History is unlikely to care much that a creature called the Ad Hoc Committee on Section 274(h) once rose from the Potomac swamps to take a bite out of a tax law.
But it did, and therein rests another of those enthralling tales about America's tax code (don't go to sleep) -- how it is written, unwritten and lunched upon by great winged creatures.
More precisely, it is a story about the partial undoing of the Tax Reform Act of 1976, of which Section 274(h) is really just a tiny chapter. Bite by bite, Congress has been eating away at its reforms of three years ago.
The 1976 law was signed by President Gerald R. Ford. He praised it as "sound, positive and long-overdue" legislation, eliminating preferential provisions and spreading the nation's tax burdens more fairly.
But times change. Appetite reached its peak last week as the Senate Finance Committee voted to repeal a central portion of the 1976 act that taxes profits from the sale of inherited assets.
Clever gambit, too. Since President Carter opposes repeal of the "carry-over basis," as it is known in taxman's jargon, the committee tacked the repealer onto the oil windfall profits tax bill that he very much wants.
With more than 230 House members co-sponsoring repeal of carryover, a provision that affects only a tiny minority of wealthy Americans, chances of its passage appear good.
Results: the repealer pushed by Sens. Bob Doyle (R-Kan.), Harry F. Byrd Jr. (Ind-Va.), Gaylord Nelson (D-Wis.) and Rep. Barber B. Conable Jr (R-N.Y.) is "veto-proofed" and the Treasury stands to lose about $800 million a year in revenue.
While last week's Senate committee action is the biggest of the bites into the 1976 overhaul, there have been other important reversals. Among them:
Minimum tax. As Congress cranked out its Revenue Act of 1978, it weakened the 1976 provisions that put a minimum tax on the affluent who otherwise might pay little or nothing due to writeoffs, credits, shelters, deductions and other generosities of the tax code. The drive for change was started by Rep. William Steiger (R-Wis.) before his death and then picked up by Rep. James R. Jones (D-Okla.).
Capital gains. As a part of that, reacting to cries of anguish from monied folk, Congress also watered down the tax on capital gains -- profits from selling stocks and bonds, real estate and other capital assets. The 1976 law had put a 15 percent minimum tax on some previously untaxed capital gains. Jones orchestrated last year's reversal. Revenue lost to the Treasury: about $3 billion.
Americans abroad. The 1976 law tightened income tax requirements for overseas Americans, who pay less than stay-at-homes. But it was reversed last year under the baton of now retired Rep. Joe Waggonner (D-La.), with an assist from multinational companies that ferried planeloads of housewives from their foreign outposts to lobby Congress. Revenue lost: about $250 million.
Those were big elements in the 1976 law, but congressional action since that time has cut away some other lesser reforms as well.
One of the first to go, in 1977, was a minimum tax on the income that oilmen get from a little shelter called an "intangible drilling deduction." That was reversed and then made permanent, and sweetened with an extra bonus, last year.
The Capitol Hill explanation is that the Carter White House agreed to it reluctantly in return for legislative support of the administration's natural gas bill. That one costs the Treasury about $50 million a year.
There were other breaks provided last year for professors who go abroad, for farmers who have problems with accounting techniques and for executives who deduct country club dues and the expense of traveling to hunting lodges as a cost of business.
How, you may ask, do these things happen? How could they occur in a period when the tax reformers, such as they are, seemed to have things going their unaccustomed way? When a new Democratic White House was preaching reform and an end to the gravy train?
Ask 10 people on Capitol Hill and 10 different answers come back. But each, in its own way, touches on intangibles of "mood" and the only slightly more palpable "politics." And each touches on the reaction of those who must pay more.
William Pietz has been watching these matters for some years. He is an attorney with Public Citizen's Tax Reform Research Group, one of the few "public interest" organizations that works full-time trying to put more fairness and balance into the U.S. tax code.
"Taxes have had their own rhythm," Pietz said. "We got some momentum with the 1969 reforms, and in 1975 we were able to end the oil depletion allowance. In 1976 many of the tax shelters were closed."
Part of it, other tax-watchers around Congress agree, was that the tax-law tightenings in 1975 and 1976 caught monied interests by surprise. Moreover, they were not very adept at dealing with the rambunctious reform-minded post-Watergate class of legislators.
"But there's a backlash now," Pietz continued. "We saw it last year when President Carter proposed an extension of the gains we had made in 1976. Timber, realestate, small business, bankers, lawyers, stock-brokers geared up -- all the capital gains people. They ran right over us . . . They have the momentum now and we are having a hard time just keeping even."
The momentum, others agree, comes in part from a more conservative bent in Congress and concern over a faltering economy -- elements that give appeals for economy-stimulating tax relief an extra credibility.
"That 1976 act was very sweeping," said Jack Nutter, a Senate tax aide. "There has been a shift in mood away from that period, when the move was to clamp down on the tax breaks for middle- and upper-income people. Congress has realized it can go too far."
Another element, in the view of others around Congress, is that delays by the new Carter administration, taking months to get its own overhaul proposals to Capitol Hill, gave the special-appealers more time to organize.
"One of the problems," said Robert S. McIntyre of the Tax Reform Research Group, "is that it's hard to keep people's attention on this stuff. It is arcane in many cases. Nobody notices what's happening in the committees."
And, McIntyre added, one of the other key factors is that "the victims never give up . . . They keep coming back."
A case in point is the Ad Hoc Committee on Section 274(h), an official-sounding body that in reality is six major U.S. hotel chains and the American Society of Association Executives, represented by lawyer Thomas H. Boggs Jr.
The Section 274(h) that concerns them is the portion of the tax code, established in the 1976 law, that puts complex and stringent rules on the deduction of expenses incurred in attending foreign conventions.
The idea behind that reform was to end out-and-out junketing and vacationing overseas by executives and convention-goers, who then write off their expenses as a cost of doing business.
One of the reasons the rules are so complex is that they were drawn up that way by the late representative Steiger and the same folks who are now complaining. The ploy was to make them so complex they would be rejected by Congress.
But that backfired at the last minute in wrangling between House and Senate tax-writing conferees, and the complicated language became law.
Hence, the Ad Hoc Committee on Section 274(h). A Senate Finance subcommittee has held hearings on a bill by Sen. Barry M. Goldwater (R-Ariz.) to repeal the section and others by Sens. Charles McC. Mathias (R-Md.) and Lloyd M. Bentsen (D-Tex.) to modify it. Boggs, of course, testified for his clients.
As they say at the Finance Committee, the measures are "pending." The creature is still hungry.