Public Law 95–615

without regard to Revenue Ruling 76–453 (and without regard to any other regulation, ruling, or decision reaching the same result as, or a result similar to, the result set forth in such Revenue Ruling); and

with full regard to the rules in effect before Revenue Ruling 76–453.

In General.—

Subsection (d) of section 1011 of the Tax Reform Act of 1976 is amended by striking out “December 31, 1976” and inserting in lieu thereof “December 31, 1977”.

Transitional Rule.—If for any taxable year beginning in 1977—

then such individual shall be treated for such taxable year as an individual for whom an unused zero bracket amount computation is provided by section 63(e) of such Code.

26 USC 63.

by striking out “January 1, 1978” each place it appears and inserting in lieu thereof “January 1, 1980”, and

by striking out “December 31, 1977” in subsection (d) and inserting in lieu thereof “December 31, 1979”.

In General.—

Subsection (k) of section 167 of the Internal

26 USC 167.

Revenue Code of 1954 (relating to depreciation of expenditures to rehabilitate low-income rental housing) is amended by striking out “January 1, 1978” each place it appears and inserting in lieu thereof “January 1, 1979”.

Technical Amendment.—

Subsection (b) of section 203 of the

26 USC 167 note.

Tax Reform Act of 1976 is amended by striking out “, and before January 1, 1978, and expenditures made pursuant to a binding contract entered into before January 1, 1978”.

Amendments of 1954 Code.—

Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed m terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision

26 USC 1.

of the Internal Revenue Code of 1954.

Limitations on Amount of Exclusion.—

Paragraph (1) of section 911(c) (relating to special rules) is amended to read as

26 USC 911.

follows:

“(1)“(1)

Limitations on amount of exclusion.—

“(A)“(A)

In general.—

The amount excluded from the gross income of an individual under subsection (a) for any taxable year shall not exceed an amount which shall be computed on a daily basis at an annual rate of $20,000 for days during which he resides in a camp.

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“(B)“(B)

Camp.—

For purposes of this section, an individual shall not be considered to reside in a camp because of his employment unless the camp constitutes substandard lodging which is—

“(i)“(i)

provided by or on behalf of the employer for the convenience of the employer because the place at which such individual renders services is in a remote area where satisfactory housing is not available on the open market,

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“(ii)“(ii)

located, as near as practicable, in the vicinity of the place at which such individual renders services, and

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“(iii)“(iii)

furnished in a common area (or enclave) which is not available to the public and which normally accommodates 10 or more employees.

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“(C)“(C)

Hardship area.—

For purposes of this section, the term ‘hardship area’ has the same meaning as in section 913(h).”.

Post, p . 3100.

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Business Premises of the Employer.—

Subsection (c) of section 911 (relating to special rules) is amended by inserting after paragraph

26 USC 911.

(6) the following new paragraph:

“(7)“(7)

Business premises of the employer.—

In the case of an individual residing in a camp who elects the exclusion provided in this section for a taxable year, the camp shall be considered to be part of the business premises of the employer for purposes of section 119 for such taxable year.”

26 USC 119.

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Section Not To Apply.—

Removal of Requirement as to Place of Receipt.—

Paragraph (8) of section 911(c) (relating to requirement as to place of receipt) is hereby repealed.

Clerical Amendments.—

Allowance of Deduction.—

Subpart B of part III of subchapter

26 USC 911.

N of chapter 1 (relating to earned income of citizens and residents of United States) is amended by adding at the end thereof the following new section:

“SEC. 913. DEDUCTION FOR CERTAIN EXPENSES OF LIVING ABROAD.

“(a)“(a)

Allowance of Deduction.—

In the case of an individual who

“(1)“(1)

Bona fide resident of foreign country.—

A citizen of the United States and who establishes to the satisfaction of the Secretary that he has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or

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“(2)“(2)

Presence in foreign country for 17 months.—

A citizen or resident of the United States and who during any period of 18 consecutive months is present in a foreign country or countries during at least 510 full days in such period,

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there shall be allowed as a deduction for such taxable year or for any taxable year which contains part of such period, the sum of the amounts set forth in subsection (b).

