An Act to change certain income tax provisions of the Internal Revenue Code of 1954, and for other purposes.
PL 94-164 (H.R.9968), enacted 12/23/1975

89 STAT. 970 
PUBLIC LAW 94-164—DEC. 23, 1975 
Public Law 94-164 
94th Congress 
An Act 
Dec. 23, 1975 
[H.R. 9968] 
Revenue 
Adjustment Act 
of 1975. 
26 use 1 note. 
26 use 1 note. 
31 use 1301 
note. 
26 use 141. 
26 use 6013. 
26 use 6012. 
'J'o change certain income tax provisions of the Internal Revenue Code of 1954, 
and for other purposes. 
Be it enacted by the Senate 
and House of Representatives 
of the 
United States of America in Congress assembled^ 
SECTION 1. SHORT TITLE. 
This Act may be cited as the "Revenue Adjustment Act of 1975". 
SEC. lA. DECLARATION OF POLICY. 
(a) Congress is determined to continue the tax reduction for the 
first 6 months of 1976 in order to assure continued economic i-ecovery. 
(b) Congress is also determined to continue to control spending 
levels in order to reduce the national deficit. 
(c) Congress reaffirms its commitments to the procedures estab-
lished by the Congressional Budget and Impoundment Control Act 
of 1974 under which it has already established a binding spending 
ceiling for the fiscal year 1976. 
(d) If the Congress adopts a continuation of the tax reduction 
provided by this Act beyond June 30,1976, and if economic conditions 
warrant doing so, Congress shall provide, through the procedures in 
the Budget Act, for reductions in the level of spending in the fiscal 
year 1977 below what would otherwise occur, equal to any additional 
reduction in taxes (from the 1974 tax rate levels) provided for the 
fiscal year 1977: Provided, 
however, That nothing shall preclude the 
right of the Congress to pass a budget resolution containing a higher 
or lower expenditure figure if the Congress concludes that this is war-
ranted by economic conditions or unforeseen circumstances. 
SEC. 2. INDIVIDUAL INCOME TAX REDUCTIONS. 
(a) Low INCOME ALLOWANCE.— 
(1) INCREASE.—Subsection (c) of section 141 of the Internal 
Revenue Code of 1954 (relating to low income allowance) is 
amended to read as follows: 
" (c) Low INCOME ALLOWANCE.— 
" (1) I N GENERAL.—The low income allowance is— 
" (A) $2,100 in the case of— 
" {i) a joint return under section 6013, or 
"(ii) a surviving spouse (as defined in section 2 ( a ) ) , 
" ( B ) $1,700 in the case of an individual who is not married 
and who is not a surviving spouse (as so defined), or 
"(C) $1,050 in the case of a married individual filing a 
separate return. 
"(2) APPLICATION or 6-MONTH RULE.—Notwithstanding the pro-
visions of paragraph (1), the following amounts shall be substi-
tuted for the amount set forth in paragraph (1)— 
"(A) '$1,700' for '$2,100' in subparagraph ( A ) , 
" ( B ) '$1,500' for '$1,700' in subparagraph (B), and 
"(C) '$850' for '$1,050' in subparagraph (C).". 
(2) 
CHANGE I N FILING REQUIREMENTS TO REFLECT INCREASE I N 
LOW INCOME ALLOWANCE.—Paragraph (1) (A) of section 6012(a) 
of such Code (relating to persons required to make returns of 
income) is amended— 
PUBLIC LAW 94-164—DEC. 23, 1975 
89 STAT. 971 
(A) by striking out "$2,350" in clause (i) of such para-
graph and inserting in lieu thereof "$2,450"; 
(B) by striking out "$2,650" in clause (ii) of such para-
graph and inserting in lieu thereof "$2,850"; and 
(C) by striking out "$3,400" in clause (iii) of such para-
graph and inserting in lieu thereof "$3,600". 
(b) 
PERCENTAGE STANDARD DEDUCTION.— 
(1) INCREASE.—Subsection (b) of section 141 of such Code 26 USC 141. 
(relating to percentage standard deduction) is amended to read 
as follows: 
"(b) 
PERCENTAGE STANDARD DEDUCTION.— 
"(1) GENERAL RULE.—The percentage standard deduction is an 
amount equal to 16 percent of adjusted gross income but not to 
exceed— 
"(A) $2,800 in the case of— 
" (i) a joint return under section 6013, or 
26 USC 6013. 
"(ii) a surviving spouse (as defined in section 2 ( a ) ) , 
" ( B ) $2,400 in the case of an individual who is not married 
and who is not a surviving spouse (as so defined), or 
"(C) $1,400 in the case of a married individual filing a 
separate return. 
