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Tax Legislation

Major Enacted Tax Legislation, 1980-1989


Omnibus Budget Reconciliation Act of 1989

  • Limited tax deductions and exclusions for employee stock ownership plans.
  • Increased fees and excise taxes on air travel, ozone-depleting chemicals, and oil spill liability.
  • Repealed completed contract method of accounting.
  • Modified the corporate alternative minimum tax.
  • Extended expiring provisions: employer provided educational assistance; research and experimentation tax credit and allocation rules; low income housing credit.

Medicare Catastrophic Coverage Repeal Act of 1989

  • Eliminated supplemental premium tax for Medicare catastrophic coverage.

Financial Institutions Reform, Recovery, and Enforcement Act of 1989

  • Repealed three provisions that had provided tax relief to financially troubled thrift institutions.

Technical and Miscellaneous Revenue Act of 1988

  • Passed technical corrections for the Tax Reform Act of 1986.
  • Extended expiring provisions: research and experimentation tax credit and allocation rules; targeted jobs credit; mortgage subsidy bonds; employer-provided educational assistance and group legal services: FSLIC relief provisions, and mutual fund expense exclusion.
  • Restricted single premium life insurance, Alaskan Native Corporations, and completed contract accounting rules; and accelerated corporate estimated tax payments.

Medicare Catastrophic Coverage Act of 1988

  • Passed new supplemental premium tax on all persons eligible for Medicare. Premium rate was 15 percent of individual income tax liability in excess of $150, increased to 28 percent in 1993. Premium limited to $800 in 1989, raised to $1,050 in 1993, with future premium cap dependent on medical care costs after 1993.

The Family Security Act of 1988

  • Extended the debt refund offset provision.
  • Tightened eligibility for the dependent care credit.
  • Required taxpayer identification number for younger children.

Continuing Resolution for Fiscal Year 1988

  • Increased IRS funding for more enforcement staff and equipment.

Airport and Airway Trust Fund Extension of 1987

  • Extended airport and airway trust excise tax.

Omnibus Budget Reconciliation Act of 1987

  • Repealed installment sales method of accounting for dealers and vacation pay reserve.
  • Tightened completed contract method of accounting.
  • Reduced inter-corporate dividends received deduction.
  • Accelerated corporate estimated tax payments.
  • Limited employer deductible contributions to defined benefit pension plans.
  • Limited mortgage interest deduction to debt less than $1 million and home equity loans of less than $100,000.
  • Extended telephone excise tax, FUTA tax, 55 percent estate tax rate, and employer Social Security to cover cash tips.
  • Increased IRS and BATF fees.

Continuing Resolution for Fiscal Year 1987

  • Increased Internal Revenue Service funding for staffing and equipment.
  • Established Immigration and Naturalization Service inspection fee.

Superfund Amendments and Reauthorization Act of 1986

  • Enacted excise tax of 8.2 cents per barrel on domestic crude oil and 11.7 cents per barrel on imported petroleum products.
  • Enacted new broad-based tax on all corporations equal to 0.12 percent of alternative minimum taxable income in excess of $2 million.
  • Enacted a 0.1 cent per gallon excise tax on gasoline, diesel fuels and other special motor fuels to finance cleanup of wastes from leaking underground petroleum storage tanks.

Omnibus Budget Reconciliation Act of 1986

  • Accelerated state and local government deposits of Social Security payroll taxes.
  • Accelerated collections of alcohol and tobacco excise taxes.
  • Increased substantial underpayment penalty and penalty for failure to comply with deposit requirements.
  • Increased customs user fee on value of imported merchandise.

Tax Reform Act of 1986

  • Individual income tax provisions. Lowered top marginal tax rate to 28 percent; increased standard deduction to $5,000 for married couples; increased personal exemption to $2,000; and increased earned income tax credit.
  • Repealed two-earner deduction, long-term capital gains exclusion, state and local sales tax deduction, income averaging, and exclusion of unemployment benefits. Limited IRA eligibility, consumer interest deduction, deductibility of passive losses, medical expenses deductions, deduction for business meals and entertainment, pension contributions, and miscellaneous expense deduction.
  • Reduced top corporate marginal tax rate to 34 percent, and tightened corporate minimum tax.
  • Repealed the investment tax credit and lengthened capital cost recovery periods.
  • Further tightened state volume limitations for private purpose tax-exempt bonds.
  • Extended research and experimentation credit: initiated new low-income housing tax credit and phased in deductibility of health insurance costs of self-employed individuals.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

  • Permanently extended 16 cents per pack cigarette excise tax.
  • Enacted new excise tax on smokeless tobacco.
  • Increased excise tax on coal production.
  • Extended hospital insurance coverage to new state and local government employees.
  • Repealed income averaging for former students.

