Tax revision issues, 1976 (H.R. 10612)

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Title:
Tax revision issues, 1976 (H.R. 10612)
Physical Description:
12 v. ; 24 cm.
Language:
English
Creator:
United States -- Congress. -- Joint Committee on Internal Revenue Taxation
United States -- Congress. -- Senate. -- Committee on Finance
Publisher:
U.S. Govt. Print. Off.
Place of Publication:
Washington
Publication Date:

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Subjects / Keywords:
Taxation -- Law and legislation -- United States   ( lcsh )
Genre:
federal government publication   ( marcgt )
non-fiction   ( marcgt )

Notes

Bibliography:
Includes bibliographical references.
General Note:
At head of title: Committee print.
Statement of Responsibility:
prepared for the use of the Committee on Finance by the staff of the Joint Committee on Internal Revenue Taxation, April 14, 1976.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 025878813
oclc - 02347319
lccn - 76601762
Classification:
lcc - KF6275.5 .I554
ddc - 343/.73/04
System ID:
AA00022127:00011

Table of Contents
    Front Cover
        Page i
        Page ii
    Table of Contents
        Page iii
        Page iv
    Introduction
        Page 1
    1. Import restrictions
        Page 2
        Page 3
    2. Automobile energy conservation programs
        Page 4
        Page 5
    3. Other nonbusiness energy conservation programs
        Page 6
    4. Business energy conservation programs
        Page 7
        Page 8
        Page 9
        Page 10
    5. Energy development loan guarantees or trust fund
        Page 11
        Page 12
Full Text
V-;4, P7'-Y;


[COMMITTEE PRINT]


TAX REVISION ISSUES-1976
(H.R. 10612)




11


ENERGY MATTERS


(H.R. 6860)





PREPARED FOR THE USE OF THE

COMMITTEE ON FINANCE

BY THE STAFF OF THE

JOINT COMMITTEE ON INTERNAL REVENUE


TAXATION


U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1.DT6


-1


-I
V


70-OA0


JCS-1S-76


(
















CONTENTS


Page
Introduction ----------------------------- 1
1. Import restrictions ----------------------------- 2
2. Automobile eniiergy conservation programs-------------------------- 4
3. Other nonbusiness energy conservation programs------------------ 6
4. Business energy conservation programs----------------------------- 7
5. Energy development loan guarantees or trust fund------------------ 11
(III)


















Digitized by the Internet Archive
in 2013












http://archive.org/details/revssta00unit










INTRODUCTION


This pamphlet presents summaries of matters that either had been
agreed to tentatively in Senate Finance Committee markup sessions
held on the House-passed energy tax bill (H.R. 6860, the Energy Con-
servation and Conversion Act of 1975) or that were dealt with in that
bill. The pamphlet includes material relating to import restrictions,
automotive energy conservation matters, other nonbuisiness ene, gy
conservation measures, business conservation and conversion mea ures,
and an Energy Development Bank or Energy Trust Fund.
In each of these areas, the pamphlet describes the Senate Finance
Committee tentative decisions and the House bill (H.R. 6860) ; it alno
notes any subsequent relevant actions (e.g., separate enactment of auto
efficiency standards and elimination of license fees). Subsequent ma-
terial will disci,:.ss alternative proposals for dealing with such issues.
(1)