" (2) APPLICATION OF 6-MONTH RULE.—Notwithstanding the pro-
visions of paragraph (1) of this subsection, the following amounts 
shall be substituted for the amounts set forth in paragraph (1)— 
" (A) '$2,400' for '$2,800' in subparagraph (A), 
" ( B ) '$2,200' for '$2,400' in subparagraph (B), and 
"(C) '$1,200' for '$1,400' in subparagraph (C).". 
(2) CONFORMING AMENDMENTS.—Section 3402 (m) of such Code 26 USC 3402. 
(relating to withholding allowances based on itemized deductions) 
is amended— 
(A) by striking out "$2,600" in paragraph (1) (B) and in-
serting in lieu thereof "$2,800", and 
(B) by striking out "$2,300" in such paragraph and insert-
ing in lieu thereof "$2,400". 
(c) EARNED INCOME CREDIT.—Subsections (a) and (b) of section 
43 oi such Code (relating to earned income credit) are amended to 26 USC 43. 
read as follows: 
" (a) ALLOWANCE OF CREDIT.— 
"(1) GENERAL RULE.—In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to 10 percent of so 
much of the earned income for the taxable year as does not 
exceed $4,000. 
"(2) 
APPLICATION OF 6-MONTH RULE.—Notwithstanding the 
provisions of paragraph (1), the term '5 percent' shall be sub-
stituted for the term '10 percent' where it appears in that para-
graph.". 
"(b) LIMITATION.— 
"(1) GENERAL RULE.—The amount of the credit allowable to 
a taxpayer under subsection (a) for any taxable year shall be 
reduced (but not below zero) by an amount equal to 10 percent 
of so much of the adjusted gross income (or, if greater, the earned 
income) of the taxpayer for the taxable year as exceeds $4,000. 
"(2) 
APPLICATION OF e-MONTH RULE.—Notwithstanding the 
provisions of paragraph (1), the term '5 percent' shall be sub-
stituted for the term '10 percent' where it appears in that 
paragraph.". 
89 STAT. 972 
PUBLIC LAW 94-164—DEC. 23, 1975 
26 use 43 note. 
(d) DISREGARD OF REFUND.—Any refund of Federal income taxes 
made to any individual by reason of section 43 of the Internal Reve-
26 use 43. 
nue Code of 1954 (relating to earned income credit) shall not be 
taken into account as income or receipts for purposes of determining 
the eligibility, for the month in which such refund is made or any 
month thereafter which begins prior to July 1, 1976, of such indi-
vidual or any other individual for benefits or assistance, or the 
amount or extent of benefits or assistance, under any Federal pro-
gram or under any State or local program financed in whole or in 
pa,rt with Federal funds, but only if such individual (or the family 
unit of which he is a member) is a recipient of benefits or assistance 
under such a program for the month before the month in which such 
refund is made. 
26 use 42 note. 
(e) EXTENSION OF CERTAIN LOW-INCOME ALLOWANCE, PERCENTAGE 
STANDARD DEDUCTION, AND TAX CREDIT PROVISIONS.—The last sentence 
Ante, p. 35. 
of section 209 (a) of the Tax Reduction Act of 1975 is amended to read 
26 use 42 note, 
^s follows: "The amendments made by section 201(a) and 202(a) 
shall cease to apply to taxable years ending after December 31,1975; 
those made by sections 201 (b), 201 (c), and 203 shall cease to apply to 
taxable years ending after December 31,1976.". 
(f) EXTENSION OF EARNED INCOME CREDIT.—Section 209(b) of the 
26 use 43 note. 
Tax Reduction Act of 1975 (relating to effective date for section 204) 
is amended by striking out "January 1, 1976," and inserting in lieu 
thereof "January 1, 1977.". 
26 use 42 note. 
(g) EFFECTIVE DATE.—The amendments made by this section apply 
to taxable years ending after December 31, 1975, and before Janu-
ary 1,1977. 
SEC. 3. TAXABLE INCOME CREDIT. 
(a) TAXABLE INCOME CREDIT.— 
(1) I N GENERAL.—Section 42 of the Internal Revenue Code of 
26 use 42. 
1954 (relating to credit for personal exemptions) is amended to 
read as follows: 
"SEC. 42. TAXABLE INCOME CREDIT. 
