully to give or accept any kickback or any illegal pa^^ment in 
connection with any q^ualined campaign expense of eligible can-
didates or their authorized committees. 
"(2) Any person who violates paragraph (1) shall be fined not 
more than $10,000, or imprisoned not more than five years, or both. 
" (3) In addition to the penalty provided by paragraph (2), any 
person who accepts any kickback or illegal payment in connection 
with any qualified campaign expense of eligible candidates or their 
authorized committees shall pay to the Secretary, for deposit in the 
general fund of the Treasury, an amount equal to 125 percent of 
the kickback or payment received. 
" ( f ) 
UNAUTHORIZED EXPENDITURES AND Ct>NTRiBUTiONS.— 
"(1) Except as provided in paragraph (2), it shall be unlawful 
for any political committee which is not an authorized committee 
with respect to the eligible candidates of a political party for 
President and Vice President in a presidential election know-
ingly and willfully to incur expenditures to further the election 
of such candidates, which would constitute qualified campaign 
expenses if incurred by an authorized committee of such can-
didates, in an aggregate amount exceeding $1,000. 
"(2) This subsection shall not apply to (A) expenditures by a 
broadcaster regulated by the Federal Communications Commis-
sion, or by a periodical publication, in reporting the news or in 
taking editorial positions, or (B) expenditures by any orga-
nization described in section 501(c) which is exempt from tax 
under section 501(a) in communicating to its members the views 
of that organization. 
Penalty. 
u^g^ ^j^y political committcc which violates paragraph (1) 
shall be fined not more than $5,000, and any officer or member of 
such committee who knowingly and willfully consents to such vio-
lation and any other individual who knowingly and willfully 
violates paragraph (1) shall be fined not more than $5,000, or 
imprisoned not more than one year, or both. 
"(g) UNAUTHORIZED DISCLOSURE OF INFORMATION.— 
"(1) It shall be unlawful for any individual to disclose any 
information obtained under the provisions of this chapter except 
as may be required by law. 
P^^^^ty* 
"(2) Any person who violates paragraph (1) shall be fined not 
more than $5,000, or imprisoned not more than one year, or both. 
"SEC. 9013. EFFECTIVE DATE OF CHAPTER. 
"The provisions of this chapter shall take effect on January 1,1973. 
"CHAPTER 96. PRESIDENTIAL ELECTION CAMPAIGN 
FUND ADVISORY BOARD 
•'SEC. 9021. ESTABLISHMENT OF ADVISORY BOARD. 
"(a) 
ESTABLISHMENT OF BOARD.—There is hereby established an 
advisory board to be known as the Presidential Election Campaign 
Fund Advisory Board (hereinafter in this section referred to as the 
'Board'). It shall be the duty and function of the Board to counsel and 
assist the Comptroller General of the United States in the perform-
ance of the duties and functions imposed on him under the Presiden-
Anie, p. 563. 
^j^l Elcction Campaign Fund Act. 
68A Stat. 163. 
26 u s e 501. 
Ante, p. 563. 
85 STAT. ] 
PUBLIC LAW 92-178-DEC. 10, 1971 
573 
"(b) COMPOSITION OF BOARD.—The Board shall be composed of the 
following members: 
" (1) the majority leader and minority leader of the Senate and 
the Speaker and minority leader of the House of Representatives, 
who shall serve ex officio; 
"(2) two members representing each political party which is a 
major party (as defined in section 9002(6)), which members shall 
be appointed by the Comptroller General from recommendations 
submitted by such political party; and 
"(3) three members representing the general public, which 
members shall be selected by the members described in paragraphs 
(1) and (2). 
The terms of the first members of the Board described in paragraphs 
(2) and (3) shall expire on the sixtieth day after the date of the first 
presidential election following January 1, 1973, and the terms of sub-
sequent members described in paragraphs (2) and (3) shall begin on 
the sixty-first day after the date of a presidential election and expire 
on the sixtieth day following the date of the subsequent presidential 
election. The Board shall elect a Chairman from its members. 
"(c) COMPENSATION.—Members of the Board (other than members 
described in subsection (b) (1) shall receive compensation at the rate 
of $75 a day for each day they are engaged in performing duties and 
functions as such members, including traveltime, and, Avhile away 
from their homes or regular places of business, shall be allowed travel 
expenses, including per diem in lieu of subsistence, as authorized by 
law for persons in the Government service employed intermittently. 
"(d) STATUS.—Service by an individual as a member of the Board 
shall not, for purposes of any other law of the United States be con-
sidered as service as an officer or employee of the United States." 
SEC. 802. MISCELLANEOUS AMENDMENTS. 
