[Senate Report 113-155]
[From the U.S. Government Publishing Office]
Calendar No. 367
113th Congress } { Report
2d Session } SENATE { 113-155
_______________________________________________________________________
TAX TECHNICAL CORRECTIONS ACT OF 2014
__________
R E P O R T
of the
COMMITTEE ON FINANCE
UNITED STATES SENATE
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
April 28, 2014.--Ordered to be printed
----
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2014
CONTENTS
Page
I. LEGISLATIVE BACKGROUND........................................ 1
A. Description of Tax Technical Corrections (secs. 1-19 of
the bill).................................................. 1
B. Deadwood Provisions (sec. 20 of the bill)................. 8
II. BUDGET EFFECTS OF THE BILL................................... 9
A. Committee Estimates....................................... 9
B. Budget Authority and Tax Expenditures..................... 9
C. Consultation with Congressional Budget Office............. 9
III. VOTES OF THE COMMITTEE...................................... 9
IV. REGULATORY IMPACT AND OTHER MATTERS.......................... 9
A. Regulatory Impact......................................... 9
B. Unfunded Mandates Statement............................... 10
C. Tax Complexity Analysis................................... 10
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED......... 10
Calendar No. 367
113th Congress } { Report
2d Session } SENATE { 113-155
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TAX TECHNICAL CORRECTIONS ACT OF 2014
_______
April 28, 2014.--Ordered to be printed
_______
Mr. Wyden, from the Committee on Finance,
submitted the following
R E P O R T
[To accompany S. 2261]
The Committee on Finance, having considered an original
bill, S. 2261, to amend the Internal Revenue Code of 1986 to
make technical corrections, to remove provisions that are no
longer applicable, and for other purposes, having considered
the same, reports favorably thereon and recommends that the
bill do pass.
I. LEGISLATIVE BACKGROUND
The Senate Committee on Finance marked up original
legislation (the ``Tax Technical Correction Act'') on April 3,
2014, and, with a majority and quorum present, ordered the bill
favorably reported, with amendments on that date. This report
describes the provisions of the bill.
A. DESCRIPTION OF TAX TECHNICAL CORRECTIONS
(SECS. 1-19 OF THE BILL)
The bill includes technical corrections to recently enacted
tax legislation. Except as otherwise provided, the amendments
made by the technical corrections contained in the bill take
effect as if included in the original legislation to which each
amendment relates.
Amendments to the Middle Class Tax Relief and Job Creation Act of 2012
(Pub. L. No. 112-96)
Repeal of certain shifts in the timing of corporate
estimated tax payments (Act sec. 7001).--The provision corrects
a reference to the repeal of certain shifts in the timing of
estimated corporate taxes with respect to the Corporate
Estimated Tax Shift Act of 2009 (Pub. L. No. 111-42).
Amendments to the American Taxpayer Relief Act of 2012 (Pub. L. No.
112-240)
Capital gain rate for certain high-income individuals (Act
sec. 102).--The provision contains a conforming amendment to
the computation of the foreign earned income exclusion.
Permanent alternative minimum tax relief for individuals
(Act sec. 104).--The provision clarifies that the exemption
amount for married individuals filing a separate return is one-
half the exemption amount for married individuals filing a
joint return, as adjusted for inflation. The provision also
clarifies that the exemption amount for individuals filing a
joint return, as adjusted for inflation, is rounded to the
nearest $100.
Amendments to the Regulated Investment Company Modernization Act of
2010 (Pub. L. 111-325)
Capital loss carryovers (Act sec. 101).--The Act provided
capital loss carryover treatment for a regulated investment
company (``RIC'') similar to the net capital loss carryovers
applicable to individuals. The provision is effective for
taxable years beginning after December 22, 2010. The Internal
Revenue Service ruled that this provision is effective for
purposes of the excise tax under section 4982 for calendar
years after 2010.\1\ Thus, the provision applies to 1-year
periods beginning after October 31, 2010, which are taken into
account in computing the excise tax for calendar years
beginning after 2010.
