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A. Sense of the Senate
Regarding Reform of the Internal Revenue Code of 1986(**)
B. Sense of the Senate Regarding Tax Treatment of Stock Options(**)
C. Sense of the Senate Resolution Regarding Estate Taxes(**)
D. Sense of the Senate Regarding Who Should Benefit from Tax Cuts(**)
E. Sense of the Senate Regarding Self-Employment Taxes of Limited Partners
(**) Not included in final bill
Present Law
The Federal Government imposes an individual income tax, a corporate income tax, a payroll tax collected from both employees and employers, certain excise taxes, and transfer taxes on certain transfers of wealth by gift or from an estate.
House Bill
No provision.
Senate Amendment
The Senate amendment provides a Sense of the Senate resolution that the Internal Revenue Code of 1986 needs broad-based reform, and that the President should submit a comprehensive proposal for reform.
Conference Agreement
The conference agreement does not include the Senate amendment.
Present Law
Under present law, an employer is generally entitled to a deduction with respect to stock options when the options are exercised by the employee. The deduction is generally the difference between the option price and the fair market value of the stock when the option is exercised.
House Bill
No provision.
Senate Amendment
The Senate amendment includes a Sense of the Senate resolution that finds that businesses can deduct the value of stock options as a business expense even though the options are not treated as an expense on the books of the business. It is the sense of the Senate that the Committee on Finance should hold hearings on the tax treatment of stock options.
Conference Agreement
The conference agreement does not include the Senate amendment.
Present Law
A gift tax is imposed on lifetime transfers by gift and an estate tax is imposed on transfers at death under a single unified graduated rate schedule that effectively begins at 37 percent and reaches 55 percent on cumulative taxable transfers over $3 million. A unified credit effectively exempts the first $600,000 in cumulative taxable transfers from estate and gift tax (sec. 2010).
An executor may elect to value certain qualified real property used in farming or another qualifying closely-held trade or business at its current use value, rather than its highest and best use value (up to a maximum reduction of $750,000). In addition, an executor may elect to pay the Federal estate tax attributable to a qualified closely-held business in installments over, at most, a 14-year period with a portion bearing 4-percent interest.
House Bill
No provision.
Senate Amendment
The Senate amendment provides a Sense of the Senate resolution that (1) estate tax relief provided by this bill is an important step that will enable more family-owned farms and small businesses to survive and continue to provide economic security and job creation in American communities and (2) Congress should eliminate the Federal estate tax liability for family-owned businesses by the end of 2002 on a deficit-neutral basis.
Conference Agreement
The conference agreement does not include the Senate amendment.
Present Law
No provision.
House Bill
No provision.
Senate Amendment
The Senate amendment includes a Sense of the Senate resolution that only those who pay Federal income taxes should benefit from the tax reduction provisions of the Act.
Conference Agreement
The conference agreement does not include the Senate amendment.
Present Law
Under the Self-Employment Contributions Act, taxes are imposed on an individual's net earnings from self employment. A limited partner's net earnings from self employment include guaranteed payments made to the individual for services actually rendered and do not include a limited partner's distributive share of the income or loss of the partnership. The Department of the Treasury has issued proposed regulations defining a limited partner for this purpose. These regulations provide, among other things, that an individual is not a limited partner if the individual participates in the partnership business for more than 500 hours during the taxable year. The regulations are proposed to be effective beginning with the individual's first taxable year beginning on or after the date the regulations are published as final regulations in the Federal Register.
House Bill
No provision.
Senate Amendment
It is the Sense of the Senate that the Department of the Treasury should withdraw the proposed regulations defining limited partner, and that the Congress should determine the tax law governing self-employment income.
Conference Agreement
The conference agreement provides that any regulations relating to the definition of a limited partner for self-employment tax purposes shall not be issued or effective before July 1, 1998.