"(a) ALLOWANCE OF CREDIT.— 
"(1) I N GENERAL.—In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to the greater of— 
"(A) 2 percent of so much of the taxpayer's taxable income 
for the taxable year as does not exceed $9,000; or 
" ( B ) $35 multiplied by each exemption for which the tax-
payer is entitled to a deduction for the taxable year under 
26 use 151. 
subsection (b) or (e) of section 151. 
"(2) 
APPLICATION OF SIX-MONTH RULE.—Notwithstanding the 
provisions of paragraph (1) of this subsection, the percentage 
"1 percent" shall be substituted for "2 percent" in subparagraph 
(A) of such paragraph, and the amount "$17.50" shall be substi-
tuted for the amount "$35" in subparagraph (B) of such 
paragraph. 
"(b) APPLICATION W I T H OTHER CREDITS.—The credit allowed by 
subsection (a) shall not exceed the amount of the tax imposed by this 
chapter for the taxable year. In determining the credits allowed 
under— 
26 use 33. 
" n ^ section 33 (relating to foreign tax credit), 
26 use 37. 
"(2) section 37 (relating to retirement income credit), 
26 use 38. 
"(3) section 38 (relating to investment in certain depreciable 
property). 
PUBLIC LAW 94-164—DEC. 23, 1975 
89 STAT. 973 
"(4) section 40 (relating to expenses of work incentive pro- 26 U
S
C 40. 
grams), and 
"(5) section 41 (relating to contributions to candidates for 26 U
S
C 41. 
public office), 
the tax imposed by this chapter shall (before any other reductions) 
be reduced by the credit allowed by this section. 
"(c) 
SPECIAL RULE FOR MARRIED INDIVIDUALS FILING SEPARATE 
RETURNS.— 
"(1) I N GENERAL.—Notwithstanding subsection (a), in the case 
of a married individual who files a separate return for the tax-
able year, the amount of the credit allowable under subsection 
(a) for the taxable year shall be equal to either— 
"(A) the amount determined under paragraph (1) (A) 
of subsection (a); or 
"(B) if this subparagraph applies to the individual for 
the taxable year, the amount determined under paragraph 
(1) (B) of subsection (a). 
For purposes of the preceding sentence, paragraph (1) of sub-
section (a) shall be applied by substituting '$4,500' for '$9,000'. 
"(2) APPLICATION or PARAGRAPH (1)(B).—Subparagraph (B) 
of paragraph (1) shall apply to any taxpayer for any taxable 
year if— 
" (A) such taxpayer elects to have such subparagraph apply 
for such taxable year, and 
"(B) the spouse of such taxpayer elects to have such sub-
paragraph apply for any taxable year corresponding, for 
purposes of section 142(a), to the taxable year of the 26 U
S
C 142. 
taxpayer. 
Any such election shall be made at such time, and in such manner, as 
the Secretary or his delegate shall by regulations prescribe. 
"(3) MARITAL STATUS.—For purposes of this subsection, the 
determination of marital status shall be made under section 143. 26 U
S
C 143. 
"(d) CERTAIN PERSONS NOT ELIGIBLE.—This section shall not apply 
to any estate or trust, nor shall it apply to any nonresident alien 
individual.". 
(2) CLERICAL AMENDMENT.—The table of sections for subpart A 
of part IV of subchapter A of chapter 1 of such Code is amended 
by striking out the item relating to section 42 and inserting in lieu 
thereof the following: 
"Sec. 42. Taxable income credit.", 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 26 U
S
C 42 laote. 
shall apply to taxable years ending after December 31, 1975. Such 
amendments shall cease to apply to taxable years ending after Decem-
ber 31, 1976. 
SEC. 
4
. 
CORPORATE TAX 
RATES AND SURTAX EXEMPTION. 
(a) CoRPOiti\TE NORMAL TAX.—Section 11(a) of the Internal Rev-
enue Code of 1954 (relating to corporate normal tax) is amended to 26 U
S
C 11. 
read as follows: 
"(b) NORMAL TAX.— 
" (1) GENERAL RULE.—The normal tax is equal to— 
"(A) in the case of a taxable year ending after Decem-
ber 31,1976,22 percent of the taxable income, and 
"(B) in the case of a taxable year ending after Decem-
ber 31,1974, and before January 1,1977, the sum of— 
"(i) 20 percent of so much of the taxable income as 
does not exceed $25,000, plus 
89 STAT. 974 
PUBLIC LAW 94-164—DEC. 23, 1975 
"(ii) 22 percent of so much of the taxable income as 
exceeds $25,000. 
