Tax Fairness and Reform Act of 1985

Tax Fairness and Reform Act of 1985 - Redesignates the Internal Revenue Code of 1954 as the Internal Revenue Code of 1985.

Title I: Individual Income Tax Provisions- Subtitle A: Rate Reductions; Increase in Standard Deduction and Personal Exemptions - Reduces the tax rates and consolidates the tax brackets into four brackets, consisting of a 15 percent, a 25 percent, a 35 percent, and a 37 percent tax bracket. Requires the Secretary of the Treasury (Secretary) to prescribe tax tables annually which will provide for a cost-of-living adjustment to prevent any tax increases resulting from inflation.

Increases the amounts of the standard deduction to: (1) $4,600 for joint returns or surviving spouses; (2) $4,026 for head of households; (3) $2,828 for single individuals; and (4) $2,300 for married individuals filing separate returns. Provides for an annual inflation adjustment to be made to the standard deduction. Provides certain rules for the standard deduction. Allows an additional amount for the aged and the blind.

Raises the personal exemption amount to $2,000. Provides for an annual inflation adjustment for years after 1986 for the amount of the personal exemption. Provides that the exemption deduction shall not reduce tax by an amount exceeding 25 percent of the exemption amount. Phases out the exemption for taxpayers whose taxable income exceeds $100,000. Makes certain technical amendments.

Subtitle B: Provisions Related to Tax Credits - Increases the earned income credit percentage to 14 percent and the maximum dollar limitation of earned income to which the percentage applies to $7,143. Increases the income level at which the earned income credit is phased out.

Repeals the tax credit for contributions to candidates for public office. Makes certain other technical amendments pertaining to various tax credits.

Subtitle C: Provisions Related to Exclusions - Allows a $5,000 limit on the exclusion of amounts received by an employee for dependent care assistance.

Requires unemployment compensation to be included in the gross income of an individual.

Provides that gross income does not include any amount received as a qualified scholarship grant by an individual who is a candidate for a degree at an educational organization. Sets forth other rules and limitations relating to scholarship grants and tuition reduction arrangements.

Provides that employee gifts are not excludible from gross income.

Subtitle D: Provisions Related to Deductions - Repeals the deduction for two-earner married couples.

Provides that miscellaneous itemized deductions shall be allowed for the taxable year only to the extent that the aggregate of such deductions exceeds one percent of adjusted gross income.

Permits the costs paid in connection with the administration of an estate or trust to be allowed as a deduction in computing the adjusted gross income of the estate or trust.

Provides that nonreimbursed business expenses of employees are subject to the one percent floor on deductions.

Makes permanent the charitable deduction for individuals who do not itemize deductions.

Repeals the deduction for adoption expenses.

Provides certain dollar limitations on the amount of consumer interest which may be deducted during the taxable year. Prohibits the deduction of any consumer interest on a loan incurred or continued for purchase of a foreign car.

Repeals the deduction for State and local sales taxes and personal property taxes.

Provides for an overall limitation on the aggregate amount of itemized deductions other than deductions for charitable contributions and qualified residence interest.

Subtitle E: Miscellaneous Provisions - Repeals the income averaging provisions for figuring tax liability.

Imposes certain additional restrictions and limitations on the allowance of deductions for meals, travel, and entertainment business expenses.

Modifies the rules relating to the treatment of hobby loss deductions.

Allows the deduction for mortgage interest and real property taxes in those cases where a parsonage allowance or military housing allowance is received.

Requires certain information reporting with respect to income taxes and real and personal property taxes.

Repeals the checkoff for the presidential election campaign fund contribution.

Subtitle F: Effective Dates - Sets forth the effective dates for the provisions of this title.

Title II: Capital Income Provisions - Subtitle A: Depreciation Provisions - Repeals the accelerated cost recovery system of depreciation and replaces such system with the incentive depreciation system for tangible property. Sets forth various rules and procedures for the operation of the incentive depreciation system.

