SECTION 2. CHANGE MADE FROM PRECEDING YEAR

An amount used to provide an exception to reporting requirements under § 6033(e)(3) of the Internal Revenue Code for certain exempt organizations with nondeductible lobbying expenditures is adjusted for inflation for tax years beginning in 1996. See section 3.11 of this revenue procedure.

SECTION 3. 1996 ADJUSTED ITEMS

.01 Tax Rate Tables .

The following adjusted tax rate tables are prescribed in lieu of the tables in subsections (a), (b), (c), (d), and (e) of § 1 of the Code with respect to tax years beginning in 1996.

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TABLE 1—Section 1(a).—MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES

If Taxable Income Is: The Tax Is:

Not Over $40,100 15% of the taxable income Over $40,100 but not over $96,900 $6,015 plus 28% of the excess over $40,100 Over $96,900 but not over $147,700 $21,919 plus 31% of the excess over $96,900 Over $147,700 but not over $236,750 $37,667 plus 36% of the excess over $147,700 Over $263,750 $79,445 plus 39.6% of the excess over $263,750

TABLE 2—Section 1(b).—HEADS OF HOUSEHOLDS

If Taxable Income Is: The Tax Is:

Not Over $32,150 15% of the taxable income Over $32,150 but not over $83,050 $4,822.50 plus 28% of the excess over $32,150 Over $83,050 but not over $134,500 $19,074.50 plus 31% of the excess over $83,050 Over $134,500 but not over $263,750 $35,024 plus 36% of the excess over $134,500 Over $263,750 $81,554 plus 39.6% of the excess over $263,750

TABLE 3—Section 1(c).—UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING SPOUSES AND HEADS OF HOUSEHOLDS)

If Taxable Income Is: The Tax Is:

Not Over $24,000 15% of the taxable income Over $24,000 butnot over $58,150 $3,600 plus 28% of the excess over $24,000 Over $58,150 but not over $121,300 $13,162 plus 31% of the excess over $58,150 Over $121,300 but not over $263,750 $32,738.50 plus 36% of the excess over $121,300 Over $263,750 $84,020.50 plus 39.6% of the excess over $263,750

TABLE 4—Section 1(d).—MARRIED INDIVIDUALS FILING SEPARATE RETURNS

If Taxable Income Is: The Tax Is:

Not Over $20,050 15% of the taxable income Over $20,050 but not over $48,450 $3,007.50 plus 28% of the excess over $20,050 Over $48,450 but not over $73,850 $10,959.50 plus 31% of the excess over $48,450 Over $73,850 but not over $131,875 $18,833.50 plus 36% of the excess over $73,850 Over $131,875 $39,722.50 plus 39.6% of the excess over $131,875

TABLE 5—Section 1(e).—ESTATES AND TRUSTS

If Taxable Income Is: The Tax Is:

Not Over $1,600 15% of the taxable income Over $1,600 but not over $3,800 $240 plus 28% of the excess over $1,600 Over $3,800 but not over $5,800 $856 plus 31% of the excess over $3,800 Over $5,800 but not over $7,900 $1,476 plus 36% of the excess over $5,800 Over $7,900 $2,232 plus 39.6% of the excess over $7,900

.03 Earned Income Tax Credit . (1) Section 32(a)(1) provides an earned income tax credit amount for certain taxpayers with one child, two or more children, or no children. For tax years beginning in 1996, the ‘‘maximum amount of the credit’’ is calculated by multiplying the ‘‘earned income amount’’ by the ‘‘credit percentage’’ as follows:

.02 Unearned Income of Minor Chil- dren Taxed as if Parent’s Income (the ‘‘Kiddie Tax’’) .

(1) Section 1(g) provides that the tax on the net unearned income of a child under the age of 14 is computed at the marginal rate of the child’s parent. Under § 1(g)(4)(A)(ii), net unearned income generally equals unearned income less the sum of (I) the amount in effect for the tax year under

446 1995–2 C.B.

§ 63(c)(5)(A), plus (II) the greater of the amount described in (I) or certain itemized deductions.

(2) The amount in effect for tax years beginning in 1996 under § 63(c)(5)(A) is $650. See section 3.04(2) below. Accordingly, for tax years beginning in 1996 net unearned income will generally equal unearned income less the greater of $1,300 or $650 plus certain itemized deductions.

