An Act to relating to the income tax treatment of terminal railroad corporations and their shareholders, and for other purposes
PL 87-870 (H.R.12599), enacted 10/23/1962

1158 
PUBLIC LAW 87-870--OCT. 23, 1962 
[76 STAT. 
October 23, 1962 
[H. R. 12599] 
Terminal rail-
road corporations. 
Income tax. 
68A Stat. 17. 
26 u s e 61 et 
seq. 
Public Law 87-870 
''iB^tf .,,, 
AN ACT 
Relating to the income tax treatment of terminal railroad corporations and their 
shareholders, and for other purposes. 
Be it enacted by the Senate and House of Representatives 
of the 
United /States of Amsrica in Congress assembled, That (a) subchapter 
B of chapter 1 of the Internal Revenue Code of 1954 (relating to 
computation of taxable income) is amended by adding at the end 
thereof the following new part: 
"PART X—TERMINAL RAILROAD CORPORATIONS AND 
THEIR SHAREHOLDERS 
"Sec. 281. Terminal railroad corporations and their shareholders. 
"SEC. 281. TERMINAL RAILROAD CORPORATIONS AND THEIR SHARE-
HOLDERS. 
"(a) 
COMPUTATION or TAXABLE INCOME OF TERMINAL RAILROAD 
CORPORATIONS.— 
"(1) I N GENERAL.—In computing the taxable income of a 
terminal railroad corporation— 
"(A) such corporation shall not be considered to have re-
ceived or accruedr— 
"(i) the portion of any liability of any railroad cor-
poration, with respect to related terminal services pro-
vided by such corporation, which is discharged by credit-
ing such liability with an amount of related terminal 
income, or 
"(ii) the portion of any charge which would be made 
by such corporation for related terminal services pro-
vided by it, out which is not made as a result of taking 
related terminal income into account in computing such 
charge; and 
"(B) no deduction otherwise allowable under this chapter 
shall be disallowed as a result of any discharge of liability 
described in subparagraph (A) (i) or as a result of any com-
putation of charges in the manner described in subparagraph 
" (2) LIMITATION.—In the case of any taxable year ending after 
the date of the enactment of this section, paragraph (1) shall not 
apply to the extent that it would (but for this paragraph) operate 
to create (or increase) a net operating loss for the terminal rail-
road corporation for the taxable year. 
"(b) 
COMPUTATION OF TAXABLE INCOME OF SHAREHOLDERS.—Sub-
ject to the limitation in subsection (a) (2), in computing the taxable 
income of any shareholder of a terminal railroad corporation, no 
amount shall be considered to have been received or accrued or paid 
or incurred by such shareholder as a result of any discharge of liability 
described in subsection ( a ) ( l ) ( A ) ( i ) or as a result of any compu-
tation of charges in the manner described in subsection ( a ) ( l ) ( A ) ( i i ) . 
"(c) AGREEMENT REQUIRED.—In the case of any taxable year, sub-
sections (a) and (b) shall apply with respect td any discharge of 
liability described in subsection ( a ) ( l ) ( A ) ( i ) , and to any computation 
of charges in the manner described in subsection ( a ) ( l ) ( A ) ( i i ) , 
only if such discharge or computation (as the case may be) was pro-
vided for in a written agreement, to which all of the shareholders of 
the terminal railroad corporation were parties, entered into before 
the beginning of such taxable year. 
76 STAT.] 
PUBLIC LAW 87-870-OCT. 23, 1962 
1159 
"(d) DEFINITIONS.—For purposes of this section— 
"(1) TERMINAL RAILROAD CORPORATION.—The term 'terminal 
railroad corporation' means a domestic railroad corporation which 
is not a member, other than as a common parent corporation, of an 
affiliated group (as defined in section 1504) and— 
68A stat. 369. 