---------------------------------------------------------------------------
\1\Rev. Rul. 2012-29, 2012-42 I. R. B. 475.
---------------------------------------------------------------------------
Capital losses carryovers under the Act are used prior to
capital losses carryovers under the provisions of prior law. As
a result of the interaction of these rules, there are
situations where capital loss carryovers may expire for
purposes of the excise tax but not for purposes of determining
investment company taxable income.
The provision allows a RIC to elect to delay the new
capital loss carryover provisions for purposes of section 4982
for one calendar year so that the provision will apply to 1-
year periods beginning after October 31, 2011, which are taken
into account in computing the excise tax for calendar years
beginning after 2011. The provision also provides that the
capital loss carryovers of a RIC will not prevent the RIC from
having sufficient earnings and profits to make the required
distribution of its capital gain net income under section 4982
(as provided in section 852(c)(2)).
Spillover dividends (Act sec. 304).--The Act provides that
a spillover dividend must be declared before the later of the
15th day of the 9th month following the close of the taxable
year or the extended due date for filing the return for the
taxable year. The provision provides the declaration may be
made on or before the relevant date.
Certain late year losses (Act sec. 308).--Under prior law,
for purposes of determining the amount of a net capital gain
dividend, the amount of net capital gain for a taxable year was
determined without regard to any net capital loss or net long-
term capital loss attributable to transactions after October 31
of the taxable year, and the post-October net capital loss or
net long-term capital loss was treated as arising on the first
day of the RIC's next taxable year.\2\ The Act provided a
similar rule with respect to the post-October net short-term
capital loss.
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\2\Treas. Reg. 1.852-11 provides rules relating to the treatment of
losses attributable to periods after October 31 of a taxable year.
Also, Notice 97-64, 1997-2 C.B. 323, provides guidance on the
application of the multiple tax rates under section 1(h) to capital
gain dividends of RICs.
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The provision provides that the post-October capital loss
means the net capital loss for the portion of the taxable year
after October 31, or if there is no such loss, the net post-
October net long-term capital loss or the net post-October
short-term net capital loss.
Under prior law, to the extent provided in regulations, a
RIC could elect to push the post-October net foreign currency
losses and the net reduction in the value of stock in a PFIC
(passive foreign investment company) with respect to which an
election is in effect under section 1296(k) forward to the next
taxable year. Regulations had been issued allowing RICs to
elect to defer all or part of any post-October net foreign
currency losses for the portion of the taxable year after
October 31 to the first day of the succeeding taxable year. The
Act expanded this rule to provide that any late-year ordinary
loss may be deferred.
The provision corrects the definition of late-year ordinary
loss by defining the loss to be the sum of the post-October
specified loss (if any) and the post-December ordinary loss (if
any).
The provision does not apply to an election made before the
date of enactment of this Act for a taxable year ending before
that date where the election to defer losses was made in
accordance with the provisions of present law as now in effect.
Deferral of certain gains and losses for excise tax
purposes (Act sec. 402).--For purposes of the section 4982
excise tax, the Act applies the mark to market provisions of
the Code and regulations thereunder as if the taxable year
ended on October 31. Also the Act allows a taxable year RIC,
except as provided in regulations, to elect to ``push'' any net
ordinary loss (determined without regard to ordinary gains and
losses which are automatically ``pushed'' to the next calendar
year) attributable to the portion of the calendar year after
the beginning of the taxable year which begins in the calendar
year to the first day of the next calendar year.
The provision provides that any rule which determines
income by reference to the value of an item on the last day of
the taxable year is treated as a mark to market provision for
which value will be determined on October 31 for purposes of
the excise tax.
The provision allows a RIC to elect to push any portion of
a net ordinary loss to the next calendar year in determining
its ordinary income or net ordinary loss for a calendar year.
