1. H.R. 318-Imposition of tire tax on tires delivered to manufacturers' 2. H.R. 327-Organizations providing funds for tax-exempt savings 3. H.R. 6319-Tax treatment of expropriation loss recoveries- 5. H.R. 7502 Casualty losses attributable to major disasters. 6. H.R. 7723-Suspension of duty on certain tropical hardwood.. 7. H.R. 8210-European Space Research Organization. 8. H.R. 8436-Watch movements from insular possessions_ 9. H.R. 8445-Retired pay of judges of the Tax Court. 10. H.R. 10625-Treatment of certain amounts paid to servicemen and 11. H.R. 11029-Certain woven fabrics.. 12. H.R. 11216-Articles assembled abroad. 13. H.R. 136 and H.R. 3438, bills to amend the bankruptcy procedures. - TH MANUFACTURERS' RETAIL (Passed the House on Octol The bill provides that the manufacture The House report on H.R. 318 estima (Passed the House on C Present law exempts from tax mutu capital stock organized before Se serve funds for, and insurance of alding and loan associations, coope nks (sec. 501(c)(14) of the code). This bill extends tax-exempt statu escribed above except that they do posits, provided at least 85 percen oviding reserve funds and other The bill also provides that the in empt and those that would be ed to the provision of reser related business income. The provisions described above revenue, would be effective f ale of enactment. 1. H.R. 318-IMPOSITION OF TIRE TAX ON TIRES (Passed the House on October 7, 1965) DELIVERED ΤΟ Under present law (sec. 4071(a)), taxes are imposed on tires and inner tubes (10 cents a pound on highway-type tires, 5 cents a pound on other tires, and 10 cents a pound on inner tubes) at the time they are sold by the manufacturer, producer, or importer. In the case of tire and inner tube manufacturers or importers who maintain their own retail outlets, no tax is imposed until a sale is made to the consumer. When the manufacturer or importer sells to an independent tire dealer, however, the tax is paid at the time the dealer acquires the tires or tubes. The bill provides that the manufacturers' excise tax on tires and inner tubes is to be imposed at the time of delivery to retail stores owned by manufacturers or importers, rather than at the time these tires or tubes are sold to customers. The change is to be effective as of the first day of the first calendar quarter beginning more than 20 days after the date of enactment. The bill also imposes a floor stocks tax on inventory on hand in manufacturer-owned or importer-owned retail stores on the date the new provision becomes effective. The House report on H.R. 318 estimates that the bill will result in a nonrecurring revenue gain of $2 million because of the speedup in the payment of the tax. Industry representatives, however, estimate that the floor stocks tax will total $12.4 million. 2. H.R. 327-ORGANIZATIONS PROVIDING FUNDS FOR TAX-EXEMPT SAVINGS INSTITUTIONS (Passed the House on October 21, 1965) Present law exempts from tax mutual, nonprofit organizations without capital stock organized before September 1, 1957, which provide reserve funds for, and insurance of shares or deposits in, domestic building and loan associations, cooperative banks, and mutual savings banks (sec. 501(c)(14) of the code). This bill extends tax-exempt status to organizations similar to those described above except that they do not provide insurance of shares or deposits, provided at least 85 percent of their income is attributable to providing reserve funds and other investments. The bill also provides that the income of both the organizations now exempt and those that would be exempt under this bill which is not related to the provision of reserves or insurance will be taxed as unrelated business income. The provisions described above, which will have a negligible impact on revenue, would be effective for taxable years beginning after the date of enactment. 3. H.R. 6319-TAX TREATMENT OF EXPROPRIATION LOSS RECOVERIES (Passed the House on October 21, 1965) Present law (sec. 111 of the code) provides for the exclusion from income of recoveries of bad debts, prior taxes, and delinquency amounts, to the extent that these amounts did not reduce taxes in the year in which the expense or loss was incurred. Court decisions and Treasury regulations have expanded the categories of recoveries that may be excluded under this "tax benefit" rule. In applying this rule, the courts generally require that the amount which resulted in a tax benefit be includible in full in income. The amount of additional tax resulting from the recovery depends upon the rates of tax to which the recovery income is subject. The amount thus may be significantly larger than the amount of tax that had been saved when the item was deducted. The bill provides a special rule in the case of recoveries of foreign expropriation losses. It provides that to the extent the amount recovered does not exceed the deductions which were allowable because of the expropriation, the amount recovered is to be excluded from income, but the tax for the year of recovery is increased by an amount equal to the increased taxes (computed at the current year's rates) which would have been payable if the deductions had not been allowed for