Revenue Act

Revenue Act - Title I: Short Title, Etc. - Sets forth the short title of this Act and the table of contents, and provides that amendments made by this Act shall apply to taxable years beginning after December 31, 1978.

Title II: Tax Treatment of Individuals - Amends the Internal Revenue Code to reduce income taxes for individuals and estates and trusts in 1978. Reduces marginal tax rates for such individuals and estates and trusts to a range of 12 to 68 percent in 1979 and succeeding years.

Eliminates deductions for personal exemptions. Establishes a $240 personal tax credit for a taxpayer, spouse and dependents, and additional credits if the taxpayer or spouse is blind or has attained age 65. Revises requirements for the withholding of income tax to reflect the substitution of the personal tax credit for personal exemptions. Increases the miniumum income levels of individuals who are required to file tax returns.

Defines the concept of a uniform tax base and establishes the order of credits deductible from such tax base.

Permits a deduction for combined medical expenses and casualty losses to the extent that they exceed ten percent of a taxpayer's adjusted gross income.

Disallows deductions for State and local personal property taxes, sales taxes, and gasoline taxes.

Eliminates deductions for contributions to candidates for public office and to political newsletter funds.

Repeals preferential tax treatment of the capital gains of noncorporate taxpayers.

Requires real estate depreciation deductions on buildings or replacement building components acquired after 1979 to be computed according to the straight line method. Permits the use of alternate methods of computing depreciation for (1) low income new housing (2) multi-family residential rental property acquired before 1983; (3) low-income housing, the original use of which does not commence with the taxpayer and which is acquired before 1983; and (4) rehabilitated historic structures. Disallows deducteds in excess of $10,000 from preference income of individuals for purposes of determining minimum tax liability.

Exempts capital gain on the sale of a personal residence from the minimum tax.

Extends to closely held corporations and personal holding companies the rule which limits deductions for business losses to amounts which such enterprises actually had at risk. Extends the range of activities subject to the "at risk" rule to all activities engaged in for the production of income, except those relating to real estate.

Treats an unincorporated organization (other than an estate or trust) as a corporation if it has more than 15 limited liability members. Specifies those members of an unincorporated organization that count, and do not count, as limited liability members. Exempts organizations formed before 1979 and certain housing organizations from such treatment.

Authorizes the Internal Revenue Service to carry out tax audits of partnerships and establishes procedures for notifying a partnership of the commencement of administrative proceedings for the review of partnership returns and tax liability. Requires the Secretary of the Treasury to make a final administrative determination within three years of the filing of the tax return, or within six years if the return contains a false statement or substantial omission. Permits an authorized representative of a partnership to request an administrative adjustment of partnership tax liability. Sets forth rules for judicial review of final administrative determinations in the tax court and the United States district courts or Court of Claims and rules governing a request for an administrative adjustment of partnership tax liability. Prescribes fines for the failure of the partnership to file a timely tax return.

Requires the owner of a nonqualified deferred annuity to include in his gross income the yearly earnings of such annuity in the year they are earned. Allows an exemption from this requirement for a single nonqualified deferred annuity contract which is designated by the taxpayer and which does not permit yearly premium payments in excess of $1,000.

Requires qualified retirement plans which are integrated with social security coverage to include workers whose wages fall below the social security wage base. Specifies that one percent in contributions or benefits will be required under a qualified plan on compensation below the social security wage base for every 1.8 percent in such contributions or benefits provided under a plan for compensation above the wage base.

Prohibits tax exclusions for the first $50,000 of employer paid group life insurance premiums or for benefits received under health, accident, and disability plans established by an employer for officers, shareholders, or highly compensated employee of a corporation unless such benefits are received under a qualified employee welfare plan, a qualified retirement plan, or a plan established pursuant to a valid collective bargaining agreement.

Eliminates the $5,000 tax exclusion for death benefits paid to the estate or beneficiary of a deceased employee by an employer.

Requires the inclusion of unemployment compensation received by taxpayers whose income exceeds $20,000 ($25,000 for married taxpayers filing jointly). Specifies that 50 cents of such compensation will be included in gross income for each dollar which the taxpayer earns in excess of $20,000 (25,000 if married and filing jointly).