Modifies the recapture of depreciation rules relating to the gain from disposition of certain depreciable realty. Sets forth the effective dates for the new depreciation provisions, and various transitional rules.

Subtitle B: Regular Investment Tax Credit - Provides that the regular investment tax credit percentage shall be five percent and shall apply only to qualified domestically produced property. Sets forth certain exceptions to this requirement.

Subtitle C: Changes in Certain Rapid Amortization Provisions - Repeals the five-year amortization period for trademark and trade name expenditures.

Makes permanent the depreciation deduction for expenditures to rehabilitate low-income housing. Increases to $30,000 the amount of expenditures per dwelling unit which may be taken into account in the depreciation of the expenses over the 60-month period.

Subtitle D: Other Capital Related Costs - Extends the termination of the tax credit for increasing research activities for three years. Reduces the amount of the credit to 20 percent. Reduces to 20 percent the research credit for basic research payments to colleges, universities, and certain research organizations. Sets forth certain definitions and special rules relating to payments for basic research.

Makes modifications in the rules concerning the investment tax credit for rehabilitation expenditures.

Subtitle E: Capital Gains and Losses - Retains the maximum 20 percent capital gains tax. Retains the maximum 32 percent tax on commodity future contract gains.

Establishes provisions for the indexing of certain assets for purposes of determining gain or loss. Sets forth such procedures.

Repeals the provisions relating to the disposal of coal or domestic iron ore with a retained economic interest therein.

Subtitle F: Provisions Relating to Oil and Gas - Modifies the percentage depletion percentages for independent producers and royalty owners. Disallows the use of percentage depletion with respect to lease bonus amounts.

Phases out the allowance of percentage depletion deductions with respect to geothermal deposits.

Allows an exemption from the windfall profits tax for certain crude oil exchanged for residential fuel oil.

Makes permanent the reduced excise tax rate on fuel used by taxicabs for providing taxicab services.

Subtitle G: Treatment of Hard Minerals - Reduces the percentage depletion deduction with respect to certain hard minerals. Sets forth rules pertaining to the tax treatment of development and mining exploration expenditures.

Title III: Corporate Provisions - Subtitle A: Corporate Rate Reductions - Reduces the tax rates on corporate income and establishes three tax brackets ranging from 15 percent to 33 percent, with the middle bracket being 25 percent. Requires an additional amount of tax where the taxable income of the corporation is in excess of $100,000. Provides for a phasein of the reduction in the tax rates during the period from 1986 through 1990.

Provides for an alternative tax for corporations which have a net capital gain for any taxable year. Computes this tax by computing the sum of the tax on the taxable income reduced by the net capital gain, plus 28 percent of the pre-1986 net capital gain, plus the applicable percentage of timber, iron, or coal capital gain, plus 33 percent of the net capital gains.

Reduces the dividend received deduction over a period of years from 1986 through 1991. Reduces the dividend received deduction percentage over this period from 85 percent to 75 percent.

Repeals the partial exclusion of dividends received by individuals.

Prohibits the deduction of expenses incurred by a corporation in connection with the redemption of its stock.

Subtitle B: Limitation on Net Operating Loss Carryforward and Excess Credit Carryforwards - Provides a limitation of net operating loss carryforwards. Sets forth rules and procedures for computing such limitation on net operating loss carryforwards. Establishes special limitation on certain excess credits for certain taxable years.

Subtitle C: Recognition of Gain and Loss on Distributions of Property in Liquidation - Requires the recognition of gain or loss to a corporation on the distribution of property in complete liquidation as if such property were sold to the distributee at fair market value except for certain corporate liquidations. Provides certain exceptions to this rule of recognition of gain or loss.

Provides for the nonrecognition of gain or loss on the sale or exchange of property by a corporation in certain types of liquidation proceedings. Sets forth rules and exceptions for such nonrecognition treatment. Provides certain technical amendments regarding the liquidation provisions. Sets forth effective dates for these provisions relating to gain or loss recognition in liquidations.