" ( 2 ) S I X - M O N T H APPLICATION OF GENERAL RULE.— 
"(A) 
CALENDAR YEAR TAXPAYERS.—Notwithstanding 
the 
provisions of paragraph (1), in the case of a taxpayer who 
has as his taxable year the calendar year 1976, the normal 
tax for such taxable year is equal to the sum of— 
"(i) 21 percent of so much of the taxable income as 
does not e xceed $25,000, plus 
"(ii) 22 percent of so much of the taxable income as 
exceeds $25,000. 
" ( B ) 
FISCAL YEAR TAXPAYERS.—Notwithstanding the pro-
visions of paragraph (1), in the case of a taxpayer whose tax-
able year is not the calendar year, effective on July 1, 1976, 
paragraph (1) shall cease to apply and the normal tax shall 
be 22 percent.". 
26 use 11. 
(b) CORPORATE SURTAX.—Section 11(c) of such Code 
(relating 
to surtax) is amended to read as follows: 
"(c) 
SURTAX.— 
"(1) GENERAL RULE.—The surtax is 26 percent of the amount 
by which the taxable income exceeds the surtax exemption for 
the taxable year. 
"(2) 
SPECIAL RULE FOR IOTG FOR CALENDAR YEAR TAXPAYERS.— 
Notwithstanding the provisions of paragraph (1), in the case 
of a taxpayer who has as his taxable year the calendar year 1976, 
the surtax for such taxable year is— 
" ( A ) 13 percent of the amount by which the taxable 
income exceeds the $25,000 surtax exemption (as in effect 
under subsection (d) (2)) but does not exceed $50,000, plus 
" ( B ) 26 percent of the amount by which the taxable 
income exceeds $50,000.". 
(c) SURTAX EXEMPTION.—Section 11(d) of such Code (relating to 
surtax exemption) is amended to read as follows: 
"(d) 
SURTAX EXEMPTION.— 
" (1) GENERAL RULE.—For purposes of this subtitle, the surtax 
exemption for any taxable year is $50,000, except that, with respect 
26 use 1561, 
to a corporation to which section 1561 or 1564 (relating to surtax 
1564. 
exemptions in case of certain controlled corporations) applies for 
the taxable year, the surtax exemption for the taxable year is the 
amount determined under such section. 
" (2) SIX-MONTH APPLICATION OF GENERAL RULE.—Notwithstand-
ing the provisions of paragraph (1) — 
" (A) CALENDAR YEAR TAXPAYERS.—In the case of a taxpayer 
who has as his taxable year the calendar year 1976, the pro-
visions of paragraph (1) shall be applied for such taxable 
year by substituting the amount '$25,000' for the amount 
'$50,000' appearing therein. 
" ( B ) 
FISCAL YEAR TAXPAYERS.—In the case of a taxpayer 
whose taxable year is not the calendar year, effective on July 1, 
1976, paragraph (1) shall be applied by substituting the 
amount '$25,000' for the amount '$50,000' appearing therein, 
and such substitution shall be treated, for purposes of section 
21, as a change in a rate of tax.". 
(d) 
TECHNICAL AND CONFORMING CHANGES.— 
(1) Section 1561 (a) (1) of such Code (relating to limitations on 
certain multiple tax benefits in the case of certain controlled cor-
porations) as such section is in effect for taxable years ending 
after December 31, 1975, is amended by striking out "$25,000". 
PUBLIC LAW 94-164—DEC. 23, 1975 
89 STAT. 975 
Section 962(c) of such Code (relating to surtax exemption for 
26USC962. 
individuals electing to be subject to tax at corporate rates) as 
such section is in effect for taxable years ending after Decem-
ber 31, 1975, is amended by striking out "$25,000" and inserting 
in lieu thereof "the surtax exemption". 
(2) Section 21(f) of such Code (relating to increase in surtax 
26 USC 21. 
exemptions) is amended— 
(A) by striking out "INCREASE" in the caption and insert-
ing "CHANGE" in lieu thereof, and 
(B) by inserting after "Tax Reduction Act of 1975" the 
following: "and the change made by section 3(c) of the 
Revenue Adjustment Act of 1975". 
(e) EFFECTIVE DATES.—The amendments made by subsections (b), 
26 USC 11 note, 
(c), and (d) apply to taxable years beginning after December 31, 
1975. The amendment made by subsection (c) ceases to apply for tax-
able years beginning after December 31,1976. 
