[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                    CERTAIN EXPIRING TAX PROVISIONS

=======================================================================

                                HEARING

                               before the

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 26, 2012

                               __________

                            Serial 112-SRM06

                               __________

         Printed for the use of the Committee on Ways and Means





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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                   Jennifer Safavian, Staff Director

                  Janice Mays, Minority Chief Counsel

                                 ______

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                   PATRICK J. TIBERI, Ohio, Chairman

PETER J. ROSKAM, Illinois            RICHARD E. NEAL, Massachusetts
ERIK PAULSEN, Minnesota              MIKE THOMPSON, California
RICK BERG, North Dakota              JOHN B. LARSON, Connecticut
CHARLES W. BOUSTANY, JR., Louisiana  SHELLEY BERKLEY, Nevada
KENNY MARCHANT, Texas
JIM GERLACH, Pennsylvania













                            C O N T E N T S

                               __________
                                                                   Page

Advisory of April 26, 2012 announcing the hearing................     2

                              WITNESS LIST

Representative Charles F. Bass...................................    35
Representative Brian Bilbray.....................................    27
Representative Diane Black.......................................    33
Representative Earl Blumenauer...................................    65
Representative Dan Boren.........................................    66
Representative Kevin Brady.......................................    18
Representative Bruce L. Braley...................................    37
Representative John Campbell.....................................    36
Representative Donna M. Christensen..............................    56
Representative Jim Costa.........................................    46
Representative Geoff Davis.......................................    21
Representative Theodore E. Deutch................................    59
Representative John Garamendi....................................    57
Representative Michael G. Grimm..................................    40
Representative Wally Herger......................................    24
Representative Jaime Herrera Beutler.............................    58
Representative Lynn Jenkins......................................    19
Representative Steve King........................................    45
Representative Tom Latham........................................    55
Representative Jim McDermott.....................................    48
Representative James P. McGovern.................................    39
Representative Pedro R. Pierluisi................................    34
Representative Mike Pompeo.......................................    63
Representative Tom Reed..........................................    62
Representative David G. Reichert.................................    67
Representative Aaron Schock......................................    31
Representative Peter Welch.......................................    24

                   MEMBER SUBMISSIONS FOR THE RECORD

Rep. Aaron Schock................................................    95
Rep. Bill Johnson................................................    97
Rep. Bill Pascrell...............................................   100
Rep. Bill Shuster................................................   103
Rep. Cedric Richmond.............................................   105
Rep. Charles Boustany............................................   107
Rep. Cory Gardner................................................   108
Rep. Cynthia Lummis..............................................   110
Rep. Dave Loebsack...............................................   112
Rep. Dave Reichert...............................................   114
Rep. David Dreier................................................   124
Rep. Devin Nunes.................................................   126
Rep. Diane Black.................................................   127
Rep. Don Young...................................................   131
Rep. Donna Christensen...........................................   135
Rep. Donna Edwards...............................................   138
Rep. Earl Blumenauer 1...........................................   140
Rep. Earl Blumenauer 2...........................................   143
Rep. Ed Towns....................................................   146
Rep. Eleanor Holmes Norton.......................................   147
Rep. Gwen Moore..................................................   148
Rep. Henry Waxman................................................   150
Rep. Howard Berman...............................................   152
Rep. Jerry Costello..............................................   154
Rep. Jim McDermott...............................................   155
Rep. John Garamendi..............................................   158
Rep. John Lewis..................................................   161
Rep. Joseph Crowley..............................................   163
Rep. Kevin Brady.................................................   169
Rep. Michael Grimm 1.............................................   178
Rep. Michael Grimm 2.............................................   184
Rep. Michael Grimm 3.............................................   188
Rep. Mike Coffman................................................   189
Rep. Mike Thompson...............................................   191
Rep. Niki Tsongas................................................   193
Rep. Pedro Pierluisi.............................................   195
Rep. Ron Kind 1..................................................   197
Rep. Ron Kind 2..................................................   199
Rep. Sander Levin................................................   202
Rep. Scott Tipton................................................   204
Rep. Shelley Berkley.............................................   206
Rep. Steve King..................................................   207
Rep. Tom Latham..................................................   209
Rep. Vern Buchanan...............................................   210
Rep. Xavier Becerra..............................................   212
Multiple Member Letter...........................................   214

