State of New Jersey a brief period of time in which to take the initiative to correct this problem if it deems such action appropriate. Explanation of Provision The bill provides that, with respect to the quarterly revenue sharing payment to be made with respect to the quarter beginning on October 1, 1982, the New Jersey Franchise and Gross Receipts Tax shall be deemed an adjusted tax of units of local government for purposes of allocating revenue sharing funds to units of local government in New Jersey. However, the Franchise and Gross Receipts Tax shall be deemed an adjusted tax of units of local government in New Jersey for purposes of future quarterly revenue sharing payments only if, prior to January 1, 1983, the Governor of the State of New Jersey notifies the Secretary of the Treasury that, prior to January 1, 1983, the State amended the New Jersey Franchise and Gross Receipts Taxes statute to provide for collection and retention of such taxes by units of local government for years beginning as of January 1, 1983. Without such action by the Governor of the State of New Jersey, the Franchise and Gross Receipts Taxes would cease to be deemed an adjusted tax of units of local government quarterly payment periods beginning after December 31, 1982. Effective Date The amendment made by the provision is effective after September 30, 1982. Revenue Effect This provision has no effect on budget receipts. 8. Relief for the Jefferson County Mental Health Center, Lakewood, Colorado (sec. 298 of the bill) Present Law Under present law, employees of a nonprofit organization are excluded from social security coverage unless the organization files with the Internal Revenue Service a certificate waiving its exemption from taxation. Employees of the organization at the time the waiver certificate is filed are given the option to participate in the program and, if they decide to do so, must sign a form accompanying the certificate waiving their right of exemption. All employees subsequently hired by the organization are automatically covered under the program. Reasons for Change The committee understands the facts of the situation to be as follows. The Jefferson County Mental Health Center, Inc. (the "Center"), an exempt organization described in section 501(c)(3), filed a waiver certificate in 1963 pursuant to section 3121(k)(1)(A), by which the Center waived the exemption for payment of social security (FICA) taxes. In accordance with that filing, the Center began deducting the employee portion of FICA and paid that portion, along with its portion, to the Internal Revenue Service. As a result of a mistaken response by the Center to a questionnaire circulated by the Internal Revenue Service, the Western Region Service Center of the Service at Ogden, Utah, mistakenly notified the Center by letter dated February 28, 1975, that the Center was not liable for the FICA taxes. As a result of that letter, and follow-up instructions received by telephone from the Service, the Center contacted those persons whom they were able to locate who had been employed by the Center (133 in number), during the calendar years 1972 through 1974, and each of those individuals was offered an election as to whether or not he or she wished to be covered over the prior 3 years (1972 through 1974) and in the future under FICA. Of those contacted, 103 elected not to be covered by FICA, and to those 103 employees and former employees, the Center paid out $74,128 from its own funds as refunds covering contributions by and for them to FICA over the 3 years (1972, 1973, and 1974). Those employees unable to be contacted were treated as though they had elected to be covered. No refunds were made to those employees nor to those who elected to remain covered (a total of 30 in both categories). This action was taken due to assurances by the Internal Revenue Service that a prompt refund would be made to the Center of the employees' tax and the tax the Center had paid, once refunds had been advanced by the Center out of its own funds to those employees. After the Center had paid the employees $74,128, the Western Region Service Center, on May 14, 1975, notified the Center that the Service had found a valid waiver certificate on file, and that neither the refunds nor the employees' electons should have been made. Those employees who elected not to be covered by FICA and who remained employees of the Center after January 1, 1975, have been treated by the Center as continuing not to be covered by FICA in accordance with their election made pursuant to the Service's instructions arising out of the February 28, 1975, letter. The Service has advised the Center that there is no provision in law which would authorize administrative relief for the action which the Center has taken in reliance on the letter from the Service of February 28, 1975. As an equitable matter for the relief of the Center, the committee has agreed to a provision to compensate the Center in full settlement of all claims arising out of the erroneous advice of the Internal Revenue Service to the Center that the contributions had been incorrectly withheld. Explanation of Provision The provision authorizes the payment of $50,000 to the Jefferson County Mental Health Center in full settlement of its claims against the United States for repayment of the $74,128 the Center refunded to its employees for individual social security contributions after the Internal Revenue Service erroneously advised the Center that the contributions had been incorrectly withheld. The bill also provides that no part of this $50,000 in excess of 10 percent shall be paid out for services rendered in connection with this claim. Effective Date The provision is effective on enactment. Revenue Effect The provision authorizes a single payment of $50,000. There would be no direct effect on budget receipts. V. COSTS OF CARRYING OUT THE REVENUE PROVISIONS OF THE BILL AND VOTE OF THE COMMITTEE IN REPORTING THE BILL Budget Effects In compliance with paragraph 11(a) of Rule XXVI of the Standing Rules of the Senate, the following statement is made relative to the budget effects of H.J. Res. 4961, as reported. The table below summarizes the estimates of the net increases in budget receipts from the tax provisions of the bill for fiscal years 1982-1987. The estimates are presented in greater detail in Section III of this report, Budget Effects of Revenue Provisions. |