Revenue Act of 1978

Summary

Revenue Act - Title I: Provisions Primarily Affecting Individual Income Tax - Amends the Internal Revenue Code to reduce income taxes for individuals and estates and trusts for taxable years beginning after December 31, 1978. Increases the zero bracket amount to $3,400 for certain surviving spouses and married individuals filing joint tax returns, to $2,300 for unmarried individuals, and to $1,700 for a married individual filing a separate return. Increases for single individuals, surviving spouses, and married individuals filing joint tax returns the minimum income level at which an income tax return must be filed. Adjusts withholding amounts to reflect such increases. Increases the personal exemption from $750 to $1,000. Makes permanent the earned income credit. Repeals tax deductions for State and local taxes on the sale of gasoline, diesel fuel, and other motor fuels. Revises the tax deduction for medical and dental expenses to permit the taxpayer to deduct all expenses relating to medical care, medical insurance, and prescription drugs which exceed three percent of the taxpayer's adjusted gross income. Repeals special provisions allowing itemized deductions for one-half the cost of medical and hospitalization insurance premiums (up to $150) and for medicine and drug expenses which exceed one percent of adjusted gross income. Defines "prescribed drug" to mean a drug or biological requiring a prescription of a physician for its use by an individual. Repeals the tax deduction for contributions to candidates for public office and to political newsletter funds. Requires the inclusion of certain amounts of unemployment compensation in gross income if gross income otherwise exceeds certain prescribed levels for any taxable year. Provides that compensation paid to a State or local government employee which is deferred under an eligible State deferred compensation plan will be includible in the gross income of the participant or beneficiary of such a plan only in the year in which the compensation is paid to the participant or beneficiary. Permits the deferral of the lesser of $7,500 or one-third of such employee's compensation in any taxable year. Sets forth rules for the tax treatment of State deferred compensation plans which do not meet the requirements for an eligible State deferred compensation plan. Provides that the year in which deferred compensation shall be included in the gross income of a participant in a private deferred compensation plan shall be determined in accordance with judicial decisions and tax regulations in effect on February 1, 1978. Allows tax deductions for deferred payments for services performed by independent contractors on the same basis as such deductions are allowed for employees. Title II: Tax Shelter Provisions - Extends to small business corporations and personal holding companies the rule which limits deductions for business losses to amounts which such enterprises actually have 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. Requires the recapture of "at risk" deductions where the taxpayer withdraws the amount originally placed at risk. Imposes additional civil fines upon partnerships which fail to file timely or accurate partnership returns. Extends the statute of limitations for assessing income tax deficiencies of partnerships required to be registered with the Securities and Exchange Commission to four years after the partnership return is filed. Title III: Provisions Primarily Affecting Business Income Tax - Reduces the maximum corporate income tax rate to 46 percent of taxable income in excess of $100,000. Establishes graduated income tax rates for corporations, ranging over five brackets, from a 17 percent rate on the first $25,000 of corporate income to a maximum 46 percent rate on income over $100,000. Excludes mutual savings banks conducting life insurance business, insurance companies, regulated investment companies, real estate investment trusts, and foreign corporations from the new rates. Makes permanent the ten percent investment tax credit and the $100,000 limitation on used property eligible for the credit. Increases over a four-year period the maximum allowable investment tax credit to $25,000 plus 90 percent of an individual's tax liability which exceeds $25,000. Sets forth alternative limitations on the investment tax credit allowable for taxpayers investing in public utilities, railroads, and airlines. Allows the full investment tax credit for pollution control facilities which are eligible for the 60 month amortization election (presently, only 50 percent of such credit may be offset against tax liability), except to the extent that such facilities are financed by tax-exempt industrial development bonds. Establishes for taxable years beginning in 1979 or 1980 a tax credit equal to 50 percent of the unemployment insurance wages paid by an employer to: (1) individuals who have registered for the work incentive (WIN) program under Title IV (Aid to Families with Dependent Children) of the Social Security Act; (2) mentally or physically disabled individuals referred to the employer under a State plan for vocational rehabilitation; or (3) individuals of ages 18 through 24 who are members of households receiving food stamps. Limits the amount of wages to which the credit is applicable to the first $6,000 of an eligible individual's wages reduced by the amount of such individual's wages paid by the employer in the preceding calendar year. Provides that the amount of unemployment insurance wages eligible for the tax credit cannot exceed 20 percent of the total amount of such wages paid by an employer to all his employees. Increases to $10,000,000 the amount of tax-exempt industrial development bonds which may be authorized as a small issue. Increases from 10 to 15 the number of shareholders a small business may have without losing Subchapter S corporate status. Treats a husband and wife owning stock in a Subchapter S corporation as one stockholder for purposes of determining the number of stockholders in such a corporation. Treats the grantor of a trust owning stock in a Subchapter S corporation as the stockholder. Extends the time period for making a Subchapter S election to the first 75 days after the beginning of the taxable year and allows such an election at any time during the preceding taxable year. Treats any election made after the 75 day period as an election made for the following taxable year. Increases to $1,000,000 the amount of small business corporation stock which a corporation may issue as potentially subject to ordinary loss treatment. Increases to $50,000 ($100,000 for married individuals filing joint tax returns) the amount of loss on small business corporation stock which may be treated as ordinary, rather than capital loss. Repeals the requirement that a corporation issue small business corporation stock pursuant to a plan developed by the corporation. Increases the amount of allowable first year additional depreciation for small business property to 25 percent of the first $20,000 of such property ($40,000 for married individuals filing joint tax returns). Extends eligibility for such depreciation allowance to only those taxpayers whose depreciable property has an aggregate adjusted basis of less than $1,000,000. Exempts from the rule requiring accrual accounting and capitalization of expenses incurred in preproductive periods certain two and three family farm corporations. Exempts farmers, nurserymen, and florists who use an accrual method of accounting and who are not required to capitalize preproductive period expenses from the requirement of taking an inventory of growing crops in computing taxable income. Permits such individuals to change to a cash method of accounting until 1981. Title IV: Capital Gains - Repeals the alternate 25 percent tax rate on the first $50,000 of long term capital gain individual taxpayers. Removes capital gains of individuals and corporations as an item of tax preference for purposes of computing the minimum or maximum tax.

