IRS News Release  
April 19, 1995

Johnson Announces Hearing on the Targeted Jobs Tax Credit,
the Exclusion for Employer-Provided Educational Assistance,
the Orphan Drug Credit and Other Temporary Tax Provisions

Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing to examine issues relating to several recently expired provisions of the tax laws, including the targeted jobs tax credit (TJTC), the exclusion for employer-provided educational assistance, the tax credit for orphan drug clinical testing expenses, and the special rule for certain contributions of qualified appreciated stock to private foundations, as well as other tax provisions scheduled to expire. The hearing will take place on Tuesday, May 9, 1995, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 a.m.


Targeted Jobs Tax Credit. Prior to January 1, 1995, certain employers could claim a credit based on qualifying wages paid to individuals from several targeted groups (Code section 51). The targeted groups consisted of individuals who generally were recipients of payments under means-tested transfer programs, economically disadvantaged, or disabled. The credit was equal to 40 percent of up to $6,000 of first-year wages paid to a certified member of a targeted group. Thus, the maximum credit generally was $2,400 per individual. With respect to economically disadvantaged summer youth employees, the credit was equal to 40 percent of up to $3,000 of wages, for a maximum credit of $1,200. The credit expired for individuals who began work for an employer after December 31, 1994. Exclusion for Employer-Provided Educational Assistance. Prior to January 1, 1995, an employee's gross income and wages for income and employment tax purposes did not include amounts paid or incurred by the employer for educational assistance provided to the employee if such Amounts were paid or incurred pursuant to an educational assistance program that met certain requirements (Code section 127). This exclusion, which expired with respect to amounts paid after December 31, 1994, was limited to $5,250 of educational assistance with respect to an individual during a calendar year. In the absence of the exclusion, for purposes of income and employment taxes, an employee generally is required to include in income and wages the value of educational assistance provided by the employer unless the cost of such assistance qualifies as a deductible job-related expense of the employee.

Tax Credit for Orphan Drug Clinical Testing Expenses. The orphan drug credit (Code section 28) provided a 50-percent nonrefundable tax credit for a taxpayer's qualified clinical testing expenses paid or incurred in the testing of certain drugs for rare diseases, generally referred to as "orphan drugs." Qualified testing expenses are costs incurred to test an orphan drug after the drug has been approved for human testing by the Food and Drug Administration (FDA) but before the drug has been approved for sale by the FDA. The orphan drug credit expired after December 31, 1994.

Gifts of Publicly-Traded Stock to Private Foundations. Prior to January 1, 1995, the deduction allowable for charitable contributions to private nonoperating foundations of certain readily marketable stock was the full fair market value of the stock on the date of contribution (Code section 170 (e)(5)). Thus, for donations made during the period prior law was applicable (July 19, 1984, through December 31, 1994), the rule generally applicable to donations of capital-gain property to nonoperating foundations (sec. 170(e)(1)(B)(ii)) -- which generally limits the deductible amount to the asset's cost -- did not apply to contributions of such stock.

Federal Unemployment Tax Act (FUTA) Exemption for H-2A Agricultural Workers. Under a program administered by the Immigration and Naturalization Service, aliens are admitted to the U.S. on a temporary basis to perform agricultural labor. Prior to January 1, 1995, this agricultural labor was exempt for purposes of FUTA employment taxes (Code section 3306(c)(l)).

Production Tax Credit for Nonconventional Fuels. Under current law, certain nonconventional fuels are eligible for a production credit equal to $3 per barrel or Btu oil barrel equivalent (Code section 29). The Energy Policy Act of 1992 extended the credit, for gas produced from biomass or synthetic coal fuels. These fuels must be produced domestically from a facility placed in service before January 1, 1997, pursuant to a written binding contract in effect before January 1, 1996. Fuels produced from facilities which satisfy the binding contract rule may qualify for the credit if sold before January 1, 2008.

Transportation Fuels Tax Exemption for Aviation Jet Fuel. The omnibus Budget Reconciliation Act of 1993 generally imposed a 4.3 cents per gallon excise tax on transportation fuels effective October 1, 1993. However, a two-year delay from the transportation tax was provided for gasoline and jet fuels used in commercial aviation. Thus, on October 1, 1995, the current commercial aviation fuels tax exemption will expire. Revenues generated by the transportation excise tax are retained in the General Fund of the Treasury.


Requests to be heard at the hearing must be made by telephone to Traci Altman or Bradley Schreiber at (202) 225-1721 no later than the close of business, Wednesday, April 26, 1995. The telephone request should be followed by a formal written request to Phillip D. Moseley, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. The staff of the Subcommittee on Oversight will notify by telephone those scheduled to appear as soon as possible after the filing deadline. Any questions concerning a scheduled appearance should be directed to the subcommittee staff at (202) 225-7601.

In view of the limited time available to hear witnesses, the Subcommittee may not be able to accommodate all requests to be heard. Those persons and organizations not scheduled for an oral appearance are encouraged to submit written statements for the record of the hearing. All persons requesting to be heard, whether they are scheduled for oral testimony or not, will be notified as soon as possible after the filing deadline. Witnesses scheduled to present oral testimony are required to summarize briefly their written statements in no more than five minutes. THE FIVE MINUTE RULE WILL BE STRICTLY ENFORCED. The full written statement of each witness will be included in the printed record.

In order to assure the most productive use of the limited amount of time available to question witnesses, all witnesses scheduled to appear before the Subcommittee are required to submit 200 copies of their prepared statements for review by Members prior to the hearing. Testimony should arrive at the Subcommittee on Oversight office, room 1136 Longworth House Office Building, no later than 5:00 p.m. on Friday, May 5, 1995. Failure to do so may result in the witness being denied the opportunity to testify in person.


Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) copies of their statement, with their address and date of hearing noted, by the close of business, Tuesday, May 23, 1995, to Phillip D. Moseley, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Oversight office, room 1136 Longworth House Office Building, at least one hour before the hearing begins.

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