[illegible stamp]
MAXWELL MCMILLAN
FEDERAL TAXES 2nd
Special Report November 29, 1990

A Complete Guide to the OMNIBUS BUDGET RECONCILIATION ACT of 1990
TAX PROVISIONS
Explanation - Code Sections Amended - Table of Effective Dates - Committee Reports - Index

OBRA Date of Enactment: November 5, 1990
Public Law 101-508

Explanation
(Page 53)
COMMENT: Since these changes are effective for tax years beginning after 12-31-89, base-year expenditures for 1990 fiscal years do not have to be reduced proportionately for the part of the year that falls in calendar 1991.
Act. Sec. 11402, extending the credit for increasing research activities, amends IRC 41(h) and makes conforming amendments to '89 OBRA 7110(a) and IRC 28(b)(1)(D), effective for taxable years beginning after 12-31-89.

[151] New Small Business Public Accommodations Access Credit. The Americans with Disabilities Act of 1990 requires businesses to make structural changes to facilities to accommodate disabled and handicapped individuals. To help small businesses with the cost of complying with that Act, the new law provides a credit for a portion of the expenditures incurred in making the required changes. At the same time, to help offset the cost of the credit, the new law cuts back on the IRC 190 deduction for removal of barriers to the handicapped.

Background. Under 190, a taxpayer meeting certain requirements may elect to currently deduct certain architectural and transportation barrier removal expenses rather than capitalize them. The maximum deduction for any tax year is $35,000.

New credit. Under the new law, an eligible small business may elect a credit in an amount equal to 50% of the eligible access expenditures for the tax year that exceed $250 but do not exceed $10,250. Thus, the maximum credit in a tax year is $5,000. The credit is effective for expenditures paid or incurred after 11-5-90.

Eligible small business. An eligible small business is a person (or any predecessor) that, for the preceding tax year, either (1) had gross receipts that did not exceed $1 million or (2) had no more than 30 full-time employees. For this purpose, an employee is considered full-time if he is employed at least 30 hours a week for at least 20 weeks in the tax year. Also, gross receipts for any tax year are to be reduced by returns or allowances made during the year. The IRS is to make appropriate adjustments to the tests where the relevant tax year (preceding year) is a short year.

Eligible access expenditures. Eligible access expenditures are amounts paid or incurred by an eligible small business for the purpose of enabling the business to comply with applicable requirements of the Americans with Disabilities Act of 1990 (as in effect on 11-5-90). Such expenditures include amounts paid or incurred (1) for the purpose of removing architectural, communication, physical, or transportation barriers that prevent a business from being accessible to, or usable by, individuals with disabilities; (2) to provide qualified interpreters or other effective methods of making aurally delivered materials available to individuals with hearing impairments; (3) to provide qualified readers, taped texts, and other effective methods of making visually delivered materials to individuals with visual impairments; (4) to acquire or modify equipment or devices for individuals with disabilities; or (5) to provide other similar services, modifications, materials, or equipment.

The expenditures must be reasonable and necessary to accomplish these purposes. Also, the taxpayer must establish to the satisfaction of 

1151
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Tax Law of 1990
(Page 54)
the IRS that the action undertaken (i.e., removal of barrier, provision of equipment, etc.) meets the standards promulgated by the IRS with the concurrence of the Architectural and Transportation Barriers Compliance Board, as set forth in IRC regulations. Amounts paid or incurred in connection with any facility first placed in service after 11-5-90 are not eligible access expenditures.

"Disability" has the same meaning as when used in the Americans with Disabilities Act.

Treatment as general business credit. The new credit is included as a general business credit. Thus, it is subject to the IRC 38 rules that limit the amount of business credit that can be used for any tax year. The portion of the unused business credit for any tax year that is attributable to the disabled access credit may not be carried back to any tax year ending before 11-5-90. For discussion of 38, see 384 of Federal Taxes 2nd and 38 of Federal Tax Guide.

Denial of double benefit. No deduction is allowed for the amount of the credit under any other Code provision. Also, no increase in basis is allowed for such amount.

Controlled groups. All members of the same controlled group of corporations (as defined in 52(a)) and all persons under common control (as defined in 52(b)) are treated as one person for purposes of the gross receipts limitation, the employee limitation, and the maximum amount of the credit. The IRS is to apportion the dollar limitation among such related persons under regulations.

