A bill to amend the Tariff Schedules of the United States to permit the importation of upholstery regulators, upholsterer's regulating needles, and upholsterer's pins free of duty.
PL 93-625 (H.R.421), enacted 01/03/1975

2108 
PUBUC LAW 93-625-JAN. 3, 1975 
[ 88 STAT. 
CHAPTER 
I
I
I 
DEPARTMENT 
OF TRANSPORTATION 
F E D E R A L R A I L R O A D 
A D M I N I S T R A T I O N 
INTERIM OPERATING ASSISTANCE 
For necessary expenses for "Interim operating assistance" under 
the Regional Rail Reorganization Act of 1973, $10,200,000, to remain 
available until expended. 
CHAPTER IV 
DEPARTMENT OF AGRICULTURE 
COMMODITY EXCHANGE AUTHORITY 
Ante, p. 1389. 
For necessary expenses to carry into effect the provisions of the 
Commodity Exchange Act, as amended (7 U.S.C. 1 et seq.) and Public 
Law 93-i63, enacted October 23,1974, including not to exceed $200,000 
for employment under 5 U.S.C. 3109, $2,473,000. 
CHAPTER V 
DEPARTMENT OF COMMERCE 
ECONOMIC DEVELOPMENT ADMINISTRATION 
JOB OPPORTUNITIES PROGRAM 
For Job Opportunities Program assistance as authorized by title I I I 
Ante, p. 1845. 
^^ ^^iQ Emergency Jobs and Unemployment Assistance Act of 1974, 
$125,000,000, to be derived by transfer from funds appropriated in this 
Act to the Department of Labor under the heading "Temporary 
Employment Assistance", to remain available until December 31,1975 : 
Provided, That this appropriation shall become available only upon 
enactment into law of H.R. 16596 or similar legislation by the Ninety-
third Congress. 
Approved January 3, 1975. 
Public Law 93-625 
January 3, 1975 
AN ACT 
[H.R. 421] 
rp^ amend the Tariff Schedules of the United States to permit the importation of 
upholstery regulators, upholsterer's regulating needles, and upholsterer's pins 
free of duty. 
Be it enacted hy the Senate and House of Representatives 
of the 
Upholstery reg- United States of America in Congress assembled. 
ulators, needles, 
•' 
^ 
' 
and pins. 
SECTION 1. AMENDMENT OF TARIFF SCHEDULES. 
portauon!^ '"" 
(a) I N GENERAL.—Schedule 6, part 3, subpart E of the Tariff Sched-
ules of the United States (19 U.S.C. 1202) is amended— 
(1) by striking out "upholstery regulators, and", and by 
inserting "and upholstery regulators, upholsterer's regulating 
needles, and upholsterer's pins," after "other hand needles," in the 
item description preceding item 651.01. 
Taxes. 
88 STAT.] 
PUBLIC LAW 93-625-JAN. 3, 1975 
2109 
(2) by striking out "and upholstery regulators" in item 651.04; 
and 
(3) by inserting after item 651.05 the following new item: 
Upholstery regulators, upholsterer's regulating needles, and 
upholsterer's pins 
| Free 
Free 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
apply with respect to articles entered, or withdrawn from warehouse, 
for consumption on or after the date of enactment of this Act. 
(c) STATUS OF NEW ITEM.—The duty free treatment applied to 
upholstery regulators, upholsterer's regulating needles, and uphol-
sterer's pins under item 651.06 of the Tariff Schedules of the United 
States (as added by subsection (a)) shall be treated as not having 
the status of a statutory provision enacted by the Congress, but as 
having been proclaimed by the President as being required or appro-
priate to carry out foreign trade agreements to which the United 
States is a party. 
SEC. 2. AMENDMENT OF INTERNAL REVENUE 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. 
SEC. 3. EXTENSION BY ONE YEAR OF PERIOD DURING WHICH POLLU-
TION CONTROL FACILITIES, RAILROAD ROLLING STOCK, 
REHABILITATION HOUSING, AND COAL MINE SAFETY EQUIP-
MENT MAY QUALIFY FOR 5-YEAR AMORTIZATION. 
(a) POLLUTION 
CONTROL 
FACILITIES.—^Section 
169(d)(4)(B) 
(defining new identifiable treatment facility) is amended by striking 
out "January 1,1975" and inserting in lieu thereof "January 1,1976". 
(b) RAILROAD ROLLING STOCK.—^Section 184(e) (relating to amor-
tization of railroad rolling stock) is amended— 
(1) by striking out "1975" in paragraph (1) and inserting in 
lieu thereof "1976", and 
(2) by striking out "January 1, 1975" in paragraph (7) and 
inserting in lieu thereof "January 1, 1976". 
(c) REHABILITATION OF LOW-INCOME RENTAL HOUSING.—Section 
167(k) (1) (relating to expenditures to rehabilitate low-income rental 
housing) is amended by striking out "January 1,1975" and inserting 
in lieu thereof "January 1,1976". 
(d) COAL MINING SAFETY EQUIPMENT.—Section 187(d) (3) (defin-
ing certified coal mine safety equipment) is amended by striking out 
"January 1, 1975" and inserting in lieu thereof "January 1, 1976". 
SEC. 4. ACCRUAL OF VACATION PAY. 
(a) I N GENERAL.—Subpart C of part I I of subchapter E of chapter 
1 (relating to taxable year for which deductions taken) is amended 
by adding at the end thereof the following new section: 
"SEC. 463. ACCRUAL OF VACATION PAY. 
"(a) ALLOWANCE OF DEDUCTION.—At the election of a taxpayer 
whose taxable income is computed under an accrual method of account-
ing, if the conditions of section 162(a) are otherwise satisfied, the 
deduction allowable under section 162(a) with respect to vacation pay 
shall be an amount equal to the sum of— 
19 use 1202 
note. 