Subtitle D: Real Estate Investment Trusts - Makes modifications in the rules affecting a real estate investment trust's (REIT) earnings and profits under the depreciation provisions. Exempts REITs from the special rules relating to corporate tax preference items. Expands the types of sales which may be made by a REIT without the imposition of the 100 percent prohibited transaction tax.

Modifies the rule relating to the exclusion of amounts received with respect to rental property that a REIT operates other than through an independent contractor.

Makes changes in the standards for disqualifications of a REIT as a personal holding company.

Permits a REIT to have a wholly owned subsidiary.

Modifies the present rules relating to REITs which disqualify income in the form of rents or interests based on net income or profits of the tenant or borrower.

Makes changes in the rule regarding the payment of capital gain dividends by REITs that have net operating loss carryovers from prior years. Permits net losses from prohibited transactions to be taken into account in computing a REITs taxable income.

Requires the special notice for capital gains dividends to be mailed to the Secretary within 45 days after the close of the REITs taxable year.

Makes modifications in the tax penalty imposed on a REIT involved in making a deficiency dividend distribution due to an adjustment of the REITs taxable income.

Excludes from the REIT distribution requirements non-cash income recognized by a REIT under certain deferred payment and installment sales rules added by the Deficit Reduction Act of 1984. Excludes from the REIT distribution requirements the income recognized by a REIT upon a determination that an exchange of real property failed to qualify for nonrecognition of gain as like-kind property.

Title IV: Tax Shelters - Extends the at-risk limitation rules to real property.

Limits the amount of the deduction for investment interest for taxpayers, other than corporations, to $10,000 plus the net investment income for the taxable year. Permits the carryover of disallowed investment interest to succeeding taxable years. Sets forth special rules and definitions relating to the limitation on the deduction of investment interest.

Title V: Alternative Minimum Tax - Subtitle A: General Provisions - Makes modifications in the alternative minimum tax provisions of the Code. Provides that the alternative minimum tax is determined to be the excess of the tentative minimum tax amount over the regular tax for the taxable year. Computes the tentative minimum tax by multiplying the alternative minimum taxable income as exceeds the exemption amount by 22.5 percent (20 percent in the case of a corporation), reduced by the alternative minimum tax foreign tax credit. Sets the exemption amounts for taxpayers, other than corporat: ions, at: (1) $30,000 for a joint return; (2) $25,000 for singles and surviving spouses; and (3) $15,000 for married people filing separately. Reduces the exemption for taxpayers with a taxable income in excess of $175,000. Allows corporations an exemption amount of $40,000. Sets forth special rules and definitions relating to the alternative minimum tax.

Subtitle B: Treatment of Existing Carryforwards of Steel Companies - Provides an effective 15-year carryback of existing unused business credit carryforwards of steel companies. Provides that the existing carryforwards of qualified corporations may offset 75 percent of the minimum tax of the corporation. Establishes a $300,000,000 limit on the carryforward amounts which may be used. Sets forth certain definitions.

Title VI: Foreign Provisions - Subtitle A: Modification in Regulations Allocating Research and Experimental Expenditures - Establishes a two year modification in regulations providing for allocation of research and experimental expenditures.

Subtitle B: Possessions Tax Credit Changes - Makes certain modifications in the possession tax credit provisions.

Subtitle C: Tax Treatment of Possessions - Part I: Permits Guam, American Samoa, and the Northern Mariana Islands to enact revenue laws. Requires the existence of certain implementing agreements providing for measures which alleviate certain problems relating to tax administration.

Excludes from the gross income of a bona fide resident of Guam, American Samoa, and the Northern Mariana Islands the income derived from or effectively connected with such possessions.

Modifies the definition of controlled foreign corporation for purposes of corporations organized in Guam, American Samoa, or the Northern Mariana Islands. Modifies the withholding requirements with respect to a corporation created or organized in Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands.