Partnerships and S corporations. For partnerships and S corporations, the dollar limitation on the amount of the credit applies at both the entity level and at the partner or shareholder level.

Regulatory authority. The new law gives the IRS regulatory authority to carry out the purposes of the credit provisions.

IRC 190 deduction. The new law reduces the maximum amount of architectural and transportation barrier removal expenses that may be deducted for any tax year to $15,000, effective for tax years beginning after 11-5-90.
Act. Sec. 11611(a), relating to the disabled access credit, adds new IRC 44, effective for expenditures paid or incurred after 11-5-90; Act. Sec. 11611(b)(1), relating to including the disabled access credit as part of the general business credit, adds new paragraph (7) to IRC 38(b), effective for expenditures paid or incurred after 11-5-90; Act. Sec. 11611(b)(2), relating to carryback of the general business credit, adds new paragraph (5) to IRC 39(d), effective for expenditures paid or incurred after 11-5-90; Act. Sec. 11611(c), relating to architectural and transportation barrier removal expenses, amends IRC 190(c) by striking "$35,000" and inserting "$15,000," effective for tax years beginning after 11-5-90. 

[152] Targeted Jobs Credit Extended. Under pre-'90 OBRA law, the targeted jobs credit, available to employers for 40% of qualified wages paid to first-time employees in certain groups, such as the economically disadvantaged or disabled, expired for individuals who began employment after 9-30-90.

Credit extension. The new law retroactively reinstates the credit and extends it to apply to wages of individuals who begin employment by 12-31-91. It also extends authorization appropriations for administrative and publicity expenses relating to the credit.

Footnotes:
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Tax Law of 1990
512
(5) Section not to apply to certain noncorporate lessors. - This section shall not apply to any section 179 property (2) which is purchased by a person who is not a corporation and with respect to which such person is the lessor unless:
(A) the property subject to the lease has been manufactured or produced by the lessor, or
(B) the term of the lease (taking into account options to renew) is less than 50 percent of the class life of the property (as defined in section 168(i)(1)), and for the period consisting of the first 12 months after the date on which the property is transferred to the lessee the sum of the deductions with respect to such property which are allowable to the lessor solely by reason of section 162 (other than rents and reimbursed amounts with respect to such property) exceeds 15 percent of the rental income produced by such property.

[For explanation, see '430.]

[1060] IRC 184. AMORTIZATION OF CERTAIN RAILROAD ROLLING STOCK. 
[Repealed by section 11801(a)(12), OBRA '90, P.L. 101-508, 11-5-90.](1)

[1061] IRC 188. AMORTIZATION OF CERTAIN EXPENDITURES FOR CHILD CARE FACILITIES. 
[Repealed by section 11801(a)(13), OBRA '90, P.L. 101-508, 11-5-90.](1)

[1062] IRC 190. EXPENDITURES TO REMOVE ARCHITECTURAL AND TRANSPORTATION BARRIERS TO THE HANDICAPPED AND ELDERLY.

(c) Limitation. -- The deduction allowed by subsection (a) for any taxable year shall not exceed (1) $15,000 (2).
[For explanation, see 151, for text of Committee Reports, see 3064.]

[Footnote IRC 179 continued]
(2) "purchased by any person described in section 46(e)(3) unless the credit under section 38 is allowable with respect to such person for such property (determined without regard to this section)."
Effective date (Sec. 11813(c), OBRA '90. -- (1) Generally applies to property placed in service after 12-31-90. 
(2) Exceptions -- The amendments made by this section shall not apply to--
(A) any transition property (as defined in section 49(e) of '86 Code (as in effect on the day before 11-5-90),
(B) any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of such Code (as so in effect), and
(C) any property described in section 46(b)(2)(C) of such Code (as so in effect.)
[Footnote IRC 184]. (1) Effective date (Sec. 11821, OBRA '90). -- (a) Generally takes effect on 11-5-90.
(b) Savings provision. -- If -- 
(1) any provision amended or repealed by this applied to --
(A) any transaction occurring before 11-5-90,
(B) any property acquired before such 11-5-90 or,
(C) any item of income, loss, deduction, or credit taken into account before such 11-5-90, and
(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments made by this part affect liability for tax for periods ending after such date of enactment, nothing in the amendments made by this part shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such 11-5-90.
[Footnote IRC 188] (1) Effective date (Sec. 11821, OBRA '90). - (a) Generally takes effect on 11-5-90.
(b) Savings provision. -- If -- 
(1) any provision amended or repealed by this part applied to --
(A) any transaction occurring before 11-5-90,
(B) any property acquired before 11-5-90,
(C) any item of income, loss, deduction, or credit taken into account before 11-5-90, and 
(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments made by this part) affect liability for tax periods ending after 11-5-90.
Nothing in the amendments made by this part shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after 11-5-90.
[Footnote IRC 190] Matter in italics in IRC 190(c) added by section 11611(c), OBRA '90, which struck out:
(1) "$35,000"
Effective date (Sec. 11611(e)(2), OBRA '90). -- Applies to tax years beginning after 11-5-90.

