An Act to amend the Railroad Retirement Act of 1937 to eliminate the provisions which reduce spouses annuities by the amount of certain monthly benefits, to increase the base on which-railroad retirement benefits and taxes are computed, and to change the railroad retirement tax
PL 89-212 (H.R.10874), enacted 09/29/1965

858 
PUBLIC LAW 89-212-SEPT. 29, 1965 
[79 STAT. 
September 29, 1965 
[H. R. 10874] 
Public Law 89-212 
AN ACT 
To amend the Railroad Retirement Act of 1937 and the Railroad Retirement 
Tax Act to eliminate certain provisions which reduce spouses' annuities, to pro-
vide coverage for tips, to increase the base on which railroad retirement 
benefits and taxes are computed, and to change the railroad retirement tax 
rates. 
Railroad Retire-
ment Act of 1937 
and Railroad Re-
tirement Tax Act, 
amendments. 
65 Stat. 683. 
Be it enacted by the Senate and House of Representatives 
of the 
United States of America in Congress assembled, 
SPOUSES' A N N U I T I E S 
SECTION 1. Subsection (e) of section 2 of the Railroad Eetirement 
Act of 1937 (45 U.S.C. 228b (e)) is amended by changing the colon 
before the last proviso to a period and by striking out all that follows 
down through the period at the end of such subsection. 
68A Stat. 431. 
26 u s e 3202. 
Ante, p. 384. 
Post, p. 859. 
Post, 
p. 861. 
Quarterly esti-
mates; deductions. 
COVEllAGE OF TIPS 
SEC. 2. (a) (1) Subsection (a) of section 3202 of the Internal Reve-
nue Code of 1954 (relating to deduction of tax from compensation) 
is amended by adding at the end thereof the following new sentence: 
"An employer who is furnished by an employee a, written statement of 
tips (received in a calendar month) pursuant to section 6053(a) 
to which paragraph (3) of section 3231(e) is applicable may deduct 
an amount equivalent to such tax with respect to such tips from any 
compensation of the employee (exclusive of tips) under his control, 
even though at the time such statement is furnished the total amount 
of the tips included in statements furnished to the employer as having 
been received by the employee in such calendar month in the course 
of his employment by such employer is less than $20.'' 
(2) Such section 3202 is amended by adding at the end thereof the 
following new subsection: 
"(c) 
SPECIAL RULE F
O
R TIPS.— 
"(1) In the case of tips which constitute compensation, sub-
section (a) shall be applicable only to such tips as are included 
in a written statement furnished to the employer pui^suant to 
section 6053(a), and only to the extent that collection can be made 
by the employer,fat or after the time such statement is so furnished 
and before the close of the 10th day following the calendar month 
(or, if paragraph (3) applies, the 30th day following the quarter) 
in which the tips were deemed paid, by deducting the amount 
of the tax fi*om such compensation of the employee (excluding 
tips, but including funds turned over by the employee to the 
employer pursuant to paragraph (2)) as are under control of 
the employer. 
"(2) If the tax imposed by section 3201, with respect to tips 
which are included in written statements furnished in any month 
to the employer pureuant to section 6053(a), exceeds the com-
pensation of the employee (excluding tips) from which the 
employer is required to collect the tax under paragraph (1), the 
employee maj furnish to the employer on or before the 10th day 
of the'followmg month (or, if paragraph (3) applies, on or before 
the 30th day of the following quarter) an amount of money equal 
to the amount of the excess. 
"(3) The Secretary or his delegate maj-, under regulations pre-
scribed by him, authorize employers— 
79 STAT. ] 
PUBLIC L
A
W 89-212-SEPT. 29, 1965 
859 
Ante, 
p. 384. 