                   PUBLIC SUBMISSIONS FOR THE RECORD

1603 Coalition, statement........................................   218
Aaron Funsfsinn, statement.......................................   234
Able Manufacturing & Assembly, statement.........................   244
Accelerated Wind Holdings, statement.............................   245
Active Financing Working Group, statement........................   246
Aegis Wind, statement............................................   249
AG Resources LLC, statement......................................   250
Air Conditioning Contractors of America (ACCA), Heating, Air-
  conditioning & Refrigeration Distributors International 
  (HARDI), and Plumbing-Heating-Cooling Contractors Association 
  (PHCC), statement..............................................   251
Alex Potier, statement...........................................   259
Alexander Bester, statement......................................   260
Alka Kapur, statement............................................   261
Alliance to Save Energy and 39 Other Groups and Organizations, 
  statement......................................................   262
American Cleaning Institute, statement...........................   265
American Cleaning Institute Appendix A, statement................   269
American Cleaning Institute Appendix B, statement................   270
American Cleaning Institute Appendix C, statement................   272
American Council of Engineering Companies, statement.............   273
American Council on Education, statement.........................   275
American Farm Bureau Federation, statement.......................   278
American Institute of Architects, statement......................   282
American Public Transportation Association, statement............   288
American Wind Energy Association 1, statement....................   291
American Wind Energy Association 2, statement....................   301
American Wind Energy Association 3, statement....................   307
Amy Lindner and Michael Failing, statement.......................   312
Ann Summer, statement............................................   313
Anna Derengowski, statement......................................   314
Anthony Kerrigan, statement......................................   315
Arctic Slope Regional Corporation, statement.....................   316
Arion Energy, statement..........................................   319
Associated Builders and Contractors, Inc., statement.............   320
Association of Fundraising Professionals, statement..............   321
AWS True Power, LLC, statement...................................   325
Ayers Maritime Services, Inc., statement.........................   327
Baird Swanson, statement.........................................   328
Ben Wright, statement............................................   329
Berman Economics, statement......................................   330
Bill Hinton, statement...........................................   335
Bingham Greenebaum Doll LLP, statement...........................   336
Biomass Power Association, statement.............................   337
Biotechnology Industry Organization, statement...................   339
Biotechnology Industry Organization Appendix A, statement........   344
Biotechnology Industry Organization Appendix B, statement........   345
Biotechnology Industry Organization Appendix C, statement........   347
Bitsa Burger, statement..........................................   348
Blattner Energy, Inc., statement.................................   349
BlueDot Analytics, statement.....................................   350
Bob Pabodie, statement...........................................   352
Bond Investment Group, statement.................................   353
Boreas Renewables, LLC, statement................................   354
BP Wind Energy North America, Inc., statement....................   355
Brad Patterson, statement........................................   358
Brewers Association, statement...................................   359
Brian Lang, statement............................................   361
Brad Foote Gear Works, statement.................................   362
Built In Gains Coalition, statement..............................   363
Burton Callicott, statement......................................   364
Business Roundtable, statement...................................   365
Carl Oerke Jr., statement........................................   372
Carol Buck, statement............................................   373
Carol Frigault, statement........................................   374
Carol Keck, statement............................................   376
Center for Fiscal Equity, statement..............................   377
Chad Glinsky, statement..........................................   380
Chaparral Stevedoring Co. of Texas, Inc., statement..............   381
Charlene Jordan, statement.......................................   382
Charles Newell, statement........................................   383
Chermac Energy Corporation, statement............................   384
Chris McFarland, statement.......................................   385
Chris McKee, statement...........................................   386
Christian Billson, statement.....................................   387
Christopher Whelpton, statement..................................   388
Cielo Wind Services, Inc., statement.............................   389
Class 4 Winds & Renewables, statement............................   390
Clear Planet Energy, LLC, statement..............................   391
Coalition for E85, statement.....................................   392
Colata Harlan, statement.........................................   394
Colleen Mertes, statement........................................   395
Columbia Gear Corporation, statement.............................   396
Community Reinvestment Fund, USA, statement......................   397
Compass Wind, LLC, statement.....................................   403
Competitive Energy Insight, Inc. , statement.....................   404
Concast, Inc., statement.........................................   405
Concerned Citizens of West Antelope Valley, statement............   406
Coulomb Technologies, Inc., statement............................   407
Council of the North America Insulation Manufactures Association, 
  statement......................................................   409
Council on Michigan Foundations on Behalf of the Council on 
  Foundations, statement.........................................   411
Creative Foam Corporation 1, statement...........................   417
Creative Foam Corporation 2, statement...........................   418
Creative Foam Corporation 3, statement...........................   419
Creative Foam Corporation 4, statement...........................   420
Creative Foam Corporation 5, statement...........................   421
Creative Foam Corporation 6, statement...........................   422
Creative Foam Corporation 7, statement...........................   423
Crow Nation, statement...........................................   424
Daniel Jaynes, statement.........................................   432
Danotek Motion Technologies, statement...........................   433
David Jordan, statement..........................................   434
David Rivers, statement..........................................   435
David Salvatore, statement.......................................   436
DC Association of Realtors, statement............................   437
DC Mayor Vincent Gray, statement.................................   439
Deborah Wagner, statement........................................   441
Denali Energy, Inc., statement...................................   442
Denver Center for the Performing Arts, statement.................   443
Diana Shaw, statement............................................   444
Distributed Wind Energy Association, statement...................   445
DNV KEMA Energy and Sustainability, statement....................   449
Donna Davidge, Peter Connely, and Candy Rupley, statement........   452
Dorayne Peplinski, statement.....................................   453
Dorothy-Anne Johnson, statement..................................   454
Douglas Lawson, statement........................................   455
Dwayne Weismann, statement.......................................   456
E.ON Climate and Renewables 1, statement.........................   457
E.ON Climate and Renewables 2, statement.........................   458
Edward Kelly, statement..........................................   460
Efficiency First, statement......................................   461
Efficiency First Appendix A, statement...........................   463
eFormative Options, LLC, statement...............................   477
Electric Drive Transportation Association, statement.............   478
Element Power US, LLC, statement.................................   480
Ellen Johnson-Fay, statement.....................................   481
Emily Hill, statement............................................   482
Emmett Carson, statement.........................................   483
Energetx Composities, statement..................................   484
Enterprise Community Partners, Inc., statement...................   485
enXco Inc., statement............................................   489
enXco Service Corporation, statement.............................   491
Eolian Renewable Energy, LLC, statement..........................   492
Eric Silverman, statement........................................   493
Evan Osler, statement............................................   494
Ewa Gruszczynski, statement......................................   495
Feeding America, statement.......................................   496
Financial Executives International, statement....................   501
Florida Community Loan Fund, Inc., statement.....................   505
Floydada Economic Development Corporation, statement.............   514
Foundation Windpower, statement..................................   515
Fred Teal, Jr., statement........................................   519
Friends of Lana`i, statement.....................................   520
Friends of Sand Canyon, statement................................   521
G&W Electric Company, statement..................................   522
Gamesa Technology Corporation, statement.........................   523
Gamesa Wind, statement...........................................   526
Gary Thompson, statement.........................................   527
Gary Wyman, statement............................................   529
Geothermal Energy Association, statement.........................   530
Gerald K. Flakas, statement......................................   536
Geronimo Wind Energy, statement..................................   537
Gilford Wind Watch, statement....................................   538
Giovanni Milanese, statement.....................................   543
Glen Bridges, statement..........................................   544
Global Energy Investors, LLC, statement..........................   545
Governors' Biofuels Coalition, statement.........................   546
Governors' Wind Energy Coalition, statement......................   548
Great Lakes Wind Truth, statement................................   550
Green Energy 911, LLC, statement.................................   553
Greenline Renewables Inc., statement.............................   554
GreenLink Employment Solutions Inc., statement...................   555
Growth Energy, statement.........................................   556
Hailo, LLC, statement............................................   558
Harvest the Wind Network, statement..............................   559
Heather P. Johnson, statement....................................   562
Heidi Topp Brooks, statement.....................................   563
HK Payroll Services, Inc., statement.............................   564
HKF Development, LLC, statement..................................   567
Holland Contracting Corporation, statement.......................   568
Horn Wind, LLC, statement........................................   569
Hugh Jarvis, statement...........................................   571
Iberdrola Renewables, LLC, statement.............................   572
Illinois Wind Watch, statement...................................   576
Information Technology Industry Counsel, statement...............   584
International Franchise Association, statement...................   586
IntegEner-W, statement...........................................   589
Interstate Informed Citizens Coalition, Inc., statement..........   590
Invenergy, LLC 1, statement......................................   599
Invenergy, LLC 2, statement......................................   600
Invenergy, LLC 3, statement......................................   601
Invenergy, LLC 4, statement......................................   602
Invenergy, LLC 5, statement......................................   603
Invenergy, LLC 6, statement......................................   604
Invenergy, LLC 7, statement......................................   606
Investment Company Institute, statement..........................   607
Jacob Houser, statement..........................................   618
Jacqueline Jenkins, statement....................................   620
James Beckstrom, statement.......................................   621
James Nelson, statement..........................................   622
Jane Offringa Rowan, statement...................................   623
Janet and Alfonso Grillo, statement..............................   624
Janet Hirschhorn, statement......................................   625
Janice Hallman, statement........................................   626
Jay Cashman, Inc., statement.....................................   627
Jeff and Debi Feuerbacher, statement.............................   629
Jeremy Barker, statement.........................................   630
The Jewish Federations of North America, statement...............   631
Jim Wiegand, statement...........................................   639
Jody Purrington, statement.......................................   652
John E. Bollwinkel, statement....................................   653
John Earl, statement.............................................   654
John Guenst, statement...........................................   655
John Irwin, statement............................................   656
John Schaumburg, statement.......................................   657
John Wilson, statement...........................................   658
Josh Green, statement............................................   659
Judith Brown, statement..........................................   660
Judy Watson, statement...........................................   661
J.W. Pavlic, statement...........................................   662
Katana Summit LLC, statement.....................................   664
Katheryne and Gerry Gall, statement..............................   666
Kathleen and Lucien Catania, statement...........................   667
Kathy McIntyre, statement........................................   668
Kathy Nobles, statement..........................................   669
Kenneth Maurer, statement........................................   670
Kent Greentree, statement........................................   671
Kent Spriggs, statement..........................................   672
Kirman Broadbent, statement......................................   673
KPG Investments, Inc., statement.................................   674
Kristina Cliff-Evans, statement..................................   675
Land Trust Alliance, statement...................................   676
Large Public Power Council, statement............................   678
Larry Frigault, statement........................................   682
Larry Rogero, statement..........................................   684
Laura Jackson, statement.........................................   685
Laura Kramer, statement..........................................   691
LED Services Inc., statement.....................................   692
Lee Glover, statement............................................   693
Leeco Steel, LLC, statement......................................   694
Leppinks, Inc., statement........................................   695
Leslie Weaver, statement.........................................   696
LM Wind Power, statement.........................................   698
Local Initiatives Support Corporation, statement.................   699
Lois Grossman, statement.........................................   703
LORD Corporation 1, statement....................................   704
LORD Corporation 2, statement....................................   705
LORD Corporation 3, statement....................................   706
LORD Corporation 4, statement....................................   707
LORD Corporation 5, statement....................................   708
LORD Corporation 6, statement....................................   709
LORD Corporation 7, statement....................................   710
LORD Corporation 8, statement....................................   711
LORD Corporation 9, statement....................................   712
LORD Corporation 10, statement...................................   713
LORD Corporation 11, statement...................................   714
LORD Corporation 12, statement...................................   715
LORD Corporation 13, statement...................................   716
LORD Corporation 14, statement...................................   717
LORD Corporation 15, statement...................................   718
LORD Corporation 16, statement...................................   719
LORD Corporation 17, statement...................................   720
LORD Corporation 18, statement...................................   721
LORD Corporation 19, statement...................................   722
LORD Corporation 20, statement...................................   723
LORD Corporation 21, statement...................................   724
Luisa Cox, statement.............................................   725
Margaret Welke, statement........................................   726
Maria Luisa Bernaldo de Quiroz, statement........................   727
Mark DuRussel, statement.........................................   728
Mark Feigenson, statement........................................   729
Mark Weller, statement...........................................   730
Marshall Hollander, statement....................................   731
Mary Burns, statement............................................   734
Mary Button, statement...........................................   738
Mary Evelyn Smith, statement.....................................   739
Marty Gardner, statement.........................................   740
Matt and Megan Richards, statement...............................   741
Mattis Deutch, statement.........................................   742
McGuire Consulting, statement....................................   743
Meghan Kosowski, statement.......................................   744
Melissa McClennen-Davis, statement...............................   745
Meridian Way Wind Farm, statement................................   746
Mesonika Piecuch, statement......................................   747
Metal Construction Association, statement........................   748
Michael Blum, statement..........................................   751
Michael Geline, statement........................................   752
Michael Mulcahey, statement......................................   753
Michael Shaw, statement..........................................   754
Midwest Minnesota Community Development Corporation, statement...   755
Mike Livermore, statement........................................   757
Mike Long, statement.............................................   758
MJ Swierczynski, statement.......................................   759
Molly Ross, statement............................................   762
Mortenson Construction, statement................................   763
Mortgage Insurance Companies of America, statement...............   764
Nancy Carringer, statement.......................................   769
Nancy Taylor, statement..........................................   770
National Association for the Self-Employed, statement............   775
National Association of the Remodeling Industry, statement,......   777
National Association of Home Builders, statement.................   779
National Association of Realtors, statement......................   786
National Automobile Dealers Association, statement...............   794
National Biodiesel Board, statement..............................   797
National Cattlemen's Beef Association, statement.................   801
National Development Council, statement..........................   805
National Education Association, statement........................   811
National Electrical Manufacturers Association, statement.........   814
National Employer Opportunity Network, statement.................   817
National Farmers Union, statement................................   820
National Federation of Independent Businesses, statement.........   822
National Foreign Trade Council, statement........................   825
National Grocers Association, statement..........................   828
National Hydropower Association, statement.......................   832
National Propane Gas Association, statement......................   836
National Resources Defense Council, statement....................   839
National Restaurant Association, statement.......................   841
National Retail Foundation, statement............................   847
National Rural Electric Cooperative Association, statement.......   851
National Treasury Employees Union, statement.....................   859
Neill Gibson, statement..........................................   862
Neil Milani, statement...........................................   863
New Markets Tax Credit Coalition, statement......................   864
New Progressive Alliance, statement..............................   873
NextEra Energy, Inc., statement..................................   874
Nick Webb, statement.............................................   881
Nissan North America, statement..................................   882
Nordex USA, Inc. 1, statement....................................   888
Nordex USA, Inc. 2, statement....................................   889
Nordex USA, Inc. 3, statement....................................   890
Nordex USA, Inc. 4, statement....................................   891
Nordex USA, Inc. 5, statement....................................   892
Nordex USA, Inc. 6, statement....................................   893
Nordex USA, Inc. 7, statement....................................   894
Nordex USA, Inc. 8, statement....................................   895
North Coast Energy Systems, statement............................   896
Northern Laramie Range Alliance, statement.......................   898
Northstar Wind Towers, LLC 1, statement..........................   902
Northstar Wind Towers, LLC 2, statement..........................   903
Northwest Kidney Centers, statement..............................   904
Novogradac and Company, LLP, statement...........................   907
Ohio Association of Nonprofit Organizations, statement...........   910
Ohio Manufactured Homes Association, statement...................   912
Partnership for Job Creation, statement..........................   913
Partnership for Philanthropic Planning, statement................   916
Patricia Christensen, statement..................................   918
Patrick Callaghan, statement.....................................   921
Patrick Hagan, statement.........................................   922
Patriot Renewables, LLC, statement...............................   923
Pattern Energy Group, statement..................................   925
Peden Harris, statement..........................................   927
Pellet Fuels Institute, statement................................   928
Perry Black, statement...........................................   931
Perry Callas, statement..........................................   932
Peter Stanley Company, LLC, statement............................   933
Plug Power, Inc., statement......................................   934
PPG Industries, statement........................................   940
Proctor and Gamble, statement....................................   941
Qualtek Mfg. Inc., statement.....................................   954
Quida Jacobs, statement..........................................   955
R&D Credit Coalition, statement..................................   956
Radian Guaranty Inc., statement..................................   961
RailAmerica, Inc., statement.....................................   965
Raymond Randall, statement.......................................   967
Rebecca Tippens, statement.......................................   968
Rebuild America's Schools, statement.............................   970
Reinhard Manfred Klaass, statement...............................   971
Reserve Energy Exploration Company, statement....................   972
Residential Energy Efficient Tax Credit Industry Coalition, 
  statement......................................................   973
Retail Industry Leaders Association, statement...................   980
Robert Boyce, statement..........................................   983
Robert Fenstermaker, statement...................................   984
Robert Hall and Maureen McGee, statement.........................   985
Roberta Rothkin, statement.......................................   986
Roger Harrison, statement........................................   987
Russell Mead, statement..........................................   988
Ruth Kneile, statement...........................................   990
SafeWorks, LLC, statement........................................   991
Sally Kaye, statement............................................   992
Sandra Wearne, statement.........................................   993
Sandra Rogers, statement.........................................   994
Save Our Scenic Hill Country Environment, Inc., statement........   995
Scott Synnestvedt, statement.....................................  1000
Scott Teresi, statement..........................................  1001
Second Wind, statement...........................................  1002
Sharon Stevenson, statement......................................  1004
Shawnee McLemore, statement......................................  1005
Sheila Salvatore, statement......................................  1006
Sherrin Loyd, statement..........................................  1007
Siemens Energy, Inc. 1, statement................................  1008
Siemens Energy, Inc. 2, statement................................  1009
Siemens Energy, Inc. 3, statement................................  1010
Siemens Energy, Inc. 4, statement................................  1011
Siemens Energy, Inc. 5, statement................................  1012
Sierra Club, Virginia Chapter, statement.........................  1013
Silicon Valley Community Foundation, statement...................  1014
Silicon Valley Tax Directors Group, statement....................  1015
Skylands Renewable Energy, LLC, statement........................  1017
Smith NMTC Associates, LLC, statement............................  1019
Stahl, Bernal & Davis, LLP, statement............................  1021
Susan Steinhauser, statement.....................................  1022
Sustainable Energy Developments, Inc., statement.................  1023
Sustainable Strategies, statement................................  1025
Tara Truett, statement...........................................  1026
Tawny Mackey, statement..........................................  1027
Team Schierl Companies, statement................................  1028
Teresa Cameron, statement........................................  1029
The Investment Company Institute, statement......................  1030
Theresa Ruscitti, statement......................................  1035
ThermoCor, LLC, statement........................................  1036
Thomas Grey, statement...........................................  1038
Thomas Wayne Jackson, statement..................................  1039
Thompson Engineering, statement..................................  1040
Tierra Farm & Grain Co., statement...............................  1041
Tim Kearney, statement...........................................  1042
Timothy Corcoran, statement......................................  1043
Tlaloc Tokuda, statement.........................................  1044
Tom Hilgartner, statement........................................  1046
TransitCenter, Inc., statement...................................  1048
Truck Renting and Leasing Association, statement.................  1052
TrueBlue, Inc., statement........................................  1056
Texas Society of Certified Public Accountants, statement.........  1060
Union County Community Development Corporation, statement........  1063
Unity Foundation of La Porte County, statement...................  1065
Urban Green Energy Inc., statement...............................  1066
U.S. Chamber of Commerce, statement..............................  1067
Utah Clean Energy, statement.....................................  1075
V. Brandt, statement.............................................  1076
Various Citizens of California, statement........................  1077
Various Citizens of Illinois, statement..........................  1085
Various Citizens of Indiana, statement...........................  1091
Various Citizens of Massachusetts, statement.....................  1107
Various Citizens of Maine, statement.............................  1114
Various Citizens of Nevada, statement............................  1118
Various Citizens of New York, statement..........................  1121
Various Citizens of Ohio, statement..............................  1136
Various Citizens of West Virginia, Virginia, Maryland, New 
  Jersey, and North Carolina, statement..........................  1149
Various Citizens of Wisconsin, statement.........................  1153
VENTOWER Industries, statement...................................  1173
Vermonters for Clean Environment, statement......................  1174
Vestas-American Wind Technology, Inc., statement.................  1182
Viejas Band of Kumeyaay Indians, statement.......................  1186
Vincent C. Grey, statement.......................................  1189
Warren Blesch, statement.........................................  1191
Wharf and Dock Builders, Pile Drivers, and Divers Local Union 
  #454, statement................................................  1192
White County Economic Development Organization, statement........  1199
Whitley County Community Foundation, statement...................  1200
Wildlife Acoustics, Inc., statement..............................  1201
Wind Clean Corp, statement.......................................  1202
Wind Energy America, Inc., statement.............................  1204
Wind Partners Finance, LLC, statement............................  1205
WindGuard North America, Inc., statement.........................  1207
Window & Door Manufacturing Association, statement...............  1208
Winergy Drive Systems Corporation 1, statement...................  1219
Winergy Drive Systems Corporation 2, statement...................  1222
WOTC Solutions, LLC, statement...................................  1223
YMCA of Greater Pittsburgh, statement............................  1225
Zachary Nickerson, statement.....................................  1227
ZF Wind Power, LLC 1, statement..................................  1229
ZF Wind Power, LLC 2, statement..................................  1230

 
                      HEARING ON CERTAIN EXPIRING
                             TAX PROVISIONS

                              ----------                              


                        THURSDAY, APRIL 26, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                            Washington, DC.