19 use 12 02 
note. 
26 use 1 et ,3eq. 
26 use 169. 
26 use 184. 
26 use 167. 
26 use 187. 
26 use 463, 
26 use 162. 
26 use 162. 
note. 
2110 
PUBLIC LAW 93-625-JAN. 3, 1975 
[88 STAT. 
"(1) a reasonable addition to an account representing the tax-
payer's liability for vacation pay earned by employees before the 
close of the taxable year and payable during the taxable year or 
within 12 months following the close of the taxable year; plus 
"(2) the amount (if any) of the reduction at the close of the 
taxable year in the suspense account provided in subsection 
(^) (2); 
Such liability for vacation pay earned before the close of the taxable 
year shall include amounts which, because of contingencies, would not 
(but for this section) be deductible under section 162(a) as an accrued 
expense. All payments with respect to vacation pay shall be charged to 
such account. 
"(b) 
OPENING BALANCE.—The opening balance of the account 
described in subsection (a) (1) for its first taxable year shall, under 
regulations pi-escribed by the Secretary or his delegate, be— 
"(1) in the case of a taxpayer who maintained a predecessor 
account for vacation pay under section 97 of the Technical Amend-
26 use 162 
ments Act of 1958, as amended, for his last taxable year ending 
before January 1, 1973, and who makes an election under this 
section for his first taxable year ending after December 31, 1972, 
the larger of— 
"(A) the balance in such predecessor account at the close 
of such last taxable year, or 
"(B) the amount determined as if the taxpayer had main-
tained an account described in subsection (a) (1) for such 
last taxable year, or 
"(2) in the case of any taxpayer not described in paragraph 
(1), an amount equal to the largest closing balance the taxpayer 
would have had for any of the taxpayer's 3 taxable years immedi-
ately preceding such first taxable year if the taxpayer had main-
tained such account throughout such 3 immediately preceding 
taxable years. 
"(c) 
SUSPENSE ACCOUNT FOR DEFERRED DEDUCTION.— 
"(1) INITIAL SUSPENSE ACCOUNT.—The amount of the suspense 
account at the beginning of the first taxable year for which the 
taxpayer maintains under this section an account (described in 
subsection (a) (1)) shall be the amount of the opening balance 
described in subsection (b) minus the amount, if any, allowed as 
deductions for prior taxable years for vacation pay accrued but 
not paid at the close of the taxable year preceding such first tax-
able year. 
"(2) ADJUSTMENTS IN SUSPENSE ACCOUNT.-—At the close of each 
taxable year the suspense account shall be— 
"(A) reduced by the excess, if any, of the amount in the 
suspense account at the beginning of the taxable year over the 
amount in the account described in subsection (a) (1) at the 
close of the taxable year (after making the additions and 
charges for such taxaole year provided in subsection (a)), or 
"(B) increased (but not to an amount greater than the 
initial balance of the suspense account) by the excess, if any 
88 STAT. ] 
PUBUC LAW 93-625-JAN. 3, 1975 
2111 
of the amount in the account described in subsection (a) (1) 
at the close of the taxable year (after making the additions 
,; 
and charges for such taxable year provided in subsection (a)) 
over the amount in the suspense account at the beginning of 
the taxable year. 
"(3) Section 381 ACQUISITIONS.—The application of this subsec-
tion to any acquisition to which section 381(a) applies shall be ^e use 38i. 
determined under regulations prescribed by the Secretary or his 
delegate. 
"(d) ELECTION.—^An election under this section shall be made at 
such time and in such manner as the Secretary or his delegate may by 
regulations prescribe. 
"(e) CHANGES IN ACCOUNTING METHOD.— 
"(1) ESTABLISHMENT OF ACCOUNT NOT CONSIDERED CHANGE.— 
The establishment of an account described in subsection (a) (1) 
shall not be considered a change in method of accounting for 
purposes of section 446(e) (relating to requirement respecting 
change of accounting method), and no adjustment shall be 
required under section 481 by reason of the establishment of such 
account. 
"(2) 
CERTAIN 
TAXPAYERS 
TREATED AS HAVING 
INITIATED 
CHANGE.—If the taxpayer treated vacation pay under section 97 
of the Technical Amendments Act of 1958, as amended, for his 
last taxable year ending before January 1, 1973, and if such tax-
payer fails to make an election under this section for his first 
taxable year ending after December 31, 1972, then, for purposes 
of section 481, such taxpayer shall be treated as having initiated 
a change in method of accounting with respect to vacation pay 
for his first taxable year ending after December 31, 1972." 
(b) CLERICAL AMENDMENT.—The table of sections for such subpart 
C is amended by adding at the end thereof the following: 
"Sec. ^63. Accrual of vacation pay." 
(c) CERTAIN INCREASES IN SUSPENSE ACCOUNT INCLUDED IN GROSS 
INCOME.— 
(1) Section 81 is amended to read as follows: 
26 use si. 
"SEC. 81. CERTAIN INCREASES IN SUSPENSE ACCOUNTS. 
"There shall be included in gross income for the taxable year for 
which an increase is required— 
" (1) CERTAIN DEALERS' RESERVES.—The amount of any increase 
in the suspense account required by paragraph (4) (B) (ii) of 
section 166(g) (relating to certain debt obligations guaranteed 
26 use i66. 
by dealers). 
"(2) VACATION PAY.—The amount of any increase in the sus-
pense account required by paragraph (2) (B) of section 463(c) 
Ante, p. 2109. 
(relating to accrual of vacation pay)." 
(2) The table of sections for part I I of subchapter B of chap-
ter 1 is amended by striking out the item relating to section 81 and 
inserting in lieu thereof the following: 
"Sec. 81. Certain increases in suspense accounts.". 
