Revenue Reconciliation Act of 1993

TABLE OF CONTENTS:

Title I: Training and Investment Incentives

Subtitle A: Provisions Relating to Education and

Training

Subtitle B: Investment Incentives

Subtitle C: Tax-Exempt Bond Provisions

Subtitle D: Expansion and Simplification of Earned

Income Tax Credit

Subtitle E: Incentives for Investment in Real Estate

Subtitle F: Other Changes

Title II: Revenue Increases

Subtitle A: Provisions Affecting Individuals

Subtitle B: Provisions Affecting Businesses

Subtitle C: Foreign Tax Provisions

Subtitle D: Energy Tax Provisions

Subtitle E: Compliance Provisions

Subtitle F: Miscellaneous Provisions

Title III: Empowerment Zones and Enterprise Communities

Revenue Reconciliation Act of 1993 - Title I: Training and Investment Incentives - Subtitle A: Provisions Relating to Education and Training - Amends the Internal Revenue Code to make permanent after June 30, 1992: (1) the tax exclusion of employer-provided educational assistance; and (2) the targeted jobs credit. Allows the use of the targeted jobs credit, with limitations, for the hiring of a qualified participant in an approved school-to-work program.

Subtitle B: Investment Incentives - Part I: Investment Tax Credit - Allows a small business regular tax credit for eligible small businesses of five percent of their qualified investment in depreciable property. Allows such credit to offset a percentage of the minimum tax.

Increases the investment tax credit for 1993 and 1994 for qualified investments. Provides for ratably including the current year business credit in gross income.

Part II: Research Credit - Makes permanent the credit for increasing research activities. Modifies the fixed base percentage of such credit for startup companies for taxable years after 1993.

Part III: Incentive For Investment in Small Business Stock - Allows a taxpayer other than a corporation to exclude from gross income 50 percent of gain from the sale or exchange of qualified small business stock held for more than five years. Sets forth rules and limitations for such exclusion. Treats one-half of such exclusion as an item of tax preference for minimum tax purposes.

Part IV: Modifications to Minimum Tax Depreciation Rules - Modifies the method of determining the depreciation deduction for certain personal property placed in service after 1993. Eliminates the depreciation adjustment for computing adjusted current earnings for such property.

Subtitle C: Tax-Exempt Bond Provisions - Provides a complete tax exemption (currently a 75 percent tax exemption) for bonds used to finance high-speed intercity rail facilities.

Permanently extends the authority to issue qualified small issue bonds to finance manufacturing facilities and farm property.

Subtitle D: Expansion and Simplification of Earned Income Tax Credit - Repeals certain interaction rules with respect to the medical expense deduction, the deduction for health insurance, and the dependent care credit. Revises credit and phaseout percentages for 1994.

Subtitle E: Incentives for Investment in Real Estate - Part I: Extension of Qualified Mortgage Bonds and Low-Income Housing Credits - Makes permanent: (1) the authority to issue qualified mortgage bonds and qualified mortgage credit certificates; and (2) the low-income housing credit.

Part II: Modification of Passive Loss Rules - Provides for the treatment of rental real estate activities under the limitations on losses from passive activities.

Part III: Provisions Relating to Real Estate Investments by Pension Funds - Modifies exceptions to the exclusion of real property acquired by a qualified organization from the meaning of acquisition indebtedness. Makes certain exceptions inapplicable to sales out of foreclosure by a financial institution.

Repeals the special rule for publicly traded partnerships with respect to the treatment of unrelated business taxable income.

Permits a tax-exempt title-holding company to receive unrelated business taxable income if the unrelated income is incidentally derived from the holding of real property.

Excludes from unrelated business taxable income: (1) gains from the sale, exchange or other disposition of real property acquired from financial institutions that are in conservatorship or receivership; and (2) loan commitment fees and certain option premiums.

Part IV: Increase in Recovery Period for Nonresidential Real Property - Increases the depreciation recovery period for nonresidential real property.

