‘Bill of Rights’ for Taxpayers Signed : New Law Also Provides Benefits for Farmers and Writers

President Reagan signed legislation providing $4.1 billion in tax benefits to farmers, writers and others, while instituting a controversial taxpayer “bill of rights” against overly aggressive agents of the Internal Revenue Service, the White House announced Friday.

The measure, called the Tax Corrections Act, originally was designed to make technical refinements in the sweeping tax reform legislation of 1986. But, as it wound its way through Congress, it became a major piece of legislation, providing tax benefits and raising the same amount of revenue by reducing tax preferences for defense contractors and others.

Complaints About IRS

Among the most contentious aspects of the legislation was its bill of rights provision, which was included because lawmakers had been deluged with complaints from constituents who cited numerous cases in which overzealous IRS agents penalized honest mistakes too severely.

The bill of rights, bitterly opposed by the IRS, was backed by an unlikely coalition, including the U.S. Chamber of Commerce, the American Civil Liberties Union, the Urban League and the National Council of La Raza.

To provide more protection for taxpayers, the new law, which Reagan signed without ceremony Thursday night, requires the IRS to give 30 days’ notice before seizing bank accounts and other property. Previously, the agency was required to give only 10 days’ notice.

The IRS will also be prohibited from basing promotions of its employees on how much money they collect. Such practices increased the potential for abuse, critics said. Now, IRS district directors must periodically sign affidavits stating that they do not link collection quotas to salary increases.

The legislation contains a provision ordering the federal government to buy more than 540 acres of land bordering the historic Civil War battlefield at Manassas, Va., thwarting developers who had wanted to build a shopping complex on the tract.

Veto Had Been Feared

Conservatives had opposed the federal land purchase, estimated to cost $50 million, arguing that it would prohibit free enterprise from taking its course. And, at one time, there were fears that the purchase would draw a Reagan veto of the entire bill.

In a victory for free-lance writers, artists and photographers, the law repeals part of the 1986 law that had raised their taxes. The new law allows them to deduct work-related expenses before a project produces income.

Morton Gould, president of the American Society of Composers, Authors and Publishers, hailed the enactment of the law, saying in a statement: “It will be of unquestionable assistance to the creative community and, therefore, a positive step in furthering American culture.”

Farmers were perhaps the most aggressive group among those lobbying for the legislation. It exempts them from paying federal tax on diesel fuel and reduces livestock farmers’ taxes through changes in accounting rules.

Tax Exemption on Bonds

Another change, beginning in 1990, will exempt from taxation the interest earned on U.S. savings bonds when the bonds are redeemed to finance a college or vocational education.

On the revenue-raising side, the law imposes a tax of 45 cents a pound on pipe tobacco, prohibits home-based businesses from deducting any part of their base telephone charges and removes some tax advantages of using single-premium life insurance as an investment.

In addition, the law further restricts defense contractors and big construction companies from delaying their taxes on profits until projects are completed. That restriction is expected to raise $1.3 billion.