(d) 
EFFECTIVE 
DATES.— 
26 use 463 
26 
use 
26 
use 
26 
use 
ote. 
26 
use 
446 
481 
162 
481 
(1) Except as provided in paragraph (2), the amendments made 
by this section shall apply to taxable years beginning after De-
cember 31,1973. 
note. 
26 use 162 
note. 
26 use 167 
note. 
26 use 167. 
26 use 
note. 
26 use 
26 use 
note. 
167 
1250, 
167 
2112 
PUBLIC LAW 93-625-JAN. 3, 1975 
[88 STAT. 
(2) If the taxpayer maintained an account for vacation pay 
under section 97 of the Technical Amendments Act of 1958, as 
amended, for his last taxable year ending before January 1, 1973, 
the amendments made by this section shall apply to taxable years 
ending after December 31,1972. 
SEC. 5. APPLICATION OF CLASS LIFE SYSTEM TO REAL PROPERTY. 
(a) GENERAL KULE.—In the case of buildings and other items of 
26"use 1250. 
section 1250 property (within the meaning of section 1250(c) of the 
Internal Eevenue Code of 1954) placed in service before the effective 
date of the class lives first prescribed by the Secretary of the Treasury 
or his delegate under section 167 (m) of such Code for the class in 
which such property falls, if an election under such section 167(m) 
applies to the taxpayer for the taxable year in which such property is 
placed in service, the taxpayer may, in accordance with regulations 
prescribed by the Secretary of the Treasury or his delegate, elect to 
determine the useful life of such property— 
(1) under Kevenue Procedure 62-21 (as amended and supple-
mented) as in effect on December 31,1970, or 
(2) on the facts and circumstances. 
(b) REPEAL OF PRIOR TRANSITIONAL RULE.—Paragraph (1) of sec-
tion 109(e) of the Revenue Act of 1971 (Public Law 92-178) is hereby 
repealed. 
(c) 
CONFORMING 
AMENDMENT.—Section 
1250(a) (1) (C) (ii) 
is 
amended by striking "January 1, 1975" and in lieu thereof inserting 
"January 1, 1976". 
(d) EFFECTIVE DATE.—The amendments made by this section shall 
apply with respect to property placed in service after December 31, 
1973. 
SEC. 
6
. 
REAL 
ESTATE 
INVESTMENT 
TRUSTS; 
TREATMENT 
OF 
FORE-
CLOSURE 
PROPERTY. 
(a) 
FORECLOSURE PROPERTY.—Section 856 (defining real estate 
investment trust) is amended by adding at the end thereof the follow-
ing new subsection: 
"(e) SPECIAL RULES FOR FORECLOSURE PROPERTY.— 
"(1) 
FORECLOSURE PROPERTY DEFINED.—For purposes of this 
part, the term 'foreclosure property' means any real property 
(including interests in real property), and any personal property 
incident to such real property, acquired by the real estate invest-
ment trust as the result of such trust having bid in such property 
at foreclosure, or having otherwise reduced such property to own-
ership or possession by agreement or process of law, after there 
was default (or default was imminent) on a lease of such prop-
erty or on an indebtedness which such property secured. 
"(2) 
GRACE PERIOD.—Except as provided in paragraph (3), 
property shall cease to be foreclosure property with respect to the 
real estate investment trust on the date which is 2 years after the 
date such trust acquired such property. 
"(3) EXTENSIONS.—If the real estate investment trust estab-
lishes to the satisfaction of the Secretary or his delegate that an 
extension of the grace period is necessary for the orderly liquida-
tion of the trust's interest in such property, the Secretary or his 
delegate may extend the grace period for such property. Any such 
extension shall be for a period of not more than 1 year, and not 
more than 2 extensions shall be granted with respect to any 
property. 
"(4) TERMINATION OF GRACE PERIOD IN CERTAIN CASES.—Any 
foreclosure property shall cease to be such on the first day (occur-
26 use 856. 
88 STAT. ] 
PUBLIC LAW 93-625-JAN. 3, 1975 
2113 
ring on or after the day on which the real estate investment trust 
acquired the property) on which— 
"(A) a lease is entered into with respect to such property 
which, by its terms, will give rise to income which is not 
described in subsection (c) (3) (otherthan subparagraph (F) 
of such subsection), or any amount is received or accrued, 
directly or indirectly, pursuant to a lease entered into on or 
after such day which is not described in such subsection, 
"(B) any construction takes place on such property (other 
than completion of a building, or completion of any other 
improvement, where more than 10 percent of the construc-
tion of such building or other improvement was completed 
before default became imminent), or 
"(C) if such day is more than 90 days after the day on 
which such property was acquired by the real estate invest-
ment trust and the property is used in a trade or business 
which is conducted by the trust (other than through an 
independent contractor 
(within the meaning of section 
(d)(3)) from whom the trust itself does not derive or receive 
any income). 
> 
" (5) TAXPAYER MUST MAKE ELECTION.—Property shall be treated 
as foreclosure property for purposes of this part only if the real 
estate investment trust so elects (in the manner provided in regu-
lations prescribed by the Secretary or his delegate) on or before 
the due date (including any extensions of time) for filing its 
return of tax under this chapter for the taxable year in which 
such trust acquires such property. Any such election shall be 
irrevocable." 
(b) MODIFICATION or HOLDING FOR SALE KULE.—Section 856(a) (4) 
^6 use sse. 
(defining real estate investment trust) is amended by inserting after 
"property" the following:" (other than foreclosure property, as defined 
in subsection (e))". 
^"^^' P- 2112. 