    The Committee met, pursuant to notice, at 10:03 a.m. in 
Room 1100, Longworth House Office Building, the Honorable Pat 
Tiberi [Chairman of the Committee] presiding.
    [The advisory of the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                  Chairman Tiberi Announces Hearing on

                    Certain Expiring Tax Provisions

Thursday, April 26, 2012

    Congressman Pat Tiberi (R-OH), Chairman of the Subcommittee on 
Select Revenue Measures, today announced that the Subcommittee will 
hold a hearing on Member proposals related to certain tax provisions 
that either expired in 2011 or will expire in 2012 (also known as ``tax 
extenders''). The hearing will take place on Thursday, April 26, 2012, 
in Room 1100 of the Longworth House Office Building at 10:00 A.M.
      
    Oral testimony at this hearing will be limited to Members of the 
House of Representatives who, as of April 25, 2012, have either 
introduced or co-sponsored legislation related to tax extenders during 
the 112th Congress. However, any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      
    For purposes of this hearing, a ``tax extender'' is any tax 
provision:
      
        1.  Extended in Title VII of the Tax Relief, Unemployment 
        Insurance Reauthorization, and Job Creation Act of 2010 (Public 
        Law No. 111-312; ``TRUIRJCA''), or
      
        2.  Expiring between the end of calendar year 2011 and the end 
        of calendar year 2012, other than any provision:
      
            -- Addressed in Titles I through VI of TRUIRJCA, or
            -- Related to a transportation trust fund.
      
    For purposes of oral testimony, ``legislation related to tax 
extenders'' means any measure introduced in the House that relates to 
the extension, modification, or termination of a tax extender.
      

BACKGROUND:

      
    As part of TRUIRJCA--enacted into law on December 17, 2010--
Congress extended various expired and expiring tax provisions through 
December 31, 2011. Most of these provisions had expired on December 31, 
2009, and were among those temporary provisions that have typically 
been extended numerous times over recent years as part of the annual 
package of ``traditional tax extenders.'' Those items include an array 
of tax provisions benefiting both individuals and businesses. In a few 
cases, TRUIRJCA modified some of these provisions, generally returning 
them to the form in which they existed prior to the American Recovery 
and Reinvestment Act of 2009 (Public Law No. 111-5).
      
    In addition, a number of provisions that were not addressed in 
TRUIRJCA either expired at the end of 2011 or expire during 2012. Some, 
like those related to transportation trust funds, typically are not 
viewed as tax extenders. Others, however, have been extended in past 
tax extenders legislation.
      
    In announcing the hearing, Chairman Tiberi said, ``As Chairman Camp 
and I stated last month, the Ways and Means Committee is engaged in a 
process to review dozens of tax provisions that either expired last 
year or expire this year. This hearing provides a formal opportunity 
for the Subcommittee to hear from our House colleagues about the merits 
of extending--or not extending--many of these tax policies.''
      

FOCUS OF THE HEARING:

      
    The hearing provides Members of Congress the opportunity to speak 
on behalf of specific tax proposals they have introduced or cosponsored 
in the 112th Congress related to the extension, modification, or 
termination of one or more tax extenders. The hearing will evaluate how 
these proposals would measure against key metrics such as cost, 
effectiveness, and job creation.
      

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FORMATTING REQUIREMENTS:

      
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call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
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the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman TIBERI. Good morning. Today we are going to 
deviate from standard practice a bit, and we are going to allow 
each member of the Subcommittee or those who are joining us 
from the Full Committee to make a five minute opening statement 
and submit a written statement for the record.
    We obviously are here today to talk about the extenders, 
those tax provisions that expired in 2011 or will expire in 
2012.
    I welcome all of you, and I welcome Members of the 
Subcommittee and members of the Full Committee who will be 
joining us.
    I first want to commend our Chairman of the Full Committee, 
Dave Camp, for his leadership in working to overhaul the Tax 
Code. As he said, as some of you may remember, at the very 
first hearing that the Full Committee had at the beginning of 
this Congress, ``Tax reform will be a long process.''
    In the meantime, we must continue to work our way through 
the Tax Code, and we have had over a dozen hearings at the Full 
Committee and Subcommittee in trying to do that.
    Unfortunately, the Tax Code is riddled with scores of 
provisions that have been enacted on a temporary basis over 
time.
    I use the word ``riddled'' not because I believe all these 
provisions are bad, because they certainly are not, but because 
while there are rare occasions when it makes sense to enact 
temporary tax provisions, such as during an economic downturn, 
most of the temporary provisions were made temporary not for 
policy reasons but for arcane Budget or Senate rules.
    I am reminded in the Spring when I go to my tax accountant 
how frustrating it is for many in the real world as to why 
there are so many temporary tax provisions.
    Making tax policy this way obviously wreaks havoc on the 
ability of families and business owners to plan for future 
choices with any certainty.
    With a few exceptions, temporary tax provisions that are 
worthy should be made permanent. Those that are not worthy 
should be terminated.
    That kind of certainty might not happen until we pass 
comprehensive tax reform, but in the meantime, today's hearing 
provides us a formal opportunity for this Subcommittee to hear 
from our House colleagues about the merits of extending or 
maybe not extending many of these tax policies.
    For too long, Congress has simply rubber stamped the 
extenders package without any review, without any oversight 
that is charged by this Committee, of whether the individual 
provisions are effective, whether they create jobs, economic 
development, whether these provisions help us in any way, shape 
or form, and if they are upholding to the original intended 
purposes that were stated when they were passed.
    This hearing will help us gather information that we can 
properly evaluate in each and every one of the provisions on 
its own individual merit.
    Last year, Congressman Neal and I introduced H.R. 749, 
which would permanently extend the Subpart F exemption for 
active financing income.
    It is among, I believe, the most important recently expired 
provisions in our Tax Code that must be extended. It is 
essential to the competitiveness of our U.S. international 
companies seeking to do business around the world.
    I look forward to my colleagues' testimony. I look forward 
to the opening statements for those of the panel who wish to 
give them, and I look forward to hearing more information, not 
only today but in the future about these tax provisions.
    I now yield to our Ranking Member, Mr. Neal, for his 
opening statement.
    Mr. NEAL. Thank you, Mr. Chairman. I am pleased you called 
this hearing to examine the 2011/2012 tax extenders.
    However, I should note my frustration that Congress has 
once again allowed so many of these important tax provisions to 
expire.
    Most are discouraged that we are now just examining the 
2011 extenders even though they expired several months ago.
    Important principles of tax policy are certainty and 
predictability. We need to remember these principles as we deal 
with the tax extenders.
    Many of the tax provisions that expired in 2011 are 
priorities of mine. For example, new markets tax credits and 
Build America bonds are very important.
    The new markets tax credit is designed to stimulate 
investment and economic growth in low income communities that 
are traditionally overlooked by conventional capital markets. 
We have seen the result in all of our districts.
    In Western Massachusetts, the local new markets tax 
credit's successes include small businesses like the River 
Valley Market in Northampton and the Massachusetts Green High-
Performance Computing Center in Holyoke. We need to extend new 
markets.
    Another provision that is very important that expired last 
year is the 15-year depreciation schedule for leasehold 
improvements, restaurant improvements and new construction, as 
well as retail improvements.
    Mama Iguanas is a restaurant that opened last year in 
Springfield and took advantage of this provision.
    We need to extend this 15-year depreciation provision and 
eliminate any tax law prejudices against retail store owners.
    It is also absolutely essential, as you have noted, Mr. 
Chairman, that active financing rules of Subpart F, which 
expired at the end of last year, be extended as well.
    This is an issue that the two of us have worked on and a 
bipartisan Majority of this Committee has co-sponsored to make 
the rules permanent.
    The active financing rules are not a special incentive, 
rather they allow U.S. banks, insurance companies and finance 
companies to apply the regular United States tax law allowing 
for the deferral of U.S. taxes on active foreign business 
income.
    Speaking of Subpart F, another important provision that we 
need to extend is the ``look through rule.'' The R&D tax credit 
is a huge priority for many of us in Massachusetts.
    In fact, Massachusetts is ranked third in the country in 
terms of the number of companies in the state reporting R&D 
activity. The R&D credit must be extended.
    Another extender that is important to Massachusetts is the 
2012 AMT patch. About 975,000 families in Massachusetts, 
including 80,000 in my district in Springfield, will be hit 
with AMT if we do not enact a patch for 2012.
    A few additional extenders that are extremely important and 
should be continued are Section 25(c), which is a tax incentive 
for the purchase of energy efficient improvements to homes and 
Section 181, which is effectively a limited form of bonus 
depreciation to encourage domestic film production and job 
creation.
    The extenders related to regulated investment companies or 
RICs, as they are called, as well, and the enhanced charitable 
deduction for contributions of inventory.
    In terms of the 2012 extenders, we also must extend Section 
127, which allows an employee to exclude from income up to 
$5,250 per year for tuition assistance from their employer.
    Furthermore, the production tax credit for onshore wind and 
the investment tax credit for offshore wind are important as 
well, and I hope both will be extended.
    I am pleased you have called this hearing this morning and 
I look forward to the testimony that we are about to receive.
    Chairman TIBERI. Thank you, Mr. Neal. As I sit here 
listening to you, I cannot help but think if you and I could 
just go in a library and skip the rest of the House, the Senate 
and the administration, we could probably accomplish this 
pretty quickly.
    Mr. NEAL. I suspect based on what we are about to hear in 
the next four hours, you may well be right.
    [Laughter.]
    Chairman TIBERI. Thank you for your opening remarks. With 
that, I yield to Mr. Roskam for five minutes.
    Mr. ROSKAM. Thank you, Mr. Chairman. I think we have an 
incredible opportunity, Mr. Chairman. I thank you and Mr. Neal 
and the spirit with which you are approaching this, and 
Chairman Camp for his leadership in putting this together.
    There is an unbelievable opportunity that we have as a 
Committee, the committee of jurisdiction over a Tax Code that 
is wildly unpopular. The opportunity is this, if you look back 
at the work of this Committee over the past 18 months or so and 
you distill down the work, and this hearing is part of that, 
and you can distill it down into one single word, I think that 
word would be ``competitiveness.''
    How do you create the United States as the most competitive 
tax jurisdiction in the world where we build upon all of these 
things that we have going for us in this country, a culture of 
creativity, intellectual property, and the list goes on and on, 
but we have a Tax Code that is underperforming and not serving 
us well.
    The question as you go through the detail and as the 
Committee goes through the detail of all these extenders is 
this, at what rate is it so attractive that companies and 
others are willing to walk away from an extender?
    That is an interesting proposition. At what rate is the 
rate low enough that you say you know what, I do not need that 
extender anymore, I will take the rate.
    That, I think, can be an animating theme today.
    The other question is there are some of these provisions 
where it is not a tax policy per se but there is some other 
foundational question that was built into that tax policy, and 
we need to re-examine that as well.
    Mr. Chairman, I appreciate the spirit with which you are 
approaching this. I think there is an opportunity here for not 
only the Congress to gain confidence with the level of scrutiny 
that the Committee is giving these things, but ultimately, for 
the country to gain confidence that the Committee is taking 
this up in a thoughtful way, and I yield back.
    Chairman TIBERI. Thank you, Mr. Roskam. Mr. Thompson is 
recognized for five minutes.
    Mr. THOMPSON of California. Thank you, Mr. Chairman. I, 
too, want to thank you for holding this hearing, Mr. Neal, for 
holding this hearing. I think it is incredibly important that 
we assess this issue and figure out how to bring some certainty 
to the Tax Code.
    There is a lot of talk about the need for certainty in the 
business community, and I can tell you that as it pertains to 
the Tax Code, I think this is most illustrative as to how 
important this issue is.
    You cannot make decisions in your personal life and your 
business life and your financial dealings if you have tax 
uncertainty. What we have right now is the ultimate in tax 
uncertainty.
    The President of the NFIB was on Bloomberg News and was 
asked what is Washington not hearing. He said they are not 
hearing about great uncertainty that small businesses feel out 
here today.
    I would argue that we are hearing it. We are just not doing 
anything about it. Again, this extender issue is most 
illustrative of that.
    Sometimes we pass them at the very last minute. We have 
been known to deal with these retroactively, and there is 
nothing that creates more uncertainty for a small business 
owner than that. We need to figure that out.
    I have a long list as everyone else does of ones I believe 
to be important. I will mention a couple of them and then I 
will put in my statement for the record the whole list.
    The production tax credit for wind expires at the end of 
December. We do not have until the end of December to deal with 
this.
    Business owners, manufacturers, energy developers, 
governments, community groups, they are already making 
decisions on this very important part of our energy future 
today.
    We are losing jobs today because wind energy development is 
not something that you wake up in the morning and decide, I 
think I will build a wind tower and site it this afternoon.
    You have to figure out where the wind is, what the wind 
trends are. You have to work with community groups, get 
permitted, raise capital, go to production for these things. 
You cannot do it in a few hours, a few days, or sometimes even 
a few years. The lead time for wind projects at a minimum is a 
year to 18 months.
    Yesterday I met with a group of combat veterans who were 
very, very outspoken on this issue, and for all the right 
reasons, including they know firsthand the cost of us being 
under the thumb of imported energy.
    We need to deal with this one up front quickly.
    R&D tax credits has already been mentioned today. I cannot 
tell you how often at home people ask me what is the future for 
the R&D tax credits. None of us can give a real answer to that. 
We can speculate. We cannot tell them with certainty how they 
should plan.
    That is not right. We should be doing everything we can to 
make sure we do R&D and we do it right here in this country.
    Another issue that is extremely important to me is the 
conservation easement legislation that Mr. Gerlach and I are 
working on.
    That bill, since it has been passed in 2006, has done so 
much for land conservation, environmental protection, keeping 
people on the family farms.
    It is not just a rural issue. It spills over into the 
community, and nowhere is that more apparent than in New York 
City, where that city gets its water from the surrounding 
watershed that is under fire for development purposes, and 
through conservation easements, folks have been able to protect 
that property and keep that watershed open and make sure city 
folks get their water.
    It has the support of over 60 groups, everybody from Ducks 
Unlimited to Audubon to the Cattlemen's Beef Association. It 
has 300 co-authors on the bill that my friend Mr. Gerlach and I 
have. We ought to be pushing that through quickly.
    One that did not make the list that should be on the list, 
Mr. Chairman, is the 48(c) rule, advance manufacturing tax 
credit. That is so important. It provides a credit to 
businesses, manufacturing, clean energy technologies, right 
here in the United States.
    Like it or not, believe it or not, we are moving toward 
renewable energy, and we are moving there at albeit not the 
pace we need to, still faster than some are willing to admit we 
are.
    The worst thing that can possibly happen is that we get 
there and all the components that we used to get there were 
made in Germany or China or someplace else.
    Those are jobs that need to be right here in this country, 
and that is why this provision is so important.
    Again, thank you, and I look forward to hearing the rest of 
the testimony on this very, very important issue.
    Chairman TIBERI. I thank the gentleman from California for 
his testimony. It is always good to hear from the 
subcommittee's official wine connoisseur.
    [Laughter.]
    Chairman TIBERI. With that, I will yield to the gentleman 
from up North, Mr. Paulsen.
    Mr. PAULSEN. Thank you, Mr. Chairman. Let me just also 
thank you and Ranking Member Neal also for holding the hearing 
and for the leadership of Chairman Camp.
    I do think it is important as we move forward with the goal 
of fundamental comprehensive tax reform that we are having 
these hearings to help look at what works and what does not 
work as a part of the Tax Code.
    I think these tax extenders certainly serve as an example 
of parts of the Code that for one reason or another do not work 
as well as they should either because the provisions are 
expired and they lose their intended use or they do not allow 
the certainty that our companies and businesses absolutely 
need, or because in fact some of these extenders have outlived 
their usefulness.
    It is my hope that as we move forward on comprehensive tax 
reform, we can move away from the need to have the extenders 
discussion every year altogether.
    I would like to highlight just a few of the extenders that 
I do think are worthy of extension or being made permanent as a 
part of more comprehensive reform.
    First is the R&D tax credit, which was already mentioned. 
That is a provision that is strictly aimed at helping companies 
create new products so the United States can continue to be 
global leaders in innovation.
    Innovation is key to economic growth and in keeping our 
competitive edge. It is part of our DNA. It drives the 
entrepreneurial spirit and has made so many small and larger 
companies successful here in the United States, and we should 
work to incentivize these types of activities.
    The R&D tax credit has actually been allowed to expire 14 
times since it was created in 1981. This undermines the 
effectiveness of the credit altogether.
    Some of us are co-sponsors, Mr. Chairman, as you know, of 
an effort to modernize and make permanent the research and 
development tax credit, which would help bring stability to 
companies that rely on the credit when they are trying to 
develop new products.
    I also want to note that as we look forward at the R&D 
credit, we need to make sure the credit is actually working as 
it is intended to work in the first place.
    I have heard from companies in Minnesota who say the IRS 
makes it so difficult to comply with through time and resources 
that it makes it very difficult for companies to actually take 
advantage of the credit.
    Similar uncertainty in depreciation tax provisions has also 
plagued the restaurant industry, which has faced inconsistency 
in their depreciation time line.
    Historically, the Code has allowed for improvements to 
depreciate over 39 years, but that is nowhere near the reality 
that these owners face.
    Congress created a provision that lowered that time line to 
15 years, but that provision has not been made permanent, and 
just like the R&D tax credit, has on occasion been allowed to 
expire as well.
    This uncertainty over the depreciation schedules led to 30 
percent of restaurant owners putting projects on hold. Making 
this provision permanent or extending it for 15 years would 
absolutely help.
    I am also a co-sponsor of the new markets tax credit, which 
was mentioned earlier. This credit would provide that 39 
percent seven-year credit against Federal taxes for investment 
in economically distressed communities.
    These credits go to areas that otherwise would not see 
investment or benefit businesses located in low income 
communities.
    In my district alone, the credits have created about 150 
jobs. The credit has been extended three times, and I believe 
it should be extended again.
    Finally, I just want to mention legislation that I have 
introduced and am sponsoring. It is regarding the mutual fund 
flow through. This again is a provision that should be extended 
and made permanent.
    There is no reason whatsoever that we should withhold 
funding from foreign persons who invest in mutual funds. We do 
not do it for other assets that are held directly.
    Sadly, to get around this problem now we have seen foreign 
companies create mirror funds that mimic U.S. funds, and if we 
do not extend this provision, the U.S. will lose out 
altogether, driving investment overseas and taking the jobs 
with it.
    Mr. Chairman, I look forward to the rest of the testimony 
we will hear from some of our colleagues today in taking a 
deeper look at some of the provisions in the Tax Code as we 
move towards that reform which we need.
    Chairman TIBERI. I thank the gentleman. Dr. Boustany from 
Louisiana is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman. I want to thank you 
and Ranking Member Neal for convening this important hearing. 
It is clearly overdue.
    I applaud the subcommittee's efforts to substantively 
reform the extenders process. For far too long, Congress has 
advocated its oversight responsibilities haphazardly, extending 
temporary law from year to year without taking time to figure 
out what works, what does not work, what is the economic 
benefit, what is the impact on employment, and so forth.
    Congress must do better. A complete overhaul of our Tax 
Code is the real answer, and we are all working toward that 
goal, but until we get there, we have to make the extenders 
process workable to provide stability and certainty to U.S. 
taxpayers.
    Job creators, whether it is a small business owner or CEO 
of a Fortune 500 multinational, are paralyzed by the 
uncertainty coming out of Washington.
    We must provide a clear path forward for taxpayers in the 
short term and work to extend important tax provisions which 
help promote economic growth and strengthen American 
competitiveness.
    To help U.S. companies compete in the global marketplace, I 
have introduced legislation along with Mr. Kind to permanently 
extend the CFC look through provision.
    Enacted in 2006, CFC look through provides flexibility to 
American companies to deploy active business earnings among its 
foreign affiliates without immediate U.S. tax burdens.
    In short, it allows American firms to deploy capital where 
it is most needed, the same treatment enjoyed by their global 
competitors.
    CFC look through enjoys strong bipartisan support and helps 
ensure that American companies remain competitive on the global 
stage.
    Mr. Chairman, I ask unanimous consent to submit into the 
record a letter signed by myself, Mr. Kind, and several of our 
colleagues in support of this very important measure.
    [The prepared statement of The Honorable Charles Boustany 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Mr. BOUSTANY. I want to thank you again for convening this 
critical hearing. I am eager to hear the testimony today and to 
work with our colleagues to implement a workable extenders 
process to provide certainty to taxpayers, to promote economic 
growth, while we continue to work on our overall goal, which is 
to enact fundamental tax reform, creating a 21st Century Tax 
Code that we can be proud of, a Tax Code that promotes American 
competitiveness.
    I yield back.
    Chairman TIBERI. I thank the gentleman from Louisiana. The 
gentleman from the Commonwealth of Pennsylvania, Mr. Gerlach, 
is recognized for five minutes.
    Mr. GERLACH. Thank you, Mr. Chairman. I would like to thank 
you, Chairman Camp and Ranking Member Neal for your leadership 
in initiating a comprehensive review of these tax extenders, 
and for allowing all members to offer their views.
    There is no doubt about the necessity of transforming our 
Tax Code. We need to move from the current hodge-podge of 
complex rules that burden our small business owners and hamper 
our country's competitiveness, to a more streamlined, more 
simple to understand and more dynamic system that unleashes 
innovation and ingenuity and encourages investment, hiring, and 
growth.
    While it is important to shred many provisions that snuff 
out opportunity and bury job creators under the ream after ream 
of paperwork, it is also paramount that we preserve those 
policies that have proven successful and allow individuals, 
owners of businesses and communities to thrive.
    Today, I would like to highlight three extenders that the 
farmers, property owners, and small business owners who I am 
fortunate to represent, believe are worthy of extending.
    The first is the conservation easement tax incentive. 
Before expiring at the end of 2011, modest income property 
owners, family farmers, and other land owners utilized this 
incentive to voluntarily protect more than 83,000 acres of 
critical farm land and open space in my District, according to 
the Montgomery Lands Trust.
    We now know that benefits derived from conservation 
easements extend well beyond the property lines of those 
participating properties.
    A study recently released in November of 2010 by Greenspace 
Alliance and the Delaware River Regional Planning Commission 
found that open space preservation in Bucks County, Chester 
County, Delaware County, Montgomery and Philadelphia County in 
southeastern Pennsylvania have added $16.3 billion to the 
region's home values, support nearly 7,000 jobs annually in 
industries, including agriculture, tourism, hospitality, 
recreation, and open space management preservation, saved more 
than $130 million in water treatment and flood control costs, 
and through recreation at area parks and trails, avoids $1.3 
billion in health related costs.
    H.R. 1964, the proposed Conservation Easement Incentive 
Act, which I have sponsored along with Congressman Mike 
Thompson, would make permanent the conservation easement tax 
credit.
    Earlier this year the legislation reached a significant 
milestone as the 300th co-sponsor signed on to this bill here 
in the House.
    It is my understanding that of the thousands of bills 
introduced this current session, fewer than ten have topped the 
300 co-sponsor mark.
    We believe this legislation has generated widespread 
support because the conservation easement tax deduction works.
    Restaurant owners and other small and mid-sized business 
owners know that the same can be said for the second provision 
I would like to highlight, that is making permanent the 15-year 
depreciation schedule for leasehold improvements, restaurant 
improvements, and new construction and retail improvements.
    The 15-year depreciation schedule more closely reflects 
economic realities for most U.S. restaurants and retailers.
    H.R. 1265, which we have introduced with Congressman Neal, 
would make the 15-year depreciation schedule permanent and 
provide much needed certainty for small and mid-sized 
businesses.
    We know that using more reasonable depreciation schedules 
has spurred tremendous economic activity according to the 
Bureau of Economic Analysis, and for every dollar spent in the 
construction industry, an additional $2.39 has been generated 
for spending in the rest of the economy.
    Moreover, for every dollar spent in the construction 
industry, 28 U.S. jobs have been created in the broader 
economy.
    While unemployment is still unacceptably high, we need tax 
policies to encourage businesses to plan for and invest in new 
capital expenditures.
    We also need to encourage investment in our communities, 
some of which are struggling even before the most recent 
economic downturn.
    The new markets tax credit is designed to stimulate 
investment and economic growth in low income, underserved 
communities, that are often overlooked by conventional capital 
markets.
    According to the GAO, 88 percent of new market tax credit 
investors surveyed would not have made the investment in low 
income communities without the credit.
    According to the Treasury Department, every one dollar of 
foregone tax revenues under this tax credit program leverages 
$12 in private investment in distressed communities on a cost 
basis.
    I am pleased to be an original co-sponsor along with 
Chairman Tiberi, Congressman Neal, and Congressman Lewis of 
H.R. 2655, and this bill would extend the credit through 2016 
at a level of $5 billion per year in credit authority.
    In closing, I would like to submit that these three 
provisions meet three very critical needs. All three of these 
proposals have received overwhelming bipartisan support.
    They have the backing of individuals, businesses, and 
communities we represent because they benefit broad segments 
rather than narrow interests, and they have a proven track 
record of creating jobs, spurring investment and enhancing our 
quality of life in our communities.
    I look forward to working with my colleagues on enacting 
these solutions and extending these three important provisions.
    Thank you, Mr. Chairman.
    Chairman TIBERI. Right on time. Thank you, Mr. Gerlach. I 
now recognize the gentleman from Connecticut, Mr. Larson.
    Mr. LARSON. I thank the Chairman. I would like to thank 
Chairman Tiberi and would also like to thank Mr. Neal as well 
for their outstanding work with all the kudos and plaudits that 
have been laid at their feet this morning.
    I am going to focus on three primary areas, the CFC look 
through, new market tax credits, and Section 181 of the 
production credit.
    I hope that our take away from this hearing is a clear 
understanding we must act responsibly to enact an extenders 
package, and I hope today's hearing marks a very positive first 
step in that direction.
    Our country works best when we provide entrepreneurs and 
innovators the opportunity to thrive and create. That is why I 
believe we look at these tax extenders and also consider a 
comprehensive tax reform, that we need to be prioritizing 
initiatives that will help us achieve both of those goals.
    That is why I am proud to join Mr. Brady of Texas in 
introducing a permanent extension of the R&D tax credit, and I 
hope the Committee will look to that bill as a major priority 
as we continue forward with the extenders.
    Further, I hope the Committee will consider retaining at a 
minimum the spirit of R&D credit in comprehensive reform.
    We must ensure that America remains the center of 
innovation for years to come. Out innovating and out creating 
our competitors requires a Tax Code that provides the right 
incentives to companies to invest in the products and 
technologies that will help further our global economic 
leadership.
    In this respect, we must act on extending and enhancing tax 
credits that have already led to promising developments in the 
energy sector.
    Specifically, this means extending critical tax credits for 
natural gas, including the motor vehicle fuel credit, the 
fueling infrastructure credit in Section 30(c), and the 
alternative fuel vehicle credit in 30(b).
    In addition, I have long supported investments in fuel cell 
technology. That is why I believe the Committee should consider 
an extension and modification of the alternative vehicle 
refueling property tax credit.
    As an aside, Mr. Chairman, although not part of the 
extenders, the Natural Gas Act, where we have more than 186 
signatures in the House, an important part of the discussion, 
both for energy independence and for providing jobs, I hope the 
Committee can also consider that. I realize it is not part of 
this issue.
    Another issue we have been working on for a number of years 
is a volunteer responder incentive tax credit which 
unfortunately lapsed at the end of 2010.
    This tax credit provided direct tax relief to volunteer 
emergency first responders, allowing communities to offer 
incentives to retain and recruit volunteer fire fighters 
without the benefit by it being diminished by Federal income 
tax liability.
    Volunteer fire fighters are essential to our nation's 
safety and security as they comprise two-thirds of the 
estimated 1.2 million fire fighters in this country.
    We all remember those going up the stairs to meet the 
firewall and those that are coming down.
    I hope we can give them consideration as well as part of 
this extender package.
    Finally, I will end on an issue that is not necessarily as 
well a tax extender but vitally important to virtually numerous 
millions of Americans.
    With many companies switching from defined benefit to 
defined contribution plans over the past decades, more 
individuals are facing the prospect of having to work longer 
and with less retirement savings than the previous generations.
    This combined with recent economic crisis presents an 
urgency for this Committee to ensure that we are creating the 
right incentives for people to save and ultimately prosper in 
their later years of life.
    I commend my good friends, Mr. Tiberi and Mr. Neal for 
recognizing the urgency of working on these issues, and I 
applaud the rest of the Committee for its efforts.
    Thank you.
    Chairman TIBERI. Thank you, Mr. Larson. I now yield to the 
gentleman who hails from the state with the lowest unemployment 
rate in our nation, Mr. Berg from North Dakota.
    Mr. BERG. Thank you, Mr. Chairman. I truly want to thank 
you, Mr. Chairman, and Ranking Member Neal for holding this 
important hearing today.
    The current Federal Tax Code is unnecessarily complex and 
burdensome that both individuals and businesses find 
frustrating, time consuming, and costly.
    This Committee has made a concerted effort to work towards 
comprehensive tax reform. Let me be clear in my belief, that 
the best thing we can do is simplify the Tax Code by lowering 
the tax rates and broadening the base.
    However, while we work to achieve this goal, it is critical 
that we understand the wide ranging group of taxpayers' needs 
and what they need to do to make decisions right now relating 
to the current law, which has an immediate impact on our 
economy.
    That uncertainty is the most damaging thing that Washington 
can do to our families and small business.
    The extenders that we are discussing today affect a broad 
range of taxpayers, including associations, businesses, 
individuals, and non-profit and charitable organizations.
    Yet their temporary nature creates substantial uncertainty. 
This uncertainty has a negative impact on economic growth and 
job creation, and places families and businesses really in 
limbo year after year and these short term extensions are not 
helping our already struggling economy.
    We need a fair, predictable tax policy now. Under the 
current Tax Code, many of these extenders are important to U.S. 
jobs and the economy. It is important that we do not pick 
winners and losers outside the context of real comprehensive 
tax reform.
    For individuals and families, deductions for state and 
local taxes, mortgage insurance premiums, teacher expenses, 
tuition, adoption credits, and military housing allowances, 
along with extending and expanding charitable IRA 
distributions, among others, all are important within the 
current Tax Code.
    Businesses need certainty as well. In my senior year in 
college, I started a small business with a couple of friends. 
Over the next 30 years, we grew that business one venture at a 
time.
    The best thing that Washington can do for small business is 
to provide certainty, and that means both tax and regulatory 
certainty. Then Washington needs to get out of the way and 
allow small business to do what they do best, grow and create 
jobs.
    The tax provisions for research and development, leasehold 
and retail improvements, depreciation production, and 
charitable contributions all serve important purposes for our 
businesses in the current Tax Code.
    In the context of tax reform, we can no longer remain the 
country with the highest employer tax rate alongside a complex 
worldwide system of additional taxation.
    Deferral, active financing, and CFC look through provisions 
are all important in the near term as we move closer to a 
comprehensive tax reform.
    Right now, North Dakota's economy is on the right track, 
and our nation could learn a lot about North Dakota. There are 
some that think the North Dakota story is purely about oil. It 
is really about instituting pro-growth policies and unleashing 
the private sector.
    In fact, North Dakota truly is an ``all the above'' energy 
state. We have the only commercial scale coal gasification 
plant in the United States that manufactures gas.
    We are the leaders in carbon capture and storage. North 
Dakota exports over 150 million cubic feet per day of 
CO2 to Canada through a 205 mile pipeline.
    We mine and burn lignite to create electricity. North 
Dakota produces over 500,000 barrels of oil a day and North 
Dakota has significant wind power, alternative and biofuel 
infrastructure, and is a leader in hydrogen research.
    In addition to breaking our dependence on foreign oil, 
domestic fuel production and alternative energy solutions mean 
good American jobs.
    Preserving tax provisions such as the percentage depletion 
for oil and gas, intangible drilling costs, among others, are 
important to encouraging domestic energy production.
    While there may be a need to refine and update the current 
alternative and biofuels provisions, these provisions serve an 
important purpose in the current Tax Code.
    I also appreciate the testimony of our committee colleague, 
Mr. Reichert, regarding the production tax credit, and I 
associate myself with his remarks.
    This is not just rhetoric. In North Dakota, we have seen it 
work, and we have also seen what uncertainty can do to disrupt 
positive growth.
    For example, wind accounts for 15 percent of our 
electricity generation in our state and provides thousands of 
North Dakota jobs.
    There are more projects waiting to come on line, but all 
are stalled because of the uncertainty in the tax environment.
    In 2003, when North Dakota faced a deficit, we solved it by 
tightening our belt and encouraging private sector economic 
growth.
    This generated higher revenue, not higher tax rates. This 
reform ensured that the state would not change the rules on 
North Dakota families and small businesses when times got 
tough. North Dakotans knew that this tax stability would 
promote investment and innovation by our state's businesses.
    Now as was mentioned, we have the lowest unemployment rate 
in the nation, and our economy is booming.
    Our committee will remain committed to moving forward 
towards comprehensive tax reform, but until we are at the point 
where we have truly a willing President and an engaged Senate 
on this important issue, I feel strongly that we should not 
effectively raise taxes on small businesses and families in our 
current economy.
    Thank you, and I yield back.
    Chairman TIBERI. I thank the gentleman from North Dakota. 
While I ask the first panel of witnesses to make their way to 
the seats in front of us, I would like to make the audience 
aware if they are not already, that you have the ability to 
submit for the record any information that you would like on 
tax provisions that we are talking about today from the 2011 
and 2012 extenders.
    You have traditionally ten business days to submit it to 
the Committee. For those who are viewing, you may as well. 
Anyone may do that.
    We are honored to have three members of the Full Committee 
with us for our first panel. Each will be recognized to give a 
summary of their written testimony before us, so let us begin 
with the gentleman from the Lone Star State, Mr. Brady.

