House Passes Minor Changes in ’86 Tax Law

The House on Thursday gave lopsided bipartisan approval to a $7.1-billion package of minor tax changes that would benefit farmers, mutual fund shareholders, free-lance writers and rural mail carriers.

The targeted tax cuts would be financed by higher taxes on defense contractors, certain other corporations, pipe smokers and purchasers of single-premium life insurance policies.

The 380-25 vote for the bill was easily the widest margin by which any tax legislation has been approved in the last decade. Voting for the measure were 230 Democrats and 150 Republicans; 6 Democrats and 19 Republicans voted no.

The bill now goes to the Senate, where the Finance Committee has approved a stripped-down version.

Seeks to Correct Errors

The chief purpose of the 960-page House bill is to correct errors and clear up ambiguities in the landmark tax overhaul enacted in 1986. Since this is almost certainly the only tax bill with a chance of becoming law this year, the Ways and Means Committee used it to carry dozens of substantive tax changes.

Among the dozens of provisions are those to:

--Wipe out a 1987 requirement that farmers, construction companies and other tax-exempt off-road users of diesel fuel pay the federal tax of 15.1 cents a gallon and later apply for a refund.

--Permanently allow owners of mutual fund shares to deduct certain operating expenses of the fund without regard to a general provision allowing deduction of only miscellaneous expenses that exceed 2% of income.

--Allow a worker to avoid tax on up to $1,500 a year of employer-provided education assistance, down from an earlier $5,250 level.

--Extend through 1990 a tax credit for owners of newly constructed low-income rental housing.

--Extend through 1990 a tax exemption for bonds issued by state and local governments to help low-income families buy their first homes.

--Allow free-lance writers, artists and photographers to deduct work-related expenses even before a project produces income. Similar relief from general “uniform capitalization” rules is included for certain livestock producers (the so-called heifer tax) and growers of pistachio nuts.