Tax Reduction and Simplification Act of 1977

(Senate agreed to conference report)

Tax Reduction and Simplification Act - =Title I: Reduction and Simplification of Individual Income Taxes= - Eliminates the standard deduction, replacing it with a zero bracket amount which is incorporated in the tax tables. Sets the zero bracket amount (effectively the equivalent of a flat standard deduction) at $3,200 for joint returns and surviving spouses, $2,200 for unmarried individuals, $1,600 for married individuals filing separately, and zero in any other case.

Eliminates the present tax tables based on taxable income and replaces them with tax tables based on the number of exemptions and "tax table income" for both itemizers and non-itemizers. Defines "tax table income" as adjusted gross income reduced by the excess itemized deductions, and in certain cases, increased by the unused zero bracket amount, if any. Defines "excess itemized deductions" as the excess, if any, of a taxpayer's itemized deductions over the zero bracket amount.

Makes specified technical and conforming amendments to the Code to reflect the elimination of the standard deduction and adoption of the new definition of taxable income, as well as the use of the new related terms, "zero bracket amount" and "excess itemized deductions.

Extends the general tax credit to taxable years beginning before 1978, and the earned income credit to taxable years beginning before 1979.

Increases the income level at which a tax return must be filed to $2,950 for a single person and $4,700 for a joint return. Reduces the withholding of wages beginning June 1, 1977. Makes all other provisions of this title effective for taxable years beginning after December 31, 1976.

=Title II: Reduction in Business Taxes= - Extends the temporary reduction in the normal tax rates for corporations and mutual insurance companies, the alternative tax rates for certain small companies, and the temporary increase in the surtax exemption, to taxable years ending before 1979.

Allows a new jobs tax credit for eligible taxpayers beginning in 1977 and 1978. Stipulates that the new jobs tax credit shall equal 50 percent of the excess of the aggregate unemployment insurance wages paid during the current year over 102 percent of such insurance wages paid during the previous year. Allows a credit only if total wages for the year are more than five percent above total wages for the previous year. Requires that any deduction for wages and salaries be reduced by the amount of the credit. Establishes limitations on such credit for new or rapidly expanding businesses. Limits, with certain exceptions, the new jobs tax credit to $100,000.

Enumerates rules and restrictions governing the utilization of the new jobs tax credit.

=Title III: Provisions Relating to Effective Dates and Other Provisions of the Tax Reform Act of 1976= - Changes the effective date of the sick pay exclusion made by the Tax Reform Act of 1976 from taxable years beginning after December 31, 1975, to taxable years beginning after December 31, 1976. Delays the effective date for changes made by such Act to the taxation of individuals working abroad, making such changes applicable to taxable years beginning after December 31, 1976. Relieves taxpayers from additions to tax, interest, and penalties (but not liability for tax) attributable to changes in the tax law which were made applicable to 1976 by the Tax Reform Act of 1976.

Excepts, for purpose of tax deductions, from the general disallowance rule and the exclusive use test, expenses allocable to the use of any portion of a residence in the trade or business of providing day care services to children, handicapped persons, and elderly persons. Requires that such day-care centers meet State licensing or certification requirements in order to quality for that exception.

Reduces an individual's minimum tax preference for the intangible cost of drilling oil and gas wells.

Extends the period during which deductions are allowable for charitable contributions of remainder interests in real property.

=Title IV: Miscellaneous Provisions= - Authorizes the appropriation of $435,000,000 for fiscal years 1978 and 1979 for the Work Incentive Program under Title IV of the Social Security Act.

Reinstates, as of January 1, 1977, the five-year amortization for certain expenditures for child care facilities.

Permits a taxpayer to elect to determine the amount of his retirement income credit for the year 1976 under the provisions of law existing before the Tax Reform Act of 1976.

Postpones the effective date of changes made by the Tax Reform Act of 1976 in the method of accounting for certain corporations engaged in farming.

Provides for a withholding tax on certain gambling winnings.

Authorizes the Secretary of the Treasury to make payments to American Samoa, Guam, and the Virgin Islands to compensate for the loss of revenue suffered by such possessions on account of this Act.

Provides for the withholding of county income or employment taxes by the Federal Government.

=Title V: Certain Social Security Act Amendments= - Specifies the procedure for garnishment of Federal government wages for enforcement of alimony and child support obligations. Sets limits on the amount of such wages subject to garnishment.

Requires that a state plan for child support comply with employee bonding requirements as prescribed by the Secretary of Health, Education and Welfare.

Changes the amount of incentive payments made to States or political subdivisions for enforcement and collection of support rights.

Changes the date on which the Secretary must submit his annual report to Congress. Specifies information which must be included in such report.

=Title VI: Intergovernmental Antirecession Assistance= - Intergovernmental Antirecession Assistance Act - Amends the Public Works Employment Act of 1976 to authorize appropriations up to $2,250,000,000 to carry out the provisions of such Act. Changes the criterion for determining the State revenue sharing amount under that Act. Changes the method of determining the unemployment rate of certain localities for the purposes of that Act. Stipulates that no State may discriminate on the basis of race, national origin, sex, age, handicap, or religion in the distribution of funds made available under such Act.

Requires the Secretary to conduct an investigation of alternative methods of allocating funds provided under such Act, and to report the results of such investigation to Congress.

Authorizes appropriations for Puerto Rico and the Virgin Islands for the purposes of such Act.