(c) TAX ON INCOME FROM FORECLOSURE PROPERTY.—Section 857(b) 
^^ "^^ *^^' 
(relating to method of taxation of real estate investment trusts, etc.) 
is amended by redesignating paragraph (4) as paragraph (5) and 
by inserting after paragraph (3) the following new paragraph: 
" (4) INCOME FROM FORECLOSURE PROPERTY.— 
"(A) IMPOSITION OF TAX.—There is hereby imposed for 
each taxable year on the net income from foreclosure prop-
erty of every real estate investment trust a tax determined 
by applying section 11 to such income as if such income 
26 use 11. 
constituted the taxable income of a corporation taxable under 
section 11, For purposes of the preceding sentence, the surtax 
exemption shall be zero. 
"(B) NET INCOME FROM FORECLOSURE PROPERTY.—For pur- 
"^et income 
poses of this part, the term 'net income from foreclosure 
p'^oper°y!'''^°^ ^
'
^
^ 
property' means the excess of— 
"(i) gain from the sale or other disposition of fore-
closure property described in section 1221(1) and the 
26 use 1221. 
gross income for the taxable year derived from fore-
closure property (as defined in section 856(e)), but only 
^"'®' P. 2112. 
to the extent such gross income is not described in sub-
paragraph (A), (B), (C), (D), or (E) of section 
856(c)(3), over 
26 use sse. 
"(ii) the deductions allowed by this chapter which are 
directly connected with the production of the income 
referred to in clause (i)." 
2114 
PUBLIC LAW 93-625-JAN. 3, 1975 
'H 
[88 STAT. 
26 u s e 856. 
Ante, p. 2112. 
(d) TECHNICAL AMENDMENTS.— 
(1) Paragraphs (2) and (3) of section 856(c) (relating to 
limitations) are each amended by striking out "and" at the end 
of subparagraph (D), by adding "and" at the end of subpara-
graph (E), and by adding at the end thereof the following new 
subparagraph: 
"(F) income and gain derived from foreclosure property 
(as defined in subsection (e));". 
26 use 857. 
^2) Section 857(a) (1) (relating to requirements applicable to 
real estate investment trusts) is amended to read as follows: 
"(1) the deduction for dividends paid during the taxable year 
26 use 561. 
^^g defined in section 561, but determined without regard to capi-
tal gains dividends) equals or exceeds the sum of— 
"(A) 90 percent of the real estate investment trust taxable 
income for the taxable year (determined without regard to 
the deduction for dividends paid (as defined in section 561)); 
and 
"(B) 90 percent of the excess of (i) the net income from 
foreclosure property over (ii) the tax imposed on such income 
by subsection (b) (4) (A), and". 
26 use 857. 
^3^ Section 857(b)(2) (defining real estate investment trust 
taxable income) is amended by adding at the end thereof the fol-
lowing new subparagraph: 
"(F) There shall be excluded an amount equal to the net 
income from foreclosure property." 
(4) Section 857(b) (2) (C) is amended by inserting before the 
the period at the end thereof "and shall be computed without 
regard to that portion of such deduction which is attributable to 
the amount excluded under subparagraph (F)". 
(e) EFFECTIVE DATE.—The amendments made by this section apply 
to foreclosure property acquired after December 31, 1973. Notwith-
standing the provisions of section 856(e) (5) of the Internal Revenue 
Code of 1954 (as added by subsection (a) of this section) any taxpayer 
required to make an election with respect to foreclosure property 
sooner than 90 days after the date of enactment of this Act, may make 
that election at any time before the 91st day after the date of enact-
ment of this Act. 
SEC. 7. INCREASE IN INTEREST CHARGED AND PAID IN CONNECTION 
WITH DEFICIENCIES, ETC. 
(a) INCREASE IN INTEREST RATE.— 
(1) Chapter 67 (relating to interest) is amended by adding at 
the end thereof the following new subchapter: 
"Subchapter C—Determination of interest rate 
26 u s e 856 
note. 
26 u s e 856. 
26 u s e 6621, 
"SEC. 6621. Determination of rate of interest. 
"SEC. 6621. DETERMINATION OF RATE OF INTEREST. 
"(a) I N GENERAL.—The rate of interest under sections 6601(a), 
6602 ""^eiiTsh 
^^^^' 6611 (a), 6332(c) (1), and 7426 (g) of this title, and under section 
7426*. 
' 
' 
2411(a) of title 28 is 9 percent per annum, or such adjusted rate as is 
established by the Secretary or his delegate under subsection (b). 
"(b) ADJUSTMENT OF INTEREST RATE.—The Secretary or his dele-
gate shall establish an adjusted rate of interest for the purpose of 
subsection (a) not later than October 15 of any year if the adjusted 
prime rate charged by banks during September of that year, rounded 
to the nearest full percent, is at least a full percentage point more or 
less than the interest rate which is then in effect. Any such adjusted 
rate of interest shall be equal to the adjusted prime rate charged by 
banks, rounded to the nearest full percent, and shall become effective 
88 STAT. ] 
PUBLIC LAW 93-625-JAN. 3, 1975 
2115 
on February 1 of the immediately succeeding year. An adjustment 
provided for under this subsection may not be made prior to the 
expiration of 23 months following the date of any preceding adjust-
ment under this subsection which changes the rate of interest. 
"'(c) DEFINITION OF PRIME RATE.—For purposes of subsection (b), 
the term 'adjusted prime rate charged by banks' means 90 percent 
of the average predominant prime rate quoted by commercial banks to 
large businesses, as determined by the Board of Governors of the 
Federal Reserve System." 
(2) The following provisions are each amended by striking 
out "the rate of 6 percent per annum" and inserting in lieu thereof 
the following: "an annual rate established under section 6621": 
^"^^' P* 2^^'*-
(A) 
section 
6601(a) 
(relating 
to 
interest 
on 
26usc66oi. 
underpayments), 
(B) section 6602 (relating to interest on erroneous refunds 
^^ "^"^ ^^^'2-
recoverable by suit), 
(C) section 6611 (a) (relating to interest on overpayments), 
26usc66ii. 