Section 11801(a)(14), OBRA '90, struck out from IRC 190(d):
(2) "(d) Application of Section. -- This section shall apply to -- 
(1) taxable years beginning after December 31, 1976, and before January 2, 1983, and
(2) taxable years beginning after December 31, 1983."
Effective date (Sec. 11821, OBRA '90). -- (a) Generally takes effect on 11-5-90.
(b) Savings provision. -- If --
(1) any provision amended or repealed by this part applied to -- 

Footnotes:
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1798 Tax Law of 1990
ship cannot be terminated. Mother dies and leaves her partnership interest to Daughter. As the sole partners, Daughter and Son acting together could remove the restriction on partnership termination. Under the conference agreement, the value of Mother's partnership interest in her estate is determined without regard to the restriction. Such value would be adjusted to reflect any appropriate fragmentation discount. 

This rule does not apply to a commercially reasonable restriction which arises as part of a financing with an unrelated party or a restriction required under State or Federal law. The provision also grants to the Treasury Secretary regulatory authority to disregard other restrictions which reduce the value of the transferred interest for transfer tax purposes but which do not ultimately reduce the value of the interest to the transferee.

[For explanation see 110-127]

[3064] SECTION 11611. CREDIT FOR COST OF PROVIDING ACCESS FOR DISABLED INDIVIDUALS
(IRC 44 and 190)
[Senate Explanation]

Present Law
Under present law, a taxpayer may elect to deduct certain architectural and transportation barrier removal expenses for the taxable year in which paid or incurred rather than capitalizing such expenses. Architectural and transportation barrier removal expenses are defined for this purpose as expenditures that are paid or incurred by a taxpayer in order to make facilities or public transportation vehicles owned or leased in connection with the taxpayer's business more accessible to handicapped and elderly individuals. In order for such expenditures to be deductible under this provision, the taxpayer must establish to the satisfaction of the Treasury Department that the facility or public transportation vehicle to which the expenditures relate conforms to standards promulgated by the Treasury Department with the concurrence of the Architectural and Transportation Barriers Compliance Board. The amount of the deduction allowed under this provision for any taxable year is limited to $35,000.

Reason for Change
The Americans with Disabilities Act of 1990 requires businesses to make structural changes to facilities to accommodate disabled and handicapped individuals. The committee is concerned that the requirements contained in the Americans with Disabilities Act of 1990 may impose a severe financial burden on certain small businesses. Consequently, the committee believes that it is appropriate to provide these small businesses with a nonrefundable income tax credit for a portion of the expenditures that are incurred in complying with the requirements of the Americans With Disabilities Act of 1990. As a means of offsetting the cost of this new credit, the committee believes [that] it is appropriate to reduce the amount that is allowed as a deduction under section 190. 

Explanation of Provision
Small business public accommodations access credit. In general. Under the bill, an eligible small business that elects the application of the provision is allowed a nonrefundable income tax credit equal to 50 percent of the amount of the eligible public accommodations access expenditures for any taxable year that exceed $250 but do not exceed $10,250.(31)

The amount of the credit allowed for any taxable year is not to exceed the excess if any of (1) the regular tax for the taxable year reduced by the amount of the foreign tax credit, any nonrefundable personal credits, and certain other specified credits allowed for such taxable year, over (2) the tentative minimum tax for the taxable year. The amount of the credit that is not allowed under this limitation for any taxable year is to be carried back 3 years and forward 15 years, except that the amount of such credit is not to be carried back to any taxable year beginning before January 1, 1991. The amount of any credit that is carried to another taxable year is subject to the limitation described above for the year to which the credit is carried.