SEa 5. WITHHOLDING; ESTIMATED TAX PAYMENTS. 
(a) 
WITHHOLDING.— 
(1) I N GENERAL.—Section 3402(a) of the Internal Revenue 
Code of 1954 (relating to income tax collected at source), as 
26 USC 3402. 
amended by section 205 of the Tax Reduction Act of 1975, is Ante, p. 32. 
amended by inserting after the second sentence thereof the fol-
lowing: "The tables so prescribed with respect to wages paid 
after December 31,1975, and before July 1,1976, shall be the same 
as the tables prescribed under this subsection which were in 
effect on December 10,1975.". 
(2) TECHNICAL AMENDMENT.—Section 209 (c) of the Tax Reduc-
tion Act of 1975 is amended bv striking out "January 1, 1976" ^«^«' P- 35. 
and inserting in lieu thereof "July 1,1976". 
26 USC 3402 
(b) 
ESTIMATED TAX PAYMENTS BY INDIVIDUALS.—Section 6153 of 
"°*®' 
such Code (relating to installment payments of estimated income 
26 USC 6153. 
tax by individuals) is amended by adding at the end thereof the 
following new subsection: 
"(g) 
SIX-MONTH APPLICATION or 
REVENUE ADJUSTMENT ACT OF 
1975 CHANGES.—In the case of a taxpayer who has as his taxable year 
the calendar year 1976, the amount of any installment the payment 
of which is required to be made after December 31, 1975, and before 
July 1, 1976, may be computed without regard to section 42(a)(2), 
43(a) (2), 43(b) (2), 141(b) (2), or 141(c) (2).". 
26 USC 42, 43, 
(c) ESTIMATED TAX PAYMENTS BY CORPORATIONS.—Section 6154 of 
141. 
such Code (relating to installment payments of estimated income 
26 USC 6154. 
tax by corporations) is amended by adding at the end thereof the 
following new subsection: 
"(h) 
SIX-MONTH APPLICATION or REVENUE ADJUSTMENT ACT OF 
1975 CHANGES.—In the case of a corporation which has as its taxable 
year the calendar year 1976, the amount of any installment the payment 
of which is required to be made after December 31, 1975, and before 
July 1, 1976, may be computed without regard to sections 11(b) (2), 
11 (c) (2), and 11(d) (2).". 
26 USC 11. 
SEC. 6. ROLLING STOCK. 
(a) 
EXCLUSION 
FROM INCOME.—Section 883(a) of the Internal 
Revenue Code of 1954 is hereby amended by adding at the end thereof 
26 USC 883. 
the following new paragraph: 
"(3) 
RAILROAD ROLLING STOCK OF FOREIGN CORPORATIONS.—Earn-
ings derived from payments by a common carrier for the use on a 
temporary basis (not expected to exceed a total of 90 days in any 
taxable year) of railroad rolling stock owned by a corporation of 
89 STAT. 976 
PUBLIC LAW 94-164—DEC. 23, 1975 
a foreign country which grants an equivalent exemption to cor-
porations organized in the United States." 
26 use 883 note. 
(b) ErrECTiVE DATE.—The amendment made by this section shall 
apply to payments made after November 18,1974. 
SEC. 7. CERTAIN IRRIGATION FACILITIES. 
26 use 103. 
(a) I N GENERAL.—Section 103 of the Internal Revenue Code of 1954 
(relating to interest on certain governmental obligations) is amended 
by redesignating subsection (e) as subsection (f) and by inserting 
after subsection (d) the following new subsection: 
"(e) CERTAIN IRRIGATION DAMS.—A dam for the furnishing of water 
for irrigation purposes which has a subordinate use in connection with 
the generation of electric energy by water shall be treated as meeting 
the requirements of subsection (c) (4) (G) if— 
"(1) substantially all of the stored water is contractually avail-
able for release from such dam for irrigation purposes, and 
"(2) the water so released is available on reasonable demand to 
members of the general public". 
26USC103note. 
(b) EFFECTIVE DATE.—The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this Act. 
Approved December 23, 1975. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 94-531 (Comm. on Ways and Means). 
SENATE REPORT No. 94-570 (Comm. on Finance). 
CONGRESSIONAL RECORD, Vol. 121 (1975): 
Oct. 6, considered and passed House. 
Dec. 19, considered and passed Senate, amended; House concurred in Senate 
amendment with an amendment; Senate concurred in House amendment.