"(A) all of the shareholders of which are domestic rail- 
^^ ^^^ ^^°'^-
road corporations subject to part I of the Interstate Commerce 
Act; 
24 Stat. 379. 
"(B) the primary business of which is the providing of 
^9 use 27. 
railroad terminal and switching facilities and services to 
^
^ > 
domestic railroad corporations subject to part I of the Inter-
' 
state Commerce Act and to the shippers and passengers of 
.; 
such railroad corporations; 
"(C) a substantial part of the services of which for the 
taxable year is rendered to one or more of its shareholders; 
and 
"(D) each shareholder of which computes its taxable 
income on the basis of a taxable year beginning or ending 
on the same day that the taxable year of the terminal railroad 
t 
corporation begins or ends. 
^: 
"(2) RELATED TERMINAL INCOME.—The term 'related terminal 
income' means the income (determined in accordance with reg-
ulations prescribed by the Secretary or his delegate) of a terminal 
railroad corporation derived— 
"(A) from services or facilities of a character ordinarily 
and regularly provided by terminal railroad corporations for 
railroad corporations or for the employees, passengers, or 
nsb • ^ 
- 
shippers of railroad corporations; 
" (B) from the use by persons other than railroad corpora-
-' 
tions of portions of a facility, or a service, which is used pri-
'•• 
marily for railroad purposes; 
"(C) fron^ any railroad corporation for services or facilities 
provided by such terminal railroad corporation in connection 
with railroad operations; and 
> 
"(D) from the United States in payment for facilities or 
services in connection with mail handling, 
i 
For purposes of subparagraph (B), a substantial addition, con-
structed after the date of the enactment of this section, to a facil-
ity shall be treated as a separate facility. 
"(3) RELATED TERMINAL SERVICES.—The term 'related terminal 
services' includes only services, and the use of facilities, taken into 
account in computing related terminal income. 
"(e) 
APPLICATION TO TAXABLE YEARS ENDING BEFORE THE DATE OF 
ENACTMENT.—In the case of any taxable year ending before the date of 
the enactment of this section— 
" (1) this section shall apply only to the extent that the taxpayer 
computed on its return, filed at or prior to the time (including 
extensions thereof) that the return for such taxable year was 
required to be filed, its taxable income in the manner described in 
subsection (a) in the case of a terminal railroad corporation, or 
in the manner described in subsection (b) in the case of a share-
holder of a terminal railroad corporation; and 
"(2) this section shall apply to a taxable year for which the 
assessment of any deficiency, or for which refund or credit of 
any overpayment, whichever is applicable, was prevented, on the 
date of the enactment of this section, by the operation of any law 
or rule of law (other than section 3760 of the Internal Revenue 
53 stat. 462. 
Code of 1939 or section 7121 of this title, relating to closing agree- 
fg^lc^Vm^' 
1160 
PUBLIC L
A
W 87-870-OCT. 23, 1962 
[76 STAT. 
53 Stat. 462. 
iiients, and section 3761 of the Internal Revenue Code of 1939 or 
6
8
A Stat. 849. 
section 7122 of this title, relating to compromises), only— 
26 use 7122. 
"(A) to the extent any overpayment of income tax would 
result from the recomputation of the taxable income of a 
terminal railroad corporation in the manner described in 
subsection (a), 
"(B) if claim for credit or refund of such overpayment, 
based upon such recomputation, is filed prior to one year after 
the date of the enactment of this section, 
"(C) to the extent that paragraph (1) applies, and 
"(D) if each shareholder of such terminal railroad cor-
poration consents in writing to the assessment, within such 
period as may be agreed upon with the Secretary or his 
delegate, of any deficiency for any year to the extent attribut-
able to the recomputation of its taxable income in the manner 
described in subsection (b) correlative to its allocable share 
of the adjustment of taxable income made by the terminal 
railroad corporation in its recomputation under subpara-
graph (A). 
"(f) REGULATIONS.—The Secretary or his delegate shall prescribe 
such regulations as may be necessary to carry out the purposes of this 
section." 
(b) The table of parts for subchapter B of chapter 1 of such Code 
is amended by adding at the end thereof the following: 
"Part X. Terminal railroad corporations and their shareholders." 
Effective date. 
