An act to amend the Internal Revenue Code of 1954 with respect to excise tax refunds in the case of certain uses of tread rubber, and for other purposes.
PL 96-598 (H.R.3317), enacted 12/24/1980

PUBLIC LAW 96-598—DEC. 24, 1980 
94 STAT. 3485 
Public Law 96-598 
96th Congress 
An Act 
Dec. 24, 1980 
[H.R. 3317] 
To amend the Internal Revenue Code of 1954 with respect to excise tax refunds in 
the case of certain uses of tread rubber, and for other purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
Internal 
Revenue Code of 
SECTION 1. EXCISE TAX REFUNDS IN CASE OF CERTAIN USES OF TREAD 1954, 
RUBBER. 
amendment. 
(a) REFUNDS FOR CERTAIN USES.—Subparagraph (G) of section 
6416(b)(2) of the Internal Revenue Code of 1954 (relating to special 26 USC 6416. 
cases in which tax payments considered overpayments) is amended to 
read as follows: 
"(G) in the case of tread rubber in respect of which tax was 
paid under section 4071(a)(4)— 
"(i) used or sold for use otherwise than in the recap-
ping or retreading of tires of the type used on highway 
vehicles (as defined in section 4072(c)), 
"(ii) destroyed, scrapped, wasted, or rendered useless 
in the recapping or retreading process, 
"(iii) used in the recapping or retreading of a tire the 
sale of which is later adjusted pursuant to a warranty or 
guarantee, in which case the overpayment shall be in 
proportion to the adjustment in the sales price of such 
tire, or 
"(iv) used in the recapping or retreading of a tire, if 
such tire is by any person exported, used or sold for use 
as supplies for vessels or aircraft, sold to a State or local 
government for the exclusive use of a State or local 
government, or sold to a nonprofit educational organiza-
tion for its exclusive use, 
unless credit or refund of such tax is allowable under 
paragraph (3);". 
(b) USE IN FURTHER MANUFACTURE, ETC.— 
(1) IN GENERAL.—Paragraph (3) of section 6416(b) of such Code 
(relating to tax-paid articles used for further manufacture, etc.) 
is amended by inserting after subparagraph (C) the following 
new subparagraph: 
"(D) in the case of tread rubber in respect of which tax was 
paid under section 4071(a)(4) used in the recapping or 
retreading of a tire, such tire is sold by the subsequent 
manufacturer or producer on or in connection with, or with 
the sale of, any other article manufactured or produced by 
him and such other article is by any person exported, sold to 
a State or local government for the exclusive use of a State or 
local government, sold to a nonprofit educational organiza-
tion for its exclusive use, or used or sold for use as supplies 
for vessels or aircraft, unless credit or refund of such tax is 
allowable under subparagraph (C);". 
94 STAT. 3486 
PUBLIC LAW 96-598—DEC. 24, 1980 
(2) TECHNICAL AMENDMENTS.— 
26 use 6416. 
(A) Subparagraph (E) of section 6416(b)(2) of such Code is 
amended by inserting after "paragraph (3)" the following: 
"(or in the case of the tread rubber on a recapped or 
retreaded tire, resold for use as provided in subparagraph (D) 
of paragraph (3)),". 
(B) Subparagraph (C) of section 6416(a)(1) of such Code is 
amended by striking out "(b)(3)(C)" and inserting in lieu 
thereof "(b)(3)(C) or (D)". 
(C) Subparagraph (A) of section 6416(b)(3) of such Code is 
amended by inserting "(D)," after "(C),". 
(D) Subparagraph (A) of section 6416(b)(4) of such Code is 
amended by striking out "section 4071" and inserting in lieu 
thereof "section 4071, or a recapped or retreaded tire in 
respect of which tax under section 4071(a)(4) was paid on the 
tread rubber used in the recapping or retreading,". 
26 use 6511. 
