1997 tax legislative initiatives and the AICPA.

• Author: Padwe, Gerald W.

1997 was a fascinating year in the context of tax policy and legislation. The Taxpayer Relief Act of 1997 (TRA '97) has (properly) been criticized as a law that increased the complexity of our tax system; however, it also brought significant tax relief to certain targeted groups of taxpayers. The IRS Restructuring Bill, passed by the House of Representatives as of presstime and having an excellent chance of passage in the Senate (most likely with some alterations), will cause significant changes in the way the Service interacts with taxpayers and tax professionals.

The AICPA was involved with both these bills (and will continue to be involved with the Restructuring Bill until its final passage), submitting written and oral testimony to both houses of Congress and supporting particular provisions of both bills with visits to Capitol Hill members and staff. This effort was hardly restricted to the Tax Division: The AICPA Key Persons Group (i.e., members that have particular personal or professional relationships with members of Congress) was extremely helpful; also, for the first time, the Institute's Spring Council Meeting was held in Washington, D.C., specifically so that Council members could also visit Capitol Hill and interact with their elected representatives on issues of importance (both tax and nontax) to the AICPA.

As might be anticipated, the results of these activities have been mixed; on the whole, the AICPA is pleased that many of its recommendations have been accepted. This column will focus on selected provisions of the TRA '97 which were of more than general interest to our members, regardless of whether they had the greatest political significance. (Assuming early passage in 1998 of the IRS restructuring legislation, it may be worthwhile to revisit that law in a future column.)

* After many years, corporate employees and self-employeds now have parity in the full deductibility of health insurance. While the Small Business Job Protection Act of 1996 had increased deductible limits for self-employeds' health insurance (from 30% to 80%), the TRA '97 finally phases in full deductibility of such costs. While equity should call for immediate full deductibility, revenue requirements led to a phase-in period of 10 years, with full deductibility in 2007.

* Also after an effort of several years, the home office deduction has been significantly liberalized, by legislatively revising the Supreme Court's Soliman decision. Effective in...