Part II: Treatment of the Virgin Islands - Provides for the coordination of the United States and the Virgin Islands individual income tax provisions.

Permits Virgin Islands corporations to use the possession tax credit.

Part III: Cover Over of Income Taxes - Provides that the net collection of taxes for each taxable year with respect to certain individuals shall be covered into the Treasury of the possession (Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands) of which such individual is a bona fide resident. Provides for transfers of other amounts to these possessions with respect to military personnel and certain employees of the United States.

Part IV: Effective Date - Sets forth the effective date for these provisions relating to Guam, American Samoa, the Northern Mariana Islands, and the Virgin Islands.

Subtitle D: Excise Tax on Certain Broadcast for Olympic Events - Imposes an excise tax of ten percent on amounts paid for United States television and radio broadcast rights for Olympic events. Sets forth special rules and definitions pertaining to this special excise tax. Establishes within the Treasury the United States Olympic Trust Fund. Provides that the amounts collected from the special excise tax, less any administrative expenses relating to such tax, shall be transferred to the Trust Fund.

Subtitle E: Excise Tax on Insurance Premiums Paid to Foreign Insurers - Imposes a four percent excise tax on certain insurance policies, indemnity bonds, annuity contracts or policies of reinsurance issued by foreign insurer. Provides for the withholding of such excise tax by the insured or withholding agent on policies issued by the insured or withholding agent on policies issued by a foreign insurers. Sets forth certain definitions and special rules.

Subtitle F: Treatment of Certain Employees of Panama Canal Commission - Provides that nothing in the Panama Canal Treaty shall be construed as exempting any citizen or resident of the United States from income tax of the United States. Permits the exclusion of certain allowances by employees of the Panama Canal Commission stationed in Panama.

Title VII: Tax-Exempt Bonds - Modifies the definition of arbitrage bonds with respect to the acquisition of annuity contracts.

Provides for the treatment of tax increment bonds issued before January 1, 1986.

Title VIII: Financial Institutions - Prohibits large banks (banks where the average adjusted bases of all assets of such bank exceeds $500,000,000) from taking the deduction for additions to a reserve for bad debts. Sets forth special rules and definitions.

Requires the pro rata allocation of interest expenses of financial institutions with respect to the interest expenses which are allocable to tax-exempt interest. Sets forth certain definitions and special rules.

Terminates the special ten-year carryback rules with respect to certain financial institutions on January 1, 1986.

Repeals the special reorganization rules with respect to financial institutions.

Provides that losses resulting from the loss on an individual's deposit in a qualified financial institution as a result of bankruptcy or insolvency of such institution shall be treated as a casualty loss.

Title IX: Accounting Provisions - Subtitle A: General Provisions - Permits an eligible small business to use the simplified dollar-value method of pricing inventories for purposes of the LIFO method of accounting. Sets forth special rules and definitions with respect to the simplified dollar-value method of pricing.

Requires that the taxable income of a "C corporation" or a partnership which has a "C corporation" partner must be computed under an accounting method other than the cash receipts and disbursement method of accounting. Sets forth certain exceptions to this rule and provides special rules and definitions.

Requires the recognition of gain on pledges of certain installment obligations. Excepts certain sales of particular capital assets. Provides special rules and definitions.

Requires income related to a long-term contract to be determined under the percentage of completion method of accounting. Requires, upon completion of the contract, the taxpayer to pay (or be entitled to receive) interest computed under the "look-back" method. Establishes the "look-back" method for computing the interest costs. Sets forth certain definitions, exceptions, and special rules.

Requires any taxpayer who produces real or personal property to capitalize the following cost: (1) the direct cost of such production; and (2) such production's proper share of those indirect costs (including taxes), part or all of which are assignable to such production. Provides exceptions to the general rule of capitalization of costs for certain activities. Sets forth certain definitions and special rules relating to capitalization of production costs.