  STATEMENT OF THE HONORABLE KEVIN BRADY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. BRADY of Texas. Mr. Chairman, Mr. Neal, thank you very 
much for having us here today. I hope we will not engage a 
grilling from this Subcommittee as we give our testimony.
    Let me, one, thank you for holding this hearing for 
examining the extenders, the value, cost, and results of these 
extensions, and I do support strongly your efforts for 
fundamental tax reform.
    In 55 seconds, let me make two points. The first is that 
America is the world's largest innovator, but we are falling 
behind our competitors.
    Our share of global R&D innovation has fallen dramatically, 
while China's has increased four-fold. We used to rank among 
the top in R&D incentives in the world. Today, we rank 24th.
    Our companies are being courted very aggressively to move 
those R&D jobs overseas with strong incentives, and the 
technology innovations and high paying jobs that go with it.
    I encourage this Committee to not only extend the R&D tax 
credit, I and others believe it should be simplified, 
modernized, increased and made permanent for us to again--our 
goal ought to be to ensure America remains the strongest 
economy in the world for the next 100 years. Innovation is key 
to that.
    Second and final point is as long as we retain the current 
Tax Code--I and Jim McDermott lead a coalition of seven sales 
tax states that represent 62 million Americans, including in 
the State of Texas, as long as we provide deductions for state 
and local income taxes, we clearly out of fairness ought to do 
the same for state and local sales taxes.
    In Texas, it saves our taxpayers about $1.2 billion, but 
here is what is interesting, the tax bracket most likely to 
itemize and save money are those making under $50,000 a year. 
This is middle class actually in a big way.
    Mr. Chairman, I conclude my remarks, and while it is not 
extender, I will tell you I still believe the death tax is the 
number one reason America family owned farms, family owned 
businesses are not passed down to their kids. That is an issue 
in a larger context at the end of the year that this Committee 
will be looking at as well.
    Thank you, Chairman.
    Chairman TIBERI. Thank you, Mr. Brady.
    With that, I will yield to the only CPA, I believe, on our 
committee, Ms. Jenkins from Kansas.

 STATEMENT OF THE HONORABLE LYNN JENKINS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF KANSAS

    Ms. JENKINS. Thank you, Chairman Tiberi, Ranking Member 
Neal, and Members of the Committee.
    I would refer to my notes but I cannot see them. I am 
wondering if there is a phone book or something that I can sit 
on. It is a very intimidating chair.
    [Laughter.]
    Ms. JENKINS. You cannot even see over the rail here. 
Regardless, I appreciate the opportunity to speak with you 
today.
    I would like to speak to you on behalf of Section 45(g), 
the short line freight railroad rehabilitation tax credit.
    This credit was first enacted in 2004 and has been extended 
twice, most recently through the end of 2011.
    America's 550 short line railroads operate 50,000 miles of 
track, mostly in rural and small town America. These are small 
businesses run by hard working, creative entrepreneurs.
    Section 45(g) allows the small businesses to keep more of 
what they earn and use those resources for investment in tracks 
and bridges to move the American economy.
    These investments generate substantial benefits. Section 
45(g) helps small companies grow and prosper. It allows the 
private sector and not a government bureaucrat to make the 
investment decisions necessary to serve rural businesses.
    Most small railroads do not have the in-house manpower for 
large capital projects, so these efforts create new jobs. 
Virtually all track materials are produced by American workers 
in American facilities.
    The investments create infrastructure that will generate 
public benefit for 40 years or longer, and they are assets that 
can never be moved out of the country.
    The ultimate beneficiaries are the thousands of railroad 
customers who depend on these local railroads to move their 
goods to market.
    An example from my own district in Kansas demonstrates a 
point replicated by 45(g) throughout rural America.
    A major national cement company needed to invest $500 
million to expand in a plant in my district. However, this 
expansion could only be justified if competitive and reliable 
rail service was available.
    The South Kansas and Oklahoma Railroad was in the right 
location but needed a significant upgrade.
    The 45(g) credit allowed SKO to make the necessary upgrades 
to meet that need. The cement company made that $500 million 
investment and today, it is producing and shipping millions of 
tons of cement by rail.
    They are the largest employer in that community and 
generate millions of dollars in economic activity.
    Creating jobs and generating economic growth is always a 
challenge, but it is especially challenging in rural America.
    Short line railroads are not the largest segment of the 
transportation industry. Their importance is not their size but 
their reach.
    There are short lines in 49 of the 50 states. They operate 
in 376 congressional districts. They serve thousands of 
businesses who would otherwise be cut off from the national 
railroad network.
    As of today, H.R. 721 has attracted 225 co-sponsors, which 
I believe is one of the highest of any bills currently referred 
to the Ways and Means Committee.
    More than 50 percent of both the Republican and Democratic 
Committee members have signed on.
    My newest Republican colleagues have been among the most 
vocal and insisting that we carefully scrutinize the nation's 
tax policy, and as of today, 62 of the 87 freshmen Republicans 
have co-sponsored this bill.
    Mr. Chairman, it would be my preference to address 
comprehensive reform of the Tax Code, instead of taking a 
piecemeal approach, but obviously, we must address these 
expired tax provisions sooner than later.
    That being said, there is much disagreement about what tax 
reform should look like, but there is a growing bipartisan 
consensus that the Tax Code should encourage capital investment 
and small entrepreneurial American business. That is exactly 
what 45(g) does.
    Thank you.
    Chairman TIBERI. Before I recognize our colleague from the 
Commonwealth of Kentucky, I will recognize Mr. Neal.
    Mr. NEAL. I appreciate Ms. Jenkins' comments because the 
short line railroad credit works well, not just in rural 
America, it works very well in urban America as well.
    It is a success story that has not been well reported.
    Ms. JENKINS. Thank you. Yes, I agree.
    Mr. NEAL. If people have a chance to discover what has 
happened in the economic downturn that we have, they are 
holding their own.
    Ms. JENKINS. Certainly.
    Chairman TIBERI. I thought you were going to make some sort 
of joke about short line and Ms. Jenkins. No, never mind.
    [Laughter.]
    Ms. JENKINS. Mr. Chairman, shame on you.
    Chairman TIBERI. Just kidding. I have told the staff to 
make sure we had a phone book for future hearings. Thank you so 
much. Great testimony, Ms. Jenkins.
    The gentleman from Kentucky is recognized.

