A bill to make certain miscellaneous changes in the tax laws.
PL 96-613 (H.R.7171), enacted 12/28/1980

PUBLIC LAW 96-613—DEC. 28, 1980 
94 STAT. 3579 
Public Law 96-613 
96th Congress 
An Act 
To make certain miscellaneous changes in the tax laws. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SECTION 1. ANNUITY CONTRACTS PURCHASED BY THE UNIFORMED 
SERVICES UNIVERSITY OF THE HEALTH SCIENCES. 
(a) IN GENERAL.—An annuity contract purchased by the Uniformed 
Services University of the Health Sciences for any employee who is a 
member of the civilian faculty or staff of such university shall, for 
purposes of section 4030t)) of the Internal Revenue Code of 1954, be 
treated as an annuity contract purchased for an employee by an 
employer described in section 501(c)(3) of such Code which is exempt 
from tax under section 501(a) of such Code. 
(b) EFFECTIVE DATE.—Subsection (a) shall apply to service after 
December 31,1979, in taxable years ending after such date. 
SEC. 2. RETIREMENT-REPLACEMENT-BETTERMENT METHOD OF DEPRE-
CIATION. 
(a) IN GENERAL.—Section 167 of the Internal Revenue Code of 1954 
(relating to allowance for depreciation) is amended by redesignating 
subsection (r) as subsection (s) and by inserting after subsection (q) 
the following new subsection: 
"(r) RETIREMENT-REPLACEMENT-BETTERMENT METHOD.—In the case 
of railroad track used by a common carrier by railroad (including a 
railroad switching company or a terminal company), the term 'rea-
sonable allowance' as used in subsection (a) includes an allowance for 
such tract computed under the retirement-replacement-betterment 
method.". 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply with respect to taxable years ending after December 31, 
1953. 
SEC. 
3
. 
TREATMENT 
OF 
CERTAIN 
RAILROAD 
STOCK 
FOR 
PURPOSES 
OF 
CONSOLIDATED 
RETURN 
REGULATIONS. 
Dec. 28, 1980 
[H.R. 7171] 
Tax laws, 
miscellaneous 
changes. 
26 use 403. 
26 use 501. 
26 use 167. 
26 use 167 note. 
(a) IN GENERAL.—For purposes of the consolidated return regula-
tions prescribed under section 1502 of the Internal Revenue Code of 
1954, if the determination of whether or not there has been a deemed 26 use 1502. 
disposition of stock in a transferor railroad (as defined in section 
374(c)(5)(B) of such Code) depends on a determination of final value by 26 use 374. 
the special court under the Regional Rail Reorganization Act of 1973, 
45 use 701 note. 
that deemed disposition shall not be treated as occurring before the 
earlier of— 
(1) the date on which such determination becomes final, or 
(2) the first date on which there is an actual disposition of the 
stock or a deemed disposition not described above. 
(b) EFFECTIVE DATE.—Subsection (a) shall apply to taxable years 
ending after March 31,1976. 
94 STAT. 3580 
PUBLIC LAW 96-613—DEC. 28, 1980 
26 u s e 374 note. 
SEC. 4. RESTORATION OF CERTAIN NET OPERATING LOSS CARRYOVERS 
TO RAILROADS IN CONRAIL PROCEEDINGS WHERE OTHER MEM 
BERS OF CONSOLIDATED GROUP HAD INCOME BECAUSE OF 
STOCK DISPOSITION. 
(a) IN GENERAL.—For purposes of subsection (e) of section 374 of the 
26 use 374. 
Internal Revenue Code of 1954 (relating to use of expired net 
operating loss carryovers to offset income arising from certain 
railroad reorganization proceedings), i
f
— 
(1) subparagraphs (A) and (B) of paragraph (1) of such subsec-
tion are satisfied with respect to a corporation, 
(2) such corporation had a net operating loss for a taxable year 
which would have satisfied the requirements of clause (i) of 
subparagraph (C) of such paragraph (1) but for the fact that such 
net operating loss was used to reduce the income of an affiliated 
group of corporations which filed a consolidated return, and 
(3) any portion of the amount so used was included in an excess 
loss account which was required to be restored to the income of a 
member or members of the affiliated group (or would be required 
to be so restored but for an election under Regulation 
?^1SS.^Q 
§1.1502-19(a)(6)), 
i.i&uz ly. 
then an amount equal to the restoration amount shall be treated as 
meeting the requirements of subparagraph (C) of such paragraph (1). 
(b) RESTORATION AMOUNT DEFINED.— 
(1) IN GENERAL.—For purposes of subsection (a), the term 
"restoration amount" means, with respect to the net operating 
loss for any taxable year, an amount equal to the sum o
f
— 
(A) so much of the portion referred to in subsection (a)(3) as 
was required to be treated as ordinary income, and 
(B) an amount equal to so much of such portion as was 
required to be treated as long-term capital gain, multiplied 
by the capital gain conversion fraction. 
(2) CAPITAL GAIN CONVERSION FRACTION.—For purposes of para-
graph (1), the capital gain conversion fraction is a fraction— 
(A) the numerator of which is the rate of tax set forth in 
26 use 1201. 
section 1201(a)(2) of such Code for the taxable year the 
portion was required to be included in income, and 
(B) the denominator of which is the highest rate of tax set 
26 use 11. 
forth in section 110)) of such Code for such taxable year. 