Deficit Reduction Act of 1984

  • Increased excise taxes. Increased distilled spirits excise tax and extended telephone excise tax.
  • Restrictions on leasing. Reduced benefits from tax-exempt leasing and postponed effective data of liberalized finance leasing rules.
  • Increased depreciable life of structures from 15 to 18 years.
  • Placed state volume limitation on private purpose tax exempt bonds.
  • Placed time value of money restrictions on accounting rules.
  • Repealed net interest exclusion (ERTA provision) before its effective date.
  • Reduced long-term capital gains holding period from one year to six months.
  • Increased earned income credit rate and phaseout range.
  • Set maximum estate tax rate at 55 percent.

Social Security Amendments of 1983

  • Accelerated scheduled increases in OASDI payroll tax rate.
  • Taxed some Social Security benefits. At most 50 percent of Social Security benefits subject to tax if income exceeds $25,000 for a single taxpayer or $32,000 for a joint return.

Interest and Dividends Tax Compliance Act of 1983

  • Repealed interest and dividend withholding and replaced with backup withholding and expanded information reporting.
  • Enacted Caribbean Basin Initiative (CBI) tax benefits.

Railroad Retirement Revenue Act of 1983

  • Increased railroad retirement payroll taxes and railroad unemployment insurance taxes.
  • Taxed railroad retirement pension plan benefits.

Tax Equity and Fiscal Responsibility Act of 1982

  • Improvements in compliance and collection. Imposed withholding on interest and dividends; further accelerated corporate estimated tax payments; expanded information reporting; and increased penalties on non-compliance.
  • Reduction in unintended benefits and obsolete incentives. Strengthened individual minimum tax; repealed future acceleration of depreciation allowances; repealed safe-harbor leasing; and tightened completed contract method of accounting rules.
  • Increased excise taxes. Increased airport and airway trust fund taxes, cigarette excise taxes, and telephone excise tax.
  • Increased employment taxes. Increased FUTA tax rate and wage base, and extended hospital insurance taxes to Federal employees.

Highway Revenue Act of 1982

  • Increased excise tax on gasoline and diesel fuel from 4 to 9 cents per gallon for 5 years.

Economic Recovery Tax Act of 1981

  • Individual income tax reductions. Reduced marginal tax rates 23 percent over three years; reduced maximum rate to 50 percent and maximum capital gains rate to 20 percent; indexed income tax brackets, personal exemption and standard deduction for inflation beginning in 1985; and provided new deduction for two-earner married couples.
  • Capital cost recovery provisions. Replaced facts and circumstances and the Asset Depreciation Range guidelines with Accelerated Cost Recovery System. Faster write-off of capital expenditures under simplified rules. Most equipment written off over 5 years, structures over 15 years. Allowed liberalized safe-harbor leasing rules, which effectively allowed companies to sell tax losses.
  • Savings incentives. Extended eligibility for IRA's to include active participants in employer pension plans. Increased Keogh annual contribution limit to $15,000.
  • Estate and gift tax provisions. Permitted unlimited marital deduction: increased estate credit to exempt from tax all estates of $600,000 or less; and reduced maximum estate tax rate from 70 to 50 percent.
  • Accelerated corporated estimated tax payments and tightened rules on tax straddles with mark-to-market rule.

Crude Oil Windfall Profit Tax Act of 1980

  • Excise Taxes. Created temporary excise tax on crude oil profits (phased-out by end of 1993).
  • Energy Tax Credits. Created several business energy tax credits.
  • Dividend Exclusion. Temporarily increased $200 dividend exclusion (for joint filers) to $400 and expanded to include interest.