Section 120 (a) amends section 1 (q) of the Railroad Retirement Act so as to provide that references in the Railroad Retirement Act to the "Social Security Act" and to the "Social Security Act, as amended," are references to the Social Security Act as amended in 1956 (that is, as amended by all acts amending the Social Security Act during and preceding 1956).

Section 120 (b) amends section 5 (f) (2) of the Railroad Retirement Act, which guarantees the payment of total benefits under the railroad retirement and old-age and survivors insurance programs at least equal to the worker's contributions to the railroad program, plus an allowance for interest. In defining the terms of this guaranty, section 5 (f) (2) of the Railroad Retirement Act refers to survivor benefits payable under the Social Security Act "upon attaining age 65." Section 120 (b) inserts the phrase "(age sixty-two in the case of a widow)" after "age sixty-five" each place it appears in section 5 (f) (2) of the Railroad Retirement Act. This takes account of the reduction in the retirement age requirement for widows from age 65 to age 62 under the Social Security Act.

The latter amendment differs from that contained in the House bill because the House bill would have reduced the retirement age for all women beneficiaries, not just widows.

TITLE II-AMENDMENTS TO INTERNAL REVENUE CODE OF 1954

GENERAL STATEMENT

Title II of the bill contains amendments to chapter 2 (Tax on Self-Employment Income) and chapter 21 (Federal Insurance Contributions Act) of the Internal Revenue Code of 1954. All references in this portion of your committee's report to the "Internal Revenue Code" or the "code" are to the Internal Revenue Code of 1954.

District of Columbia credit unions

Section 201 (a) of the bill, as does section 201 (a) of the House bill, adds a new section 3113 to subchapter B of chapter 21 of the Internal Revenue Code of 1954. Section 3113 would render inoperative, with respect to the employer tax imposed by section 3111 of such code, any exemption from taxation which is now granted, or which may in the future be granted, to credit unions in the District of Columbia chartered pursuant to the act of June 23, 1932. Service performed in the employ of these credit unions now constitutes employment under chapter 21 of such code and title II of the Social Security Act, and such credit unions are now required to report and pay over the employee tax imposed by section 3101 of such code with respect to such service. However, such credit unions are not required to pay the employer tax imposed by section 3111 of such code in view of the exemption from taxation now granted under section 16 of the act of June 23, 1932. Section 201 (a) has the effect of subjecting such credit unions to liability for the employer tax with respect to such service. Under section 201 (k) of the bill, the amendment made by section 201 (a) is effective with respect to remuneration paid after 1956. Standby pay

Section 201 (b) of the House bill would amend section 3121 (a) (9) of the Internal Revenue Code of 1954 to conform such section to the changes made by section 102 (a) and (b) (4) of the House bill in the

definition of the term "retirement age" for purposes of section 209 (i) of the Social Security Act. Under existing law, any payment (other than vacation or sick pay) made to an employee after the month in which he or she attains age 65 is excluded from "wages," as that term is defined in the Federal Insurance Contributions Act, if the employee did not work for the employer in the period for which such payment is made. Under the House bill, any such payment made after 1955 is excluded if made to a male employee after the month in which he attains age 65 or, in the case of a woman, after the month in which she attains age 62. Section 201 (b) of the House bill has been deleted in view of the changes made by your committee in section 102 (a) of the House bill.

Service in connection with gum resin products

Under the existing section 3121 (b) (1) (A) of the Internal Revenue Code of 1954, service performed in connection with the Production or harvesting of crude gum (oleoresin) from a living tree or the processing of such crude gum into gum spirits of turpentine and gum resin, if such processing is carried on by the original producer of the crude gum, is excepted from employment. Section 201 (c) of the House bill would remove the specific exception of this service from employment and would have the effect of covering such service under the Federal Insurance Contributions Act on the same basis as other agricultural labor. Your committee's bill contains no corresponding amendment. Foreign agricultural workers

Section 201 (b) of the bill, for which there is no corresponding provision in the House bill, amends section 3121 (b) (1) (B) of the code. Under existing law, section 3121 (b) (1) (B) excepts from the term "employment," service performed by (1) certain foreign agricultural workers under contracts entered into in accordance with title V of the Agricultural Act of 1949, as amended, and (2) service performed by foreign agricultural workers lawfully admitted to the United States from the Bahamas, Jamaica, and the other British West Indies on a temporary basis to perform agricultural labor. Section 201 (b) of your committee bill amends section 3121 (b) (1) (B) so as to extend the exception contained in such section to service performed by foreign agricultural workers lawfully admitted to the United States from any foreign country or possession thereof on a temporary basis to perform agricultural labor.