(D) section 6332(c) (1) (relating to interest with respect 
26 use 63S2. 
to failure to surrender property subject to levy), and 
(E) section 7426(g) (relating to interest on judgments 
^6 use 7426. 
with respect to property wrongfully levied upon). 
Section 2411(a) of title 28 of the United States Code (relating to 
interest on judgments for overpayments of tax) is amended by strik-
ing out "the rate of 6 per centum per annum" and inserting in lieu 
thereof: "an annual rate established under section 6621 of the Internal 
Revenue Code of 1954". 
(b) TERMINATION OF REDUCED INTEREST RATE I N CERTAIN CASES.— 
(1) CERTAIN EXTENSIONS OF TIME.—Section 6601 is amended by 
26 use 6601. 
striking out subsection (b) (relating to extensions of time in the 
case of certain estates) and subsection (j) (relating to extensions 
of time in the case of certain expropriation lesses), and by redes-
ignating subsections (c), (d), (e), (f), (g), (h), (i), (k), and 
(1) as subsections (b), (c), (d), (e), (f), (g), (h), (i), and (j), 
respectively. 
(2) DEBT-FINANCED PROPERTY.—Section 514(b) (3) (D) (relat- 
26 use 514. 
ing to interest with respect to certain unrelated debt-financed 
income) is amended by striking out the last sentence. 
(c) INCREASE I N PENALTY FOR FAILURE To P A Y ESTIMATED INCOME 
TAX.—Section 6654(a) (relating to failure by individuals to pay esti- 
26 use 6654. 
mated income tax) and sections 6655 (a) and (g) (1) (relating to fail- 
26 use 6655. 
ure by corporations to pay estimated income tax) are each amended 
by striking out "the rate of 6 percent per annum" and inserting in lieu 
thereof the following: "an annual rate established under section 6621". 
(d) CONFORMING AMENDMENTS.— 
(1) Section 6163(c) is amended to read as follows: 
26 use 6I63. 
"(c) 
CROSS REFERENCE.— 
"For authority of the Secretary or his delegate to require security 
in the case of an extension under this section, see section 616.5." 
26 use 6166, 
6167. 
(2) Sections 6166(g) and 6167(e) are each amended by striking 
out the last sentence. 
(3) Sections 6166 (k) and 6167(h) are each amended by striking 
out paragraph (1) and by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively. 
(4) Section 6504(15) is amended by striking out "6601(h)" 
26 use 6504 
and inserting in lieu thereof "6601 (g)". 
(5) The table of subchapters for chapter 67 is amended by 
adding at the end thereof the following: 
"SUBCHAPTER 0. Determination of Interest Rate.". 
2116 
PUBLIC L
A
W 93-625-JAN. 3, 1975 
[88 STAT. 
26 use 6621 
note. 
26 use 861, 
(e) EFFECTIVE DATE.—The amendments made by this section shall 
take effect on July 1, 1975, and apply to amounts outstanding on such 
date or arising thereafter. 
SEC. 8. INTEREST ON CERTAIN DEPOSITS, ETC., IN THE UNITED 
STATES. 
The last sentence of section 861(c) (relating to interest on deposits, 
etc.) is amended by striking out "December 31,1975," and inserting in 
lieu thereof "December 31,1976,". 
SEC. 9. EXCLUSION OF INTEREST ON CERTAIN OBLIGATIONS ISSUED 
PRIOR to 1971. 
(a) I N GENERAL.—Section 861(a)(1) (relating to income from 
sources within the United States) is amended— 
(1) by striking out "and" at the end of subparagraph (F), 
(2) by striking out the period at the end of subparagraph (G) 
and inserting in lieu thereof a comma and the word "and", and 
(3) 
by adding at the end thereof 
the following 
new 
subparagraph: 
"(H) interest on a debt obligation Avhich was part of an 
issue which— 
"(i) was part of an issue outstanding on April 1,1971, 
" (ii) was guaranteed by a United States person, 
26 use 4911. 
" (iii) was treated under chapter 41 as a debt obligation 
of a foreign obligor, 
"(iv) as of June 30, 1974, liad a maturity of not more 
than 15 years, and 
" (v) when issued, was purchased by one or more under-
writers for the purpose of distribution through resale.". 
26USC2104. 
^)3^ CoNFOKMixd AMENDMENT.—The 1 ast Sentence of section 2104 (c) 
(relating (o debt obligations treated as property within the United 
States) is amended by striking out "or section 861(a)(1)(G)" and 
inserting in lieu thereof a comma and "section 861(a) (1) (G), or sec-
tion 861(a) (1) (H)". 
26 use 861 
^(3^ EFFECTIVE DATE.—The amendment made by subsection (a) 
applies to interest paid after the date of enactment of this Act, and the 
amendment made by subsection (b) applies with respect to estates of 
decedents dying after such date. 
SEC. 10. TAX ON CERTAIN INCOME OF POLITICAL ORGANIZATIONS. 
26use5oi. 
(a) GENERAL RULE.—Subchapter F of chapter 1 (relating to exempt 
organizations) is amended by adding at the end thereof the following 
new part: 
"PART VI—POLITICAL ORGANIZATIONS 
"Sec. 527. Political Organizations. 
26 use 527. 
«sEC. 527. POLITICAL ORGANIZATIONS. 
(a) GENERAL RULE.—A political organization shall be subject to 
taxation under this subtitle only to the extent provided in this section. 
A political organization shall be considered an organization exempt 
from income taxes for the purpose of any law which refers to organiza-
tions exempt from income taxes. 