Amendments to the Tax Relief, Unemployment Insurance Reauthorization,
and Job Creation Act of 2010 (Pub. L. No. 111-312)
Indexing of amount of reduction of marriage penalty for
earned income credit (Act sec. 103.--The earned income tax
credit in section 32 of the Code is clarified to provide that
the $5,000 amount by which the phase-out thresholds for married
couples filing jointly are increased are indexed for inflation
for all taxable years after 2009, not just taxable years
beginning in 2010.
Amendments to the Creating Small Business Jobs Act of 2010 (Pub. L. No.
111-240)
Failure to furnish correct payee statements (Act sec.
2102).--The provision clarifies that the effective date for the
amendments to both section 6721 and section 6722 apply with
respect to both information returns required to be filed and
payee statements required to be furnished on or after January
1, 2011.
Amendments to the American Recovery and Reinvestment Act of 2009,
Division B (Pub. L. No. 111-5)
Refundable portion of child credit for certain taxable
years (Act sec. 1003).--The child tax credit in section 24 of
the Code is clarified regarding the determination of the
refundable credit in any taxable years beginning after 2008 and
before 2018. The provision provides that, to the extent that
the child credit exceeds the taxpayer's tax liability, the
taxpayer is eligible for a refundable credit equal to 15
percent of earned income in excess of $3,000 not indexed for
inflation (in lieu of $10,000 indexed for inflation). The
present-law alternative formula for families with three or more
children is unchanged.
American Opportunity Tax Credit (Act sec. 1004).--The Act
includes a reference to ``tuition, fees, and course
materials.'' The reference to course materials was intended to
apply to the Hope credit, but not to the Lifetime learning
credit. The provision corrects this reference to the inclusion
of course materials so that it applies only to the Hope credit
and not to the Lifetime learning credit.
Deduction for State sales tax and excise tax on the
purchase of certain motor vehicles (Act sec. 1008).--The Act
provides an itemized deduction and increased standard deduction
for qualified motor vehicle taxes. The provision strikes Code
section 164(b)(6)(E) (which refers to the last sentence of
section 164(a)) as inoperative, because the taxes referred to
in that last sentence do not include qualified motor vehicle
taxes.
Coordination with renewable energy grants (Act sec.
1104).--The provision provides that grants in lieu of energy
credits under section 1603 of the Act are not includible in
alternative minimum taxable income (including adjusted current
earnings of a corporation). This treatment is consistent with
the treatment of energy credits.
Credits for certain vehicles and refueling property (Act
secs. 1141 and 1142, and secs. 1341 and 1342 of the Energy Tax
Incentives Act of 2005 (Pub. L. No. 109-58)).--The provisions
conform the rules relating to the amount of basis reduction, as
well as the reduction of other credits and deductions, on
account of the credits for certain vehicles and refueling
property under sections 30, 30B, 30C, and 30D of the Code.
Qualifying advanced energy project credit (Act sec.
1302).--The provision restores missing words, clarifying that
the amount subject to the limitation in Code section 48C(b)(3)
is the amount which is treated as the qualified investment.
Regulated investment companies allowed to pass through tax
credit bond credits (Act sec. 1541).--The provision clarifies
that a regulated investment company electing to pass through
credits on tax credit bonds, and its shareholders, are treated
in a manner similar to that which would occur if the company
distributed to its shareholders an amount of money equal to the
amount of the credits passed through.
Special credit for certain government retirees (Act sec.
2202).--The provision clarifies the credit with respect to
treatment of the U.S. possessions. The provision is intended to
operate in a manner similar to the operation of the Making Work
Pay Credit with respect to the U.S. possessions (see H.R. Rep.
111-16, February 12, 2009, at 516-517).
Amendments to the Emergency Economic Stabilization Act of 2008 (Pub. L.
No 110-343)
Division B, the Energy Improvement and Extension Act of
2008
Credit for steel industry fuel (Act Div. B sec. 108).--The
provision clarifies that coke and coke gas produced using fuel
qualifying for a steel industry fuel credit is not eligible for
the credit under present-law section 45K(g).
Temporary increase in coal excise tax; funding of Black
Lung Disability Trust Fund (Act Div. B sec. 113).--The
provision clarifies that the term ``trust fund'' means the
Black Lung Disability Trust Fund.
