A BILL TO SUSPEND THE INVESTMENT CREDIT AND THE ALLOWANCE OF ACCELERATED DEPRECIATION IN THE CASE OF CERTAIN REAL PROPERTY

OCTOBER 13, 1966.—Ordered to be printed

65-010 O

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 1966

CONTENTS

I. Summary.

II. Reasons for the bill..

The bill is part of a comprehensive program_
The state of the economy..

Inflationary pressures must be moderated.
The impact of this bill.

Revenue effect.

III. General explanation

A. Suspension of the investment credit (sec. 1 of the bill and
sec. 48 of the code).

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6

10

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1. Present law.

2. Explanation of provision in general.

3. Effective date of October 10, 1966

4. Exemption of up to $25,000__

5. Exemption of water and air pollution control facilities
6. Exemption of railway freight and passenger cars.
7. Procedure for taking suspended credits into account in
computing maximum limitation_.

8. Property to equip new UHF television stations.

9. Effective date_.

B. Limitation on use of certain methods of depreciation (sec. 2 of
the bill and sec. 167 of the code).

1. Present law..

2. Explanation of provision.

3. Exception of up to $100,000 of construction...

4. Effective date___.

C. Rules common to suspensions of investment credit and accel-
crated depreciation__

1. Suspension period property (secs. 1 and 2 of the bill
and secs. 48 (h)(2) and 167(i)(1) of the code) -

2. Binding contracts (secs. 1 and 2 of the bill and secs.
48(h)(3) and 167(i)(1) of the code)___

3. Equipped building rule (secs. 1 and 2 of the bill and
secs. 48(h) (4) and 167(i)(1) of the code) -

4. Plant facility rule (sec. 1 of the bill and sec. 48(h) (5)
of the code)--

5. Machinery and equipment rule (sec. 1 of the bill and
sec. 48(h) (6) of the code)..

6. Certain lease-back transactions (secs. 1 and 2 of the
bill and secs. 48(h) (7) and 167(i)(1) of the code).

7. Certain leases involving third parties (secs. 1 and 2
of the bill and secs. 48 (h) (8) and 167(i)(1) of the
code).

8. Rules where property is transferred at death, etc.
(secs. 1 and 2 of the bill and secs. 48(h) (9) and
167 (i)(1) of the code)..

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35

9. Property acquired from affiliate corporations (secs. 1
and 2 of the bill and secs. 48(h) (10) and 167(i) (1)
of the code).--.

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D. Certain limitations on the investment credit (sec. 3 of the
bill and sec. 46 of the code)_

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1. Present law..

2. Increase in percentage limitation on the investment
credit____

3. Provision of a 7-year carryforward..

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III. General explanation-Continued

E. Treasury savings bonds not subject to the interest rate ceiling
(sec. 5 of the bill and sec. 22(Ă) of the Second Liberty Bond
Act).

1. Reasons for the amendment_
2. Explanation of provision.

IV. Technical explanation...--

Section 1. Suspension of the investment credit.

Equipped building rule..

Plant facility rule.

Machinery or equipment rule.

Certain lease-back transactions....

Certain lease and contract obligations.-

Property acquired from affiliated corporation
Railroad rolling stock..

Property to equip new UHF television stations.
Clerical amendments.--.

Exemption from suspension of $25,000 of investment.

Suspension period..

Section 2. Suspension of accelerated depreciation on real prop

erty..

Section 3. Determination of investment credit allowed.

Section 4. Effective date..

V. Changes in existing law... –

Mr. LONG of Louisiana, from the Committee on Finance, submitted the following

REPORT

[To accompany H. R. 17607]

The Committee on Finance, to which was referred the bill (H.R. 17607) to suspend the investment credit and the allowance of accelerated depreciation in the case of certain real property, having considered the same, reports favorably thereon with amendments and recommends that the bill as amended do pass.

I. SUMMARY

H.R. 17607 as passed by the House is designed to moderate the pace of the economy to a more sustainable level of economic growth. Your committee has accepted this objective of the House and reported the bill with relatively few modifications (described subsequently). This bill is an integral part of a coordinated anti-inflationary program of the administration. Other features of the program include an expenditure reduction of at least $3 billion and measures designed to relieve the pressures of government borrowing on the money market. This bill, together with the other features of this program, is designed to restrain inflationary forces by moderating economic activity in those sectors of the economy where inflationary pressures are the strongest. The primary features of this bill directed at this result are the suspension for approximately 15 months of two tax incentives for investment in plant and equipment and other investment property; namely, the 7-percent investment credit, and, in the case of buildings not eligible for the credit, accelerated depreciation. By temporarily removing these incentives for business investment, the bill, and the other parts of the program, also will ease pressures in the money market, thereby promoting a greater flow of credit into the home mortgage market.