"(b) 
TAX IMPOSED.— 
"(1) I N GENERAL.—A tax is hereby imposed for each taxable 
year on the political organization taxable income of every political 
organization. Such tax shall consist of a normal tax and surtax 
26 use 11. 
computed as provided in section 11 as though the political 
oiganization were a corporation and as though the political 
organization taxable income were the taxable income referred to 
88 STAT. ] 
PUBLIC LAW 93-625-JAN. 3, 1975 
2117 
26 u s e 11, 
in section 11. For purposes of this subsection, the surtax exemption 
provided by section 11(d) shall not be allowed. 
"(2) 
ALTERNATIVE TAX IN CASE or CAPITAL GAINS.—If for 
any 
taxable year any political organization has a net section 1201 gain, 
2 6 use 1201. 
then, in lieu of the tax imposed by paragraph (1), there is hereby 
imposed a tax (if such a tax is less than the tax imposed by 
paragraph (1)) which shall consist of the sum of— 
"(A) a partial tax, computed as provided by paragraph 
(1), on the political organization taxable income deter-
mined by reducing such income by the amount of such gain, 
and 
"(B) an amount determined as provided in section 1201 
(a) on such gain. 
"(c) 
POLITICAL ORGANIZATION TAXABLE INCOME DEFINED.— 
"(1) TAXABLE INCOME DEFINED.—For purposes of this section, 
the political organization taxable income of any organization 
for any taxable year is an amount equal to the excess (if any) 
of— 
"(A) the gross income for the taxable year (excluding 
any exempt function income), over 
"(B) tne deductions allowed by this chapter which are 
directly connected with the production of the gross income 
(excluding exempt function income), computed with the 
modifications provided in paragraph (2). 
" (2) MODIFICATIONS.—For purposes of this subsection— 
"(A) there shall be allowed a specific deduction of $100, 
"(B) no net operating loss deduction shall be allowed 
under section 172, and 
^6 use 172. 
"(C) no deduction shall be allowed under part VIII of 
subchapter 
B 
(relating 
to 
special 
deductions 
for 
26 use 241. 
corporations). 
"(3) EXEMPT FUNCTION INCOME.—For purposes of this sub-
section, the term 'exempt function income' means any amount 
"Exempt func 
received as— 
_ 
_ 
tion income." 
"(A) a contribution of money or other property, 
"(B) membership dues, a membership fee or assessment 
from a member of the political organization, or 
"(C) proceeds from a political fundraising or entertain-
ment event, or proceeds from the sale of political campaign 
materials, which are not received in the ordinary course of 
any trade or business, 
to the extent such amount is segregated for use only for the 
exempt function of the political organization. 
"(d) 
CERTAIN USES NOT TREATED AS INCOME TO CANDIDATE.—For 
purposes of this title, if any political organization— 
"(1) contributes any amount to or for the use of any political 
organization which is treated as exempt from tax under sub-
section (a) of this section, 
" (2) contributes any amount to or for the use of any organiza-
tion described in paragraph (1) or (2) of section 509(a) which is 
^^ "^^ ^°^-
exempt from tax under section 501 (a), or 
26 use 501. 
"(3) deposits any amount in the general fund of the Treasury 
or in the general fund of any State or local government, 
such amount shall be treated as an amount not diverted for the per-
sonal use of the candidate or any other person. No deduction shall be 
allowed under this title for the contribution or deposit of any amount 
described in the preceding sentence. 
38-194 O - 76 - 51 Pt. 2 
26 use 271. 
26 use 501. 
2118 
PUBLIC LAW 93-625-JAN. 3, 1975 
[88 STAH 
" (e) OTHER DEFINITIONS.—For purposes of this section— 
"(1) POLITICAL ORGANIZATION.—The term 'political organiza-
tion' means a party, committee, association, fund, or other 
organization (whether or not incorporated) organized and oper-
ated primarily for the purpose of directly or indirectly accept-
ing contributions or making expenditures, or both, for an 
exempt function. 
"(2) EXEMPT FUNCTION.—The term 'exempt function' means 
the function of influencing or'attempting to influence the selec-
tion, nomination, election, or appointment of any individual to 
any Federal, State, or local public office or office in a political 
organization, or the election of Presidential or Vice-Presidential 
electors, whether or not such individual or electors are selected, 
nominated, elected, or appointed. 
"(3) CONTRIBUTIONS.—The term 'contributions' has the mean-
ing given to such term by section 271 (b)(2). 
"(4) EXPENDITURES.—The term 'expenditures' has the meaning 
given to such term by section 271 (b) (3). 
"(f) 
EXEMPT ORGANIZATION W H I C H IS NOT POLITICAL ORGANIZA-
TION MUST INCLUDE CERTAIN AMOUNTS IN GROSS INCOME.— 
"(1) I N GENERAL.—If an organization described in section 
501(c) which is exempt from tax under section 501(a) expends 
any amount during the taxable year directly (or through another 
organization) for an exempt function (within the meaning of 
subsection (e) (2)), then, notwithstanding any other provision of 
law, there shall be included in the gross income of such organiza-
tion for the taxable year, and shall be subject to tax under sub-
section (b) as if it constituted political organization taxable 
income, an amount equal to the lesser of— 
"(A) the net investment income of such organization for 
the taxable year, or 
"(B) the aggregate amount so expended during the taxable 
year for such an exempt function. 
"Net invest- 
" ^ 2 ) 
N E T INVESTMENT INCOME. 
F o r purpOSCS of t h i s SubsCC-
inc ome. 
tlou, tlic tcmi 'uct investmcut income' means the excess of— 
"(A) the gross amount of income from interest, dividends, 
rents, and royalties, plus the excess (if any) of gains from 
the sale or exchange of assets over the losses from the sale or 
exchange of assets, over 
"(B) the deductions allowed by this chapter which are 
directly connected with the production of the income referred 
to in subparagraph (A). 