Accelerated recovery period for depreciation of smart
meters and smart grid systems (Act Div. B. sec. 306).--The
provision clarifies that the accelerated recovery period for
smart meters and smart grid systems does not apply to property
with a class life less than 16 years.
Special depreciation allowance for certain reuse and
recycling property (Act Div. B sec. 308).--Consistent with the
intent of the Act, the provision clarifies that a taxpayer does
not qualify for the special depreciation allowance under this
provision if it elects out of bonus depreciation under Code
section 168(k)(4), which permits a taxpayer to accelerate the
recognition of AMT and research credits in lieu of claiming
bonus depreciation. This conforms to the parallel rule in
section 168(n)(2)(B)(i)(1) (excluding such property from the
definition of qualified disaster assistance property) under the
national disaster provisions.
Special rules in case of foreign oil and gas income (Act
Div. B sec. 402).--The Act expands the FOGEI rules to apply to
all foreign income from production and other activity related
to the sale of oil and gas product (the sum of prior-law FORI
and FOGEI). A transition rule in the Act unintentionally fails
to properly apply pre-effective date law to pre-2009 credit
carryforwards. The provision clarifies that pre-2009 credits
carried forward to post-2008 years continue to be governed by
prior law for purposes of determining the amount of
carryforward credits eligible to be claimed in a post-2008
year.
Broker reporting of customer's basis in securities
transactions (Act Div. B sec. 403).--The provision makes
conforming changes necessitated by the deletion of the defined
term ``open-end fund,'' so that the provision refers to
regulated investment companies rather than open-end funds.
The Act provides a definition of a dividend reinvestment
plan (``DRP''), and also permits use of average cost basis for
stock acquired after December 31, 2010 in connection with a
DRP. The Act further provides that stock acquired before 2012
for which an average basis method is permissible is treated as
a separate account from any such stock acquired after 2011, and
provides an election for a regulated investment company to
treat as a single account all stock held by a customer without
regard to the date of acquisition of the stock. For stock for
which an average basis method is permissible, the Act's basis
reporting requirements apply to stock acquired after December
31, 2011. The provision conforms the effective date for the
availability of an average basis method for DRP stock to the
effective date for the basis reporting requirement for stock
for which an average basis method is permissible by making the
former rule applicable to DRP stock acquired after December 31,
2011 (rather than December 31, 2010). The provision makes a
conforming change to the effective date provision applicable to
required basis reporting related to DRP stock. Under this
change, unless a broker elects otherwise, basis reporting for
DRP stock remains mandatory, as under the Act, only for stock
acquired on or after January 1, 2012.
The provision also clarifies that if an election is made to
treat as a single account all stock acquired in connection with
a DRP, the average basis method is permissible with respect to
all such stock without regard to the date of acquisition of the
stock.
Division C, Tax Extenders and Alternative Minimum Tax
Relief Act of 2008
Qualified investment entities (Act Div. C sec. 208).--The
Act generally extends the inclusion of a RIC within the
definition of a ``qualified investment entity'' under the
FIRPTA rules of section 897 through December 31, 2009. The Act
imposes withholding tax on certain RIC distributions to foreign
shareholders; however, distributions may have been made after
the provision had expired on December 31, 2007, but before the
extension was enacted. The provision clarifies that no
withholding is required for distributions that were made on or
before the date of enactment (October 4, 2008). The provision
also clarifies that a RIC is not liable to a foreign
shareholder to whom a distribution was made before October 4,
2008, for amounts that were withheld from such a distribution
and paid over to the Secretary.
Extension of 15-year straight-line cost recovery for
qualified leasehold improvements and qualified restaurant
improvements; 15-year straight-line cost recovery for certain
improvements to retail space (Act Div. C sec. 305).--The Act
expands the application of the 15-year MACRS recovery period to
restaurant property, for property placed in service after
December 31, 2008, and to a new category of retail improvement
property, also for property placed in service after December
31, 2008. Both of these rules provide that bonus depreciation
generally is not available for such property. The provision
clarifies, however, that assets that qualify as both qualified
leasehold improvement property and either qualified restaurant
property or qualified retail improvement property qualify for
bonus depreciation, consistent with the legislative intent with
respect to assets that overlap in this manner.