(a) 
DESIGNATION or 
INCOME TAX PAYMENTS TO PRESIDENTIAL 
ELECTION CAMPAIGN FUND.—Effective with respect to taxable years 
ending on or after December 31, 1972, section 6096(a) (relating to 
designation of income tax payments to the presidential election cam-
paign fund) is amended to read as follows: 
"(a) I N GENERAL.—Every individual (other than a nonresident 
alien) whose income tax liability for any taxable year is $1 or more 
may designate that $1 shall be paid over to the Presidential Election 
Campaign Fund for the account of the candidates of any specified 
political party for President and Vice President of the United States, 
or if no specific account is designated by such individual, for a general 
account for all candidates for election to the offices of President and 
Vice President of the United States, in accordance with the provisions 
of section 9006(a) (1). In the case of a joint return of husband and 
^"^^' P* S^^* 
wife having an income tax liability of $2 or more, each spouse may 
designate that $1 shall be paid to any such account in the fund." 
(b) 
REPEAL OF CERTAIN PROVISIONS.— 
(1) Sections 303,304, and 305 of the Presidential Election Cam-
paign Fund Act of 1966 (80 Stat. 1587) are repealed. 
3i use 971-973. 
(2) The enactment of subtitle H of the Internal Revenue Code 
of 1954 by section 801 of this Act is intended to comply with the 
'^"'^' ^* ^^^* 
provisions of section 5 (relating to the Presidential Election Cam-
paign Fund Act of 1966) of the Act entitled "An Act to restore 
the investment credit and allowance of accelerated depreciation 
80 Stat. 1587,. 
26 u s e 6096. 
574 
PUBLIC LAW 92-179-DEC. 10, 1971 
[85 STAT. 
in the case of certain real property", approved June 13, 1967 
^^31 use 971 
(Public Law 90-26, 81 Stat. 58). The provisions of section 6096 
Ante, p. 5
7 3. 
of the Internal Revenue Code of 1954, together with the amend-
ments of such section made by subsection (a), shall be applicable 
only to taxable years ending on or after December 31, 1972. 
Approved December 10, 1971. 
Public Law 92-179 
December 10,1971 
^^ 
A C T 
[H. R. 6283] 
To extend the period within which the President may transmit to the Congress 
plans for the reorganization of agencies of the executive branch of the Govern-
ment, and for other purposes. 
Executive re-
Be it enacted by the Senate and House of Representatives 
of the 
anization 
United States of America in Congress asse77ibled, That (a) section 
""^PresIde'nti'ai 
901 (a) of titlc 5, United States Code, is amended to read as follows: 
authority, exten- 
"(a) Tlic Cougrcss dcclarcs that it is the policv of the United 
sion. 
t:+ f 
i- 
^ 
80 Stat, 394, 
oiates— 
"(1) to promote better execution of the laws, more effective 
management of the executive branch and of its agencies and 
functions, and expeditious administration of the public business; 
" (2) to reduce expenditures and promote economy to the fullest 
extent consistent with the efficient operation of the Government; 
"(3) to increase the efficiency of the operations of the Govern-
ment to the fullest extent practicable; 
"(4) to group, coordinate, and consolidate agencies and func-
tions of the Government, as nearly as may be, according to major 
purposes; 
"(5) to reduce the number of agencies by consolidating those 
having similar functions under a single head, and to abolish such 
agencies or functions as may not be necessary for the efficient con-
duct of the Government; and 
" (6) to eliminate overlapping and duplication of effort." 
(b) Section 901 of such title is amended by adding at the end thereof 
the following new subsection: 
"(c) The President shall from time to time examine the organization 
of all agencies and shall determine what changes in such organization 
are necessary to carry out any policy set forth in subsection (a) of this 
section.*' 
Reorganization 
gj,^_ g. (a) Scctiou 903(a) of title 5, United States Code, is amended 
plans* 
^ ' 
^ •' 
^ 
^ 
to read as follows: 
"(a) Whenever the President, after investigation, finds that changes 
in the organization of agencies are necessary to carry out any policy set 
forth in section 901(a) of this title, he shall prepare a reorganization 
plan specifying the reorganizations he finds are necessary. Any plan 
may provide for— 
" (1) the transfer of the whole or a part of an agency, or of the 
whole or a part of the functions thereof, to the jurisdiction and 
control of another agency; 
" (2) the abolition of all or a part of the functions of an agency; 
"(3) the consolidation or coordination of the whole or a part of 
an agency, or of the whole or a part of the functions thereof, with 
the whole or a part of another agency or the functions thereof; 
"(4) the consolidation or coordination of a part of an agency 
or the functions thereof with another part of the same agency or 
the functions thereof; 
"(5) the authorization of an officer to delegate any of his func-
tions ; or