Disallows deductions for entertainment, amusement, or recreation expenses directly related to, or associated with, the active conduct of a taxpayer's trade or business. Permits partial deductions for business meals and facilities for providing such meals. Permits deductions for meals furnished by an employer to an employee.

Disallows deductions for first class air fare as a traveling expense to the extent that such fare exceeds coach fare for the same flight. Permits deductions for business-related expenses in attending a foreign convention if the Secretary determines that it is reasonable to hold the convention outside the United States.

Title III: Tax Exempt Financing - Grants to State and local govenments an election to issue either bonds which yield tax-exempt interest to the holder or taxable bonds eligible for a subsidy from the Treasury for a fixed percentage of their interest costs. Authorizes a subsidy of 35 percent of the interest costs on bonds issued in 1979 and 1980 and 40 percent on bonds issued after 1980.

Eliminates the tax exemption for interest on industrial development bonds issued for pollution control facilities and industrial parks. Permits the issuance of tax-exempt industrial development bonds in an amount of $1,000,000 or less which are used for facilities constructed in an economically distressed area (as defined by the National Development Bank Act of 1978). Prohibits tax exemptions for interest on bonds issued by State and local governments to finance hospital construction for private nonprofit institutions, unless the State certifies that a new hospital is needed.

Title IV: Tax Treatment of Business - Reduces the corporate tax rate on taxable income of $25,000 or less to 18 percent and to 20 percent on income in excess of $25,000. Reduces the surtax to 24 percent of taxable income in excess of $50,000, effective in 1980.

Makes permanent the ten percent investment tax credit. Extends the investment tax credit to the construction of new industrial buildings and to investments made to rehabilitate existing industrial buildings, if such construction or investment occurred after December 31, 1977. Limits the investment tax credit to a maximum 90 percent offset against tax liability for any taxable year. Permits carryover and carryback of work incentive program expenses for purposes of computing the work incentive program tax credit. Extends the full ten percent investment tax credit to pollution control facilities amortizable over a five year period.

Increases from 10 to 15 the number of shareholders a small business may have without loosing Subchapter S corporate status. Sets forth rules for qualifying certain individuals and trusts as Subchapter S sharholders, for making an election to qualify as a Subchapter S Corporation, and for terminating or revoking such election.

Sets forth rules for computing depreciation expenses of small businesses. Requires the Secretary to prescribe a table of useful lives for depreciable business property which will permit small businesses to deduct larger depreciation expenses earlier in the useful life of the property.

Increases the amount of loss on small business stock that may be treated as ordinary, rather than capital, loss.

Repeals provisions which confer preferential tax treatment on domestic international sales corporations (DISC). Increases, during the years 1978 to 1981, the percentage of DISC dividends taxable to its shareholders until 100 percent of such dividends are taxable. Sets forth rules for the taxation of accumulated DISC income to shareholders and for the allocation of gains and losses incurred by shareholders of a terminated DISC.

Eliminates, over a three year period, provisions which allow a U.S. controlled foreign corporation to defer payment of taxes on earnings. Treats the gross income, deductions, and taxes which are eligible for the foreign tax credit as earned or incurred directly by the U. S. shareholder. Provides that the earnings of the controlled foreign corporation will be taxed currently whether or not such earnings are paid to U. S. shareholders as dividends.

Eliminates the percentage method for determining additions to bad debt reserves of commercial banks. Requires bonks to base future additions to bad debt reserves on their actual experience in the current and succeeding five years.

Requires mutual savings banks and savings and loan associations to reduce bad debt deduction percentages over a five year period.

Eliminates the tax exempt status of credit unions.

Requires farm corporations to use the accrual method of accounting unless such corporations elect Subchapter S corporate status or have less than $1,000,000 of gross receipts in taxable years beginning in 1976.

Title V: Excise Taxes - Repeals the excise tax on communications services as of October 1, 1978.

Imposes an unemployment tax on employers equal to 3.2 percent of the total wages paid by such employers after December 31, 1978.