Amendments to the Heroes Earnings Assistance and Relief Tax Act of 2008
(Pub. L. No. 110-245)
Special period of limitation when uniformed services
retired pay is reduced as result of award of disability
compensation (Act sec. 106).--The provision clarifies that the
date June 17, 2008 (date of enactment), applies for purposes of
the portion of the transition rule specifying what date should
be substituted for the date of the determination.
Disposition of unused health benefits in flexible spending
accounts (Act sec. 114).--The Act provides that a plan does not
fail to be treated as a cafeteria plan or health FSA merely
because the plan provides for qualified reservist
distributions. The provision clarifies that a plan does not
fail to be treated as an accident or health plan under Code
section 105 merely because it provides for qualified reservist
distributions.
Amendments to the Economic Stimulus Act of 2008 (Pub. L. No. 110-185)
2008 recovery rebates for individuals (Act sec. 101).--The
provision clarifies that summary assessment procedures can
apply with respect to any taxpayer identification number under
the provision (not just in the case of limited age errors).
Amendments to the Tax Technical Corrections Act of 2007 (Pub. L. No.
110-172)
Act section 4(c).--The provision reinstates a part of Code
section 911, relating to the netting of disallowed deductions
against excluded income, that was inadvertently deleted by the
Act.
Amendments to the Tax Relief and Health Care Act of 2006 (Pub. L. No.
109-432)
WOTC and Indian employment credit (Act sec. 105).--Code
section 45A(b)(1)(B) coordinates the Indian employment credit
with WOTC. It provides that wages are not taken into account
during the one-year period beginning on the date the individual
begins work for the employer if wages are taken into account
under WOTC. In 2006, a second year was added to WOTC for long-
term family assistance recipients (section 51(e)). The
provision clarifies that the two-year period is taken into
account for purposes of section 45A(b)(1)(B) if any portion of
wages are taken into account under subsection (e)(1)(A) of
section 51.
Amendments to the Safe, Accountable, Flexible, Efficient Transportation
Equity Act of 2005: A Legacy for Users (SAFETY-LU) (Pub. L. No.
109-59)
Transfer to Highway Trust Fund of amounts equivalent to
certain taxes and penalties (Act sec. 11161).--The taxes on
aviation fuel and aviation gasoline, imposed on removal from a
terminal directly into the fuel tank of an aircraft, are
credited to the Airport and Airways Trust Fund (sec.
9502(b)(1)(D)). The provision makes a technical amendment to
section 9503(b)(1)(D) to clarify that the Highway Trust Fund is
not credited with these same amounts.
Amendments to the American Jobs Creation Act of 2004 (Pub. L. No. 108-
357)
ETI and 199 circularity (Act sec. 101).--The provision
incorporates an ordering rule for purposes of section 114 of
the Code that requires the computation of the section 114
extraterritorial income (``ETI'') exclusion without regard to
the section 199 deduction. Under this ordering rule, a taxpayer
must first compute the amount of the section 114 exclusion,
determined without regard to the section 199 deduction, before
the taxpayer computes its section 199 deduction. As under
present law, any amount excluded from gross income pursuant to
section 114 continues to be taken into account in determining
qualified production activities income (``QPAI''). The
provision is consistent with technical corrections previously
made to provide ordering rules to avoid circular calculations
resulting from the interaction between the computations under
section 199 and sections 163(j), 170, and 613A.
