[Congressional Record Volume 141, Number 97 (Wednesday, June 14, 1995)]
[Extensions of Remarks]
[Page E1246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


   EXPLANATION OF H.R. 1729 TAX EXCLUSION REGARDING PRE-NEED FUNERAL 
                                 TRUSTS

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                           HON. PATSY T. MINK

                               of hawaii

                    in the house of representatives

                        Wednesday, June 14, 1995
  Mrs. MINK of Hawaii. Mr. Speaker, I introduced H.R. 1729 to reverse a 
bureaucratic inequity created by a January 29, 1988, Internal Revenue 
ruling (87-127) which created two classes of taxpayers with 
disproportionate tax treatment which my legislation seeks to remedy.
  Because funeral expenses often saddle a family abruptly with an 
unexpected financial burden, many families find it in their best 
interest to establish a pre-need funeral plan (trust) where moneys are 
set aside for future funeral costs.
  Under this IRS ruling, families purchasing pre-need funeral plans are 
required to pay taxes on the interest income earned by these trusts, 
despite the fact that trust moneys and earned interest remains in the 
possession of the seller of the trust--usually a funeral home. Trusts 
purchased before the effective date of the ruling were subject to a 
grandfather clause, establishing a significant inequity between trusts 
purchased before and after the effective date.
  Furthermore, the IRS ruling forced sellers of pre-need trusts to 
assume the responsibility for informing purchasers of the tax amounts 
owed on their trusts. This has created difficulty for sellers due to 
confusion on the part of the purchasers who believe it inequitable that 
they be assessed this tax on interest that they never receive nor 
benefit from.
  H.R. 1729 would reverse Revenue ruling 87-127 by requiring the 
providers of pre-need funeral trusts once again to pay taxes on earned 
interest on the trusts, unless the interest is returned to the 
purchaser.
  I urge my colleagues to support H.R. 1729 to relieve families from 
unwarranted taxes.


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