Earned Income

Amount

Maximum Amount

of the Credit

Type of Taxpayer

Credit Percentage

1 child 34 $6,330 $2,152 2 or more children 40 $8,890 $3,556 no children 7.65 $4,220 $ 323

(2) Section 32(a)(2) provides for the phaseout of the earned income tax credit. The amount of the reduction in the maximum amount of the credit caused by the phaseout is calculated by multiplying the ‘‘phaseout percentage’’ by the amount by which the taxpayer’s adjusted gross income (or, if greater, earned income) exceeds the ‘‘threshold phaseout amount.’’ For tax years beginning in 1996, the ‘‘phaseout percentages,’’ the ‘‘threshold phaseout amounts,’’ and the ‘‘completed phaseout amounts’’ are as follows:

Completed

Amount

Threshold

Phaseout

Amount

Phaseout

Type of Taxpayer

Phaseout Percentage

1 child 15.98 $11,610 $25,078 2 or more children 21.06 $11,610 $28,495 no children 7.65 $ 5,280 $ 9,500

(3) The Internal Revenue Service will prescribe tables showing the amount of the earned income tax credit for each type of taxpayer.

.04 Standard Deduction . (1) The following adjusted standard deduction amounts are prescribed in lieu of the amounts set forth in § 63(c)(2) with respect to tax years beginning in 1996.

Filing Status

Standard Deduction

MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES $6,700 HEADS OF HOUSEHOLDS $5,900 UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING SPOUSES AND HEADS OF HOUSE HOLDS) $4,000 MARRIED INDIVIDUALS FILING A SEPARATE RETURN $3,350

(2) Under § 63(c)(5) for tax years beginning in 1996, the standard deduction for an individual who may be claimed as a dependent by another taxpayer for a tax year beginning in the calendar year in which the individual’s tax year begins, cannot exceed the greater of (A) $650 or (B) the amount of the individual’s earned income.

(3) Under § 63(f) for tax years beginning in 1996, the additional standard deduction amounts for the aged and for the blind are $800 for each. These amounts are each increased to $1,000 if the individual is also unmarried and not a surviving spouse.

.05 Overall Limitation on Itemized Deductions . (1) Section 68 provides that the amount of itemized deductions other wise allowable for the tax year shall be reduced by the lesser of (1) 3 percent of the excess of adjusted gross income over the ‘‘applicable amount,’’ or (2) 80 percent of the amount of certain itemized deductions otherwise allowable for the tax year.

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(2) The ‘‘applicable amount’’ for tax years beginning in 1996 is $117,950 ($58,975 in the case of a separate return by a married individual within the meaning of § 7703).

.06 Qualified Transportation Fringe . (1) Section 132(f) provides an exclusion from gross income for certain employer-provided transportation referred to as a ‘‘qualified transportation fringe.’’ A ‘‘qualified transportation fringe’’ means any of the following: transportation in a commuter highway vehicle between the employee’s residence and place of employment, any transit pass, and qualified parking. Section 132(f)(2)(A) limits the exclusion for the aggregate of the transportation in a commuter highway vehicle

Type of Taxpayer

and the transit pass to $60 per month (the ‘‘$60 vehicle/transit’’ limitation). Section 132(f)(2)(B) limits the exclusion for qualified parking to $155 per month (the ‘‘$155 parking’’ limitation).

(2) For tax years beginning in 1996, the ‘‘$60 vehicle/transit’’ limitation is $65 and the ‘‘$155 parking’’ limitation is $165.

.07 Income from United States Sav- ings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses .

(1) Section 135 provides an exclusion of income from the redemption of United States savings bonds for taxpayers who pay qualified higher education expenses. Section 135(b)(2) provides for the phaseout of the exclusion. The amount of the reduction in the

Threshold Phaseout Amount

exclusion caused by the phaseout is calculated by multiplying the amount otherwise excludable by a fraction. The numerator of the fraction is the excess of the taxpayer’s modified adjusted gross income over the threshold amount ($60,000 for joint returns or $40,000 for others) and the denominator is $30,000 for joint returns or $15,000 for others.

(2) For tax years beginning in 1996, the amounts of modified adjusted gross income above which the phaseout of the exclusion begins (‘‘threshold phaseout amounts’’) and the amounts at which the benefit is completely phased out (‘‘completed phaseout amounts’’) are as follows:

Completed Phaseout Amount

Code § 1(a) $65,250 $95,250 Others $43,500 $58,500

.08 Personal Exemption . (1) Section 151(b) generally allows a taxpayer an exemption for himself or herself. Section 151(c) generally allows a taxpayer additional exemptions for dependents as defined in § 152. The personal exemption for tax years beginning in 1996 is $2,550.