This text is taken from the official record. PoliticalRepo does not editorialize.

Timeline

1. 18 July 1978

   Introduced

   Referred to House Committee on Ways and Means.

   Source: IntroReferral

2. 18 July 1978

   Introduced

   Introduced in House

   Source: IntroReferral

3. 18 July 1978

   Introduced

   Introduced in House

   Source: IntroReferral

4. 4 August 1978

   Reported

   Reported to House from the Committee on Ways and Means with amendment, H. Rept. 95-1445.

   Source: Committee

5. 4 August 1978

   Reported

   Reported to House from the Committee on Ways and Means with amendment, H. Rept. 95-1445.

   Source: Committee

6. 10 August 1978

   Vote

   Measure passed House, amended, roll call #685 (362-49).

   Source: Floor

7. 10 August 1978

   Vote

   Passed/agreed to in House: Measure passed House, amended, roll call #685 (362-49).

   Source: Floor

8. 10 August 1978

   Floor

   Measure called up by special rule in House.

   Source: Floor

9. 14 August 1978

   Introduced

   Referred to Senate Committee on Finance.

   Source: IntroReferral

10. 1 October 1978

    Reported

    Reported to Senate from the Committee on Finance with amendment, S. Rept. 95-1263.

    Source: Committee

11. 1 October 1978

    Reported

    Reported to Senate from the Committee on Finance with amendment, S. Rept. 95-1263.

    Source: Committee

12. 5 October 1978

    Floor

    Call of calendar in Senate.

    Source: Floor

13. 6 October 1978

    Floor

    Measure considered in Senate.

    Source: Floor

14. 7 October 1978

    Floor

    Measure considered in Senate.

    Source: Floor

15. 9 October 1978

    Floor

    Measure considered in Senate.

    Source: Floor

16. 10 October 1978

    ResolvingDifferences

    Conference scheduled in Senate.

    Source: ResolvingDifferences

17. 10 October 1978

    Floor

    Measure considered in Senate.

    Source: Floor

18. 10 October 1978

    Vote

    Passed/agreed to in Senate: Measure passed Senate, amended, roll call #478 (86-4).

    Source: Floor

19. 12 October 1978

    ResolvingDifferences

    Conference scheduled in House.

    Source: ResolvingDifferences

20. 15 October 1978

    President

    Measure enrolled in Senate.

    Source: President

21. 15 October 1978

    President

    Measure enrolled in House.

    Source: President

22. 15 October 1978

    Vote

    Motion to recommit conf. rept. to the Comm. of Conf. with instructions rejected in Senate, roll call #517 (29-46).

    Source: ResolvingDifferences

23. 15 October 1978

    Vote

    Conference report agreed to in Senate: Senate agreed to conference report, roll call #518 (72-3).

    Source: ResolvingDifferences

24. 15 October 1978

    Vote

    House agreed to conference report, roll call #940 (337-38).

    Source: ResolvingDifferences

25. 15 October 1978

    Vote

    Conference report agreed to in House: House agreed to conference report, roll call #940 (337-38).

    Source: ResolvingDifferences

26. 15 October 1978

    ResolvingDifferences

    Conference report filed in House, H. Rept. 95-1800.

    Source: ResolvingDifferences

27. 15 October 1978

    ResolvingDifferences

    Conference report filed: Conference report filed in House, H. Rept. 95-1800.

    Source: ResolvingDifferences

28. 31 October 1978

    Floor

    Measure presented to President.

    Source: Floor

29. 31 October 1978

    President

    Measure presented to President.

    Source: President

30. 6 November 1978

    President

    Public Law 95-600.

    Source: President

31. 6 November 1978

    Became law

    Signed by President.

    Source: BecameLaw

32. 6 November 1978

    President

    Signed by President.

    Source: President

Votes

Versions

No version snapshots stored. Document URLs remain at the source.

Documents

3 official files

• Public Law (PDF)

  Public Law · EN · 7 November 1978

  ViewDownloadOpen at official source

• Conference report filed in House

  summary · EN · 15 October 1978

  Open at official source

• Introduced in House

  summary · EN · 18 July 1978

  Open at official source

Sponsors

• Rep. Ullman, Al [D-OR-2] · D · Sponsor
• Rep. Jones, James R. [D-OK-1] · D · Cosponsor
• Rep. Conable, Barber B., Jr. [R-NY-35] · R · Cosponsor
• · ssfi00 · Standing
• · hswm00 · Standing

Related records

• related to → A resolution providing for the consideration of the bill (H.R. 13511) to amend the Internal Revenue Code of 1954 to reduce income taxes, and for other purposes.
• related to → A resolution waiving all points of order against the Conference Report on bill H.R. 13511 to amend the Internal Revenue Code of 1954 to reduce income taxes, and for other purposes.