Repeals the reserve for bad debt deduction of taxpayers other than financial institutions.

Restricts the vacation-pay deduction for accrual method taxpayers by requiring the amounts to be paid within the taxable year or within eight and one-half months following the close of the taxable year.

Includes in the gross income of the taxpayer amounts contributed in aid of construction.

Subtitle B: Provisions Relating to Timber - Permits qualified timber producers to elect to expense (and claim as a deduction during the taxable year) 50 percent of the qualified timber preproductive period expenses paid or incurred during the taxable year. Defines "qualified timber preproductive expense" and "qualified timber producer." Provides certain depreciation rules relating to such taxpayers making this election.

Provides that the capital gains tax treatment for timber is not available to corporate taxpayers.

Subtitle C: Special Provisions Relating to Agriculture - Repeals the special tax treatment of expenditures for fertilizer and clearing land.

Limits the expensing of soil and water conservation expenditures by providing that such expenditures must be consistent with soil conservation plans.

Provides that gain from the disposition of converted wetland or highly erodible cropland shall be treated as ordinary income. Requires any loss recognized on the disposition of converted wetland or highly erodible cropland to be treated as long-term capital loss. Sets forth definitions and special rules.

Provides rules for the netting of gains and losses by cooperatives among one or more of the allocation units of the cooperative. Sets forth various requirements with respect to such netting.

Provides that certain plant variety protection certificates shall be treated as patents for purposes of the taxation on the sale or exchange of patents.

Title X: Insurance Products and Companies - Part I: Policyholder Issues - Repeals the exclusion of interest on the installment payments of life insurance proceeds. Provides that the deduction for nonbusiness casualty losses covered by insurance is allowable only if a timely insurance claim with respect to such loss is filed.

Provides that the exclusion from income of amounts received with respect to structured settlements is limited to cases involving physical injury.

Part II: Life Insurance Companies - Repeals the special life insurance company deduction. Repeals the tax-exempt status for certain organizations providing commercial-type insurance coverage. Provides certain exceptions for activities attributable to high-risk and small groups. Requires the Secretary to conduct a study of fraternal beneficiary associations and report the findings to certain congressional committees.

Permits the operations loss deduction of insolvent life insurance companies to offset the distributions from the policyholders surplus account.

Part III: Property and Casualty Insurance Companies - Requires that 25 percent of unearned premium reserves be included in income each taxable year. Repeals the provisions allowing deductions for amounts allocated to the protection against loss accounts. Provides that amounts in such accounts shall be includible in income not less rapidly than ratably over a five-year period. Repeals the tax-exempt status of insurance companies or associations other than life or marine if the net written premiums for the taxable year exceed $500,000.

Repeals the cap on tax of certain mutual insurance companies where the income is less than $12,000.

Revises the alternative tax for certain small companies.

Repeals the special small company deduction in computing statutory underwriting income or loss.

Provides that the special determination of tentative life insurance company taxable income shall apply to corporations in Virginia and Louisiana.

Establishes an advisory commission to conduct a study which will comprehensively analyze all aspects of the taxation of property and casualty insurance companies. Requires the results of such study to be submitted to selected congressional committees and the Secretary no later than March 31, 1988.

Title XI: Pensions and Deferred Compensation - Subtitle A: Individual Retirement Accounts - Permits a maximum deduction of $2,000 contributed to an individual retirement account established for the benefit of a spouse. Provides that the $2,000 maximum deduction shall be phased-in over a period of five years. Permits nondeductible contributions to individual retirement plans. Limits the amount of such nondeductible contributions to $2,000 per year maximum. Phases in the maximum amount of the nondeductible contribution limit over a period of five years. Makes certain modifications in the rules relating to the tax treatment of distributions from individual retirement accounts. Requires that certain information be maintained with respect to designated nondeductible contributions to individual retirement accounts and individual retirement annuities.

