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United States · Bill · HR

H.R. 1215 (104th)

Tax Fairness and Deficit Reduction Act of 1995

openUnited States· United States Congress· EN

Introduced

13 March 1995

Last action

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Status

For Further Action See H.R.2491.

Sponsors

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Subjects

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Source updated

7 April 2025

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Summary

TABLE OF CONTENTS: Title I: American Dream Restoration Title II: Senior Citizens' Equity Subtitle A: Repeal of Increase in Tax on Social Security Benefits Subtitle B: Treatment of Long-term Care Insurance and Services Subtitle C: Treatment of Accelerated Death Benefits Subtitle D: Inclusion in Gross Income of Excess Long-term Care Benefits Title III: Job Creation and Wage Enhancement Subtitle A: Capital Gains Reform Subtitle B: Cost Recovery Provisions Subtitle C: Alternative Minimum Tax Relief Subtitle D: Public Debt Reduction Checkoff and Trust Fund Subtitle E: Small Business Incentives Title IV: Family Reinforcement Title V: Social Security Earnings Test Title VI: Technical Corrections Contract With America Tax Relief Act of 1995 - Title I: American Dream Restoration - Amends the Internal Revenue Code to allow individuals a tax credit of $500 multiplied by the number of qualifying children who have not attained age 18. Places limitations on such credit for taxpayer adjusted gross incomes over $200,000. Provides an inflation adjustment for such credit and the taxpayer adjusted gross income amount. (Sec. 102) Allows a marriage penalty reduction credit for qualified married couples to be determined under tables prescribed by the Secretary of the Treasury. (Sec. 103) Establishes individual retirement plans (IRAs) which can be designated as American Dream Savings Accounts. Disallows a tax deduction for amounts contributed to such accounts. Limits contributions to such accounts to the lesser of $2,000, or compensation includible in an individual's gross income for a taxable year ($4,000 in the case of certain married individuals). Provides an inflation adjustment on such amounts. Permits contributions to be made after age 70 and one-half. Excludes distributions from such accounts from gross income and makes the penalty on early distributions inapplicable. Designates qualified distributions as those: (1) made after the individual attains age 59.5; (2) made to a beneficiary on or after the death of the individual; (3) attributable to the individual being disabled; and (4) qualified as special purpose distributions. Prohibits qualified distributions from being made within the five-year period since the account began. Describes special purpose distributions as those for: (1) qualified first-time homebuyers; (2) qualified higher education expenses; and (3) qualified medical expenses, including long-term care insurance. Terminates the authority to make nondeductible contributions to IRAs. (Sec. 104) Provides for computing a spousal IRA on the basis of compensation of both spouses. Title II: Senior Citizens' Equity - Subtitle A: Repeal of Increase in Tax on Social Security Benefits - Amends the Internal Revenue Code to decrease the tax on social security benefits from 1996 through 1999. Terminates such tax after December 31, 1999. Subtitle B: Treatment of Long-Term Care Insurance and Services - Provides for the treatment of qualified long-term care insurance as accident and health insurance for purposes of insurance company taxation. Prohibits long-term care insurance under cafeteria plans. Includes in the gross income of an employee employer-provided coverage for qualified long-term care services provided through flexible spending arrangements. Provides that the continuation coverage excise tax does not apply to a group health plan solely by reason of failing to provide long-term care insurance. Declares that payments to relatives (unlicensed with respect to long-term medical care services) shall be treated as not paid for medical care. (Sec. 212) Includes amounts paid for qualified long-term care services as medical expenses for individual itemized deductions. (Sec. 213) Provides for the nonrecognition of gain or loss on the exchange of any life insurance contract or an endowment or annuity contract for a long-term care insurance contract. (Sec. 214) Excludes from gross income certain amounts withdrawn from individual retirement accounts and certain employer cash or deferred arrangements to pay long-term care premiums. Subtitle C: Treatment of Accelerated Death Benefits - Provides for the exclusion as a death benefit of any amount paid or advanced to an individual under a life insurance contract because such individual is terminally ill or chronically ill and confined to a qualified facility. (Sec. 222) Allows