Under section 201 (k) (1) of the bill, the amendment made by section 201 (b) applies with respect to service performed after 1956. Employees of Federal home loan banks and of the Tennessee Valley Authority

Section 201 (d) (1) of the House bill would amend section 3121 (b) (6) (B) (ii) of the Internal Revenue Code of 1954 so as to remove the exception from employment now provided by section 3121 (b) (6) (B) in respect of service performed in the employ of a Federal home loan bank. Thus, under the House bill, the general exception from employment provided by such section for service which is performed in the employ of a Federal instrumentality exempt from the employer tax on December 31, 1950, and which is covered by the retirement system of such instrumentality would no longer apply to service performed in the employ of a Federal home loan bank.

Section 201 (d) (2) of the House bill would amend section 3121 (b) (6) (C) (vi) of the Internal Revenue Code of 1954 so as to remove the exception from employment of service performed in the employ of the Tennessee Valley Authority by an individual who is subject to the retirement system of that instrumentality. At present, such service is excepted from employment under the general exception of service performed by an individual who is excluded from the Federal civil service retirement system because he is subject to another Federal retirement system.

Your committee's bill contains no amendments corresponding to those in section 201 (d) of the House bill.

Share-farming arrangements

Section 201 (c) (1) of the bill amends section 3121 (b) of the Internal Revenue Code of 1954 by adding a new paragraph (16). The new paragraph provides that service performed by an individual under an arrangement with the owner or tenant of land, pursuant to which such individual undertakes to produce agricultural or horticultural commodities on such land, shall be excepted from employment, provided that, pursuant to the arrangement, the agricultural or horticultural commodities produced by such individual, or the proceeds therefrom, are to be divided between him and the owner or tenant and the amount of such individual's share depends solely on the amount of the agricultural or horticultural commodities produced. Although the amendment is made effective (by sec. 201 (k) (1) of the bill) with respect to service performed after 1954, it is declaratory of present law.

Section 201 (c) (2) of the bill, which corresponds to section 201 (e) (2) of the House bill, amends section 1402 (a) (1) of the code under which rentals from real estate and from personal property leased with the real estate (including such rentals paid in crop shares) are excepted from "net earnings from self-employment." Under the amendment, the present exception would not apply to any income derived by an owner or tenant of land under an arrangement with another individual for the production by such other individual of agricultural or horticultural commodities on such land if such arrangement provides for material participation by the owner or tenant in the production of such agricultural or horticultural commodities, and there is participation by the owner or tenant in the production of any such commodity to a degree which is material with respect to that commodity.

Under this amendment it is contemplated that the owner or tenant of land which is used in connection with the production of agricultural or horticultural commodities must participate to a material degree in the management decisions or physical work relating to such activities in order for the income derived therefrom to be classified as "net earnings from self-employment." Your committee is of the opinion that in any case in which the owner or tenant establishes the fact that be periodically advises or consults with such other individual as to the production of the commodities and also establishes the fact that he periodically inspects the production activities on the land he will have presented strong evidence of the existence of the degree of participation contemplated by the amendment. If the owner or tenant also establishes the fact that he furnishes a substantial portion of the machinery, implements, and livestock used in the production of the

commodities or that he furnishes, or advances, or assumes financial responsibility for, a substantial part of the expense (other than labor expense) involved in the production of the commodities, your committee feels that he will have established the existence of the degree of participation contemplated by the amendment.

The amendment made by section 201 (c) (2) applies (under sec. 201 (k) (1) of the bill) with respect to taxable years ending after 1955. However, under section 201 (k) (3) of the bill, any self-employment tax which is due, solely by reason of the amendment made by section 201 (c) (2), for any taxable year ending on or before the date of enactment of the bill shall be considered timely paid if payment is made in full within 6 calendar months after the month in which the bill is enacted. In no event shall interest on any such tax accrue during any period ending on the date of enactment of the bill.

Section 201 (c) (3) of the bill, which corresponds to section 201 (e) (3) of the House bill, amends section 1402 (c) (2) of the code so as to include in the term "trade or business" the service described in the new paragraph (16) (relating to certain share farmers) which is added to section 3121 (b) of the code by section 201 (c) (1) of the bill. Although the amendment made by section 201 (c) (3) applies (under sec. 201 (k) (1) of the bill) with respect to taxable years ending after 1954, it is declaratory of present law.

