Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, October 12, 1995                   TAG: 9510120050
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

SENATE PLAN WOULD GRANT

The credit would be retroactive to Jan. 1, allowing parents to claim it when they file their returns next spring, said Sen. Orrin Hatch, R-Utah, a member of the Senate Finance Committee.

Single parents with incomes up to $75,000 and couples with incomes up to $110,000 would be eligible, he said Wednesday.

Making the credit retroactive would put the money in voters' pockets before the 1996 presidential election.

However, in a cost-saving gesture, the credit in the Senate plan would end after 1999. Conservative senators are relying on Congress and a president who they hope will be Republican to renew the credit before it expires.

A bill already passed by the House would start the credit a year later but continue it indefinitely. The income limit in the House version is $200,000.

In a nod to President Clinton, Senate Republicans want to include a tax credit to offset college tuition, Hatch said. However, according to a GOP source, the figure being discussed by senators is $750 - a smaller break than proposed by Clinton.

According to Hatch, the emerging Senate bill, expected to be voted upon by the Finance Committee next week, also would:

Offer Americans a new type of Individual Retirement Account. Contributions would not be tax-deductible, but earnings would build up tax-free and withdrawals would be permitted for first-time home purchases, college tuition, medical expenses and in the event of protracted unemployment.

Cut capital gains taxes for individuals in half, making the top rate 19.6 percent, and reduce the top rate for corporations from 35 percent currently to 28 percent. The House version would cut the corporate rate to 25 percent and index corporate and individual capital gains for inflation.

Increase the estate-tax exemption for family-owned small businesses and farms from $600,000 currently to $1.5 million. The House bill would increase the exemption for all estates to $750,000.

Extend expiring tax credits, including one aimed at encouraging development of drugs for rare diseases.

Ease the alternative minimum tax, which is aimed at preventing corporations from using too many loopholes. Manufacturers complain the law as written is too hard on businesses with heavy investments in machinery and equipment.

Phase out some corporate loopholes, including the Section 936 credit which benefits pharmaceutical companies manufacturing in Puerto Rico. The Senate bill would phase out Section 936 over seven years, compared with 10 years in the House version.