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“(b)“(b)

Amounts.—

The amounts referred to in this subsection are:

“(1)“(1)

The qualified cost-of-living differential.

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“(2)“(2)

The qualified housing expenses.

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“(3)“(3)

The qualified schooling expenses.

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“(4)“(4)

The qualified home leave travel expenses.

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“(5)“(5)

The qualified hardship area deduction.

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“(c)“(c)

Deduction Not To Exceed Net Foreign Source Earned Income.—

“(1)“(1)

In general.—

The deduction allowed by subsection (a) to any individual for the taxable year shall not exceed—

“(A)“(A)

such individual’s earned income from sources outside the United States for the portion of the taxable year in which such individual’s tax home is in a foreign country, reduced by

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“(B)“(B)

the sum of—

“(i)“(i)

any earned income referred to in subparagraph (A) which is excluded from gross income under section 119, and

26 USC 119.

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“(ii)“(ii)

the allocable deductions.

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“(2)“(2)

Allocable deductions defined.—

For purposes of paragraph (l)(B)(ii), the term ‘allocable deductions’ means the deductions properly allocable to or chargeable against the earned income referred to in paragraph (1) (A), other than the deduction allowed by this section.

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“(d)“(d)

Qualified Cost-of-Living Differential.—

“(1)“(1)

In general.—

For purposes of this section, the term ‘qualified cost-of-living differential’ means a reasonable amount determined under tables (or under another method) prescribed by the Secretary establishing the amount (if any) by which the general cost of living in the foreign place in which the individual’s tax home is located exceeds the general cost of living for the metropolitan area in the continental United States (excluding Alaska) having the highest general cost of living. The tables (or other methods) so prescribed shall be revised at least once during each calendar year.

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“(2)“(2)

Special rules.—

For purposes of paragraph (1) —

“(A)“(A)

Computation on daily basis.—

The differential shall be computed on a daily basis for the period during which the individual’s tax home is in a foreign country.

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“(B)“(B)

Differential to be based on daily living expenses.—

An individual’s cost-of-living differential shall be determined by reference to reasonable daily living expenses (excluding housing and schooling expenses).

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“(C)“(C)

Basis of comparison.—

The differential prescribed for any foreign place—

“(i)“(i)

shall vary depending on the composition of the family (spouse and dependents) residing with the individual (or at a qualified second household), and

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“(ii)“(ii)

shall reflect the costs of living of a family whose income is equal to the salary of an employee of the United States who is compensated at a rate equal to the annual rate paid for step 1 of grade GS–14.

5 USC 5332 note.

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“(D)“(D)

State department’s index may be taken into account.—

The Secretary, in determining the qualified cost-of-living differential for any foreign place, may take into account the Department of State’s Local Index of Living Costs Abroad as it relates to such place.

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“(E)“(E)

No differential for periods during which individual is eligible under section 119.—

Except as provided in subsection (i) (1) (A) (ii) an individual shall not be entitled to any qualified cost-of-living differential for any period for which such individual’s meals and lodging are excluded from gross income under section 119.

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“(e)“(e)

Qualified Housing Expenses.—

“(1)“(1)

In general.—

For purposes of this section, the term ‘qualified housing expenses’ means the excess of—

“(A)“(A)

the individual’s housing expenses, over

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“(B)“(B)

the individual’s base housing amount.

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“(2)“(2)

Housing expenses.—

“(A)“(A)

In general.—

For purposes of paragraph (1), the term ‘housing expenses’ means the reasonable expenses paid or incurred during the taxable year by or on behalf of the individual for housing for the individual (and, if they reside with him, for his spouse and dependents) in a foreign country. Such term—

“(i)“(i)

except as provided in clause (ii), includes expenses attributable to the housing (such as utilities and insurance), and

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“(ii)“(ii)

does not include interest and taxes of the kind deductible under section 163 or 164 or any amount allowable

26 USC 163, 164, 216.

as a deduction under section 216(a).

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“(B)“(B)

Portion which is lavish or extravagant not allowed.—

For purposes of subparagraph (A), housing expenses shall not be treated as reasonable to the extent such expenses are lavish or extravagant under the circumstances.