(c) STATUTE OF LIMITATIONS.—Section 6511 of such Code (relating to 
limitations on credit or refund) is amended by redesignating subsec-
tion (i) as subsection 0) and by inserting after subsection (h) the 
following new subsection: 
"(i) SPECIAL RULE FOR CERTAIN TREAD RUBBER TAX CREDITS OR 
REFUNDS.—The period for allowing a credit or making a refund-of any 
overpayment of tax arising by reason of subparagraph (G)(iii) of 
Ante, p. 3485. 
section 6416(b)(2) with respect to any adjustment of sales price of a 
tire pursuant to a warranty or guarantee shall not expire if claim 
therefor is filed before the date which is one year after the day on 
which such adjustment is made.". 
(d) IMPORTED RECAPPED OR RETREADED UNITED STATES TIRES.— 
26 use 4071. 
Section 4071 of such Code (relating to excise tax on tires and tubes) is 
amended by adding at the end thereof the following new subsection: 
"(0 IMPORTED RECAPPED OR RETREADED UNITED STATES TIRES.— 
"(1) IN GENERAL.—For purposes of subsection (a)(4), in the case 
of a tire which has been exported from the United States, 
recapped or retreaded (other than from bead to bead) outside the 
United States, and imported into the United States— 
"(A) the person importing such tire shall be treated as 
,: ,, ; 
importing the tread rubber used in such recapping or 
J 
retreading (determined as of the completion of the recapping 
or retreading), and 
"(B) the sale of such tire by the importer thereof shall be 
treated as the sale of such tread rubber. 
"(2) EXCEPTION FOR CERTAIN TAXABLE SALES.—Paragraph (1) 
shall not apply with respect to the sale of any tire if such tire is 
sold on or in connection with the sale of an article on which tax is 
imposed under section 4061.". 
26 use 4071 
(e) EFFECTIVE DATE.—The amendments made by this section shall 
^°^- 
take effect on the first day of the first calendar month which begins 
more than 10 days after the date of the enactment of this Act. 
26 use 1034 
SEC. 2. NONRECOGNITION OF GAIN ON SALE OF PRINCIPAL RESIDENCE. 
(a) IN GENERAL.—In the case of an individual— 
(1) who sold his principal residence (within the meaning of 
section 1034 of the Internal Revenue Code of 1954) in 1977, 
(2) who purchased property on which to construct a new 
principal residence (within the meaning of such section)— 
(A) the construction of which commenced during such 
year, and 
PUBLIC LAW 96-598—DEC. 24, 1980 
94 STAT. 3487 
(B) the construction of which was terminated before com-
pletion, 
(3) who brought an action, and obtained a judgment, against 
the builder who commenced construction of the new residence 
but failed to complete it, 
(4) who suspended construction of such residence so that the 
partially constructed residence could be used as evidence in 
connection with the prosecution of the builder (without regard to 
whether it was so used), and 
(5) who failed to meet the requirements of such section with 
respect to occupancy of the new principal residence because of 
such suspension of construction, 
the Secretary of the Treasury, in the administration of section 1034(c) 
of the Internal Revenue Code of 1954 (relating to rules for application 
of section 1034), shall apply paragraph (5) of such section as if "5 
years" were substituted for "2 years where it appears in the last 
sentence of such paragraph. 
(b) EFFECTIVE DATE.—The provisions of the first section of this Act 
shall apply with respect to taxable years beginning after December 
31,1976, and before January 1,1983. 
SEC. 3. DISCLOSURE OF TAX RETURNS TO STATE AUDIT AGENCIES. 
(a) GENERAL RULE.—Subsection (d) of section 6103 of the Internal 26 USC 6103. 
Revenue Code of 1954 (relating to disclosure of return information to 
State tax officials) is amended to read as follows: 
"(d) DISCLOSURE TO STATE TAX OFFICIALS.— 
"(1) IN GENERAL.—Returns and return information with 
respect to taxes imposed by chapters 1, 2, 6, 11,12, 21, 23, 24, 31, 
32, 44, 51, and 52 and subchapter D of chapter 36 shall be open to 26 USC l 1401, 
inspection by, or disclosure to, any State agency, body, or com- g^^J' gg^J' g^^J' 
mission, or its legal representative, which is charged under the 4001' 40Q1, idsi, 
laws of such State with responsibility for the administration of 5001^ 570li 448l! 
