Small Business Job Protection Act of 1996

TABLE OF CONTENTS: Title I: Small Business and Other Tax Provisions Subtitle A: Expensing; Etc. Subtitle B: Extension of Certain Expiring Provisions Subtitle C: Provisions Relating to S Corporations Subtitle D: Pension Simplification Subtitle E: Foreign Simplification Subtitle F: Revenue Offsets Subtitle G: Technical Corrections Subtitle H: Other Provisions Subtitle I: Foreign Trust Tax Compliance Subtitle J: Generalized System of Preferences Title II: Payment of Wages Small Business Job Protection Act of 1996 - Title I: Small Business and Other Tax Provisions - States that no addition to any underpayment of a tax installment required to be paid before enactment shall be made to the extent such underpayment was created by this title. Subtitle A: Expensing; Etc. - Amends the Internal Revenue Code to incrementally increase to $25,000 by the year 2003 the amount which a small business may expense. (Sec. 1112) Revises varied tax provisions concerning: (1) employee tips; (2) the tax treatment of the storage of product samples in a residence; (3) charitable risk pools; (4) dues paid to agricultural or horticultural organizations; (5) the employment tax status of certain fisherman; (6) tax-exempt bond rules for first-time farmers; (7) newspaper distributors as direct sellers; (8) the application of involuntary conversion rules to presidentially declared disasters; (9) the class life for gas station convenience stores and similar structures; (10) the treatment of leasehold improvements and the treatment of lessor improvements abandoned at lease termination; and (11) housing provided to employees by academic health centers. (Sec. 1122) Amends provisions of the Revenue Act of 1978 concerning whether or not individuals are employees to: (1) require the IRS to provide an individual who is the subject of an employment status audit with the applicable Code provisions; (2) prohibit a taxpayer from relying on audit, in specified instances, unless such audit included an examination for employment tax purposes of whether the individual involved should be treated as an employee of the taxpayer; (3) revise safe harbor practices; and (4) place the burden of proof on the Secretary of the Treasury, if the taxpayer establishes a prima facie case that it was not reasonable to treat an individual as an employee and the taxpayer fully cooperated with the Secretary's reasonable requests. Subtitle B: Extension of Certain Expiring Provisions - Decreases from 40 to 35 percent the work opportunity credit. Extends and makes other revisions to such credit, including redefining members of targeted groups. Extends: (1) employer provided educational assistance programs; and (2) permanently, the Federal unemployment tax for alien agricultural workers; (3) the credit for increasing research activities; (4) the orphan drug tax credit; (5) the special rule for contributions of stock to charitable private foundations; (6) the binding contract date for biomass and coal facilities; and (7) the moratorium on the excise tax on diesel fuel sold for use in diesel-powered motorboats. Subtitle C: Provisions Relating to S Corporations - Increases from 35 to 75 the number of S corporation shareholders permitted. (Sec. 1302) Permits an electing small business trust as a shareholder. (Sec. 1304) Permits financial institutions to hold safe harbor debt. Revises S corporation provisions concerning: (1) the post-death qualification period; (2) the rules relating to inadvertent terminations and invalid elections; (3) an agreement to terminate the taxable year; (4) the post-termination transition period; and (5) the treatment of distributions during loss years. (Sec. 1310) Provides: (1) subject to exception, for the application of Subchapter C rules to an S corporation and its shareholders; (2) for the elimination certain earnings and profits; (3) for the carryover of disallowed losses and deductions under at-risk rules; and (4) adjustments to the basis of inherited S stock to reflect certain items of income. (Sec. 1314) Makes applicable to S corporations the rules applicable to individuals with respect to real property subdivided for sale. (Sec. 1316) Permits certain tax-exempt organizations to become S corporation shareholders. Subtitle D: Pension Simplification - Repeals: (1) five-year income averaging for lump sum distributions; and (2) the $5,000 exclusion of employees' death benefits. (Sec. 1403) Revises provisions concerning: (1) taxing annuity distributions under certain employer plans; and (2) the present requirement of beginning distributions on April 1 of the calendar year following a participant's attainment of the age 70 and one-half. (Sec. 1421) Establishes a simple retirement account matching plan for employees of businesses with 100 or fewer employees. Permits a simple plan under a 401(k) plan. (Sec. 1426) Permits 401(k) plans for tax-exempt organizations. (Sec. 1427) Permits, as specified, deductible IRA contributions of up to $2,000 for each spouse, including a homemaker spouse. (Sec. 1431) Revises the definition of a highly compensated employee. Repeals the family aggregation rules. Modifies additional participation requirements. Provides alternative methods of meeting nondiscrimination requirements. (Sec. 1442) Provides for the applicability of the special vesting rules for multiemployer plans to other qualified plans. (Sec. 1443) Provides for the treatment of: (1) distributions under rural cooperative plans; and (2) qualified governmental excess benefit arrangements. (Sec. 1445) Provides: (1) for the treatment of the social security retirement age as a uniform retirement age; and (2) that subsidized early retirement benefits and joint and survivor annuities shall not be treated as being unavailable to employees on the same terms merely because such benefits are based on an employee's social security retirement age. (Sec. 1446) Provides for the treatment of: (1) contributions on behalf of disabled employees; (2) deferred compensation plans of State and local governments and tax-exempt organizations. (Sec. 1448) Requires governmental