(3) FIFO RULE FOR ADDITIONS TO EXCESS LOSS ACCOUNT.—For 
purposes of this subsection, the amount in any excess loss 
account at the time of restoration (and the ordinary income 
portion of the restoration) shall be treated as attributable to net 
operating losses in the order of the years in which the respective 
net operating losses arose. 
(4) CAPITAL GAIN TREATMENT.—For purposes of paragraph (1), 
any 
amount 
to which 
an election 
under 
Regulation 
26eFR 
§ 1.1502-19(a)(6) applies shall be treated as long-term capital 
1.1502-19. 
gain. 
(c) EFFECTIVE DATE.—This section shall apply to restorations occur-
ring after March 31,1976. 
SEC. 5. PREVENTION OF ABUSE OF CERTAIN PENSION PLAN PROVISIONS 
THROUGH THE USE OF SEPARATE CORPORATIONS OR OTHER 
ORGANIZATIONS. 
26 use 414. 
(a) IN GENERAL.—Section 414 (relating to definitions and special 
rules relating to pension plan, etc.) is amended by adding at the end 
thereof the following new subsection: 
"(m) EMPLOYEES OF AN AFFIUATED SERVICE GROUP.— 
PUBLIC LAW 96-613—DEC. 28, 1980 
94 STAT. 3581 
"(1) IN GENERAL.—For purposes of the employee benefit 
requirements listed in paragraph (4), except to the extent other-
wise provided in regulations, all employees of the members of an 
affiliated service group shall be treated as employed by a single 
employer. 
"(2) AFFILIATED SERVICE GROUP.—For purposes of this subsec-
tion, the term 'affiliated service group' means a group consisting 
of a service organization (hereinafter in this paragraph referred 
to as the 'first organization') and one or more of the following: 
"(A) any service organization which— 
"(i) is a shareholder or partner in the first organiza-
tion, and 
"(ii) regularly performs services for the first organiza-
tion or is regularly associated with the first organization 
in performing services for third persons, and 
"(B) any other organization i
f
— 
"(i) a significant portion of the business of such organi-
zation is the performance of services (for the first 
organization, for organizations described in subpara-
graph (A), or for both) of a type historically performed in 
such service field by employees, and 
"(ii) 10 percent or more of the interests in such 
organization is held by persons who are officers, highly 
compensated employees, or owners of the first organiza-
tion or an organization described in subparagraph (A). 
"(3) SERVICE ORGANIZATIONS.—For purposes of this subsection, 
the term 'service organization' means an organization the princi-
pal business of which is the performance of services. 
"(4) EMPLOYEE BENEFIT REQUIREMENTS.—For purposes of this 
subsection, the employee benefit requirements listed in this 
paragraph are— 
"(A) paragraphs (3), (4), (7), and (16) of section 401(a), 26 USC 401. 
"(B) sections 408(k), 410,411, and 415, 
26 USC 408, 410, 
"(C) section 105(h), and 
il\iii^\ n
^ 
(D) section 125. 
26 USC 125. 
"(5) OTHER DEFINITIONS.—For purposes of this subsection— 
"(A) ORGANIZATION DEFINED.—The term 'organization' 
means a corporation, partnership, or other organization. 
"(B) OWNERSHIP.—In determining ownership, the princi-
ples of section 267(c) shall apply. 
26 USC 267. 
"(6) PREVENTION OF AVOIDANCE.—The Secretary shall prescribe Regulations. 
such regulations as may be necessary to prevent the avoidance 
with respect to service organizations, through the use of separate 
organizations, of any employee benefit requirement listed in 
paragraph (4)." 
(b) TECHNICAL AMENDMENTS.— 
(1) Paragraph (8) of section 105(h) (relating to amount paid to 26 USC 105. 
highly compensated individuals under a discriminatory self-
insured medical expense reimbursement plan) is amended— 
(A) by striking out "subsection (b) or (c) of section 414" and 
inserting in lieu thereof "subsection (b), (c), or (m) of section 
414", and 
(B) by striking out "CONTROLLED GROUPS" in the paragraph 
heading and inserting in lieu thereof "CONTROLLED GROUPS, 
ETC.". 
(2) Paragraph (4) of section 125(g) (relating to special rules for 
26 USC 125. 
cafeteria plans) is amended— 
94 STAT. 3582 
PUBLIC LAW 96-613—DEC. 28, 1980 
(A) by striking out "subsection (b) or (c) of section 414" and 
inserting in lieu thereof "subsection (b), (c), or (m) of section 
414", and 
(B) by striking out "CONTROLLED GROUPS" in the paragraph 
heading and inserting in lieu thereof "CONTROLLED GROUPS, 
ETC.". 
26 u s e 414 note. 
(g) EFFECTIVE D A T E S . — 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to plan years 
ending after November 30,1980. 
(2) PLANS IN EXISTENCE ON NOVEMBER 30,1980.—In the case of a 
plan in existence on November 30, 1980, the amendments made 
by this section shall apply to plan years beginning after Novem-
ber 30,1980. 
Approved December 28, 1980. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 96-1050 (Comm. on Ways and Means). 
SENATE REPORT No. 96-1032 (Comm. on Finance). 
CONGRESSIONAL RECORD, Vol. 126 (1980): 
June 17, considered and passed House. 
Dec. 13, considered and passed Senate, amended; House agreed to certain 
Senate amendments, to others with amendments, and disagreed to Senate 
amendment No. 9; Senate receded from its amendment No. 9 and agreed to 
House amendments.