"(A) to estimate the amount of tips that will be reported 
by the employee pursuant to section 6053(a) in any quarter 
of the calendar year, 
"(B) to determine the amount to be deducted upon each 
payment of compensation (exclusive of tips) durmg such 
quarter as if the tips so estimated constituted actual tips so 
reiw)rted, and 
"(C) to deduct upon any payment of compensation (other 
than tips, but including funds turned over by the employee 
to the employer pursuant to paragraph (2)) to such employee 
during such quarter (and within 30 days thereafter) such 
amount as may be necessary to adjust the amount actually 
deducted upon such compensation of the employee during 
the quarter to the amount required to be deducted in respect 
of tips included in written statements furnished to the 
employer during the quarter. 
"(4) If the tax imposed by section 3201 with respect to tips ^°^'' ^- ^^^' 
which constitute compensation exceeds the portion of such tax 
which can be collected by the employer from the compensation of 
the employee pursuant to paragraph (1) or paragraph (3), such 
excess shall be paid by the employee." 
(b) (1) The second sentence of subsection (e) (1) of section 3231 of 
such Code (relating to definition of compensation for purposes of the ll%l^c\23i' 
Railroad Retirement Tax Act) is amended by inserting "(except as is 
provided under paragraph (3))" after "tips . 
(2) Subsection (e) of such section 3231 is further amended by 
adding at the end thereof the following new paragraph: 
" (3) Solely for purposes of the tax imposed by section 3201 and 
other provisions of this chapter insofar as they relate to such tax, 
the term 'compensation' also includes cash tips received by an 
employee in any calendar month in the course of his employment 
by an employer unless the amount of such cash tips is less than 
$20." 
(3) Such section 3231 is further amended by adding at the end 
thereof the following new subsection: 
"(h) 
TIPS CONSTITUTING COMPENSATION, TIME DEEMED PAID.—For 
purposes of this chapter, tips which constitute compensation for pur-
poses of the tax imposed under section 3201 shall be deemed to be paid 
at the time a written statement including such tips is furnished to the 
employer pursuant to section 6053(a) or (if no statement including 
such tips is so furnished) at the time received; and tips so deemed to 
be paid in any month shall be deemed paid for services rendered in 
such month." 
(c) Section 3402(k) of such Code (relating to income tax collected 
^""' P- ^*'*-
at source on tips) is amended (1) by inserting "or section 3202(c) (2)" 
after "section 3102(c) (2)" and (2) by inserting "or section 3202(a)" 
after "section 3102(a)". 
(d) (1) Section 6053(a) of such Code (relating to reports of tips by 
employees) is amended by inserting "or which are compensation (as 
defined in section 3231(e))" after "or section 3401(a))". 
(2) Section 6053(b) of such Code (relating to statements fur-
nished by employers) is amended (A) by inserting "or section 3201 
(as the case may be)" after "section 3101", and (B) by inserting "or 
section 3202 (as the case may be)" after "section 3102^'. 
(e) Section 6652(c) of such Code (relating to failure to report 
^"'^' p- •^^^^ 
tips) is amended (1) by inserting "or which are compensation (as 
defined in section 3231(e))" after "which are wages (as defined in 
section 3121(a))", and (2) by inserting "or section 3201 (as the case 
may be)" after "section 3101'\ 
Ante, p. 384. 
860 
PUBLIC LAW 89-212-SEPT. 29, 1965 
[79 STAT. 
(f) (1) Subsection (h) of section 1 of the Railroad Retirement Act 
50 Stat. 309 
9^ l?^'^ ^^ amended (A) by inserting "(1)" after "(h)", (B) by insert-
45 use 2283. 
ing in the second sentence thereof " (except as is provided under para-
graph (2))" after "tips", and (C) by adding at the end thereof the 
following new paragraphs: 
" (2) Solely for purposes of determining amounts to be included in 
the compensation of an individual who is an employee (as defined in 
subsection (b)) the term 'compensation' shall (subject to section 3 (c)) 
also include cash tips received by an employee in any calendar month 
in the course of his employment by an employer unless the amount of 
such cash tips is less than $20. 
"(3) Tips included as compensation by reason of the provisions of 
paragraph (2) shall be deemed to be paid at the time a written state-
ment including such tips is furnished to the employer pursuant to 
section 6053(a) of the Internal Revenue Code of 1954 or (if no state-
ment including such tips is so furnished) at the time received; and 
tips so deemed to be paid in any month shall be deemed paid for 
services rendered in such month." 