SEC. 2. (a) The amendments made by the first section of this Act 
shall apply with respect to taxable years beginning after December 
ol, 1953, and ending after August 16,1954. 
Internal Revenue 
(b) Provislous liaviug the Same effect as section 281 of the Internal 
^"s'ffec^t i f pro- 
Revenue Code of 1954 (as added by the first section of this Act) shall 
visions. 
be deemed to be included in the Internal Revenue Code of 1939, 
effective with respect to all taxable years to which such Code applies. 
68A Stat. 895. 
SEC. 3. (a)(1) Chapter 77 of the Internal Revenue Code of 1954 
2
^
6 use 7501 et (relating to miscellaneous provisions) is amended by adding at the 
end thereof the. following new sections: 
"SEC. 7515. SPECIAL STATISTICAL STUDIES AND COMPILATIONS AND 
OTHER SERVICES ON REQUEST. 
"The Secretary or his delegate is authorized within his discretion, 
upon written request, to make special statistical studies and compila-
tions involving data from any returns, declarations, statements, or 
other documents required by this title or by regulations or from any 
records established or maintained in connection with the administration 
and enforcement of this title, to engage in any such special study or 
compilation jointly w^ith the party or parties requesting it, and to fur-
nish transcripts of any such special study or compilation, upon the pay-
ment, by the party or parties making the request, of the cost of the 
work or services performed for such party or parties. 
"SEC. 7516. SUPPLYING TRAINING AND TRAINING AIDS ON REQUEST. 
"The Secretary or his delegate is authorized within his discretion, 
upon written request, to admit employees and officials of any State, the 
Commonwealth of Puerto Rico, any possession of the United States, 
any political subdivision or instrumentality of any of the foregoing, 
the District of Columbia, or any foreign government to training 
courses conducted by the Internal Revenue Service, and to supply 
diem with texts and other training aids. The Secretary or his dele-
gate may require payment from the party or parties making the 
request of a reasonable fee not to exceed the cost of the training and 
training aids supplied pursuant to such request." 
aeq. 
76 STAT.] 
PUBLIC LAW 8 7 - 8 7 0 - O C T . 23, 1962 
1161 
(2) The table of sections for chapter 77 is amended by adding at 
the end thereof the following new items: 
"Sec. 7515. Special statistical studies and compilations and other 
services on request. 
"Sec. 7516. Supplying training and training aids on request." 
(b) Section 7809 of the Internal Revenue Code of 1954 (relating to 
^SA stat. 9i8. 
deposit of collections) is amended— 
^^ "^^ ^^°^' 
(1) by striking out "subsection (b)," in subsection (a) and in-
serting in lieu thereof "subsections (b) and (c) and in", and 
(2) by adding at the end thereof the following new subsection: 
"(c) DEPOSIT OF CERTAIN RECEIPTS.—Moneys received in payment 
for— 
"(1) Work or services performed pursuant to section 7515 Ante, p. ueo. 
(relating to special statistical studies and compilations and other 
services on request); 
"(2) work or services performed (including materials sup-
plied) pursuant to section 7516 (relating to the supplying of 
Ante, p. iieo. 
training and training aids on request); and 
"(3) other work or services performed for a State or a depart-
ment or agency of the Federal Government (subject to all pro-
visions of law and regulations governing disclosure of informa-
tion) in supplying copies of, or data from, returns, statements, or 
other documents filed under authority of this title or records 
maintained in connection with the administration and enforce-
ment of this title, 
shall be deposited in a separate account which may be used to reim-
burse appropriations which bore all or part of the costs of such work 
or services, or to refund excess sums when necessary." 
SEC. 4, Section 6512(b)(2) of the Internal Revenue Code of 1954 esA stat. sn. 