Section 199 W-2 wages (Act sec. 102).--Section 199(b)(2)(A)
provides that the amounts included as W-2 wages are only those
amounts paid during the calendar year ending during the taxable
year of a taxpayer. In some instances, this results in taxable
years in which no W-2 wages are included (e.g., short years
that do not include December 31). Consequently, in such
instances, the taxpayer may be precluded from claiming a
section 199 deduction due to the W-2 wage limitation. Although
section 199(b)(3) provides the Secretary with authority to
address cases in which there may be a short taxable year as a
result of a taxpayer's acquisition or disposition of a trade or
business (or a major portion of a separate unit of a trade or
business), it does not provide explicit authority to address
other circumstances that result in a short taxable year (e.g.,
change in accounting period).
The provision provides the Secretary the authority to issue
guidance for short taxable years (outside of the context of an
acquisition or disposition) permitting the allocation of W-2
wages to a short taxable year that does not include the end of
a calendar year. For example, the Secretary may issue guidance
that permits a taxpayer to allocate a portion of the annual W-2
wages to a short taxable year that does not include the end of
the calendar year and the full amount of such W-2 wages to the
subsequent 12-month taxable year that includes such calendar
year end.
Clerical corrections
The bill makes clerical and typographical corrections.
B. DEADWOOD PROVISIONS
(SEC. 20 OF THE BILL)
A number of provisions in the Internal Revenue Code are not
used in computing current taxes and are thus obsolete. These
provisions are referred to as ``deadwood''. The bill repeals 16
sections of the Code and repeals or amends portions of more
than 100 other sections of the Code to remove deadwood. The
bill does not change substantive law.
The amendments relating to deadwood made by the bill are
effective on the date of enactment. The bill includes savings
provisions to mitigate the effects of repealing the deadwood
items in the event those items have any remaining applicability
to past transactions. For example, if a transfer of property
took place before the date of enactment, the basis of the
property is not changed by reason of any provision of the bill
which amends a Code section relating to the determination of
basis.
II. BUDGET EFFECTS OF THE BILL
A. COMMITTEE ESTIMATES
In compliance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate, the following statement is made
concerning the estimated budget effects of the revenue
provisions of the ``Tax Technical Corrections Act of 2014'' as
reported. The bill has no revenue effect.
B. BUDGET AUTHORITY AND TAX EXPENDITURES
Budget authority
In compliance with section 308(a)(1) of the Budget Act, the
Committee states that no provisions of the bill as reported
involve new or increased budget authority.
Tax expenditures
In compliance with section 308(a)(2) of the Budget Act, the
Committee states that no provisions of the bill contain tax
expenditures.
C. CONSULTATION WITH CONGRESSIONAL BUDGET OFFICE
In accordance with section 403 of the Budget Act, the
Committee advises that the Congressional Budget Office has not
submitted a statement on the bill. The letter from the
Congressional Budget Office will be provided separately.
III. VOTES OF THE COMMITTEE
Final Passage of the Tax Technical Corrections Act of
2014--agreed to by voice vote.
IV. REGULATORY IMPACT AND OTHER MATTERS
A. REGULATORY IMPACT
Pursuant to paragraph 11(b) of rule XXVI of the Standing
Rules of the Senate, the Committee makes the following
statement concerning the regulatory impact that might be
incurred in carrying out the provisions of the bill as amended.
Impact on individuals and businesses, personal privacy and paperwork
The bill provides for technical corrections to the Internal
Revenue Code of 1986, as amended. The bill should not result in
any additional regulation with respect to individuals and
businesses, and should not result in additional recordkeeping
responsibilities for individuals and businesses beyond that
required for present law.
B. UNFUNDED MANDATES STATEMENT
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the tax provisions of the
reported bill do not contain Federal private sector mandates or
Federal intergovernmental mandates on State, local, or tribal
governments within the meaning of Public Law 104-4, the
Unfunded Mandates Reform Act of 1995. The costs required to
comply with each Federal private sector mandate generally are
no greater than the aggregate estimated budget effects of the
provision.
C. TAX COMPLEXITY ANALYSIS
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
The staff of the Joint Committee on Taxation has determined
that no provision of the bill has widespread applicability to
individuals or small businesses.
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary in order
to expedite the business of the Senate, to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).