1. Import Restrictions


(The Finance Committee did not make tentative decisions with re-
spect to this part (title I) of the House bill.)
A. Quotas
House bill
The House bill (sec. 111) would impose mandatory oil import
quotas. These would be set at 6.0 million barrels per day (mbd) in
1975 and 19761 6.5 mbd in 19,7, 6.0 mbd in 1978 and 1979, and 6.5 mbd
thereafter. The President would be authorized to vary the quota by
1.0 mbd in 1975-77, 1.5 mbd in 1978 and 1979, and 2.0 mbd in 1980
and future years. The President would be required to further reduce
import quotas to the extent necessary to be sure that savings in U.S.
0oil consumption are reflected in reduced imports. Imports of petro-
chemical feedstocks, and imports for strategic oil reserves would be
exempt from the quota system; and imports of residual oil and heating
oil (within the quotas set above) would be guaranteed at 2.0 mbd for
1975-77 (of which no more than 400,000 barrels per day could. be
heating oil).
B. Import Licensing System
House bill
Under the House bill (sec. 112), the Federal Energy Adiministration
would distribute import licenses by public auction, and there would
be a separate auction for small refiners and independent marketers.
This system was to be established before December 31, 1975; the 1975
quotas (described above) were to begin to apply the day the license
system was to go into effect.
C. Duties-Restriction on Prior Authority
House bill
Under the House bill (sec. 121), tihe President's authority to impose
import restrictions on oil under the national security provisions of the
Trade Expansion Act of 1962 would be ended except in time of war,
etc., and the then existing license fees on oil ($2.21 per barrel on crude
oil and $1.23 on petroleum products) which the President imposed
under this provision would be repealed (but see new duties set forth in
item immediately below).
Subsequent action
On AuguLst 11, 1975, the Court of Appeals for the D.C. Circuit
ruled that the import license fees imposed initially by President Nixon
effective May 1, 1973, and increased significantly by President Ford in
1975 (by $2.00 per barrel on crude oil and $0.60 on petroleum products)
-were illegal because they exceeded the President's authority under the
(2)








Trade Expansion Act. The FEA has appealed this decision to the Su-
preme Court. Effective December 22, 1975, President Ford removed
these license fees. The disposition of the $1.8 billion in fees collected
after May 1, 1973, is currently pending before the Supreme Court.
D. Duties-New Authority
House bill
Instead of the license fees described above, the House bill (sec. 121)
would establish a new ad valorem tariff of 2 percent (approximately
21 cents at mid-1975 prices) for crude oil and 5 percent (approxi-
mately 60 cents at mid-1975 prices) for petroleum products. The Presi-
dent would be given the authority to raise these tariffs to 10 percent
(between $1.00 and $1.20 at mid-1975 prices) or $1 a barrel, whichever
is higher, except that the tariff on imports of residual oil and heating
oil could not exceed 5 percent for 2 years. (The 10-percent tariff ap-
proximates the $1 license fee that the President imposed on crude oil
on February 1, 1975, plus the 21-cent import license fee that was first
imposed in 1973.)
Subsequent action
As described above, the Court of Appeals has declared the Presi-
dent's license fees illegal in a decision now on appeal to the Supreme
Court. The President has removed the fees.










2. Automotive Energy Conservation Programs


A. Auto Efficiency Standards
Senate Finance
The Senate Finance Committee tentatively voted down a proposed
set of auto efficiency standards similar to those in the House bill. The
general issue was left open to further consideration.
House bill
The House bill (secs. 211-217) would establish a set of auto efficiency
standards-1S.5 miles per gallon (mpg) for the 1978 model year, 19.5
mpg for 1979, 20.5 mpg for 1980, and 28.0 mpg for 1985 and there-
after. Companies would have to meet the standards (or pay the
penalties, discussed below) on their U.S. and foreign car production
separately, with domestic production defined to include Canada. The
Secretary of Transportation would establish standards for the years
1981-84, and the 1985 standard could be changed by the Secretary
subject to a one-House congressional veto. The bill would impose
on any manufacturer who fails to meet these standards by as much'as
0.5 miles per gallon a civil penalty of $50 per car for each mile per
gallon by which the manufacturer's sales-weighted "harmonic" fleet
average gas mileage is below the standard. This penalty would not be
deductible under the Federal income tax. (The Secretary of Transpor-
tation is also to establish separate standards for light-duty trucks,
multipurpose passenger vehicles, and vehicles manufactured by com-
panies that manufacture fewer than 10,000 vehicles per year. The civil
penalty rules described above would also apply to vehicles failing to
meet these standards.) The Secretary of Transportation also would
reduce the mileage standards to the extent necessary to take account of
any more stringent auto emissions standards imposed in the future.
Any manufacturer that exceeds the mileage standards by more than
0.5 mpg for any one model year would be permitted to carry back or
carry over this excess for one year therebyy reducing the mileage
standard for the year to which the excess is carried).
Subsequent action
The Energy Policy and Conservation Act (Public Law 94-163)
which was recently enacted includes auto efficiency standards that are
similar to those in the House version of H.R. 6860.
B. Buses
Senate Finance
The Senate Finance Committee tentatively voted to exempt all buses
from the manufacturers excise tax now imposed on trucks (other than
light-duty trucks), buses, trailers, etc.
(4)








