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Bipartisan Amendment to Small Business Tax Bill Extends R&D Credit, Airline Ticket Tax, Section 127

Thursday, June 27, 1996

Deloitte & Touche OnLine

The bipartisan amendment to the small business tax incentive bill (HR 3448) to be considered on the Senate floor July 8 would extend the research and development tax credit, the airline ticket tax and the expired Section 127 education deductions further than contemplated by the Finance Committee’s version of the bill.

Earlier, Senate Democrats and Republicans planned to each offer separate amendments to the bill when it is considered on the floor. Now, leaders from both parties will offer a single amendment that ensures that political grandstanding is avoided and that the bill moves as fast as possible.

Though the current amendment is not final, no major changes are expected to it when it is offered on the floor since most senators from both parties have signed off on the language.

The amendment also contains additional miscellaneous pension simplification provisions, authorizes the Internal Revenue Service to use mathematical tests to verify dependency exemptions and filing status for certain tax returns and provides a non-refundable 10% tax credit for education expenses incurred by small businesses.

Democratic and Republican leaders also went a step further than the Finance Committee by proposing to clarify the Revenue Act of 1978’s Section 530, used to determine the status of workers.

Changes to Section 530 included in the amendment include: expanding it beyond employment taxes to all taxes, repealing Section 1706 which prohibits third party technical service firms from using Section 530, and expanding Tax Court jurisdiction over worker classification issues.