Subtitle B: Cash and Deferred Arrangements - Provides for the coordination of the individual retirement account deduction with other elective deferral provisions of the Code. Provides a $12,000 limit on the tax-free deferral with respect to elective qualified cash or deferred arrangements. Sets forth certain rules with respect to the elective deferrals.

Provides that tax-exempt entities are eligible for having certain qualified cash or deferred arrangement plans. Prohibits the Federal Government or State or local governments from maintaining a qualified cash or deferred arrangement.

Provides that if any plan amendments are required as a result of provisions of this Act, such amendment shall not be required to be made before the first plan year beginning on or after January 1, 1988.

Subtitle C: Basis Recovery Rules for Qualified Pension Plans - Repeals the special rules for employees' annuities where the employee's contributions were recoverable in three years. Provides that amounts not received as annuities are allocated first to income.

Subtitle D: Repeal of Exclusion for Cost of Group-Life Insurance - Repeals the exclusion from income for an employee of the cost of group-life insurance purchased by the employer.

Subtitle E: Tax Treatment of Parsonage Allowances and Military Housing Allowances - Permits the deduction of mortgage interest and real property taxes by the taxpayer even though a parsonage allowance or military housing allowance has been received.

Subtitle F: Additional Tax on Early Withdrawal From Pension Plans - Provides for a ten-percent additional tax on early distributions from certain qualified retirement plans. Exempts certain types of distributions from the ten-percent additional tax.

Subtitle G: Treatment of Certain Full-Time Life Insurance Salesmen - Provides that a full-time life insurance salesman shall be considered an employee for purpose of the tax exclusion rules relating to employer cafeteria plans.

Subtitle H: Changes Relating to Employee Stock Ownership Plans - Repeals the employee stock ownership tax credit. Terminates the exclusion from the income of certain taxpayers the interest received on loans used to acquire employer securities. Terminates the dividend paid deduction.

Terminates the provision for the nonrecognition of gain on the sales of stock to an employee stock ownership plan.

Terminates the provision permitting the transfer of certain estate tax liability to an employee stock ownership plan with respect to employer securities transferred to the plan or a worker-owned cooperative.

Makes certain changes in the qualification requirements and other requirements with respect to employee stock ownership plans.

Provides a special rule for eligible worker-owned cooperatives with respect to the nonrecognition of gain on the sale of securities to such cooperative.

Subtitle I: Three Year Extension of the Exclusion for Educational Assistance - Extends for three years, until December 31, 1988, the exclusion from the gross income of an employee amounts paid or expenses incurred by an employer to provide educational assistance to the employee.

Title XII: Repeal of Generation-Skipping Tax - Repeals the provisions of the Code providing for the tax on generation-skipping transfers. Provides for a credit or refund of any generation-skipping taxes which have been paid. Waives the statute of limitations with respect to refunds or credits for such taxes.

Title XIII: Compliance and Tax Administration - Part I: Penalty for Failure to File Information Returns and Statements - Provides penalties for: (1) failure to file certain information returns; (2) failure to furnish certain payee statements; and (3) failure to include certain information on certain returns and statements. Establishes certain waiver provisions, definitions, and special rules relating to the filing of information returns and statements.

Increases the penalty for failure to pay tax in certain cases from 0.5 percent per month to one percent per month.

Modifies the provisions relating to the tax penalty in instances involving negligence and fraud.

Part II: Estimated Tax Payments by Individuals - Increases the percentage tests for liability of taxpayers to pay estimated tax payments from 80 percent to 90 percent of the tax shown on the return for the taxable year.

Part III: Provisions Relating to Attorneys' Fees and Exhaustion of Administrative Remedies - Extends the provisions permitting the awarding of attorneys' fees to the prevailing party in certain tax cases. Provides that Internal Revenue Service employees may be personally liable for court costs in certain cases. Requires the Secretary to report annually for a certain period of time to select congressional committees certain information relating to the awarding of court costs and attorneys' fees in tax cases.