insurance companies to issue accelerated death benefit riders on life insurance contracts. Subtitle D: Inclusion in Gross Income of Excess Long-term Care Benefits - Includes in gross income excess long-term care benefits, except for terminally ill individuals. (Sec. 232) Establishes reporting requirements for persons who pay long-term care benefits. Title III: Job Creation and Wage Enhancement - Subtitle A: Capital Gains Reform - Amends the Internal Revenue Code to allow a 50 percent income tax deduction for the net capital gain of noncorporate taxpayers. Allows such deduction in computing gross income. (Sec. 302) Requires indexing, based on the gross national product deflator, of the adjusted basis of certain assets (corporate stock and tangible property that is a capital asset or property used in a trade or business) that have been held for more than three years at the time of sale or other transfer, solely for the purpose of determining gain or loss. Allows a taxpayer, other than a corporation that holds any readily tradable stock on January 1, 1995, to treat such stock as having been sold on the last business day before such date for an amount equal to its closing market price on such last business day (and as having been reacquired on such last business day for an amount equal to such closing market price). (Sec. 311) Reduces the alternative capital gains tax on corporations from 35 percent to 25 percent. (Sec. 316) Allows an itemized deduction for losses arising from the sale or exchange of a principal residence. Subtitle B: Cost Recovery Provisions - Allows the depreciation deduction to be computed based on a neutral recovery basis for property placed in service after December 31, 1994. (Sec. 322) Provides for the treatment of lessor improvements which are abandoned at the termination of a lease. Subtitle C: Alternative Minimum Tax Relief - Phases out the alternative minimum tax for corporations to zero after December 31, 2000. Provides for earlier termination of certain tax adjustments. Subtitle D: Public Debt Reduction Checkoff and Trust Fund - Establishes a Public Debt Reduction Trust Fund for the deposit of designated amounts. Makes amounts in such Trust Fund available only to pay at maturity, or to redeem or buy before maturity, any obligation of the Federal Government included in the public debt. Prohibits the reissuance of any obligation which is paid, redeemed, or bought with amounts from the Trust Fund. Subtitle E: Small Business Incentives - Increases the unified credit against the estate tax and the unified credit against the gift tax and provides a cost-of-living adjustment for such credits. Provides an inflation adjustment for the alternate valuation of certain farm property, the gift tax exclusion, the generation-skipping tax exemption, and the estate tax on closely held businesses. (Sec. 352) Increases the dollar limitation on the election to expense certain depreciable business assets. (Sec. 353) Provides qualifications for a home office as a principal place of business for purposes of the deductibility of expenses. (Sec. 354) Treats the storage of product samples as inventory for deduction purposes. Title IV: Family Reinforcement - Allow an income tax credit for up to $5,000 of qualified adoption expenses paid or incurred by the taxpayer during the taxable year. Sets forth a formula for reduction of such credit for taxpayers whose adjusted gross income exceeds $60,000. Denies such a credit for any expense for which a deduction or credit is allowable under another Code provision. Defines "qualified adoption expenses" as reasonable and necessary adoption fees, court costs, attorney fees, and other lawful expenses directly related to legal adoption of a child, but not any expenses paid from any funds received under a Federal, State, or local program. Disqualifies for such a credit any expenses in connection with the adoption of a child of the taxpayer's spouse. (Sec. 402) Allows a tax credit for an individual who maintains a household which includes one or more qualified persons requiring custodial care equal to $500 for each such person. Title V: Social Security Earnings Test - Amends title II (Old Age, Survivors and Disability Act) of the Social Security Act to increase the monthly exempt amount for individuals who have attained retirement age. Title VI: Technical Corrections - Makes technical amendments to the Revenue Reconciliation Act of 1990 and the Revenue Reconciliation Act of 1993. Provides for the application of amendments made by title XII of the Omnibus Budget Reconciliation Act of 1990. Includes among such amendments clarification of U.S. shareholder interests in controlled foreign corporations with respect to dividends, modification of the election to include a child's unearned income on a parent's return, and certain investments in annuity contracts.

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