For purposes of the preceding sentence, there shall not be taken 
into account items taken into account for purposes of the tax 
imposed by section 511 (relating to tax on unrelated business 
income). 
"(3) 
CERTAIN SEPARATE SEGREGATED FUNDS.—For purposes of 
this subsection and subsection (e) (1), a separate segregated fund 
(within the meaning of section 610 of title 18 or of any similar 
State statute, or within the meaning of any State statute which 
permits the segregation of dues moneys for exempt functions 
(within the meaning of subsection (e) (2))) which is maintained 
by an organization described in section 501(c) which is exempt 
from tax under section 501(a) shall be treated as a separate 
organization. 
" (g) TREATMENT or NEWSLETTER FUNDS.— 
"(1) I N GENERAL.—For purposes of this section, a fund estab-
lished and maintained by an individual who holds, has been 
26 use 511. 
26 u s e 501. 
88 STAT. ] 
PUBLIC LAW 93-625-JAN. 3, 1975 
2119 
elected to, or is a candidate (within the meaning of section 41(c) 
^^ ^^'^ '*^-
(2)) for nomination or election to, any Federal, State, or local 
elective public office for use by such individual exclusively for the 
preparation and circulation of such individual's newsletter shall, 
except as provided in paragraph (2), be treated as if such fund 
constituted a political organization, 
"(2) 
ADDITIONAL MODIFICATIONS.—In the case of any fund 
described in paragraph (1)— 
"(A) the exempt function shall be only the preparation 
and circulation of the newsletter, and 
"(B) the specific deduction provided by subsection (c) 
(2) (A) shall not be allowed." 
(b) REQUIREMENT OF RETURN.—Section 6012(a) (relating to per- 
^^ ^^^ ^°^^-
sons required to make returns of income) is amended by striking out 
"and" at the end of paragraph (4), by inserting "and" at the end of 
paragraph (5), and by inserting after paragraph (5) the following 
new paragraph: 
"(6) Every political organization (within the meaning of sec-
tion 627(e)(1)), and every fund treated under section 527(g) 
An^e, p. 2116. 
as if it constituted a political organization, which has political 
organization taxable income (within the meaning of section 
527(c) (1)) for the taxable year;". 
Section 6012(a) is amended by striking out the last sentence thereof. 
^"'^' p-1297. 
(c) CONFORMING AMENDMENT.—Section 501(b) (relating to tax on 
26 use 501. 
unrelated business income and certain other activities) is amended by 
striking out "parts I I and I I I " each place it appears and inserting in 
lieu thereof "parts II, III, and VI". 
(d) CLERICAL AMENDMENT.—The table of parts for subchapter F is 
amended by adding at the end thereof the following new item: 
"Part VI. Political Organizations.". 
(e) EFFECTIVE DATE.—The amendments made by subsections (a), 
(b), (c), and (d) shall apply to taxable years beginning after 
December 31,1974. 
(f) 
EXEMPTION 
FROM FILING REQUIREMENT FOR PRIOR 
YEARS 
WHERE INCOME OF POLITICAL PARTY WAS $100 OR LESS.—In the case 
of a taxable year beginning after December 31,1971, and before Janu-
ary 1, 1975, nothing in the Internal Revenue Code of 1954 shall be 
deemed to require any organization described in section 527(e) (1) of 
such Code to file a return for the taxable year under such Code if such 
organization would be exempt from so filing under section 6012(a) (6) 
of such Code if such section applied to such taxable year. 
(g) TECHNICAL AMENDMENT.—The Act entitled "An Act to amend 
the Internal Revenue Code of 1954 with respect to advertising in a 
convention program of a national political convention", approved 
June 18,1968 (82 Stat. 183; Public Law 90-346) is repealed. 
SEC. 11. EXTENSION OF EXISTING CREDIT AND DEDUCTION PROVI-
SIONS FOR POLITICAL CONTRIBUTIONS TO CONTRIBUTIONS 
FOR NEWSLETTERS; TWO-YEAR RULE FOR ANNOUNCING 
CANDIDACY. 
(a) GENERAL RULE.—Section 41(a) (relating to contributions to 
candidates for public office) is amended by inserting "and all news-
letter fund contributions" after "all political contributions". 
(b) VERIFICATION.—Section 41(b) (3) (relating to verification) is 
amended— 
(1) by striking out "political contribution" the first place it 
appears and inserting in lieu thereof "political contribution or 
newsletter fund contribution", and 
(2) by striking out "political contribution" the second place it 
appears and inserting in lieu thereof "contribution". 
26 use 
note. 
26 use 
note. 
26 use 
seq. 
Ante, p, 
Supra. 
Repeal. 
26 use 
note. 
26 use 
527 
6012 
1 et 
. 2 1 1 f 
276 
4 1 . 
26 use 218. 
26 use 41 note. 
2120 
PUBLIC L
A
W 93-625-JAN. 3, 1975 
[88 STAT. 
26 use 41. 
^^^ DEriNiTioN.—Section 41(c) is amended by adding at the end 
thereof the following new paragraph: 
funcfcrntrlbu- 
"^^) NEWSLETTER FUND CONTRIBUTION.—The term 'newsletter 
tion." 
fund contribution' means a contribution or gift of money to a 
fund established and maintained by an individual who holds, has 
been elected to, or is a candidate for nomination or election tOj any 
Federal, State, or local elective public office for use by such indi-
vidual exclusively for the preparation and circulation of a 
newsletter." 
(d) CONFORMING AMENDMENTS IN DEDUCTION PROVISION.—Section 
218 (relating to contributions to candidates for public office) is 
amended— 
(1) by inserting "or newsletter fund contribution (as defined 
•^"P'^- 
in section 41 (c) (5))" after "section 41 (c) (1)" in subsection (a); 
and 
(2) (A) by striking out "political contribution" the first place 
it appears in subsection (b) (2) and inserting in lieu thereof 
"political contribution or newsletter fund contribution"; and 
(B) by striking out "political contribution" the second place it 
appears in subsection (b) (2) and inserting in lieu thereof 
"contribution". 