(relating to limit on amount of credit or refund of overpayment deter- 
26 use 6;.i2. 
mined by the Tax Court) is amended by striking out "or" at the end 
of subparagraph ( A ) ; by striking out the period at the end of sub-
j)aragraph (B) and inserting in lieu thereof ", or"; and by adding 
after subparagraph (B) the following new subparagraph: 
"(C) within the period which would be applicable under 
section 6511 (b) (2), (c), or (d), in respect of any claim for 
26 use 65ii. 
refund filed within the applicable period specified in section 
6511 and before the date of the mailing of the notice of defi-
ciency— 
"(i) which had not been disallowed before that date, 
"(ii) which had been disallowed before that date and 
in respect of which a timely suit for refund could have 
been commenced as of that date, or 
"(iii) in respect of which a suit for refund had been 
commenced before that date and within the period 
specified in section 6532." 
26 use 6532. 
SEC. 5. (a) Section 7701(a) of the Internal Revenue Code of 1954 Ante, p. 988; 
is amended by adding after paragraph (31) the following new para- ^^ use 7701. 
graph : 
"(32) COOPERATIVE BANK.—The term 'cooperative bank' means 
an institution without capital stock organized and operated for 
mutual purposes and without profit, which— 
"(A) either— 
"(i) is an insured institution within the meaning of 
section 401(a) of the National Housing Act (12 U.S.C., 
sec. 1724(a)), or 
48 stat. 125s. 
"(ii) is subject by law to supervision and examination 
by State or Federal authority having supervision over 
such institutions, and 
1162 
PUBLIC LAW 87-871-OCT. 23, 1962 
[76 STAT. 
Ante, 
p. 983. 
68A Stat. 50. 
26 u s e 166. 
Ante, 
p. 979. 
Effective date. 
"(B*) meets the requirements of subparagraphs (B), (C), 
(D), (E), and (F) of paragraph (19) of this subsection 
(relating to definition of domestic building and loan associa-
tion) determined with the application of the second, third, 
and fourth sentences of paragraph (19). 
In determining whether an institution meets the requirements 
referred to in subparagraph (B) of this paragraph, any reference 
to an association or to a domestic building and loan association 
contained in paragraph (19) shall be deemed to be a reference to 
such institution. 
In the case of an institution which, for the 
taxable year, is a cxjoperative bank within the meaning of the 
first sentence of this paragraph by reason of 
the application 
of the second and third sentences of paragraph (19) of this sub-
section, the deduction otherwise allowable under section 166(c) 
for a reasonable addition to the reserve for bad debts shall, under 
regulations prescribed by the Secretary or his delegate, be reduced 
in a manner consistent with the reductions provided by the table 
contained in section 593(b)(5)." 
(b) The amendment made by subsection (a) of this section shall 
apply with respect to taxable years beginning after the date of the 
enactment of the Revenue Act of 1962. 
Approved October 23, 1962. 
October 23, 1962 
[H. R. 10002] 
Public Law 87-871 
^ 
AN ACT 
For the relief of civilian employees of the New York Naval Shipyard and the 
San Francisco Naval Shipyard erroneously in receipt of certain wages due 
to a misinterpretation of a Navy civilian personnel instruction. 
Naval ship-
yards, New York 
and San Francisco. 
Relief of certain 
civilian employ-
ees. 
Be it enacted by the Senate and House of Representatives 
of the 
Tlmted States 
of America 
in Congress assem,bled, That civilian 
employees and former civilian employees of the New York Naval 
Shipyard and the San Francisco Naval Shipyard are relieved of all 
liability to refund to the United States the amounts, which were 
otherwise correct, and which occurred without fault on their part, 
erroneously received by them after June 1, 1960, and before March 1, 
1962, caused by a premature within-grade advancement based upon 
a misinterpretation of Navy Civilian Personnel Instruction 552 
entitled "Salary and Wa^e Changes". Any employee or former 
employee who has at any time made repayment to the United States 
of any amount paid to him as a result of this misinterpretation is 
entitled to have refunded to him the amount repaid provided applica-
tion is made within one year. 
SEC. 2. In the audit and settlement of the accounts of any certifying 
or disbursing officer of the United States full credit shall be given 
for the amount for which liability is relieved by this Act. 
SEC. 3. Appropriations available for the pay of civilian personnel 
of the Navy are available for refunds under this Act. 
Approved October 23, 1962. 
ifl.;-
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