A bill to amend section 451 of the Internal Revenue Code of 1954 to provide for a special rule for the inclusion in income of magazine sales for display purposes.

(Reported to Senate from the Committee on Finance with amendment, S. Rept. 95-1278)

Amends the Internal Revenue Code to allow taxpayers using the accrual method of accounting to elect not to include in gross income the income attributable to the qualified sale of magazines, paperbacks, or records which are returned to the taxpayer before the close of the merchandise return period, as determined by this Act, if the taxpayer has a legal obligation to accept their return. Specifies the amount that is properly excludable from gross income for the return of such items.

Permits the taxpayer to substitute certification, that the magazines, paperbacks, or records have not been or will not be resold in lieu of the actual physical return of such items, if such certification is in the possession of the taxpayer at the close of the merchandise return period and is satisfactory to the Secretary of the Treasury.

Requires the taxpayer to establish a suspense account for the qualified sale of paperbacks and records.

Permits an accrual basis taxpayer to deduct from gross income the cost of redeeming qualified discount coupons which were: (1) outstanding at the close of the taxable year; (2) received by the taxpayer before the close of the redemption period for the taxable year; and (3) incurred by the taxpayer during the taxable year. Stipulates that the redemption period for any taxable year is the six-month period immediately following the close of the taxable year, unless the taxpayer selects a shorter period.

Provides: (1) when such election shall be made; (2) that such election is binding for future years unless the taxpayer secures the consent of the Secretary of the Treasury to revoke it; (3) that such election applies to all qualified discount coupons issued by the taxpayer's trade or business; and (4) that the election of this method or a change to another method of accounting will be subject to the applicable rules governing accounting changes.

Requires the taxpayer to establish a suspense account for each trade or business in which an election is made, if such election would result in a net decrease in taxable income. Sets forth the formula to be used: (1) in computing the initial opening balance of such suspense account; and (2) in any annual adjustments made to such suspense accounts to account for fluctuations in redemptions.

Provides that if the taxpayer's election results in a net decrease in income, it is to be taken into income ratably over a ten-year period beginning with the year of change.

Permits the taxpayer to validate certain tax accounting methods used to account for discount coupons in years prior to the effective date of the Act.

Allows tire manufacturers to take an excise tax credit or refund on tread rubber where tax paid tread rubber is: (1) destroyed or wasted in the recapping or retreading process; (2) used in the recapping or retreading of tires the sales of which are later adjusted under a warranty or guarantee; or (3) used in the recapping or retreading of tires which are exported, used, or sold as supplies for vessels or aircraft, sold to State or local governments or sold to nonprofit educational institutions.

Allows an excise tax credit or refund on retreaded tires which have been sold by a subsequent manufacturer on or in connection with another article manufactured by him, and exported or sold for certain purposes.

Sets forth the method of computing the credit or refund of the manufacturers excise tax where tire warranty or guarantee adjustments have been made in connection with the sale of a replacement tire.

Provides that the period for allowing a credit or making a refund of tire tax or tread rubber tax filed as a result of a warranty or guarantee adjustment shall be one year from the date on which the adjustment is made.

Provides that tires which are exported from the United States, recapped, or retreaded outside the United States and imported into the United States shall be taxed as imported tread rubber to the extent that tread rubber is used in the recapping or retreading.

Amends the Second Liberty Bond Act to authorize the Secretary of the Treasury to increase interest rates on retirement plan bonds and individual retirement bonds issued under such Act to bring such interest rates in line with rates applicable to new offerings of similar bonds.

Amends the Internal Revenue Code to permit a tax credit for amounts paid by a taxpayer to a family member for child care expenses except if such family member is a dependent of the taxpayer or a child of the taxpayer under the age of 19.