Definition of eligible small businesses. An eligible small business is defined for any taxable year as any person that is engaged in the trade or business of operating a public accommodation and is required by Federal law to make such accommodation accessible to, or usable by, individuals with disabilities, and that either (1) had gross receipts(32) for the preceding taxable year that did not exceed $4 million or (2) had fewer than 30 full-time employees(33) during the taxable year.

Definition of eligible public accommodations access expenditures. Eligible public accommodations access expenditures are defined as amounts paid or incurred by a taxpayer either (1) for the purpose of removing architectural, communication, or transportation barriers which prevent a public accommodation operated by the taxpayer from being accessible to, or usable by, an individual with a disability, or (2) for provid-

Footnotes:
[Footnote 3064] (31) Consequently, the maximum amount of the credit for any taxable year is $5,000.
(32) The gross receipts of a person for any taxable year are to be determined after reduction for returns and allowances made during the taxable year.
(33) For this purpose, a full-time employee is defined as any employee of the taxpayer who is employed at least 30 hours per week for 20 or more calendar weeks during the taxable year.

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Committee Reports 1799
ing auxiliary aids or services to an individual with a disability who is an employee of, or using, a public accommodation operated by the taxpayer.

The amount of an expenditure is not to be considered an eligible public accommodations access expenditure unless the taxpayer establishes to the satisfaction of the Treasury Department that the removal of any barrier or the provision of any auxiliary aid or service to which the expenditure relates satisfies standards set forth in regulations promulgated by the Treasury Department with the concurrence of the Architectural and Transportation Barriers Compliance Board. In addition, amounts paid or incurred by a taxpayer for the purpose of removing architectural, communication, or transportation barriers do not qualify as eligible public accommodations access expenditures if the amounts are paid or incurred in connection with any facility that is first placed in service (i.e., the first occupancy of which occurs) after December 31, 1990.

Other definitions and special rules. For purposes of this provision, ***"disability,"***[has] the***[meaning given] by the Americans With Disabilities Act of 1990, as in effect on the date of enactment of this provision.

For purposes of determining the amount of the credit and in determining whether the $4 million gross receipts limitation and the 30 full-time employee limitation are satisfied, all members of the same controlled group of corporations (as defined in section 52(a)) and all persons under common control (as defined in section 52(b)) are treated as one person. Thus, for example, two or more corporations that are members of the same controlled group of corporations would be allowed a credit that is not to exceed $5,000 if, treating all such corporations as a single person, the $4 million gross receipts limitation or the 30 full-time employee limitation is satisfied.

In the case of a partnership, the $10,250 annual limitation on the amount of expenditures that are taken into account in determining the amount of the credit is to apply at both the partnership level and the partner level. Similarly, in the case of an S corporation, the $10,250 annual limitation on the amount of the expenditures that are taken into account in determining the amount of the credit is to apply at both the S corporation level and the shareholder level.

The bill also provides that no deduction or credit is to be allowed under any other provision of chapter 1 of the Internal Revenue Code for any amount for which a credit is allowed and the adjusted basis of any property with respect to which a credit is determined is not to include the amount of the credit.

Finally, the bill requires the Treasury Department to prescribe such regulations as are necessary to carry out the purposes of the provision, including regulations that (1) adjust the $4 million gross receipts limitation and the 30 full-time employee limitation in the case of taxable years that are less than 12 months and (2) apportion the $10,250 annual limitation among two or more persons that are treated as a single person under the related-person rules described above. 

Reduction of amount deductible as architectural and transportation barrier removal expenses. The bill also reduces the amount of architectural and transportation barrier removal expenses that may be deducted for any taxable year to $15,000.

Effective Date.
The small business public accommodations access credit applies to eligible expenditures paid or incurred after the date of enactment. 

The reduction in the amount of deductible architectural and transportation barrier removal expenses applies to taxable years after the date of enactment.

[Conference Report]

Conference Agreement.
The conference agreement follows the Senate amendment, with the following modifications.

First, an eligible small business is defined for any taxable year as a person that had gross receipts for the preceding taxable year that did not exceed $1 million or had no more than 30 full-time employees during the preceding taxable year.