Subtitle F: Other Changes - Repeals the tax preference for the appreciated property charitable deduction. Disallows an adjustment related to the earnings and profits effects of any charitable contribution from being made in computing adjusted current earnings.

Amends the Railroad Retirement Solvency Act of 1983 to make permanent the treatment of certain railroad retirement benefits as received under employer plans.

Provides for the temporary extension of the deduction of health insurance costs of self-employed individuals.

Title II: Revenue Increases - Subtitle A: Provisions Affecting Individuals - Part I: Rate Increases - Lowers the tax rates for certain taxpayers and increases the tax rate for certain higher incomes. Imposes a surtax on certain higher incomes.

Increases the tentative minimum tax for taxpayers other than corporations.

Makes permanent the overall limitation on itemized deductions and the phaseout of personal exemptions for high-income taxpayers.

Sets forth provisions to prevent the conversion of ordinary income to capital gain in certain financial transactions.

Repeals certain exceptions to market discount rules.

Provides for the treatment of purchases of stripped preferred stock after April 30, 1993.

Revises the methods of: (1) computing the limitation on the deductibility of investment interest; and (2) determining substantial appreciation of partnership inventory items.

Part II: Other Provisions - Repeals the limitation on the amount of wages and subject to the health insurance employment tax.

Increases and makes permanent the highest estate and gift tax rate.

Reduces the deduction for business meals and entertainment expenses.

Disallows a tax deduction for social club membership dues, except for employee recreational expenses.

Disallows a deduction as a trade or business expense remuneration to certain employees in excess of $1 million.

Reduces the compensation taken into account in determining contributions and benefits under qualified retirement plans.

Removes qualified residence sales, purchases, or leases and meals from the deduction for moving expenses.

Subtitle B: Provisions Affecting Businesses - Increases the tax rate for corporate income in excess of $10 million and the tax rate on personal service corporations.

Denies a tax deduction for lobbying expenses. Subjects lobbying organizations to special reporting requirements.

Requires any security which is inventory in the hands of the dealer to be included in inventory at its fair market value. Requires any dealer in securities that holds any security which is not in inventory at the close of any taxable year to: (1) recognize gain or loss as if the security were sold on the last business day of the taxable year; and (2) take into account any such gain or loss for such year (the mark-to-market requirement).

Requires taking into account, for certain tax purposes: (1) certain Federal Savings and Loan Insurance Corporation (FSLIC) assistance as compensation for loss; and (2) any FSLIC assistance for any debt for determining whether such debt is worthless and in determining the amount of any addition to a reserve for bad debts arising from such worthlessness or partial worthlessness.

Increases the required annual payment for corporations that fail to pay estimated income tax.

Limits the Puerto Rico and possession tax credit to 60 percent of the possession corporation's qualified possession wages.

Modifies the limitation on corporate deductions for interest paid to related persons to take into account disqualified guarantees of indebtedness and the imposition of a gross basis tax.

Subtitle C: Foreign Tax Provisions - Part I: Current Taxation of Certain Earnings of Controlled Foreign Corporations - Requires U.S. shareholders of controlled foreign corporations to include in gross income a pro rata share of the corporations' excess passive assets. Sets forth rules for determining such amounts. Modifies the rule on taxation of investment in United States property and takes into account excessive passive assets.

Excepts from foreign personal holding income dividends attributable to earnings and profits of the distributing corporation accumulated during any period during which the person receiving such dividend did not hold such stock.

Requires the establishment of an excess limitation account by taxpayers who receive foreign tax credits in a year they receive previously taxed earnings and profits.

Part II: Allocation of Research and Experimental Expenditures; Treatment of Certain Royalties - Requires a complete allocation and apportionment of research and experimental expenditures from sources within the United States and bases such expenditures attributable to activities conducted outside the United States on gross sales.

Treats royalties as passive income for purposes of the foreign tax credit.