INCREASE IN BASE FOE BENEFIT COMPUTATION PURPOSES 
SEC. 3. (a) Subsection (a) of section 3 of the Railroad Retirement 
45 use' V
^
c
" 
-S^^pi 1937 is amended by striking out "the next $300" and inserting 
in lieu thereof the following: "the remainder up to a total of (i) 
$450, or (ii) an amount equal to one-twelfth of the current maximum 
annual taxable 'wages' as defined in section 3121 of the Internal Reve-
^^"uscT^s iV/" 
^^^ Code of 1954, whichever is greater". 
6
0 Stat. 728." 
(b) The second sentence oi subsection (c) of such section 3 is 
amended by inserting before ", shall be recognized" the following: 
"and before the calendar month next following the cale^ndar month 
in vzhich this Act was amended in 1965, or in excess of (i) $450, or 
(ii) an amount equal to one-twelfth of the current maximum annual 
taxable 'wages' as defined in section 3121 of the Internal Revenue 
Code of 1954, whichever is greater, for any calendar month after the 
month in which this Act was so amended". 
77^stat^^22^^' 
^^^ Subsectioii (f) (2) of section 5 of such Act is amended by 
45 use 22*8e. 
inserting after "so amended" where it appears the second time in the 
first parenthetical phrase after clause (vi) the following: "and before 
the calendar month next following the month in which this Act was 
amended in 1965, and in excess of (i) $450, or (ii) an amount equal 
to one-twelfth of the current maximum annual taxable 'wages' as 
defined in section 3121 of the Internal Revenue Code of 1954, which-
ever is greater, for any month after the month in which this Act was 
so amended". 
65 Stat, 689. 
(d) Subsectioii (1) (9) of section 5 of such Act is amended— 
(1) by striking out "and" where it appears the fourth time 
and inserting in lieu thereof a comma; 
(2) by inserting after "so amended" where it appeal's the sec-
ond time the following: "and before the calendar month next 
following the calendar month in which this Act was amended 
''in 1965, and any excess over (i) $450, or (ii) an amount equal to 
one-twelth of the current maximum annual taxable 'wages' as 
defined in section 3121 of the Internal Revenue Code of 1954, 
whichever is greater, for any calendar month after the month 
in which this Act was so amended"; 
Ante, p. 400. 
(3) by Striking out "$6,600" both times it appears in such sub-
section and inserting in lieu thereof "an amount equal to the cur-
rent maximum annual taxable 'wages' as defined in section 3121 of 
the Internal Revenue Code of 1954'*: and 
68A Stat. 417. 
26 u s e 3121. 
79 STAT. ] 
PUBLIC LAW 89-212-SEPT. 29, 1965 
861 
(4) by striking out "$450" where it appears the second time and 
inserting in lieu thereof "(i) $450, or (ii) an amount equal to 
one-twelfth of the current maximum annual taxable 'wages' as 
defined in section 3121 of the Internal Revenue Code of 1954, 
whichever is greater,", 
(e) Subsection (1) (10) of section 5 of such Act is amended by strik- JJ^^^J^^^JQ"^' 
ing out "$450" and inserting in lieu thereof "(i) $450, or (ii) an 
45usc'228e, 
amount equal to one-twelfth of the current maximum annual taxable 
'wages' as defined in section 3121 of the Internal Revenue Code of 
1954, whichever is greater". 
INCREASE 
IN 
BASE 
FOR 
TAX 
PURPOSES 
SEC. 4. Sections 3201, 3202, 3211, and 3221 of the Internal Revenue 
Code of 1954 (relating to taxes under the Railroad Retirement Tax 
^e us^c 3
^
2
^
o
^
i 
Act) are each amended by inserting after the phrase "or $450 for any 3202, 3211, 3221. 
calendar month after the month in which this provision was so 
amended", wherever such phrase appears in such sections, the follow-
ing: "and before the calendar month next following the calendar 
month in which this provision was amended in 1965, or (i) $450, or 
(ii) an amount equal to one-twelfth of the current maximum annual 
taxable 'wages' as defined in section 3121 of the Internal Revenue Code 
of 1954, whichever is greater, for any month after the month in which 
this provision was so amended". 
