The House Ways and Means Committee voted yesterday to postpone for a second time the tougher tax treatment of Americans working abroad that Congress enacted last fall - effectively buying time for officials to work out a compromise on the issue.
By unanimous vote, the panel agreed to delay application of the new provisions until next January 1. Congress originally had earmarked the changes to apply to income earned in 1976, but postponed that last spring to the 1977 tax year.
At the same time, the committee voted to approve a $8 million tax break for Pittsburgh Plate Glass Industries that Congress rejected in the 1976 bill, and $4.7 million in cuts for two other companies. Reading & Bates drilling company and Tidewater Marine Services, Inc.
The action came as the panel completed work on a pair of companion tax bills intended to correct "technical" errors made in the 1976 act, and to extend several minor provisions that otherwise would expire at the end of this year.
The vote on the provision affecting Americans working overseas was intended as a compromise. Although the changes seemed innocuous when Congress enacted them, the tightening since had drawn vigorous protests both from expatriates and U.S. corporations.
The Senate Finance Committee is scheduled to meet Thursday to consider a compromise measure by Sen. Abraham Ribicoff (D-Conn.) that would set up a new system for taxing income earned by U.S. citizens living abroad. But the vote may be sidetracked by the stalemate over the energy tax bill.
The 1976 legislation reduced the amount that U.S. citizens working abroad may earn tax-free to $15,000, from the previous $20,000-to-$25,000 level; boosted the effective tax rate on income above that level, and limited taxpayers' use of the foreign tax credit.
Although the Ribicoff measure is pending in the Senate Finance Committee, few observers believe it will pass both houses this session. Instead, officials expect both House and Senate agreeing on another year's postponement of the 1976 changes.
The provision affecting Pittsburgh Plate Glass Industries, Inc. would save the company as estimated $3 million by exempting the firm for three years from a change in the tax laws enacted last fall, affecting recapture of foreign losses by a U.S. corporation.
The exception was turned down last year by a Senate-House conference committee, but was brought up again this week, reportedly at the insistence of Ways and Means Committee chairman, Rep. Al Ullman (D-Ore.). The vote in committee was 19 to 10.
The other breaks affecting single companies involve a delay in the effective date of an Internal Revenue Service ruling affecting oil-drilling operations being conducted in Indonesia by Reading & Bates and Tidewater Marine. The change is designed to take account of a different tax year imposed by the Indonesian government.
At the same time, the committee also voted, 21 to 12, to put off until the current tax year a crackdown approved last year on a loophole in the laws affecting Domestic Internationl Sales Corporations that allowed firms to avoid permanently the tax on accumulated income.
Along with the other provisions, the panel approved a spate of proposals extending portions of the 1976 tax bill that otherwise would expire this year, or countering changes proposed by the Internal Revenue Service. Among other things, the committee voted to:
Bar IRS from moving before next July 1 to expand the number of employee finge benefits that specifically are classified as taxable income. The IRS had attempted to issue new regulations earlier this year, but drew protests from some taxpayers who would have been affected.
Put off for another year the effective date of a proposed IRS ruling what would limit deductions for commuting expenses of construction workers. The IRS had contended that such costs should not be deductible, no matter how far the worker had to travel.
Allow persons who entered the Armed Forces Health Professionals Scholarships Program in 1977 and 1978 to take advantage of a special exclusion that allows them to exempt their award money from their taxable income. THe exclusion wouldapply through 1981.