House bill
The House bill (sec 221) would exempt from this tax all buses to be
used predominantly in public passenger transportation service, effec-
tive on the date of enactment.
C. Radial Tires, Tread Rubber
Senate Finance
The Senate Finance Committee tentatively decided to accept the
House bill's exemption of radial tires from manufacturers excise tax,
with some technical changes relating to floor stocks refunds and
original equipment tires. Also, the tax on all tread rubber would be
repealed.
House bill
The House bill (sec. 222) would repeal the excise tax on radial tires
(and tread rubber for such tires), effective on March 18, 1975.
D. Lubricating Oil
Senate Finance
The Senate Finance Committee tentatively decided to accept the
House bill's rules on new lubricating oil mixed with rerefined lubri-
cating, oil.
House bill
The House bill (sec. 223) would repeal the excise tax on new oil used
in a mixture with rerefined lubricating oil, effective on March 18,1975.
E. Electric Motor Vehicles
Senate Finance
The Senate Finance Committee tentatively decided to delete the
House bill's credit for electric cars.
House bill
The House bill (sec. 233) would provide a 25-percent tax credit for
the purchase of electric cars for personal use on highways, up to a
maximum $3,000 of expenditures ($750 maximum credit). The credit
would be available for the period June 4, 1975, through December 31,
1978.









3. Other Nonbusiness Energy Conservation Programs
A. Home Insulation
Senate Finance
The Senate Finance Committee tentatively decided to provide a re-
fundable income tax credit for home insulation equal to 30 percent of
insulation expenditures, up to a maximum expenditure of $750 (max-
imum credit of $225). This amount is not to be reduced on account of
expenditures by a prior owner. The credit would be available for the
period March 18,1975, through December 31,1977.
House bill
The House bill (sec. 231) would provide a similar credit, except
that: (1) the maximum expenditures taken into account would be
$500, (2) the $500 would be reduced by prior owners' insulation ex-
penditures, and (3) the credit would not be refundable.
Subsequent action
The Senate Commerce Committee is expected to begin marking up
a bill to provide loan subsidies for home insulation improvements.
B. Home Solar Energy and Geothermal Energy
Senate Finance
The Senate Finance Committee tentatively decided to provide a re-
fundable income tax credit for solar energy and geothermal energy
equipment installed in, on, or connected to a residence. The credit is
40 percent of the first $1,000 of qualified expenditures, plus 25 percent
of the next $6,400 (maximum credit of $2,000). The solar energy
equipment must meet definitive or interim performance criteria pre-
scribed by the Secretary of Housing and Urban Development. The
credit is available for equipment installed on any residence of the
taxpayer, without regard to whether the taxpayer installed such
equipment on any other residence. The credit is available for the
period March 18, 1975, through December 31,1980.
House bill
The House bill (spec. 232) would provide similar credit, except that:
(1) the credit would be 25 percent of the first $8,000, (2) the credit
would not be refundable, (3) the qualified expenditures would be
reduced by expenditures made by that taxpayer for other residences,
and (4) geothermal energy equipment expenditures would not be
eligible for the credit.
Subsequent action
The Senate Commerce Committee is expected to begin markup on a
bill to provide loan subsidies for energy conservation improvements.
(6)