State tax laws for the purpose of, and only to the extent 
necessary in, the administration of such laws, including any 
procedures with respect to locating any person who may be 
entitled to a refund. Such inspection shall be permitted, or such 
disclosure made, only upon written request by the head of such 
agency, body, or commission, and only to the representatives of 
such agency, body, or commission designated in such written 
request as the individuals who are to inspect or to receive the 
returns or return information on behalf of such agency, body, or 
commission. Such representatives shall not include any individ-
ual who is the chief executive officer of such State or who is 
neither an employee or legal representative of such agency, body, 
or commission nor a person described in subsection (n). However, 
such return information shall not be disclosed to the extent that 
the Secretary determines that such disclosure would identify a 
confidential informant or seriously impair any civil or criminal 
tax investigation. 
"(2) DISCLOSURE TO STATE AUDIT AGENCIES.— 
"(A) IN GENERAL.—Any returns or return information 
obtained under paragraph (1) by any State agency, body, or 
commission may be open to inspection by, or disclosure to, 
officers and employees of the State audit agency for the 
purpose of, and only to the extent necessary in, making an 
audit of the State agency, body, or commission referred to in 
paragraph (1). 
94 STAT. 3488 
PUBLIC LAW 96-598—DEC. 24, 1980 
"(B) STATE AUDIT AGENCY.—For purposes of subparagraph 
(A), the term 'State audit agency' means any State agency, 
body, or commission which is charged under the laws of the 
State with the responsibihty of auditing State revenues and 
programs.". 
26 use 6103 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
"°*® 
take effect on the date of the enactment of this Act. 
SEC. 4. TREATMENT OF BONNER'S FERRY RESTORIUM UNDER THE SUP-
PLEMENTARY SECURITY INCOME PROGRAM. 
(a) TREATMENT AS NON-PUBLIC INSTITUTION.—For purposes of title 
42 use 1381. 
XVI of the Social Security Act, the Boundary County Restorium 
(popularly known as the Bonner's Ferry Restorium) in Bonner's 
Ferry, Idaho, shall not be considered a public institution (within the 
42 use 1382. 
meaning of section 1611(e)(1)(C) of such Act). 
(b) EFFECTIVE DATE.—Subsection (a) shall apply to supplemental 
security income benefits payable under title XVI of the Social 
Security Act for months beginning with November 1980. 
SEC. 5. TREATMENT OF CERTAIN EXPENSES INCLUDIBLE IN THE INCOME 
OF THE RECIPIENT. 
(a) IN GENERAL.—Subsection (e) of section 274 of the Internal 
26 use 274. 
Revenue Code of 1954 (relating to specific exceptions to application of 
disallowance of certain entertainment, etc., expenses) is amended by 
inserting after paragraph (9) the following new paragraph: 
"(10) EXPENSES INCLUDIBLE IN INCOME OF PERSONS WHO ARE NOT 
EMPLOYEES.—Expenses paid or incurred by the taxpayer for 
goods, services, and facilities to the extent that the expenses are 
includible in the gross income of a recipient of the entertain-
ment, amusement, or recreation who is not an employee of the 
taxpayer as compensation for services rendered or as a prize or 
award under section 74. The preceding sentence shall not apply 
to any amount paid or incurred by the taxpayer if such amount is 
required to be included (or would be so required except that the 
amount is less than $600) in any information return filed by such 
26 use 6031. 
taxpayer under part III of subchapter A of chapter 61 and is not 
so included." 
26 use 274 note. 
(b) EFFECTIVE DATE.—The amendment made by this section shall 
apply to any expenses paid or incurred after December 31, 1980, in 
taxable years ending after such date. 
SEC. 6. PRESERVING EXISTING TAX STATUS OF WINE AND FLAVORS 
USED IN THE PRODUCTION OF DISTILLED SPIRITS. 
(a) ALLOWANCE OF CREDIT.—Subpart A of part I of subchapter A of 
chapter 51 of the Internal Revenue Code of 1954 (relating to distilled 
spirits) is amended by adding at the end thereof the following new 
section: 
26 use 5010. 
SEC. 5010. CREDIT FOR WINE CONTENT AND FOR FLAVORS CONTENT. 