the recovered loss. This changes present law in two major respects: (1) where the tax benefit was reduced because of the availability of tax credits, or because the deduction of the loss reduced income which was subject to rates other than the regular corporate tax rates (such as long-term capital gains and income of Western Hemisphere corporations), then similar limitations are to apply to the additional tax produced by the income arising from the recovery; (2) where certain conditions exist as to the recovery (e.g. the bulk of the recovery is in property other than cash) up to 10 years is to be allowed, with interest at 4 percent, for the payment of the tax on the recovered amount. Another provision of the bill would treat released reserves of life insurance companies as recoveries of foreign expropriation losses under certain circumstances. The bill also provides that in all cases where a domestic corporation has a security which became worthless, by reason of an expropriation of assets of the corporation issuing the security, and there is a restoration in whole or in part of the value of the security because of the recovery of part or all of the assets expropriated, then this increase in value is to be taken into the income of the domestic corporation. The character of the income will depend upon the character of the loss previously incurred. This provision, except for the amendment referred to in the prior paragraph, applies to recoveries in years beginning on or after January 1, 1965, of foreign expropriation losses sustained after 1958. The amendment referred to in the prior paragraph applies to taxable years beginning on or after January 1, 1965. This bill is the same as an amendment made by this committee to H.R. 7502, also pending before the committee, similar to a provision in H.R. 8050, a bill passed by the Senate in 1964 that was not enacted because it was not sent to conference and similar to S. 1291 referred to this committee. 4. H,R. 6568-COCONUT OIL (Passed the House on October 18, 1965) This bill would make permanent the duty-free treatment or lower rates of duty temporarily applicable to copra, palm nuts, and palmnut kernels; their oils; and specified fatty acids, salts, and other chemical products derived from the oils. The temporary duty-free treatment or lower rates applicable to these products (presently scheduled to expire June 30, 1966), reflect the suspension of the processing taxes formerly applicable to such commodities under section 4511 of the Internal Revenue Code. H.R. 6568 would also enlarge the duty-free quotas for Philippine coconut oil for the year 1965 (retroactively) and for the years 1966 and 1967 if the President determines that for these latter 2 years the Philippines has waived its rights with respect to the preferential treatment applied to Philippine copra under the Philippine trade agreement. the Philippines does waive its rights, then the bill would permit copra from all non-Communist countries to enter the United States free of duty during 1966 and 1967. 1 The portion of the tariff reflecting the processing tax has been suspended on a temporary basis since 1957. The original suspension was for a 3-year period (through June 30, 1960). Subsequently, Congress extended this temporary suspension, first through June 30, 1963, and then through June 30, 1966. Because of the interplay of tariff reductions under reciprocal trade agreements, the Philippine Trade Agreements Acts, and the conversion of the processing tax into an import duty and its temporary suspension, the present tariff structure on copra, palm nuts, and palm nut kernels (and their oils) is quite intricate. The Philippine Trade Agreement provides duty-free entry for a progressively diminishing quantity of Philippine coconut oil. In 1963 and 1964 the duty-free quota amounted to 160,000 tons. Under present law for 1965 through 1967, the dutyfree quota is 120,000 tons. There would be no duty-free quota after 1973. This agreement also obligates the United States to maintain a 2 cents per pound preference on copra and coconut oil imported from the Philippines (3 cents if the oil is within the quota) unless the President proclaims that supplies in that country are inadequate to satisfy U.S. demands. In that event the 2-cent preference is suspended. The President has never issued such a proclamation. The tariff structure (a) Coconut oil.-The permanent m-f-n duty applicable to nonPhilippine coconut oil is 6 cents per pound. This duty was derived from a historical 1-cent-per-pound duty and a 5-cent processing tax. Of this 6-cent duty, 3 cents is temporarily suspended. The permanent duty for Philippine coconut oil is 3 cents per pound, if within quota, and 4 cents per pound for over-quota oil. Of each of these rates, also, 3 cents is temporarily suspended. Thus, Philippine coconut oil is currently free of duty if within quota, and subject to a 1-cent duty if over quota, whereas all coconut oil produced in other non-Communist countries is currently dutiable at 3 cents per pound. The current duty-free quota for Philippine oil is 120,000 tons. 1 The 3 cents per pound processing tax was converted into a duty in 1963 but its suspension continued. |