Part IV: Tax Administration Provisions - Grants the Secretary the authority to rescind a notice of deficiency mailed to the taxpayer with the consent of the taxpayer.

Permits the Secretary to abate interest assessments due to errors or delays by the Internal Revenue Service.

Suspends the compounding of interest charges where the interest charges on a deficiency has been suspended.

Provides that certain service-connected disability payments are exempt from levy for tax payment.

Increases to $100,000 the value of personal property subject to certain listing and notice procedures.

Provides that the recordkeeping requirements for the use of an automobile by an agent of the Internal Revenue Service shall be the same as the use of an automobile by an officer of any other law enforcement agency.

Part V: Interest Provisions - Establishes rules concerning the differenterial interest rate.

Provides that the interest charges on any accumulated earnings tax shall begin to accrue on the date the return is due.

Part VI: Modification of Withholding Allowances - Directs the Secretary to modify the withholding schedules to reflect the tax rate changes in this Act. Prohibits certain decreases in the withholding of taxes.

Part VII: Information Reporting Provisions - Requires the reporting of certain information with respect to real estate transactions.

Requires taxpayers to report on their returns amounts of tax-exempt interest received or accrued during the taxable year.

Part VIII: Report on Return-Free System - Requires the Secretary to prepare a report on a return-free system for the Federal income tax of individuals which would include: (1) the identification of classes of individuals who would be permitted to use a return-free system; (2) how such system would be phased in; (3) what additional resources the IRS would need to carryout such a system; and (4) the type of changes to the Internal Revenue Code which would inhibit or enhance the use of such system.

Part IX: Certain Diesel Fuel Taxes May be Imposed on Sales to Retailers - Provides that the excise tax on diesel fuel for highway vehicles may be imposed on the sale to the retailer by the wholesaler (jobber) or by the manufacturer where the sale is direct to the retailer.

Title XIV: Miscellaneous Provisions - Excludes from income amounts paid to the foster parent for caring for a qualified foster child in the foster parent's home.

Provides that the tax relief provisions applicable with respect to Vietnam MIAs (and their spouses) that expired after 1982 are retroactively reinstated and made permanent.

Provides that in the case of any tax-exempt organization, the term unrelated trade or business does not include any trade or business of such organization that consists of exchanging names and addresses of donors to (or members of) such organization with another such tax-exempt organization. Provides that the term unrelated trade or business of a tax-exempt organization does not include activities of such organization relating to the distribution of low cost articles incidental to the solicitation of charitable contributions.

Permits a housing cooperative, where the cooperative charges such tenant-stockholder with a portion of the cooperative's interest and taxes in a manner that reasonably reflects the cost to the cooperative of the interest and taxes attributable to such tenant-stockholder's dwelling unit, to make an election whereby the share of the cooperative's interest and taxes that each tenant-stockholder is permitted to deduct would be the amounts that were so separately allocated and charged.

Provides that certain royalties relating to computer software are not treated as personal holding company income, and therefore not subject to the additional tax on personal holding company income, if the recipient: (1) is actively engaged in the trade or business of producing, developing, or manufacturing computer software; (2) derives more than half of its income from software royalties; (3) incurs substantial trade or business expenses, or research and development expenses; and (4) distributes most of its passive income other than software royalties. Provides special rules with respect to taxpayers who are members of an affiliated group and receive royalties with respect to the licensing of computer software.

Allows certain securities dealers to exclude from personal holding company income certain income received on securities or money market instruments held in inventory if the taxpayer: (1) derives at least 50 percent of its income from the active conduct of the business of dealing in securities; (2) distributes most of its passive income not derived from the business of dealing in securities; and (3) incurs substantial trade or business expenses relating to the business of dealing in securities.

Amends part E (Foster Care and Adoption Assistance) of title IV of the Social Security Act with respect to adoption assistance agreements and "nonrecurring adoption expenses" relating to the adoption of special needs children.