4. Business Energy Conservation Programs


A. Business Use of Oil and Natural Gas
Senate Finance
The Senate Finance Committee tentatively decided to provide an
excise tax on oil and gas used in business as a fuel. The tax is phased in
between 1977 and 1980 for natural gas, and between 1977 and 1982 for
oil. When fully effective, the rates will be $1 per barrel for oil and 18
cents per thousand cubic feet for gas. There are exemptions for use as
reformer fuel, natural gas used in gas pipeline compressors, extraction
of oil or gas. vessels, aircraft, apartments and other residential facili-
ties. mining, textiles, glass, farming, existing facilities for generating
electrical power (in this latter case only until 1982 and only if either
EPA certifies that environmental requirements force use of oil or gas
or FEA certifies that there is no economically feasible alternative to
use of oil or gas), vehicles (but only as to diesel fuel or where gasoline
would be exempt under present law-e.g., sales to State or local govern-
ments), and tax-exempt educational, charitable, or religious organiza-
tions (but not for these organizations' unrelated trades or businesses).
By April 1, 1976, FEA is to make a report as to factors bearing on
use.- which should be exempt from this tax.
House bill
The House bill (sec. 411) would provide a similar tax, except that;
(1) exemptions would not be provided for reformer fuel, pipeline com-
pressors, and extraction of oil or gas; (2) existing electrical power
generators would be exempt until 1982 without the need of EPA or
FEA certificates; (3) vehicular use would be exempt from this busi-
ness ui-e tax even where gasoline is taxable under present law, and (4)
the FEA report would be due by June 1, 1976.
B. Business Insulation
Senate F;iTnvce
The Senate Finance Commnnittee tentatively decided to extend
the investment, credit to insulation in the case of businesses. The credit
is to be available, at the 10-percent rate, for insulation installed after
March 17, 1975, and before January 1, 1981, in the case of new
st ructures as well as existing structures.
House bill
The House bill (sec. 431) would provide a similar credit, except
that: (1) the period for installation of the equipment would end
December 31, 1977; (2) the credit would be available only as to
buildings in existence on March 17, 1975; and (3) the credit would
be at the then current investment credit rate.
(7)








Subsequent action
The Senate Commerce Conmmittee is expected to begin markup of a
bill to provide loan subsidies for energy conservation improvements
by small business.
C. Business Solar Energy and Geothermal Energy
Senate Finance
The Senate Finance Committee tentatively decided to extend the
investment credit to solar energy equipment and geothermal energy
equipment in the case of businesses. The credit is to be at the rate of
20 percent for equipment installed after March 17, 1975, and before
January 1, 1981; and at 10 percent for equipment installed after
December 31, 1980, and before January 1, 1986. The credit is to be
available for new structures as well as existing structures.
Iouse bill
The House bill (sec. 431) would provide a similar credit except
that: (1) the credit would not be available for geothermal energy
equipment; (2) the credit would be available only for equipment
installed after March 17, 1975, and before January 1, 1981; and (3)
the credit would be at the then current investment credit rate.
D. Room Air Conditioners and Space Heaters
Senate Finance
The Senate Finance Committee tentatively decided to remove the in-
vestment credit for room air conditioners and space heaters.
House bill
The House bill (sec. 431) would provide the same treatment as the
Senate Finance Committee tentative decisions.
E. Qualified Waste Equipment and Deep Mining Coal Equipment
Senate Finance
The Senate Finance Committee tentatively decided to allow an in-
creased investment credit. for waste-burning and recycling equipment
and for deep mining coal equipment. The credit is to be at the rate
of 12 percent for equipment installed after Mlarch 17, 1975, and before
January 1,1981.1
House bill
The House bill (sec. 421) would provide 5-year amortization for
such equipment.
Subsequent action
The Senate Commerce Committee is expected to begin marking up
a bill that would provide loan guarantees for business energy ecnserva-
tion investments.

1 Tn addition, the Seivste Fip'ance Commiftee tentatively decided to allow fin
additional one-percentage point of investment credit if the taxpayer has in effect
an employee stock ownership plan. Also, the Tennessee Valley Authority would'
he entitled to reduce its annual repayments to the United States by the amount
of the investment credit it would be entailed to under this provision if TVA were
a taxable corporation.