plans to hold deferred amounts in trusts. Revises provisions concerning the treatment of Indian tribal government annuities. (Sec. 1450) Permits multiple salary reduction agreements. (Sec. 1452) Repeals the limitation in the case of a defined benefit plan and a defined contribution plan for the same employee. (Sec. 1453) Increases the five percent tax on prohibited transactions to ten percent. (Sec. 1454) Revises the definition of a leased employee. (Sec. 1455) Applies failure to file information report penalties to pension payments. (Sec. 1456) Exempts the retirement benefits of ministers, including the rental value of a parsonage, received under a church plan from the tax on net earnings from self-employment. (Sec. 1457) Directs the Secretary to develop a model spousal consent form for purposes of the minimum survivor annuity requirements. (Sec. 1458) Exempts volunteer fire fighters and emergency medical and ambulance service personnel from certain deferred compensation requirements. (Sec. 1459) Permits a 401(k) plan, under specified conditions for purposes of the actual deferral percentage test, to disregard non-highly compensated employees eligible to participate before they have completed one year of service and attained age 21. (Sec. 1460) Amends the Employee Retirement Income Security Act to revise provisions concerning the fiduciary responsibility of an insurance company. (Sec. 1461) Makes revisions concerning church plans, including allowing certain self-employed ministers to participate. Subtitle E: Foreign Simplification - Repeals provisions which require certain U.S. shareholders of a controlled foreign corporation to include in income for tax purposes specified earnings from such corporations. Subtitle F: Revenue Offsets - Terminates, subject to exception, the Puerto Rico and possessions tax credit after December 31, 1995. Adds a Puerto Rican economic activity credit. (Sec. 1602) Repeals the exclusion for interest on loans used to acquire employer securities. (Sec. 1603) Treats as taxable unrelated business income certain amounts derived from foreign corporations. (Sec. 1604) Revises rules for depreciation under the income forecast method. (Sec. 1605) Revises provisions concerning the exclusion of damages received because of personal injuries or sickness. (Sec. 1606) Repeals the diesel fuel tax rebate to original purchasers of diesel-powered automobiles and light trucks. (Sec. 1607) Extends and phases out after December 31, 2002 the excise tax on luxury automobilies. (Sec. 1608) Provides for the termination, as specified, of the tax exempt bond status of certain local furnishers of electricity and gas. (Sec. 1609) Provides for a temporary extension of the Airport and Airway Trust fund excise tax. (Sec. 1610) Modifies the rules concerning the basis of property acquired through involuntary conversion. (Sec. 1611) Provides, with respect to life insurance contracts, for the treatment of: (1) certain contracts on retired lives; and (2) modified guaranteed contracts. (Sec. 1613) Provides for the treatment of contributions in aid of construction for water and sewage disposal facilities. (Sec. 1614) Permits certain qualified scholarship organization bonds to continue as tax-exempt bonds even if an organization ceases to meet certain requirements for tax-exemption, if specified requirements are still met. (Sec. 1615) Denies any personal exemptions and the dependent care credit to individuals failing to provide taxpayer identification numbers. (Sec. 1616) Repeals the bad debt reserve method for thrift savings associations. (Sec. 1617) Limits energy conservation subsidies provided by public utilities to dwelling units. (Currently, other properties are included.) (Sec. 1621) Exempts a Financial Asset Securitization Investment Trust (FASIT) from taxation under subtitle M (Regulated Investment Companies and Real Estate Investment Trusts) of Chapter One of the IRC and prohibits its treatment as a trust, partnership, corporation, or taxable mortgage pool. Sets forth provisions which provide for determining the taxable income of the holder of the ownership interest in a FASIT. Subtitle G: Technical Corrections - Amends the Internal Revenue Code, the Revenue Reconciliation Act of 1990, the Revenue Reconciliation Act of 1993, the Employee Retirement Income Security Act of 1974, the Public Health Service Act, and other legislation to make technical corrections. Subtitle H: Other Provisions - Provides for an exception to the diesel fuel dyeing requirements for diesel fuel exempted from specified dyeing requirements under the Clean Air Act. (Sec. 1802) Modifies provisions concerning the: (1) treatment of certin university employment taxes; (2) excise tax on ozone-depleting chemicals; and (3) issuance of tax-exempt bonds to finance the acquisition of the Snettisham hydroelectric project from the Alaska Power Administration. (Sec. 1805) Provides for the nonrecognition of certain transfers by common trust funds to regulated investment companies. (Sec. 1806) Exempts, as specified, a qualified State tuition program from taxation. (Sec. 1807) Allows a limited tax credit for qualified adoption expenses. Provides for an employer adoption assistance program. (Sec. 1808) Amends title IV (Grants to States for Aid and Services to Needy Families with Children and for Child-Welfare Services) of the Social Security Act to prohibit denial of an adoption or foster care placement on the basis race, color, or national origin. (Sec. 1809) Delays, for six months, certain electronic fund transfer percentage requirements concerning the collection of depository taxes. Subtitle I: Foreign Trust Tax Compliance - Revises the requirements regarding information that must be reported regarding certain foreign trusts. Sets forth failure to file penalty provisions relating to transfers to foreign entities. Modifies the circumstances (with regard to foreign trusts having one or more U.S. beneficiaries) in which a transferor is treated as the owner. Replaces provisions setting forth a special rule applicable to foreign grantors with provisions declaring that provisions relating to