(2) Section 151(d)(3) provides for the phaseout of the tax benefit of the personal exemptions allowed by § 151. The reduction in the amount of personal exemptions caused by the phaseout is calculated by reducing the total amount of the personal exemptions by 2 percent for each $2,500 increment (or portion thereof) of adjusted gross income in excess of a threshold phaseout amount. For tax years beginning in 1996, the ‘‘threshold phaseout amounts’’ and the ‘‘completed phaseout amounts’’ are as follows:

Completed Phaseout Amount After

Type of Taxpayer

Threshold Phaseout Amount

Code § 1(a) $176,950 $299,450 Code § 1(b) $147,450 $269,950 Code § 1(c) $117,950 $240,450 Code § 1(d) $ 88,475 $149,725

2-percent of the contribution, or $50 (the ‘‘$50 benefit’’ limitation), whichever is less;

(b) The contribution is $25 (the ‘‘$25 payment’’ limitation) or more, and the only benefits received by the donor in return during the calendar year have a cost, in the aggregate, of not more than a ‘‘low cost article’’ under § 513(h)(2); or

(c) In connection with a request for a charitable contribution, the charity mails or otherwise distributes free, unordered items to patrons, and the cost of such items (in the aggregate) distributed to any single patron in a

.09 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns .

(1) Section 513(h)(1)(A) provides that, in the case of certain exempt organizations, the term ‘‘unrelated business income’’ does not include activities relating to the distribution of ‘‘low cost articles’’ (as defined in § 513(h)(2)) if the distribution of such articles is incidental to the solicitation of charitable contributions.

(2) Section 3 of Rev. Proc. 90–12, 1990–1 C.B. 471, as amplified by Rev. Proc. 92–49, 1992–1 C.B. 987, and as modified by Rev. Proc. 92-102, 1992–2

448 1995–2 C.B.

C.B. 579, provides guidelines for determining the deductible amount of contributions under § 170 when the contributors receive something in return for their contributions. The guidelines provide that insubstantial benefits received by the contributor (in the context of a charitable fund-raising campaign) are disregarded, which makes the contribution fully deductible under § 170. The guidelines further provide the following three alternative limitations on what are insubstantial benefits:

(a) The fair market value of all the benefits received is not more than

calendar year is not more than a ‘‘low cost article’’ under § 513(h)(2).

(3) For tax years beginning in 1996, the ‘‘$50 benefit’’ limitation is $67, the ‘‘$25 payment’’ limitation is $33.50, and the ‘‘low cost article’’ limitation is $6.70.

.10 Luxury Automobile Excise Tax . (1) Section 4001(a) imposes an excise tax on the first retail sale of any passenger vehicle to the extent the price exceeds $30,000 (the ‘‘$30,000 amount’’). Section 4003(a) imposes an excise tax on the installation of parts or accessories on a passenger vehicle within six months of the date after the vehicle was first placed in service, to the extent the price of all parts and accessories, including installation, and the price of the vehicle exceed the ‘‘$30,000 amount.’’

(2) The ‘‘$30,000 amount’’ for calendar year 1996 is $34,000.

.11 Reporting Exception for Certain Exempt Organizations with Nondeduct- ible Lobbying Expenditures .

(1) Section 6033(e)(1)(A) provides that certain exempt organizations that pay or incur nondeductible lobbying expenditures must include the total of those expenditures on their annual returns and must notify their members with a reasonable estimate of the portion of dues allocated to those expenditures. Section 6033(e)(3) provides that § 6033(e)(1)(A) shall not apply to an organization that establishes to the satisfaction of the Secretary that substantially all of its dues are nondeductible without regard to the lobbying expenditure restrictions. Section 4.02 of Rev. Proc. 95–35, 1995–32 I.R.B. 51, provides that § 501(c)(4) social welfare organizations and § 501(c)(5) agricultural and horticultural organizations are treated as satisfying § 6033(e)(3) if either (1) more than 90 percent of all annual dues are received from persons, families, or entities who each pay less than $50 (the ‘‘$50 exception’’ amount), or (2) more than 90 percent of all annual dues are received from certain exempt entities.

(2) For tax years beginning in 1996, the ‘‘$50 exception’’ amount is $52.