F. Qualified Shale Oil Conversion Equipment, Coal Processing
(Gasification and Liquefaction) Equipment, and Coal Pipe-
lines
Senate Fi'it,ioe
The Senate Finance Committee tentatively decided to allow an in-
creased investment credit for -: 1ale oil conversion equipment, coal proc-
essing (gasifi,.tion and liquefactlon) equipment, and coal pipelines.
Tile credit is to be available at the rate of 12 percent for (A,1uipment
inst.alled after March 17, 1975, anid before, January 1, 1986. (The rules
de-cribed in footnote 1 (qualified w.-te equipment) are also to apply
to the types of equipment described in this provision.)
Hou.xe bill
Tlhe Hiouse bill (-ec. 4-,21) would provide 5-year amortization for
essentially tle -aeii equipment, except that the qualified sliale oil con-
version property would not include equipment to remove impurities.
G. Qualified Gasoline Substitute Equipment
Senate Fina(ice
The Senate Finance Committee tentatively decided to allow an in-
crea.ecd investment credit for equipment used to convert organic mate-
rial into methanol or any other synthetic fuel which can be sub-tituited
for, or blended with. gasoline for use as a fuel. The credit is to be at the
rate of 12 percent for equipment installed after July 21, 1975, and
before January 1, 1982. (See footnote 1-qualified waste equipment.)
House bill
The House bill does not have a comparable provision.
H. Qualified Railroad Equipment
Senate Finance
The Senate Finance Committee tentatively decided to allow an in-
creased investment credit for certain railroad equipment and rolling
stock. The credit is to be at the rate of 12 percent if installed after
July 21, 1975, and before January 1, 1981. (See footnote 1-qualified
waste equipment.)
House bill
The House bill (sec. 422) would provide 5-year amortization for such
equipment, but only through December 31, 1979.
I. Qualified Geothermal and Seathermal Equipment
Senate Finance
The Senate Finance Committee tentatively decided to allow an
increased investment credit for geothermal equipment and seathermal
equipment. This applies to (1) geothermal equipment which is neces-
sary to gather or distribute geothermal steam or associated geothermal
resources to consumers of such energy and to seathermal equipment
which is designed to convert ocean heat into significant quantities of
electric energy through the use of large-scale floating power plants
or otherwise. The credit is to be at the rate of 12 percent for equip-
ment installed after March 17, 1975, and before January 1, 1981. (See
footnote 1-qualified waste equipment.)






10


House bil
The House bill had no comparable provision.
J. Recyclable Paper Purchases
Senate Finance
The Senate Finance Committee tentatively decided to allow an
investment credit for the cost of used paper which is recycled by
the taxpayer. The credit is to be at the rate of 10 percent of the pur-
chase price of the paper and is to apply to purchases made after
December 31,1975.
House bill
The House bill had no comparable provision. However, the bill
reported by the House Ways and Means Committee included a pro-
vision (deleted by a House floor amendment) which was similar, except
that the credit would not be allowed until the taxpayer purchased
recycling equipment.
K. Investment Credit for Oil- and Gas-Burning Electrical Gener-
ating Equipment
Senate Finance
The Senate Finance Committee has not as yet made tentative de-
cisions with respect to this issue.
House bill
The House bill (sec. 432) would remove the investment credit for
oil- and gas-burning electrical generating equipment (with an exemp-
tion for property placed in service in the future pursuant to existing
contracts or certain types of existing commitments). Apart from this
exemption, the loss of investment credit would apply to property
placed in service after April 17, 1975.




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5. Energy Development Loan Guarantees or Trust Fund
Senate Finawce
The Senate Finance Committee tentatively decided to provide an
energy development loan guarantee program to encourage the com-
mercial development by private industry of new and alternative en-
ergy sources. Loan guarantees for up to 80 percent of the cost of a
project could be made available, but only if recommended by a 5-
member Presidentially-appointed advisory board and approved by
the Secretary of the Treasury. Loan guarantee agreements could be
entered into up to December 31, 1980. Loans guaranteed in any fiscal
year could not exceed $2.5 billion. The loan guarantees are to be backed
by receipts from existing tariffs (or tariffs that might otherwise
be provided in the bill) of 10 cents per barrel of oil (plus loans from
the general Treasury, if needed).
The committee also decided to delete the Energy Trust Fund pro-
vision of the House bill.
House bill
The House bill would establish an Energy Conservation and Con-
version Trust Fund. The trust fund could be used for (1) basic and
applied research on new energy technologies, (2) development and
administration of new energy technologies, (3) development of energy
resources from U.S. lands, (4) research projects and capital expendi-
tures for demonst ration projects relating to more efficient public trans-
portation. Trust fund receipts would include revenues from the im-
port tariff provided by the bill, the tax on business use of oil and gas as
fuels, and (if subsequently authorized) proceeds from U.S. oil and
gas properties. The trust fund would terminate on October 1, 1985.
Expenditures could be made out of the fund only subject to annual
authorizations and appropriations.
Subsequent action
The Senate Commerce Committee is expected to begin marking up
a similar bill.
(11)