treating grantors and others as substantial owners shall apply only when that application results in an amount being currently taken into account in computing the income of a U.S. citizen or resident or a domestic corporation. Requires a United States person to report information regarding foreign gifts or bequests when the gifts' aggregate value during a taxable year exceeds $10,000. Modifies requirements regarding the interest charge on accumulation distributions from foreign trusts. Changes the circumstances in which an estate or trust is included in the definition of "United States person." Modifies the definition of "foreign estate or trust." Requires (for provisions relating to the imposition of a tax on transfers to avoid income tax) treating a trust which is not a foreign trust and which becomes a foreign trust as having transferred, immediately before becoming a foreign trust, all of its assets to a foreign trust. Subtitle J: Generalized System of Preferences - GSP Renewal Act of 1996 - Amends the Trade Act of 1974 with respect to the Generalized System of Preferences (GSP). Authorizes the President to designate a country as a least-developed beneficiary developing country for extension of trade preferences under the GSP. Removes Austria, Finland, and Sweden from the list of countries which may not be designated as beneficiary developing countries. (The three countries are now member states of the European Union, which is ineligible for such designation.) Declares that, for purposes of designating a beneficiary developing country, a country may be found to not provide protection of intellectual property rights, notwithstanding the fact that it may be in compliance with the specific obligations of the Agreement on Trade-Related Aspects of Intellectual Property Rights of the Uruguay Round Agreements Act. Authorizes the President to withdraw or suspend duty-free treatment for the products of a country based on consideration of specified factors. Requires the President to: (1) withdraw or suspend the designation of a country as a beneficiary developing country if it is determined that changed circumstances would bar its designation as a beneficiary developing country; and (2) terminate the designation of a country as a beneficiary developing country if during any calendar year the official statistics of the International Bank for Reconstruction and Development demonstrate that such country has become a "high income" country. Requires the President to notify the Congress before designating or terminating a country as a beneficiary developing country. Revises provisions on the designation of articles as eligible for preferential treatment. Authorizes the President to designate additional articles as eligible articles for countries designated as least-developed beneficiary developing countries if, after receiving advice from the International Trade Commission, it is determined that such articles are not import-sensitive. Prohibits an article that has been denied designation as an eligible article from being reconsidered for such designation for a three year period. Prohibits, with respect to the President's withdrawing, suspending, or limiting the duty-free treatment of an eligible article, the establishment of a duty rate for such article other than the rate which would apply but for this Act. Requires the President to terminate the duty-free treatment for an article from a beneficiary developing country (except least-developed beneficiary developing countries) whenever it is determined that such country has exported, directly or indirectly, to the United States during any calendar year a quantity of an eligible article: (1) having an appraised value in excess of $75 million (increased by $5 million on January 1 each calendar year after 1995); or (2) equal to or exceeding 50 percent of the appraised value of the total imports of such article into the United States during the calendar year. Authorizes waiver of such competitive need limitation in the national economic interest if any U.S. industry is unlikely to be adversely affected by it. Prohibits any action under this Act from affecting any tariff duty imposed by the Legislature of Puerto Rico under the Tariff Act of 1930 on coffee imported into Puerto Rico. Requires the President to report to the Congress on: (1) the operation of this Act; and (2) the status of internationally recognized worker rights within each beneficiary developing country. Title II: Payment of Wages - Employee Commuting Flexibility Act of 1996 - Amends the Portal-to-Portal Act of 1947 to provide that an employer does not have to pay minimum wages or overtime compensation to an employee for or on account of such employee's use of employer-owned vehicles for traveling for commuting purposes, if such use is: (1) within the normal commuting area for the employer's business or establishment; and (2) subject to an agreement on the part of the employer and the employee or employee representative. Considers such commuting use, and activities incidental to it, as not part of the employee's principal activities, thus relieving the employer of liability and punishment, under the Fair Labor Standards Act of 1938, Walsh-Healey Act, and Davis-Bacon Act, for failure to pay such wage or compensation for the time of such use. (Sec. 4) Minimum Wage Increase Act of 1996 - Amends the Fair Labor Standards Act of 1938 to increase the minimum wage rate from the current $4.25 per hour to: (1) $4.75 per hour during the year beginning on October 1, 1996; and (2) $5.15 per hour beginning September 1, 1997. (Sec. 5) Amends the Fair Labor Standards Act of 1938 to exempt from minimum wage and overtime requirements certain computer professionals who are compensated at a rate of not less than $27.63 per hour. Revises provisions relating to the tip credit for determining the minimum wage for tipped employees. Allows an employer to pay less than the minimum wage (as increased by this Act, but not less than $4.25 per hour) to any employee who is less than 20 years old, during the first 90 consecutive calendar days after such employee is hired.