(e) Two-YEAR RULE FOR ANNOUNCING CANDIDACY.—Section 41(c) 
26 use 41. 
(2) (A) (defining candidate) is amended by striking out "has publicly 
announced" and inserting in lieu thereof "publicly announces before 
the close of the calendar year following the calendar year in which 
the contribution or gift is made". 
(f) EFFECTIVE DATE.—The amendments made by this section shall 
apply to any contribution payment of which is made after December 31, 
1974, in taxable years beginning after such date. 
SEC. 12. INCREASE IN POLITICAL CONTRIBUTIONS CREDIT AND 
DEDUCTION. 
(a) INCREASE IN CREDIT.—Section 41(b) (1) (relating to maximum 
credit for contributions to candidates for public office) is amended to 
read as follows: 
"(1) MAXIMUM CREDIT.—The credit allowed by subsection (a) 
for a taxable year shall not exceed $25 ($50 in the case of a joint 
return under section 6013)." 
26 use 218. 
^1^^ INCREASE IN DEDUCTION.—Section 218(b)(1) 
(relating to 
amount of deduction for contributions to candidates for public office) 
is amended to read as follows: 
"(1) AMOUNT.—^The deduction under subsection (a) shall not 
exceed $100 ($200 in the case of a joint return under section 
6013)." 
26 use 41 note. 
^^^ EFFECTIVE DATE.—The amendments made by subsections (a) 
and (b) shall apply with respect to any contribution the payment of 
which IS made after December 31, 1974, in taxable years beginning 
after such date. 
SEC. 13. TRANSFER OF APPRECIATED PROPERTY TO POLITICAL 
ORGANIZATIONS. 
(a) INCLUSION I N GROSS INCOME OF TRANSFEROR.— 
26 use 71. 
(1) jjf GENERAL.—Part I I of subchapter B of chapter 1 (relat-
ing to items specifically included in gross income) is amended by 
adding at the end thereof the following new section: 
26 use 84. 
gj;c. 84. TRANSFER OF APPRECIATED PROPERTY TO POLITICAL 
ORGANIZATION. 
"(a) GENERAL RULE.—^If— 
"(1) any person transfers property to a political organization, 
and 
26 use 6013. 
88 STAT. ] 
PUBLIC LAW 93-626-JAN. 3, 1975 
2121 
" (2) the fair market value of such property exceeds its adjusted 
basis, 
then for purposes of this chapter the transferor shall be treated as 
having sold such property to the political organization on the date 
of the transfer, and the transferor shall be treated as having realized 
an amount equal to the fair market value of such property on such 
date. 
(b) BASIS OF PROPERTY.—In the case of a transfer of property to a 
political organization to which subsection (a) applies, the basis of 
such property in the hands of the political organization shall be the 
same as it would be in the hands of the transferor, increased by the 
amount of gain recognized to the transferor by reason of such transfer. 
"(c) POLITICAL ORGANIZATION DEFINED.—For purposes of this sec-
tion, the term 'political organization' has the meaning given to such 
termby section 527(e)(1)." 
Ante, p. 2116. 
(2) CLERICAL AMENDMENT.—The table of sections for such 
part I I is amended by adding at the end thereof the following: 
"Sec. 84. Transfer of appreciated property to political organizations." 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
^^ ^^^ ^'^ "°*«-
shall apply to transfers made after May 7,1974, in taxable years end-
ing after such date. 
(c) NONRECOGNITION OF G A I N OR LoSS W H E R E ORGANIZATION SOLD 
26 USC 84 note. 
CONTRIBUTED PROPERTY BEFORE AUGUST 2, 1973.—In the case of the 
sale or exchange before August 2, 1973, by an organization described 
in section 527(e) (1) of the Internal Revenue Code of 1954 of property 
which such organization acquired by contribution (within the mean-
ing of section 271(b)(2) of such Code), no gain or loss shall be 
recognized by such organization. 
SEC. 14. GIFT TAX NOT TO APPLY TO CONTRIBUTIONS TO POLITICAL 
ORGANIZATIONS. 
(a) I N GENERAL.—Section 2501(a) (relating to taxable transfers 
for purposes of the gift tax) is amended by adding at the end thereof 
the following new paragraph: 
"(5) 
TRANSFERS TO POLITICAL ORGANIZATIONS.—Paragraph 
(1) 
shall not apply to the transfer of money or other property to a 
political organization (within the meaning of section 527(e) (1)) 
^"*^> p- 2116. 
for the use of such organization." 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall 
^^ ^^"^ 2^°^ 
apply to transfers made after May 7,1974. 
Approved January 3, 1975. 
Public Law 93-626 
A N A C T 
January 3, 1375 
To establish the Canaveral National Seashore in the State of Florida, and for 
[H. R. 5773] 
other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress asserribled, That in order to 
Canaveral Na-
preserve and protect the outstanding natural, scenic, scientific, ecologic, F"^ ^
^ seashore, 
and historic values of certain lands, shoreline, and waters of the State 
Establishment. 
of Florida, and to provide for public outdoor recreation use and 
le use 459J. 
enjoyment of the same, there is hereby established the Canaveral 
National Seashore (hereinafter referred to as the "seashore"), as 
generally depicted on the map entitled "Boundary Map, Canaveral 
National Seashore", dated August 1974 and numbered NS-CAN-
40,000A. Such seashore shall comprise approximately sixty-seven 
thousand five hundred acres within the area more particularly 
26 USC 271, 
26 USC 250:l.