CHANGES I N TAX RATES 
SEC. 5. (a) Section 3201 of the Internal Revenue Code of 1954 73 stat. 23. 
(relating to rate of tax on employees under the Railroad Retirement 
Tax Act) is amended by striking out paragraphs (1) and (2) and 
inserting in lieu thereof the following: 
" (1) 61/4 percent of so much of the compensation paid to such 
employee for services rendered by him after September 30, 1965, 
" (2) QV2 percent of so much of the compensation paid to such 
employee for services rendered by him after December 31, 1965, 
"(3) 6% percent of so much 01 the compensation paid to such 
employee for services rendered by him after December 31, 1966, 
"(4) 7 percent of so much of the compensation paid to such 
employee tor services rendered by him after December 31, 1967, 
and 
"(5) 714 percent of so much of the compensation paid to such 
emplovee for services rendered by him after December 31,1968,". 
(b) Section 3211 of such Code (relating to rate of tax on employee 
representatives under the Railroad Retirement Tax Act) is amended 
by striking out paragraphs (1) and (2) and inserting in lieu thereof 
tlie following: 
"(1) 121/2 percent of so much of the compensation paid to such 
emplovee representative for services rendered by him after Sep-
tember 30, 1965, 
"(2) 13 percent of so much of the compensation paid to such 
employee representative for services rendered by him after Decem-
ber 31, 1965, 
"(3) 131/^ percent of so much of the compensation paid to such 
employee representative for services rendered by him after Decem-
ber 31,1966, 
"(4) 14 percent of so much of the compensation paid to such 
employee representative for services rendered by him after Decem-
ber 31,1967, and 
26 u s e 3221. 
862 
PUBLIC L
A
W 89-212-SEPT. 29, 1965 
[79 STAT. 
"(5) 141/^ percent of so much of the compensation paid to such 
employee representative for services rendered by him after Decem-
ber 31, 1968,". 
73 stau 2
9
^ 
(c) Section 3221(a) of such Code (relating to rate of tax on 
"' """ 
employers under the Railroad Retirement Tax Act) is amended by 
striking out paragraphs (1) and (2) and inserting in lieu thereof the 
following: 
"(1) 6% percent of so much of the compensation paid by such 
employer for services rendered to him after September 30, 1965, 
(2) 614 percent of so much of the compensation paid by such 
employer for services rendered to him after December 31, 1965, 
"(3) 6% percent of so much of the compensation paid by such 
employer for services rendered to him after December 31, 1966, 
"(4) 7 percent of so much of the compensation paid by such 
employer for services rendered to him after December 31, 1967, 
and 
"(5) 7 ^ percent of so much of the compensation paid by such 
employer for services rendered to him after December 31, 1968,". 
EFFECTIVE DATES 
SEC. 6. The amendments made by sections 1 and 3 of this Act shall 
take effect with respect to annuities accruing and deaths occurring in 
months after the month in which this Act is enacted, and shall apply 
also to annuities paid in lump sums equal to their commuted value 
because of a reduction in such annuities under section 2(e) of the 
65 stau 683^ 
Railroad Retirement Act of 1937, as in effect before the amendments 
made by this Act, as if such annuities had not been paid in such lump 
sums: Provided^ however^ That the amounts of such annuities which 
were paid in lump sums equal to their commuted value shall not be 
included in the amount of annuities which become payable by reason 
of section 1 of this Act. The amendments made by section 2 of this 
Act shall apply only with respect to tips received after 1965. The 
amendments made by section 4 of this Act shall apply only with 
respect to calendar months after the month in which this Act is 
enacted. The amendments made by section 5 of this Act shall apply 
only with respect to compensation paid for services rendered after 
September 30,1965. 
Approved September 29, 1965. 
45 u s e 228b.