Second, the amount of the credit for any taxable year is equal to 50 percent of the eligible access expenditures for the taxable year that exceed $250 but do not exceed $10,250. Eligible access expenditures are defined as amounts paid or incurred by an eligible small business for the purpose of enabling such eligible small business to comply with applicable requirements of the Americans with Disabilities Act of 1990 (as in effect on the date of enactment of the credit).

Eligible access expenditures generally include amounts paid or incurred (1) for the purpose of removing architectural, communication, physical, or transportation barriers which prevent a business from being accessible to, or usable by, individuals with disabilities; (2) to provide qualified interpreters or other effective methods of making aurally delivered materials available to individuals with visual impairments; (3) to provide qualified readers, taped texts, and other effective methods of making visually delivered materials available to individuals with visual impairments; (4) to acquire or modify equipment or devices for individuals with disabilities; or (5) to provide other similar services, modifications, materials, or equipment. The expenditures must be reasonable and necessary to accomplish these purposes.

Finally, the disabled access credit is included as a general business credit and 

Footnotes:
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1800 Tax Law of 1990
thus, is subject to the rules of present law that limit the amount of the general business credit that may be used for any taxable year. The portion of the unused business credit for any taxable year that is attributable to the disabled access credit is not to be carried back to any taxable year ending before the date of enactment of the credit.

[For explanation, see 151]

[3065] SECTION 11621. REVIEW OF IMPACT OF REGULATIONS ON SMALL BUSINESS.
(IRC 7805)
[Conference Report]

Present Law. The Internal Revenue Service (IRS) must submit proposed regulations (after they are published) to the Small Business Administration (SBA) for comment on the impact of those regulations on small business. The SBA must respond within four weeks. Similar rules apply to final regulations that do not supersede proposed regulations.

Conference Agreement. IRS must continue to submit proposed regulations (after they are published) to the SBA for comment on the impact of those regulations on small business. The SBA must respond within four weeks. The IRS must consider the SBA comments and discuss them in the preamble of the final regulations. Similar rules apply to final regulations that do not supersede proposed regulations. The provision applies to regulations issued after the date that is 30 days after the date of enactment.

[For explanation, see 334.]

[3066] SECTION 11622. GRAPHIC PRESENTATION OF MAJOR CATEGORIES OF FEDERAL OUTLAYS OF INCOME.
(IRC 7523)
[Conference Report]

Present Law. There is no requirement for the Internal Revenue Service (IRS) to publish pie charts. Pie charts illustrating where the Government dollar comes from and where it goes have, however, been published by the IRS in Publication 17, Your Federal Income Tax.

Conference Agreement. The conference agreement requires the IRS to include two pie charts in individual income tax form instruction booklets: one depicting sources of Government revenue and the other showing how that revenue is spent. This provision applies to instructions prepared for taxable years beginning after 1990.

[For explanation, see 335]

[3067] SECTIONS 11700--11704. TAX TECHNICAL CORRECTIONS.
[Conference Report]

House Bill. No provision in H.R. 5835. H.R. 5822 as reported by the House Ways and Means Committee contains technical, clerical, and conforming amendments to the Revenue Reconciliation Act of 1989, the Technical and Miscellaneous Revenue Act of 1988, and other recently enacted tax legislation (H. Rpt. 101-894).

Senate Amendment. No provision.

Conference Agreement. The conference agreement contains the tax technical correction provisions of H.R. 5822 as reported by the House Ways and Means Committee.

Tax-exempt bonds. -- With regard to the technical corrections to the tax-exempt bond provisions of the 1989 Act, the conferees wish to clarify that the legislative history specifying the treatment of investment earnings in determining whether the expenditure requirements of the 24-month exception to arbitrage rebate requirement have been satisfied is intended to apply only to bonds issued after October 16, 1990.

OID. -- One of the technical corrections provides rules for determining the yield on a debt instrument that makes a payment or payments in the form of the stock of the issuer (or a related person). The conferees understand that, in the case of a debt instrument that makes payments in the form of stock which provides for an annual dividend rate and a stated redemption amount by a fixed date, the amount of stock to be taken into account under the technical correction should generally be determined by discounting such payments. The discount rate for such purpose shall be the yield on the debt instrument, determined assuming the payments under the stock are made as provided.

[For explanation, see 400-425]

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