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“(3)“(3)

Base housing amount.—

For purposes of paragraph (1)—

“(A)“(A)

In general.—

The term ‘base housing amount’ means 20 percent of the excess of—

“(i)“(i)

the individual’s earned income (reduced by the deductions properly allocable to or chargeable against such earned income (other than the deduction allowed by this section)), over

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“(ii)“(ii)

the sum of—

“(I)“(I)

the housing expenses taken into account under paragraph (1)(A) of this subsection,

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“(II)“(II)

the qualified cost-of-living differential,

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“(III)“(III)

the qualified school expenses,

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“(IV)“(IV)

the qualified home leave travel expenses, and

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“(V)“(V)

the qualified hardship area deduction.

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“(B)“(B)

Base housing amount to be zero in certain cases.—

If, because of adverse living conditions, the individual maintains a household for his spouse and dependents at a foreign place other than his tax home which is in addition to the household he maintains as his tax home, and if his tax home is in a hardship area as defined in subsection (h), the base housing amount for the household maintained at his tax home shall be zero.

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“(4)“(4)

Periods taken into account.—

“(A)“(A)

In general.—

The expenses taken into account under this subsection shall be only those which are attributable to housing during periods for which—

“(i)“(i)

the individual’s tax home is in a foreign country, and

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“(ii)“(ii)

except as provided in subsection (i) (1) (B) (iii). the value of the individual’s housing is not excluded

26 USC 119.

under section 119.

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“(B)“(B)

Determination of base housing amount.—

The base housing amount shall be determined for the periods referred to in subparagraph (A) (as modified by subsection (i)(l)

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“(5)“(5)

Only one house per period.—

If, but for this paragraph, housing expenses for any individual would be taken into account, under paragraph (2) of subsection (b) with respect to more than one abode for any period, only housing expenses with respect to that abode which bears the closest relationship to the individual’s tax home shall be taken into account under such paragraph (2) for such period.

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“(f)“(f)

Qualified Schooling Expenses.—

“(1)“(1)

In general.—

For purposes of this section, the term ‘qualified schooling expenses’ means the reasonable schooling expenses paid or incurred by or on behalf of the individual during the taxable year for the education of each dependent of the individual at the elementary or secondary level. For purposes of the preceding sentence, the elementary or secondary level means education which is the equivalent of education from the kindergarten through the 12th grade in a United States-type school.

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“(2)“(2)

Expenses included.—

For purposes of paragraph (1), the term ‘schooling expenses’ means the cost of tuition, tees, books, and local transportation and of other expenses required by the school. Except as provided in paragraph (3), such term does not include expenses of room and board or expenses of transportation other than local transportation.

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“(3)“(3)

Room, board, and travel allowed in certain cases.—

If an adequate United States-type school is not available within a reasonable commuting distance of the individual’s tax home, the expenses of room and board of the dependent and the expenses of the transportation of the dependent each school year between such tax home and the location of the school shall be treated as schooling expenses.

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“(4)“(4)

Determination of reasonable expenses.—

If—

“(A)“(A)

there is an adequate United States-type school available within a reasonable commuting distance of the individual’s tax home, and

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“(B)“(B)

the dependent attends a school other than the school referred to in subparagraph (A),

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then the amount taken into account under paragraph (2) shall not exceed the aggregate amount which would be charged for the period by the school referred to in subparagraph (A).

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“(5)“(5)

Period taken into account.—

An amount shall be taken into account as a qualified schooling expense only if it is attributable to education for a period during which the individual’s tax home is in a foreign country.

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“(g)“(g)

Qualified Home Leave Travel Expenses.—

“(1)“(1)

In general.—

For purposes of this section, the term ‘qualified home leave travel expenses’ means the reasonable amounts paid or incurred by or on behalf of an individual for the transportation of such individual, his spouse, and each dependent from the location of the individual’s tax home outside the United States to—

“(A)“(A)

the individual’s present (or, if none, most recent) principal residence in the United States, or

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“(B)“(B)

if subparagraph (A) does not apply to the individual, the nearest port of entry in the continental United States (excluding Alaska)

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and return.