  STATEMENT OF THE HONORABLE GEOFF DAVIS, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                            KENTUCKY

    Mr. DAVIS of Kentucky. Thank you, Chairman Tiberi and 
Ranking Member Neal for the opportunity to testify about these 
critical provisions of our Tax Code.
    While I share the goal of broad-based tax reform, there are 
many preferences in our Code that are vital to America's 
economic health and job creation, provisions such as Section 
179, expensing, and 100 percent bonus depreciation help cash 
flow for vital manufacturing and small business taxpayers.
    According to the National Federation of Independent 
Business, one in two businesses face regular cash flow 
problems. While not within the scope of this hearing, these 
provisions help manufacturers and small businesses smooth out 
the roller coaster of these cash flow issues.
    I hope as we continue to talk about extenders and tax 
reform, we keep these crucial provisions in mind.
    Another provision that helps manufacturers is the research 
and development tax credit, which is what I would like to 
discuss today.
    The R&D tax credit has spurred private sector investment 
and research by companies of all sizes across key industries. 
It is both bolstered America's place as the world leader in 
innovation, fostering development of new products and life 
improving technologies.
    However, in recent years, many of our foreign competitors 
have invested more generously or in more generous R&D 
incentives in order to attract innovative companies and high 
skilled workers.
    As of 2009, the U.S. had dropped to 24th in research 
incentives among industrialized nations. This is only 
compounded by the fact that as of April 1 of this year, we had 
the highest corporate tax rate in the world. Higher tax rates 
and smaller incentives hurt our position as a world leader in 
technological breakthroughs.
    H.R. 942, the American Research and Competitiveness Act of 
2011, introduced by my friend from Texas, Chairman Kevin Brady, 
would simplify and strengthen the U.S. credit by increasing the 
alternative simplified credit from 14 to 20 percent and making 
it permanent, while providing an one year bridge for companies 
that still use the traditional credit.
    The certainty of a permanent R&D credit along with lower 
corporate rates would help to maintain America's position as a 
leader in innovation. The R&D credit leads to job creation in 
America.
    A study by the Information Technology and Innovation 
Foundation estimates expanding the alternative simplified 
credit from 14 to 20 percent would spur the creation of 162,000 
jobs in the short term, with additional job creation in the 
long run.
    The credit was first adopted by Congress in 1981 and has 
been extended 14 times. It is time to give business the 
predictability they need to invest in next generation of 
invention or development by making the R&D tax credit 
permanent.
    Finally, I would like to mention a bill I introduced with 
Ranking Member Levin, H.R. 3729, which would expand and make 
permanent tax incentives for businesses to donate food 
inventory to charity.
    Permanently extending this deduction is a necessary step in 
the continued fight against hunger in America, and I would urge 
your support.
    I thank the Chairman and Ranking Member for their time to 
testify and yield back.
    Chairman TIBERI. Thank you, Mr. Davis. I would like to 
thank the three of you. If you would not mind staying just a 
couple of extra minutes, I wanted to ask a quick question.
    Mr. Brady, you mentioned the R&D tax credit as well. You 
and I have talked in the past about Texas and the economy in 
Texas and the number of Fortune 500 companies/employers who 
have moved to Texas over the years, including to your 
metropolitan area.
    I know you have talked to many of those companies. Can you 
talk about some of your discussions with those companies with 
respect to the R&D tax credit?
    Mr. BRADY of Texas. Thanks, Chairman. I know it is 
important in Ohio, Massachusetts and Pennsylvania as well.
    We have been fortunate to have a number of businesses 
located in Texas, but what is interesting is they tell us how 
aggressively they are courted around the world, whether it is 
energy companies that do R&D or technology companies that do 
the same, our medical industry as well.
    These other countries know that when they bring the R&D, 
they bring good paying jobs and they have first claim on the 
patents and technology that go with them.
    With the stop and start, go/stop process, one year, two 
years at a time, in effect, we are not getting the full bang 
for the buck for R&D. We are buying a car but we are only 
driving it one month installment at a time.
    It can go farther and faster in innovation if we make it 
permanent and we simplify it, not looking backward to what a 
company has done on R&D, but looking forward and encouraging 
more of that.
    Like you, in Ohio, these companies--we want to keep that 
innovation in America. At the end of the day, that is what is 
going to drive our future economy.
    Chairman TIBERI. Thank you. Ms. Jenkins, obviously as a 
CPA, you know a little bit about the Tax Code. Mr. Roskam in 
his opening remarks talked about the complexity of the Tax 
Code.
    When you talk to other CPAs, not just in Kansas but around 
the country, what do you hear with respect to the complexity 
and how that might be inefficient for Americans and American 
businesses?
    Ms. JENKINS. I think that is the one thing that all 
political parties can agree on, that the Tax Code is too 
complex. We spend 18 to $19 billion a year complying with the 
Tax Code. That ought to tell you something.
    In addition to just simplifying the Code, making it less 
costly to comply with, I think a second priority should be to 
certainly give them some certainty as it relates to the Tax 
Code as well.
    I know tax reform is on the horizon. It is not necessarily 
the topic of the day, but we need to work to that end, to not 
only give them a less complex Code to comply with but one they 
can do planning beyond a six to 12 month period.
    Chairman TIBERI. Thank you. Following, Mr. Davis, just to 
expand on the provision that you and Mr. Levin are co-
sponsoring together, from your perch as the Subcommittee 
Chairman here on the Ways and Means Committee, what have you 
seen in terms of the benefit of that extender that you have co-
sponsored?
    Mr. DAVIS of Kentucky. The food donation credit is a great 
benefit because much food waste that happens in businesses can 
be handed off to frankly offset what could be an additional 
occurrence of taxpayer expense.
    There is a ready pool of willing providers both in 
distribution networks and also from restaurants to get that 
food out to homeless shelters and a number of other vendors, 
soup kitchens, et cetera, that can make a real difference in 
people's lives, especially in that urgency transition.
    Chairman TIBERI. Food that may otherwise not be provided to 
shelters?
    Mr. DAVIS of Kentucky. That is correct. In all likelihood 
it would just be scraped. Often times I have been asked the 
question why would not the companies just take it down there 
anyway, but within their own operating rules, ironically, and 
other regulations that would impinge on that, there is a cost 
of transportation. There are other liabilities that are 
incurred.
    By having the credit, it can offset not only the base 
material costs but also the transportation and overhead that is 
necessary to get it to the locations, particularly when it is 
in bulk.
    Chairman TIBERI. Thank you. Thanks for your point. Mr. 
Brady is recognized for a thought.
    Mr. BRADY of Texas. Thirty seconds. To follow up on a point 
you have made continually about our uncompetitive Tax Code, not 
only do we risk the loss of R&D innovation in America, but our 
Tax Code, when these companies compete around the world, they 
are punished to bring home those profits.
    Many of them are stranded overseas, so not only do our 
global competitors have better incentives on R&D, they have 
access to ready capital to make those investments over there 
rather than the United States.
    You are pushing for a territorial system to remove those 
impediments, and I think this, too, will help the innovation.
    Chairman TIBERI. Great point. Thank you, Mr. Brady. Thank 
you, Ms. Jenkins. Thank you, Mr. Davis, for your time today.
    We are going to move to our second panel. I will call up, 
if they are here, Mr. Welch from Vermont, Mr. Herger from 
California, Mr. Bilbray from California, and Mr. Schrock from 
Illinois.
    It looks like we have two of the four here. We are not 
going to wait for the other two. We are just going to go ahead 
and begin.
    With that, I will recognize the gentleman from California, 
Chairman of the Health Subcommittee of Ways and Means, who will 
be missed next year, Mr. Herger. You are recognized.

 STATEMENT OF THE HONORABLE WALLY HERGER, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           CALIFORNIA

    Mr. HERGER. Thank you, Chairman Tiberi and Ranking Member 
Neal, and Committee members. Thank you for the opportunity to 
testify.
    As our committee works to reform the Tax Code, it is 
important to closely examine the merits of the various tax 
extender provisions.
    One tax extender I strongly support is the charitable IRA 
rollover provision first enacted in 2006. This policy allows 
IRA owners to make tax free charitable contributions from their 
savings.
    Our country has a long and proud tradition of charitable 
giving and meeting human needs through voluntary, private 
generosity, rather than relying solely on the taxpayer funded 
programs.
    The tax deduction for charitable contribution recognizes 
the importance of this tradition and the charitable IRA 
rollover extends this favorable tax treatment to retirement 
savings.
    Maintaining incentives for charitable giving is especially 
important in tough economic times, and several organizations in 
my Northern California District have told me that this 
provision has been very helpful to them.
    I and Mr. Blumenauer have introduced a Public Good IRA 
Rollover Act to permanently extend the charitable IRA rollover. 
Our legislation would also make some important modifications 
such as allowing tax free rollover's to donor advised funds 
which help to keep foundations focused on local community 
needs.
    Also, I would urge the Subcommittee to take a careful look 
at expiring energy tax incentives.
    I strongly support increasing American energy production, 
but some of these incentives have outlived their usefulness. In 
particular, the ethanol blenders tax credit, I feel, is a 
wasteful subsidy that distorts the economy. It should not be 
extended or replaced with new tax subsidies.
    To the extent that some tax incentives for renewable energy 
may be maintained, I believe we should aim to make them 
technologically neutral and avoid picking winners and losers.
    Currently, wind energy receives a production tax credit 
that is double the level of other renewable resources, such as 
biomass and hydropower.
    The Renewable Energy Parody Act, which I have introduced 
with Mr. Thompson, would equalize the PTC for all renewables, 
and I urge the Subcommittee to consider this reform.
    Thank you, Mr. Chairman and members.
    Chairman TIBERI. Thank you, Mr. Herger. Thank you for your 
leadership on the Committee.
    With that, I will yield to the gentleman from Vermont, our 
colleague, Mr. Welch. Welcome to the Ways and Means Committee.