Professional self-employed

Under section 1402 (c) (5) of the Internal Revenue Code of 1954, the performance of service by an individual (or a partnership) in the exercise of designated professions is excluded from the definition of the term "trade or business" for purposes of determining "net earnings from self-employment" and "self-employment income." The professional service thus excluded under present law is service performed by any person as a physician, lawyer, dentist, osteopath, veterinarian, chiropractor, naturopath, optometrist, or Christian Science practitioner. Section 201 (f) of the House bill would delete these exclusions, except in the case of physicians and Christian Science practitioners. Section 201 (d) of your committee's bill corresponds to section 201 (f) of the House bill except for 3 changes. These changes are (1) to retain the exclusion now provided for osteopaths, (2) to substitute "doctor of medicine" for "physician," and (3) to substitute "doctor of osteopathy" for "osteopath." The changes in terminology referred to in (2) and (3) of the preceding sentence are not intended to effect any change in the law.

The amendment has the effect of requiring that any income derived by an individual or a partnership from the practice of a profession as a lawyer, dentist, chiropractor, veterinarian, naturopath, or optometrist, must be taken into account in determining liability for the selfemployment tax,

Section 1402 (e) of such code, which permits Christian Science practitioners to file a coverage certificate waiving their exemption from this tax under certain conditions, is not affected by this amendment. Section 201 (k) (1) of the bill provides that the amendment made by section 201 (d) shall apply with respect to taxable years ending after 1955. However, under section 201 (k) (3) of the bill, any selfemployment tax which is due, solely by reason of the amendment made by section 201 (d), for any taxable year ending on or before the

date of enactment of the bill shall be considered timely paid if payment is made in full within 6 calendar months after the month in which the bill is enacted. In no event shall interest on any such tax accrue during any period ending on the date of enactment of the bill. Ministers

Section 201 (e) of the bill, for which there is no corresponding provision in the House bill, amends section 1402 (a) (8) (B) of the Internal Revenue Code of 1954. Section 1402 (a) (8) (B) now provides, in part, that a United States citizen performing services as a duly ordained, commissioned, or licensed minister of a church shall compute his "net earnings from self-employment" as a minister without regard to the exclusions from gross income provided in sections 911 and 931 of the code, if the minister is employed by an "American employer", as that term is defined in section 3121 (h) of the code. Section 201 (e) would extend the application of section 1402 (a) (8) (B) so as to provide that any other United States citizen performing such services in a foreign country shall compute his "net earnings from selfemployment" attributable to such services without regard to these exclusions from gross income if his congregation is composed predominantly of United States citizens.

Section 201 (k) (2) of the bill provides that the amendment made by section 201 (e) shall apply only with respect to taxable years ending after 1956, except in those cases where an individual who, for a taxable year ending after 1954 and prior to 1957, had income of the type to which the amendment is applicable makes an election to have the amendment apply with respect to the first such year in which he had such income. No such election is valid, however, unless the individual has filed a waiver certificate under section 1402 (e) of the code before making the election, or files such a waiver certificate at the time of making the election.

The election must be made on or before April 15, 1957, or the due date of the return (including any extension thereof) for the individual's last taxable year ending prior to 1957, whichever date is later, in the case of any such individual who has filed a waiver certificate under section 1402 (e) of the code before the date of enactment of the bill, or who files a waiver certificate on or before the due date of his return (including any extension thereof) for his first taxable year ending prior to 1957. If the individual has not filed a waiver certificate within this period, the election may be made on or before the due date of his return (including any extension thereof) for his last taxable year ending after 1956, and such individual may file a waiver certificate at the time he makes the election even though the period prescribed in section 1402 (e) (2) for filing such waiver certificate has expired in his case.

The waiver certificate filed under section 1402 (e) by any individual who makes an election under section 201 (e) of the bill is effective for the taxable year prescribed in section 1402 (e) (3) of the code or, notwithstanding section 1402 (e) (3), for the first taxable year ending after 1954 in which the individual had income to which the election applies, whichever is earlier, and for all succeeding taxable years.

Any election under section 201 (e) must be made in the manner provided in regulations to be prescribed by the Secretary of the Treasury or his delegate. No interest or penalty will accrue, prior to the day after the day on which an election is made by an individual, in respect