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“(2)“(2)

One trip per 12-month period abroad.—

Amounts may be taken into account under paragraph (4) of subsection (b) only with respect to one round trip per person for each continuous period of 12 months for which the individual’s tax home is in a foreign country.

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“(h)“(h)

Qualified Hardship Area Deduction.—

“(1)“(1)

In general.—

For purposes of this section, the term ‘qualified hardship area deduction’ means an amount computed on a daily basis at an annual rate of $5,000 for days during which the individual’s tax home is in a hardship area.

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“(2)“(2)

Hardship area defined.—

For purposes of this section, the term ‘hardship area’ means any foreign place designated by the Secretary of State as a hardship post where extraordinarily difficult living conditions, notably unhealthful conditions, or excessive physical hardships exist and for which a post differential of 15 percent or more—

“(A)“(A)

is provided under section 5925 of title 5, United States Code, or

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“(B)“(B)

would be so provided if officers and employees of the Government of the United States were present at that place.

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“(i)“(i)

Special Rules Where Individual Maintains Separate Household for Spouse and Dependents Because of Adverse Living Conditions at Tax Home.—

“(1)“(1)

In general.—

For any period during which an individual maintains a qualified second household—

“(A)“(A)

Qualified cost-of-living differential.—

“(i)“(i)

Allowance determined by reference to location of qualified second household.—

Paragraph (1) of subsection (d) shall be applied by substituting ‘the qualified second household’ for ‘the individual’s tax home’.

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“(ii) 26 USC 119. Disregard or section 119 rule.—

Subparagraph (E) of subsection (d) (2) shall not apply with respect to the spouse and dependents.

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“(B)“(B)

Qualified housing expenses.—

“(i)“(i)

Expenses with respect to qualified second household taken into account.—

For purposes of Subsection (e), the expenses for housing of an individual’s spouse and dependents at the qualified second household shall be treated as housing expenses if they would meet the requirements of subsection (e) (2) if the individual resided at such household.

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“(ii)“(ii)

Separate application of subsection (e).—

Subsection (e) shall be applied separately with respect to the housing expenses for the qualified second household; except that, in determining the base housing amount, the housing expenses (if any) of the individual for housing at his tax home shall also be taken into account under subsection (e) (3) (A) (ii).

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“(iii)“(iii)

Certain rules not to apply.—

Paragraphs (4) (A) (ii) and (5) of subsection (e) shall not apply with respect to housing expenses for the qualified second household.

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“(C)“(C)

Requirement that spouse and dependents reside with individual for purposes of schooling and home leave.

“(i)“(i)

In general.—

The requirement of subsection (j) (3) that the dependent or spouse of the individual (as the case may be) reside with the individual at his tax home shall be treated as met if such spouse or dependent resides at the qualified second household.

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“(ii)“(ii)

Substitution of household for tax home.—

In any case where clause (i) applies, paragraphs (3) and (4) of subsection (f), and paragraph (1) of subsection (g), shall be applied with respect to amounts paid or incurred for the spouse or dependent by substituting the location of the qualified second household for the individual’s tax home.

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“(2)“(2)

Definition of qualified second household.—

For purposes of this section, the term ‘qualified second household’ means any household maintained in a foreign country by an individual for the spouse and dependents of such individual at a place other than the tax home or such individual because of adverse living conditions at the individual’s tax home.

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“(j)“(j)

Other Definitions and Special Rules.—

“(1)“(1)

Definitions.—

For purposes of this section—

“(A)“(A)

Earned income.—

The term ‘earned income’ has the meaning given to such term by section 911(b) (determined

26 USC 911.

with the rules set forth in paragraphs (2), (3), (4), and (5) of section 911(c)), except that such term does not include amounts paid by the L^Tnited States or any agency thereof.

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“(B)“(B)

Tax home.—

The term ‘tax home’ means, with respect to any individual, such individual’s home for purposes of section 162(a) (2) (relating to traveling expenses while away

26 USC 162.

from home). An individual shall not be treated as having a tax home in a foreign country for any period for which his abode is within the United States.

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“(C)“(C)

Residence at tax home.—

A household or residence shall be treated as at the tax home of an individual if such household or residence is within a reasonable commuting distance of such tax home.