"(a) ALLOWANCE OF CREDIT.— 
"(1) WINE CONTENT.—On each proof gallon of the wine content 
of distilled spirits, there shall be allowed a credit against the tax 
imposed by section 5001 (or 7652) equal to the excess o
f
— 
"(A) $10.50, over 
"(B) the rate of tax which would be imposed on the wine 
under section 5041(b) but for its removal to bonded premises. 
"(2) FLAVORS CONTENT.—On each proof gallon of the flavors 
content of distilled spirits, there shall be allowed a credit against 
the tax imposed by section 5001 (or 7652) equal to $10.50. 
PUBLIC LAW 96-598—DEC. 24, 1980 
94 STAT. 3489 
"(3) FRACTIONAL PART OF PROOF GALLON.—In the case of any 
fractional part of a proof gallon of the wine content, or of the 
flavors content, of distilled spirits, a proportionate credit shall be 
allowed. 
"(b) TIME FOR DETERMINING AND ALLOWING CREDIT.— 
"(1) IN GENERAL.—The credit allowable by subsection (a)— 
"(A) shall be determined at the same time the tax is 
determined under section 5006 (or 7652) on the distilled 
spirits containing the wine or flavors, and 
"(B) shall be allowable at the time the tax imposed by 
section 5001 (or 7652) on such distilled spirits is payable as if 
the credit allowable by this section constituted a reduction in 
the rate of tax. 
"(2) DETERMINATION OF CONTENT IN THE CASE OF IMPORTS.—For 
purposes of this section, the wine content, and the flavors 
content, of imported distilled spirits shall be established by such 
chemical analysis, certification, or other methods as may be set 
forth in regulations prescribed by the Secretary. 
"(c) DEFINITIONS.—For purposes of this section— 
"(1) WINE CONTENT.— 
"(A) IN GENERAL.—The term 'wine content' means alcohol 
derived from wine. 
"(B) WINE.—The term 'wine'— 
"(i) means wine on which tax would be imposed by 
paragraph (1), (2), or (3) of section 5041(b) but for its 
removal to bonded premises, and 
"(ii) does not include any substance which has been 
subject to distillation at a distilled spirits plant after 
receipt in bond. 
"(2) FLAVORS CONTENT.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the term 'flavors content' means alcohol derived from 
flavors of a type for which drawback is allowable under 
section 5134. 
"(B) EXCEPTIONS.—The term 'flavors content' does not 
include— 
"(i) alcohol derived from flavors made at a distilled 
spirits plant, and 
"(ii) in the case of any distilled spirits product, alcohol 
derived from flavors to the extent such alcohol exceeds 
(on a proof gallon basis) 2y2 percent of the finished 
product." 
(b) CLERICAL AMENDMENT.—The table of sections for such subpart 
A of part I of subchapter A of chapter 51 of such Code is amended by 
adding at the end thereof the following new item: 
"Sec. 5010. Credit for wine content and for flavors content." 
(c) EFFECTIVE DATE.—The amendments made by subsections (a) and 26 use 50io 
(b) shall take effect on January 1,1980. 
"o<^e. 
94 STAT. 3490 
PUBLIC LAW 96-598—DEC. 24, 1980 
(d) TRANSFERS OF ALCOHOL.—Section 5212 of the Internal Revenue 
26 use 5212. 
Code of 1954 (relating to the transfer of spirits in bond) is amended by 
adding at the end thereof the following new sentence: "The provisions 
of this section restricting transfers to bulk distilled spirits shall not 
apply to alcohol bottled under the provisions of section 5235 which is 
to be withdrawn for industrial purposes." 
Approved December 24, 1980. 
>
. ^. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 96-560 (Cbmm. on Ways and Means). 
SENATE REPORT No. 96-898 (Ck)mm. on Finance). 
CONGRESSIONAL RECORD: 
Vol. 125 (1979): Nov. 27, considered and passed House. 
Vol. 126 (1980): Oct. 1, considered and passed Senate, amended. 
Dec. 10, House agreed to Senate amendments with simend-
ments. 
Dec. 12, Senate agreed to House amendments.