The Tax Reform Act of 1976 was passed by the
United States Congress
The United States Congress is the legislature of the federal government of the United States. It is Bicameralism, bicameral, composed of a lower body, the United States House of Representatives, House of Representatives, and an upper body, ...
in September 1976, and signed into law by
President
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Gerald Ford
Gerald Rudolph Ford Jr. ( ; born Leslie Lynch King Jr.; July 14, 1913December 26, 2006) was an American politician who served as the 38th president of the United States from 1974 to 1977. He was the only president never to have been elected ...
on October 4, 1976, becoming .
The act increased the percentage
standard deduction
Under United States tax law, the standard deduction is a dollar amount that non- itemizers may subtract from their income before income tax (but not other kinds of tax, such as payroll tax) is applied. Taxpayers may choose either itemized deduc ...
to 16% ($2,800 max) and minimum standard deduction to $2,100 (joint returns). The general tax credit (max of $35/capita or 2% of $9,000 income) was temporarily extended, and small business tax rates were temporarily lowered through 1977.
For the first time in US history, the Tax Reform Act of 1976 established tax incentives designed to encourage the preservation of historic structures – "sixty years after architectural obsolescence had first been officially recognized in the US tax code."
The act delayed decreasing in the
investment tax credit
A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state. It may also be a credit granted in recognition of taxes already paid or a form of state "disc ...
through 1980. It expanded the individual minimum tax and increased the long-term capital gains holding period from 6 months to 1 year.
A unified rate schedule for estate and gift taxes with a $175,000 exemption was created.
The act also created the
501(h) election procedure, allowing
501(c)(3) non-profit organizations to choose to participate in legislative
lobbying
In politics, lobbying, persuasion or interest representation is the act of lawfully attempting to influence the actions, policies, or decisions of government officials, most often legislators or members of regulatory agencies. Lobbying, whic ...
limited by the annual financial expenditure on that lobbying, rather than its overall extent.
Capital Gains
The previous major tax legislation (
Tax Reform Act of 1969) had established a 10% minimum tax and while it had left long-term capital gains under $50,000 to continue to qualify for the 25 percent alternative capital gains tax rate, it increased the rate on gains over $50,000 to 29.5 percent in 1970, 32.5 percent in 1971, and 35 percent (one-half the 70 percent top tax rate applicable to ordinary income) in 1972 and later years.
This Act increased the minimum tax rate to 15%. The Act also increased the holding period defining long-term
capital gains
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares. ...
, which receive preferential tax treatment, from six months to one year.
References
External links
Full text of the Act
{{US_tax_acts
United States federal taxation legislation
1976 in law