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“(D)“(D)

Adverse living conditions.—

The term ‘adverse living conditions’ means living conditions which are dangerous, unhealthful, or otherwise adverse.

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“(E)“(E)

United states.—

The term ‘United States’, when used in a geographical sense, includes the possessions of the United States and the areas set forth in paragraph (1) of section 638 and so much of paragraph (2) of section 638

26 USC 638.

as relates to the possessions of the United States.

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“(2)“(2)

Limitation to coach or economy fare.—

The amount taken into account under this section for any transportation by air shall not exceed the lowest coach or economy rate at the time of such transportation charged by a commercial airline for such transportation during the calendar month in which such transportation is furnished. If there is no such coach or economy rate or if the individual is required to use first-class transportation because of a physical impairment, the preceding sentence shall be applied by substituting ‘first-class’ for ‘coach or economy’.

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“(3)“(3)

Requirement that spouse and dependents reside with individual for purposes of schooling and home leave.—

Except as provided in subsection (i) (1) (C) (i), amounts may be taken into account under subsection (f) with respect to any dependent of the individual, and under subsection (g) with respect to the individual’s spouse or any dependent of the individual, only for the, period that such spouse or dependent (as the case may be) resides with the individual at his tax home.

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“(k)“(k)

Certain Double Benefits Disallowed.—

An individual shall not be allowed—

“(1)“(1)

as a deduction (other than the deduction under

26 USC 151.

section 151),

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“(2)“(2)

as an exclusion, or

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“(3) 26 USC 44A.

as a credit under section 44A (relating to household and dependent care services),

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any amount to the extent that such amount is taken into account under subsection (d), (e), (f),or (g).

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“(l) 26 USC 911. Application With Section 911.—

An individual shall not be allowed the deduction allowed by subsection (a) for any taxable year with respect to which he elects the exclusion provided m section 911.

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“(m)“(m)

Regulations.—

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations providing rules—

“(1)“(1)

for cases where a husband and wife each have earned income from sources outside the United States, and

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“(2)“(2)

for married individuals filing separate returns.”.

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Deduction Allowed in Determining Adjusted Gross Income.—

Section 62 (relating to definition of adjusted gross income) is amended by inserting after paragraph (13) the following new paragraph:

“(14)“(14)

Deduction for certain expenses of living abroad.—

Ante, p. 3100.

The deduction allowed by section 913.”

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Clerical Amendment.—

The table of sections for subpart B of part III of subchapter N of chapter 1 is amended by adding at the end thereof the following:

by striking out “furnished to him by his employer for the convenience of the employer” and inserting in lieu thereof “furnished to him, his spouse, or any of his dependents by or on behalf of his employer for the convenience of the employer”, and

by striking out “There shall” and inserting in lieu thereof “(a) Meals and Lodging Furnished to Employee. His Spouse, and His Dependents, Pursuant to Employment.—There shall”.

Authority To Require Information Concerning Section 912 Allowances.—

Section 6011 (relating to general requirement of return, statement, or list) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:

“(d)“(d)

Authority To Require Information Concerning Section 912 Allowances.—

The Secretary may by regulations require any individual who receives allowances which are excluded from gross income under section 912 for any taxable year to include on his return of the taxes imposed by subtitle A for such taxable year such information with respect to the amount and type of such allowances as the Secretary determines to be appropriate.”

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Information From Federal Agencies.—

Each agency of the Federal Government which pays allowances excludable from gross income under section 912 of such Code shall furnish to the Secretary of the Treasury such information as he determines to be necessary to carry out his responsibility under subsection (a).

General Rule.—

Except as provided in subsections (b) and (c) the amendments made by this title shall apply to taxable years beginning after December 31, 1977.

Wage Withholding.—

The amendment made by section 207(a) shall apply to remuneration paid after the date of the enactment of this Act.

Election of Prior Law.—

In General.—

Title I of this Act (other than sections 4 and 5

26 USC 61 note.

thereof) shall cease to have effect on the day after the date of the enactment of this Act.

Special Rule for Section 5.—

Section 5 of this Act shall not

26 USC 401 note.

apply with respect to any type of plan for any period for which rules for that type of plan are provided by the Revenue Act of 1978.