and on into the future are inevitable, but with other important
issues on the legislative agenda it is possible no tax changes will
be made this year, according to Thomas P. Ochsenschlager, partner
with the Grant Thornton accounting firm in Washington D.C.
Ochsenschlager was the guest speaker Thursday for the Oklahoma
City Estate Planning Council's meeting.
Congress is expected to continue tinkering with tax legislation
in order to generate some additional revenue, but another major
action is still far away.
"It is quite conceivable nothing will happen this year, and
everything will fall into a tinkering bill in 1989," Ochsenschlager
said. "In 1990 or 1991, they will finally realize they've run out of
tinkering cuts and will probably do something major."
The main question still stands as to how changes will be
imposed, and what they will involve, he said.
Congress is expected to consider the catastrophic health bill
and the trade bill before adjourning for Easter recess,
If there is time to address a tax bill during this session, the
issues will most likely include:
- Research and development credits. While they are considered
to be revenue losers, Ochsenschlager said, the credits will most
likely be extended because they go hand in hand with the trade bill.
- The repeal of the windfall profits tax.
- Mutual fund expenses deductions. As a result of the 1986
tax reform act, mutual funds are required to report administrative
costs to shareholders, who in turn must report their share as income
to the Internal Revenue Service. The problem is that the expenses
must be deducted as part of miscellaneous items, which can only be
deducted to the extent they exceed 2 percent of the gross annual
If miscellaneous items exceed 2 percent of the income, the
shareholder is not able to claim a deduction for the income (coined
"phantom income" because shareholders never see it) and therefore
pay taxes on more income than they actually received during the year
in cash, Ochsenschlager said.
"What we hope to happen, is it will be changed that so mutual
funds would not have to report administrative costs to the
shareholders," he said.
- Capital gains rate decreases. Hearings on this issue are
deadlocked, with some Representatives divided on whether the capital
gains tax is actually a good revenue raiser, Ochsenschlager said.
In the tinkering process, Ochsenschlager said several of the
following items will probably going to be considered in a tax bill
in the next two years. …