Foreign Investment in Real Property Tax Act of 1979

(Reported from Sen. Comm. on Finance Amended, S.Rept.96-684)

=Title I: Taxation of Foreign Investment in United States Real Property= - Foreign Investment in Real Property Tax Act of 1979 - Amends the Internal Revenue Code to impose upon nonresident alien individuals or foreign corporations a tax equal to one-third of 28 percent of the excess of gains over losses realized from the sale of United States real property interests. Exempts taxpayers whose net gain for a taxable year is less than $5,000.

Defines "U.S. real property interest" as: (1) an interest in real property located in the United States; or (2) any interest in a U.S. real property holding organization (a business entity in which a controlling interest is held by ten or fewer individuals and of which U.S. real property interests constitute more than 50 percent of the fair market value of the organization). Includes within the term "interest in real property" fee ownership and co-ownership of land or improvements thereon, leaseholds of land or improvements, and options to acquire such leaseholds of land or improvements.

Requires individuals who acquire a U.S. real property interest from a nonresident alien or a foreign corporation to withhold an amount equal to the smaller of: (1) one-third of 28 percent of the amount realized on the transaction; (2) the amount of the seller's maximum tax liability; or (3) the fair market value of the proceeds of the sale which are within the withholding agent's control. States that the purchaser is not required to withhold any amounts unless he knows the seller is a foreign person, or has received a notice to that effect. Requires sellers who are foreign persons, and their agents, to notify purchasers of their status as foreigners.

Provides an exemption from the withholding requirements of this Act if: (1) the seller of a property interest provides the buyer with a statement that any tax liability with respect to the sale has been satisfied or does not exist; (2) the transaction involves the acquisition of stock in a corporation which is effected through the medium of an organized stock exchange; (3) the transaction involves the sale of property used as a single family principal residence and the amount realized upon disposition does not exceed $150,000.

Authorizes the Secretary of the Treasury to prescribe reduced amounts of withholding under specified conditions.

Allows nonresident aliens and foreign corporations a refundable income tax credit for tax withheld with respect to dispositions of U.S. real property interests and tax-free covenant bonds.

Requires an organization whose U.S. real property interests constitute more than 40 percent of the fair market value of its assets and which is controlled by not more than ten individuals, one or more of whom are foreign persons, to file an informational return with the Secretary concerning the holdings and transactions. Prescribes civil penalties for organizations which fail to file such returns.

Overrides, for taxable years after December 31, 1984, tax treaties which would exempt foreign investors from the requirements established by this Act.

=Title II: Reforestation= - Amends the Internal Revenue Code to allow an income tax deduction from gross income with respect to the amortization of reforestation expenditures, based on a period of seven years. Limits the amount of expenditures which may be amortized in any one taxable year to $10,000. Allows a ten percent investment tax credit for such reforestation expenditures. Establishes a reforestation trust fund to supplement congressional appropriations for reforestation and timber stock improvement on publicly-owned forest lands.

=Title III: Employee Stock Ownership Plan Provisions= - Amends the Internal Revenue Code to permit a tax-qualified stock bonus plan to distribute cash to a participant entitled to a distribution, subject to the participant's right to demand that benefits be distributed in the form of employer stock.

Permits a public utility which is required to flow-through its regular ten percent investment tax credit to its consumers to claim the additional one and one-half percent investment tax credit for contribution to a tax credit employee stock ownership plan, if the utility is not required to flow-through the additional credit.

Specifies that cash used to acquire employer securities contributed to a tax credit employee stock ownership plan may be included in determining the dollar limitation on annual additions to such plans.

Provides that the value of employer securities listed on a national exchange contributed to a tax credit employee stock ownership plan shall be the average of the closing prices of such securities for the 20 consecutive trading days immediately preceding the date of contribution to the plan.

Permits a second-tier subsidiary to contribute securities of its parent corporation to a tax credit employee stock ownership plan under certain conditions.

Provides that a tax credit employee stock ownership plan which is the only tax-qualified plan maintained by an employer shall not fail to meet its minimum coverage requirements due to employee elections to establish individual retirement accounts, if the plan benefits at least 50 percent of all employees and total allocations under the plan are equal to no more than two percent of the compensation of participating employees.

=Title IV: Miscellaneous Revenue Provisions= - Amends the Internal Revenue Code to permit an electing shareholder who transfers proven oil or gas properties to a controlled corporation to have his depletable oil quantity allocated among all the properties owned directly by him and among the properties transferred to the controlled corporation.

Extends until December 31, 1980 the time allowed to amend certain charitable trusts in order to conform such trusts to meet requirements for the deductibility of a transfer of a split interest (i.e. part charitable and part noncharitable) to a charity.

Revises the payment schedule for the manufacturers excise tax on fishing equipment.

Permits the executor of an estate to elect the alternate valuation date for valuing estate assets even though the estate return is filed after the due date.

Permits a taxpayer to roll over complete distributions from a money purchase pension plan or report income from such distribution according to the ten year income averaging rules, even if there is no similar distribution from another pension plan of the same employer in which the taxpayer is a participant.

Allows a money purchase pension plan in existence on June 27, 1974, which provided for a salary reduction arrangement, to continue such arrangement after December 31, 1979 under certain conditions.

Exempts from income tax annuities paid to certain nonresident aliens.

Repeals the requirement that certain defined contribution plans must pass through to plan participants voting rights on major corporate issues with respect to employer securities held by the plan.

Expands the scope of cafeteria-type plans (combination of taxable and nontaxable fringe benefits) to include deferred compensation plans.