Part III: Other Provisions - Excludes passive dividends or interest income from foreign oil and gas income.

Modifies accuracy-related penalties for tax underpayments.

Denies the inclusion of certain contingent interest in the exemption for portfolio interest for nonresident aliens.

Authorizes the Secretary of the Treasury to prescribe regulations recharacterizing any multiple-party financing transaction as a transaction directly among any two or more of such parties where appropriate to prevent any tax avoidance.

Subtitle D: Energy Tax Provision - Imposes an excise tax on the following energy products: (1) taxable refined petroleum products removed from a U.S. refinery or entered into the United States for consumption, use, or warehousing; (2) natural gas removed in the United States from any pipeline (not part of a local distribution system) for transmission to ultimate users through a local distribution system or for use prior to entry into a local distribution system; (3) coal received at any facility for use as a fuel at such facility; and (4) certain electricity generated in or outside the U.S. Bases the rate of tax on such products on the applicable Btu factor.

Declares that no tax is imposed on any taxable energy source which is exported by the person otherwise liable for such tax. Provides for refunds to: (1) ultimate vendors of home heating oil and international commercial transportation; (2) ultimate users in cases of exempt petroleum products; and (3) certain users of methane recovered from biomass or coal mining.

Imposes a tax on the use of any fossil fuel (other than coal): (1) in the manufacture or production of a fuel other than at a U.S. refinery; or (2) as a fuel. Specifies the application of such tax and exceptions.

Imposes a tax on floor stock of taxable fuels held on the date of the tax increase. Allows a credit against such tax.

Provides for such tax increases to begin July 1, 1994.

Increases the tax on gasoline and diesel fuels for purposes of the Highway Trust Fund financing rate. Increases the amount to be transferred to the Mass Transit Account from such Fund.

Subtitle E: Compliance Provisions - Requires information reporting on payments to corporations for services.

Modifies provisions concerning substantial understatement and return-preparer penalties to allow reasonable cause exceptions.

Subtitle F: Miscellaneous Provisions - Establishes substantiation requirements for charitable contributions of $750 or more.

Sets forth disclosure requirements for an organization that receives a quid pro quo contribution (payment made partly as a contribution and partly in consideration for goods or services provided to the payor by the donee organization). Imposes a penalty for failure to make such disclosure.

Expands the 45-day interest-free period for refunding tax overpayments to all returns, as well as to amended returns and claims for refunds. Provides that if interest is not refunded within 45 days after the taxpayer files an amended return or claim for refund, interest will be paid only for periods after the date on which the return or claim is filed.

Denies the business travel expense deduction for spouses, dependents, or others.

Increases the withholding rate for supplemental wage payments.

Title III: Empowerment Zones and Enterprise Communities - Provides for the designation of 100 tax enterprise communities and ten empowerment zones during calendar years after 1993 and before 1996: (1) by the Secretary of Housing and Urban Development, in the case of an urban area; (2) by the Secretary of Agriculture in the case of a rural area; and (3) the Secretary of the Interior for an Indian reservation.

Sets forth the eligibility criteria for such designations.

Allows a zone resident empowerment savings credit to employers as a general business credit of 50 percent of the qualified savings contributions made to a defined contribution plan on behalf of an employee. Limits the amounts of such contributions.

Makes buildings in such communities or zones eligible for the low-income housing credit applicable to buildings in high-cost areas.

Provides for the issuance of enterprise zone facility bonds in enterprise communities and empowerment zones in a manner similar to exempt facility bonds. Excludes enterprise zone facility bonds from the interest deduction limitations on financial institutions.

Allows an empowerment zone employment credit to employers for a percentage of qualified zone wages paid during calendar years 1994 through 2004. Limits the amount of such credit.

Increases the limitation on expensing certain depreciable business assets.

Increases the volume cap applicable to enterprise zone facility bonds if the business owners meet specified ownership requirements with regard to abiding in such zones.

Allows the use of the targeted jobs credit for hiring empowerment zone residents.