  STATEMENT OF THE HONORABLE PETER WELCH, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF VERMONT

    Mr. WELCH. Quite a place. Good to be here. Thank you very 
much.
    Chairman TIBERI. Glad to have you.
    Mr. WELCH. It is good to be here. Thank you so much for 
having this hearing.
    I wanted to talk about the production tax credit, known as 
the PTC. The enormous responsibility of this Committee on taxes 
is quite astonishing because we do more through the Tax Code 
than we actually do through the appropriations process. This is 
the place where major policy is made, something you all well 
know.
    This will have a real implication for us in Vermont, and I 
think in energy policy as well.
    My view on tax credits is in emerging industries where 
there is a decision that makes sense to try to give them a 
boost because it is good for the creation of jobs, the creation 
of industry, and strengthening in this case our local energy 
production, is worthwhile.
    As industries get more mature and they stand on their own, 
hopefully we would then wean them from tax credits.
    This production tax credit especially for wind is really, 
really essential to help this industry get on its feet and be a 
solid performer, and essentially give us a chance to compete 
against where a lot of wind technology is being exported, and 
that is to China.
    The way to do that, have a new energy future and create 
jobs here, is to maintain this production tax credit.
    Since 1980, that credit has helped bring down the cost of 
these wind generation facilities by 90 percent. The credit 
helps create that market that allows scale to bring down price 
and then create jobs right here.
    Wind has provided about 35 percent of all the new 
electricity generated in the last five years. Across the 
country, the wind industry has increased domestic manufacturing 
and created about 75,000 jobs.
    In my home State of Vermont, renewable energy companies are 
producing clean and renewable energy and jobs. Right now, 
Vermont is generating 46 megawatts of energy, enough to power 
11,000 homes, over 200 megawatts of new Vermont projects are in 
development.
    Without these PTC credits, the projects are going to stall. 
That is just the fact. In fact, most likely, they will fail.
    We have a great company, one of them called NRG Systems in 
Hinesburg, provides wind developers, utilities and turbine 
manufacturers with the tools needed to measure wind, and 
because of the uncertainty about the PTC and uncertainty 
obviously concerns all of us, they report about a 50 percent 
drop in U.S. orders compared with last year.
    This PTC is really the life blood of making it economical 
to decide to do wind production.
    Every day that we allow the extension of the PTC to hang in 
limbo, it creates a lot of uncertainty. I think both sides 
recognize uncertainty is no friend of security and investment 
decisions.
    My request is that you include the PTC tax extender in the 
legislation and bring this to the Floor as soon as possible.
    I thank you very much for this opportunity.
    Chairman TIBERI. I thank you both. Would you mind 
subjecting yourselves to some questions if the panel has 
questions?
    One that I have for both of you, if either of you would 
like to take a crack at it, we have a colleague testifying 
later today, this afternoon. He is going to testify, I believe, 
that we should actually eliminate all energy tax credits 
because he would argue--Mr. Bilbray, if you would like to have 
a seat, there is a seat right next to Mr. Herger, the 
California line there.
    He would argue that it raises the cost in the marketplace 
of energy altogether.
    How would either of you two, if you wish, respond to that?
    Mr. HERGER. I think virtually everyone agrees that we need 
to be moving to renewal energy as much as we can. We need to be 
doing all of the above.
    I think it is important that as we are looking at tax 
reform at a time when we are spending 40 cents out of every 
dollar's borrowed money, we need to be carefully analyzing 
everything and particularly, as I mentioned in my testimony, I 
think it is important that we put renewable on a level playing 
field. Let that renewable which is the most efficient move 
forward.
    For example, I have a lot of bio renewable in my District 
that has tax incentives half the degree as say wind would have. 
Same way with hydro, which we have a lot of hydro in our area.
    I think again this Committee and the Congress should be 
looking at what is the most efficient so the taxpayer gets the 
most for their dollar both through incentives and other ways.
    That would be my request.
    Mr. WELCH. That is a central question. My view on it is 
this, that ideally, we would have a partnership between private 
industry, entrepreneurs, and to some extent, the U.S. Congress 
with policies that facilitate the creation of jobs and 
encourage and facilitate the success of emerging technologies.
    We are in a competitive global market. Other countries do 
have public policies that have a significant impact on the 
ability of their companies to get an industry started, get it 
to scale, where you can start bringing down costs and make it 
affordable.
    My view is that Congress cannot take a pass and not 
actively decide and self-consciously decide about where in fact 
we want to have a public policy that is going to help an 
emerging industry, because if we sit on our hands and we do not 
do anything, then China is going to move ahead, Brazil is going 
to move ahead, and we are going to find that they get the jobs 
and we do not.
    The difficulty is that to the extent you do a tax credit 
that does provide a competitive opportunity or advantage for 
the industry that has received that, others may complain.
    We have to work that out here. Doing nothing and just 
saying hey, it is hands off, means our competitors are going to 
move ahead.
    I see this as an important function of this Committee. We 
all know what the problems can be, that some of these tax 
credits over live their useful life, like for instance, I agree 
with Mr. Herger about ethanol, but to do nothing is to allow 
the other side and our competitors to move ahead.
    Thank you.
    Chairman TIBERI. Thank you. Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman. I think the nexus 
between Mr. Welch and Mr. Herger's commentaries is very 
important because one of the most under reported success 
stories in America today is the fact that we are currently 
using two million barrels of oil less than we were.
    Mr. HERGER. Right.
    Mr. NEAL. It is wild. What is going to happen over the next 
few years is even more extraordinary. I think we all want to 
get to the same corner of the room, whether it is from this 
angle or that angle.
    There is also an important point, I think, that has been 
made here, as we transition away from less dependence on fossil 
fuels, but getting there also means that during this transition 
stage, we are going to need the help of the Tax Code because it 
does create behaviors and outcomes that I think in this 
instance are very desirable.
    As Mr. Welch suggested, there will come a time when they 
can be ended, but in the short run, in order to keep them 
going, we are going to need those preferences.
    Chairman TIBERI. Thank you, gentlemen. Mr. Bilbray, you are 
recognized.

 STATEMENT OF THE HONORABLE BRIAN BILBRAY, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           CALIFORNIA

    Mr. BILBRAY. Thank you, Mr. Chairman, Members of the 
Committee.
    I wanted to address 1149. It is a bipartisan bill that 
basically says that when you have one fuel like cellulosic 
ethanol that gets a tax credit, and then you have another fuel 
that is algae based fuel, you have one fuel that has only 70 
percent of the energy content of regular gasoline, the other 
fuel has 100 percent of the energy capacity of gasoline, you 
have one fuel that is not compatible with refinery and cannot 
be exchanged one for one in a refinery situation, you have 
another that is compatible.
    You could have one-half of one percent or you have 99 
percent of your fuel system that could be algae produced, no 
difference in production.
    When you have a situation where you have one fuel like 
ethanol, cellulosic ethanol, which has air emission problems 
but algae has none of those air pollution problems, why in the 
world would the Federal Government have a Tax Code that says 
that the one fuel with less performance and less environmental 
benefit would have the benefit, and the other fuel that does 
not depend on different technologies, in fact, does not even 
depend on the use of fresh water, can be grown in salt water, 
why would you not give that tax equity along with cellulosic 
ethanol?
    This is where we are trying to get our Tax Code to reflect 
good science, not inappropriate politics.
    All we are asking on this issue is that when you are 
looking at this mixture, if you want to talk about true green 
fuels, true fuels that can actually in the long run help to not 
only supplement but replace to a large degree over a long 
period of time, granted, the existence of fossil fuels as we 
know it today, then why would not our Tax Code reflect that 
strategy by saying that algae based fuel should get the same 
tax benefits as cellulosic.
    I think when we get down to it, this is one place where 
Republicans and Democrats should agree that common sense, good 
science, and responsible political guidance says algae based 
fuels should get the same, at least the same, Mr. Chairman, 
seeing that it is 30 percent more energy per gallon.
    Even if you give it equity, you are still short changing 
algae 30 percent when it comes to how much energy the consumer 
gets out of it.
    I think that Tax Code should at least be equal, if not 
question the logic that maybe we ought to go to a BTU based 
credit somewhere in the future that reflects true energy that 
the consumer is receiving and the country is getting the 
benefit from.
    I would yield back my time at this time, Mr. Chairman.
    Chairman TIBERI. Thank you, Mr. Bilbray. I will ask you the 
same question that I asked the other two gentlemen with respect 
to energy tax credits.
    What is your view that some of our colleagues may have that 
we should eliminate all the extenders with respect to energy 
tax credits? What would you say to that?
    Mr. BILBRAY. Well, I think that is a legitimate argument to 
be held at this time. I think that in all fairness, you need to 
choose either to be engaged in the activity, trying to give an 
incentive, but if you do that, the incentive should reflect 
reality not politics.
    If we are going to retreat from having tax incentives to 
try to encourage this type of production, where in the United 
States we have companies in the United States today that are 
actively engaged in algae production, including many that are 
under contract to the Federal Government for jet fuel, 
something that ethanol cannot do, I think you need to choose 
one or the other.
    If you choose to be engaged in the encouragement of the 
production of so-called ``green fuels/renewables,'' then it 
should reflect the science, not the politics. This bill 
basically does that.
    Chairman TIBERI. Thank you. Mr. Neal.
    Mr. NEAL. Mr. Bilbray, would you argue then that we should 
truncate these initiatives immediately right now, get away from 
them?
    Mr. BILBRAY. I would prefer not to. I think there are some 
opportunities there, but I think the credibility, Mr. Neal, 
Congressman, of the program has been severely hampered by what 
basically appears to be Congress picking winners and losers 
based on political agenda's or misconceptions of environmental 
benefits.
    I was a member of the Air Resources Board for six years. I 
was on an Air District for ten. I think you will agree, nobody 
is more hard core about environmental stuff than the California 
Air Resources Board.
    The policies and the politics in Washington did not reflect 
the realities that I learned in all those years, 16 years of 
working on environmental and clean air strategies.
    I think we need to go back, if we are going to maintain 
this policy, it needs to be based on good science, not based on 
back room politics. Right now, it appears to those of us 
involved in the environment that it is a misconception or it 
was a conscious--I think it was a misconception.
    I think it was an admission through ignorance, not through 
intention. That is not the perception you get when you are in 
California.
    Mr. NEAL. Let me pursue this. Are we suggesting that, for 
example, as President Obama says, ``all of the above,'' a very 
integrated approach to energy independence, are we suggesting 
that you could build a nuclear power plant without Government 
guarantees?
    Mr. BILBRAY. First of all, let me just say quite clearly, 
if you had the Federal Government streamline the procedures and 
take a more positive attitude of going to next generation 
nuclear, literally be active.
    In fact, Mr. Neal, I can tell you right now as a member of 
the Energy and Commerce Committee, you are seeing this 
Administration working within the United States Navy that is 
becoming very aggressive at doing exactly that.
    We have been able to show that there are third generation 
nuclear that is not only safe but much more cost effective, 
much lower problem, you are going to see much less of those 
guarantees.
    The barriers to nuclear power are not scientific. They are 
political and they are regulatory. I say that as a former 
regulator.
    Mr. NEAL. If we are talking about the present tense, it 
would be hard to draw the investor class to nuclear power 
without some sort of Government guarantee.
    Mr. BILBRAY. Because of the regulation and obstructionism, 
30 years of obstruction, before you can get something on line.
    That is why it is easier to build a natural gas power plant 
than a nuclear power plant, although over long term, even as a 
proponent of natural gas as I am, long term, stationary sources 
such as natural gas plants should be the last choice of an 
environmental strategy not the first choice.
    Mr. NEAL. Whether one supports or opposes the use of 
nuclear power, and to acknowledge the apprehension that the 
American people feel about it at this time, would almost 
guarantee that you could not go forward without those 
Government----
    Mr. BILBRAY. Because of the misconceptions and the 
political agenda's that are tied to it. To say that clearly as 
somebody that would tell you is working on stuff like 
greenhouse gases, we do not embrace some of this technology as 
the U.N. Council on Climate Change said, who got the Nobel 
Peace Prize along with Vice President Gore, you have to embrace 
it and have a robust expansion of nuclear power if we are going 
to address issues such as clean air and climate change.
    That is the kind of reality we run into that there is not 
compatible politics, but our politics should reflect the 
science, not the political pressure at the moment.
    Mr. NEAL. There are notable uses of incentives that draw 
people to making investments that will not return----
    Mr. BILBRAY. I wholly agree. In fact, we are actively 
engaged right now through the budget process of contracting 
with people to develop alternative energy sources and to 
develop safer forms and more efficient forms of nuclear power.
    We are engaged in it one way or the other through the 
budget process, either directly through contracting or 
indirectly through tax incentives.
    Mr. NEAL. Reducing the carbon footprints, entirely 
desirable. Moving away from fossils is a good idea. Certainly, 
I think everybody, given what has happened in Iraq and the 
Hormuz Straits right now, would agree that the dependence we 
still have on foreign oil is a direct threat to the security of 
many of our young men and women who serve us admirably every 
day.
    Mr. BILBRAY. Mr. Ranking Member, let me say this quite 
clearly as somebody who was a regulator more than I was a 
congressman, how many times have you heard we need a Manhattan 
Project for energy independence?
    Let me assure you as a regulator, the Manhattan Project 
would not be legal under today's laws. You could not legally 
even site the base in New Mexico within the boundaries that we 
did in World War II.
    We have to make it legal, and one of the things I would say 
to you as a member of the other side, Energy and Commerce, as a 
regulator and somebody who is very environmentally involved, I 
see that those of us in Energy and Commerce need to be 
aggressive about standing up and making sure our regulations 
reflect a good outcome rather than politics, but I want the 
Taxation Department to do the same thing.
    Mr. NEAL. This is a worthwhile conversation. One of the 
reasons we are less dependent on foreign oil right now by 
almost two million barrels a day is because the Government 
stepped forward to create greater requirements for more energy 
efficiency with many of the household appliances that we use 
today.
    Would you agree with that?
    Mr. BILBRAY. Well, I agree energy efficiency across the 
board has been probably one of the most cost effective benefits 
we can do, but it has its limits, as long as you know.
    It is sort of the low lying fruit when we get into it. It 
is always the most cost effective because it is low lying.
    Mr. NEAL. The point that I am raising is that there is 
general agreement on reducing the carbon footprint and there 
are a series of steps that the Government might incent to help 
get us there.
    Mr. BILBRAY. I agree with that. Remember, too, at the same 
time as we talked about changing light bulbs, if we had allowed 
some environmental health departments to say because of mercury 
content, we are not going to allow those kinds of light bulbs, 
that whole strategy could have been blocked by Government 
regulation.
    That is the kind of thing we see a lot of in other points. 
Thank God it did not happen there. It is a lot of issues.
    My biggest concern is why reduce ten percent of electricity 
when this plant is burning coal, Mr. Ranking Member, and the 
fact is when we have the technology today that could totally 
eliminate the greenhouse gas emissions caused by our 
electricity here.
    We have taken the easy part, but we have not taken on 
tough. We are still buying coal fired electricity for the 
Capitol of the United States, and as a Californian, you would 
go to prison for doing that.
    Mr. NEAL. If you are in Washington State, you would agree 
that for the coal ash that is traveling through Seattle and 
through that state now, that has created its own uproar.
    Mr. BILBRAY. That is a whole different issue. I do not 
think you want to take the heat, and we are going to address 
issues that when we stop coal--let me be frank with you.
    My attitude is clean coal is as logical as safe cigarettes. 
That is a Californian perception. You know how we feel about 
both of those.
    The fact is, Mr. Chairman, we all love railroads. We love 
the efficiency of them. We love the environmental benefit of 
them. As soon as we stop shipping coal in railroads, there is a 
whole new crisis that we are going to be addressing, but that 
is part of being aggressive and doing the right thing.
    Sometimes there are real problems unforeseen that we are 
going to have to address.
    I appreciate the chance to be able to talk about your part 
of the deal, and that is make our Tax Code fair, equal, and 
rational, and right now, it is not.
    Chairman TIBERI. Who says taxes are not fun? This was very 
entertaining, Mr. Ranking Member.
    I will say one point before I recognize the gentleman from 
Illinois. One other issue has driven down consumption, and that 
is the economy.
    Mr. BILBRAY. Absolutely.
    Chairman TIBERI. I know a lot of folks who are not driving 
as much, not traveling as much because of the economy.
    Thank you, Mr. Bilbray.
    Mr. Schock, you are recognized.

 STATEMENT OF THE HONORABLE AARON SCHOCK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. SCHOCK. Thank you, Mr. Chairman, and thank you, Ranking 
Member Neal. It is a pleasure to be before our committee to 
testify.
    We all know that this Committee is undertaking the 
necessary task of reforming our current convoluted Tax Code, 
and in this process, we have held over 20 hearings looking at 
ways to reform and make less burdensome different parts of the 
Code.
    Turning 70,000 pages into a manageable, simplified Tax Code 
that is economically beneficial for both individuals and job 
creators, does not happen overnight.
    While great strides have been made in the last 16 months, 
more work remains to be done.
    In the meantime, as this Committee continues working 
towards our shared goal of lowering the rates and broadening 
the base, it is important that we give employers and 
individuals the certainty that their taxes will not increase by 
over $500 billion in the short term.
    That is the topic which brings us here today. Many of the 
low tax provisions which expired last year or will at the end 
of this year serve a specific economic purpose and create jobs 
by keeping taxes low on both individuals and employers.
    In reality, many of these ``extenders'' are patches put in 
place to prevent tax increases from taking effect until this 
Committee can finish its work on comprehensive tax reform.
    Through tax reform, we hope to no longer remain the country 
with the highest employer tax rate in a worldwide system of 
additional taxation.
    U.S. employers are forced to compete in a global economy, 
and important tax extenders which give them that temporary 
patch to compete, things like deferral, active financing, and 
CFC look through, are all slated to expire.
    Extension of these provisions and others give this 
Committee the necessary time to rewrite the underlying rules of 
the game, a game quite frankly we are losing right now to our 
foreign competitors.
    Some will say that the only economic effect of extending 
expiring tax provisions is a reduction in revenue to the 
Government. This argument sorely understates the benefit and 
economic growth which is derived from these low tax mechanisms.
    I have taken a leadership role in the work opportunity tax 
credit, which provides a reduction in tax liability for private 
sector employers who hire employees off of public assistance.
    Most recently, this Congress expanded this program to 
include unemployed veterans.
    However, without the core work opportunity program, 
employers will be less willing to participate in the new 
veterans' hiring credit. It is hard for employers to justify 
maintaining that costly infrastructure of a work opportunity 
program which will now be one-tenth the size of the core work 
opportunity program, unless it is extended.
    For an average tax credit of $1,000 through WOTC, it saves 
the Federal Government $5,000 in public assistance payments in 
just a year, nearly an equal amount in the state contributions 
to public assistance as well is saved.
    In my home State of Illinois, which has one of the worse 
budget shortfalls in the country, this extension is extremely 
important.
    Also of vital importance is the current biodiesel tax 
incentive, which has been on the books since 2004.
    Until we can reduce the farmers' tax burdens below the 
current levels, I favor extending this policy which supports 
39,000 jobs and returns more than $600 million per year in tax 
revenue to the Federal, state and local governments.
    As I have told our Chairman, I will be the first in line to 
help reduce the 70,000 pages of our Tax Code to a slim volume 
which could fit in any of our pockets.
    The bulk of these pages will become unnecessary with a 
lower and fairer tax rate for individuals and employers, a Code 
that helps taxpayers keep more of their hard earned money and 
employers more of theirs to invest, expand, grow and hire here 
in the U.S.
    Until we are at that point where we have truly a willing 
President and an engaged Senate, it is of vital importance that 
we prevent looming tax increases on business and individuals, 
and we do so now.
    Our President not too long ago said and I quote ``You do 
not raise taxes in a recession, which is why we have not and 
why instead we have cut taxes. You do not raise taxes in a 
recession.''
    Well, for once, I could not agree more with our President's 
sentiments. With that, I yield back.
    Chairman TIBERI. Thank you, Mr. Schock. Any comments from 
the Subcommittee?
    [No response.]
    Chairman TIBERI. Thank you for testifying today.
    Mr. SCHOCK. Thank you.
    Chairman TIBERI. That concludes our second panel. We will 
now move to our third panel of members.
    Our first panelist today hails from the great State of 
Tennessee. Mrs. Black is recognized.

  STATEMENT OF THE HONORABLE DIANE BLACK, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           TENNESSEE

    Mrs. BLACK. Thank you, Mr. Chairman and members. I am here 
today to acknowledge the merits of extending some of the tax 
provisions this body has addressed in the past that benefit 
both individuals and businesses.
    Businesses of all size in Tennessee tell me how worried 
they are that one more tax increase or mandate from Washington 
might just sink them, and individuals are at risk of seeing 
their tax bills go up at the end of the year.
    I want to address very briefly four of these extenders that 
are important either to my state or what I believe are 
important to the nation.
    The first is the sales tax deduction. I agree with the 
Governor of my state that the state and local tax deductions 
are especially important for Tennesseeans as it is for six 
other states, including Texas, Florida, Washington, Wyoming, 
South Dakota and Nevada, that are without a state income tax.
    That is why I am the co-sponsor of H.R. 476 introduced by 
my colleague, Mr. Brady from Texas. This bill would include the 
extension of state and local sales tax deduction.
    This really is a fairness issue. Since 2004, when the 
deduction was restored, we have agreed that taxpayers in sales 
tax states should be treated equally as those in the Tax Code 
of those in states that rely upon an income tax.
    Sales tax adds up for families. We are trying to protect 
them from a significant tax increase and help them stretch 
their pocketbooks a little further.
    Taxpayers in these seven states who itemize their 
deductions have come to depend upon this provision and this 
deduction puts extra money in the pockets of our Tennesseeans 
which helps families and their budgets.
    The second is the charitable tax deduction. Unlike other 
tax incentives, the charitable tax deduction encourages 
behavior that enriches our communities rather than individuals 
because it successfully encourages taxpayers to give more.
    As charities struggle to meet the increased demands for 
their services and raise additional funds, we need to encourage 
all individuals of every level regardless of income to give 
more to the charitable organizations.
    This is behavior that we need to encourage rather than to 
discourage.
    The nice thing is this is one of those cherished traditions 
that we do not see anywhere else in the world. I would think 
this is one that we would want to keep.
    The next one is the R&D tax credit. Congress has extended 
the R&D tax credit 14 times since it was originally enacted in 
1981, and the R&D credit has proved an important incentive to 
spur our private sector investments in innovative research by 
companies of all sizes and sectors.
    That is why I am a co-sponsor of H.R. 942, the American 
Research and Competitive Act of 2011 by Mr. Brady once again.
    Finally, the 15-year depreciation that is a bill by Mr. 
Gerlach, 1265. Generally, the depreciation period, as you all 
know, for commercial building and improvements is 39 years.
    Congress has modified that depreciation schedule for 
certain types of property over time, in addition to better 
reflecting the unique characteristics of property used in 
certain types of commerce.
    Shortening the depreciation schedule stimulates the economy 
and job growth.
    For this reason, I am a co-sponsor of this bill.
    I just want to close by thanking you for having this 
hearing so that we could individually talk about why these are 
so important to us either in our communities or why we think 
generally they are important.
    Thank you very much.
    Chairman TIBERI. I thank the gentle lady from Tennessee who 
is a great member of the Full Committee. I thank her for being 
here today.
    Mrs. BLACK. Thank you.
    Chairman TIBERI. With that, I yield to the gentleman from 
Puerto Rico, Mr. Pierluisi.

STATEMENT OF THE HONORABLE PEDRO PIERLUISI, A REPRESENTATIVE IN 
           CONGRESS FROM THE TERRITORY OF PUERTO RICO

    Mr. PIERLUISI. Thank you, Chairman Tiberi, Ranking Member 
Neal, and Members of the Subcommittee.
    I respectfully urge extension of two tax provisions that 
expired in 2011 and that are of great importance to Puerto 
Rico's economy.
    First, I have introduced H.R. 4605, which would extend for 
two years a deduction allowable with respect to income 
attributable to domestic production activities in Puerto Rico.
    In the American Jobs Creation Act of 2004, Congress enacted 
Section 199, domestic production activities deduction. The 
deduction was intended to achieve a number of policy goals 
including providing support for the domestic manufacturing 
sector, and reducing effective corporate tax rates.
    Section 199 allows a company to receive a deduction equal 
to nine percent of the taxable income that the company derives 
from qualified production activities within the United States.
    However, the 2004 Act did not authorize a company to 
receive the Section 199 deduction on the income derived from 
those activities in Puerto Rico, even though Puerto Rico was 
part of the U.S., and jobs in Puerto Rico are American jobs.
    Fortunately, that exclusion was corrected back in 2006, but 
every year or every two years actually, we need to extend it.
    I respectfully submit that there is ample justification to 
extend this provision for an additional period of years or 
better yet to make it permanent.
    Mr. Chairman, I have also sponsored H.R. 4374, introduced 
by Congresswoman Christensen, which would extend for two years 
the modest increase in the limit on the cover over of excise 
taxes to Puerto Rico and the U.S. Virgin Islands.
    The cover over program dates back to 1917 in the case of 
Puerto Rico, and to 1954 in the case of the U.S. Virgin 
Islands. The territories are treated unequally under many 
Federal programs, and the cover over program helps to 
compensate for this fact.
    The purpose of the program is to provide budgetary support 
to the territorial governments, and historically, funding has 
been used primarily for economic development, health care, 
infrastructure, education, and conservation.
    I do believe the cover over program could be refined in 
certain respects to ensure that it is providing the greatest 
possible benefit to the U.S. citizens living in the two 
territories, where median household income is roughly half of 
what it is in our poorest states.
    I have introduced legislation for that purpose. 
Nevertheless, the importance of the cover over program for my 
constituents and Congresswoman Christensen's constituents who 
are short changed in so many respects cannot be overstated.
    Mr. Chairman, these two extenders have enjoyed bipartisan 
support and have had a positive impact on our national economy 
of which Puerto Rico and the U.S. Virgin Islands are integral 
parts.
    I hope the Subcommittee will take action to prevent the 
economic harm that would result if these two provisions are not 
renewed. I yield back.
    Chairman TIBERI. Thank you for your testimony.
    With that, I yield to the gentleman from New Hampshire.
    Mr. Bass is recognized.

 STATEMENT OF THE HONORABLE CHARLES BASS, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF NEW HAMPSHIRE

    Mr. BASS of New Hampshire. I thank distinguished Chairman 
Tiberi and Ranking Member Neal for your time and your 
attention. I think this is a great series of hearings that you 
are having today.
    I want to preface by saying that I applaud this Committee's 
work in trying to come up with a comprehensive plan for tax 
reform and simplification for this country.
    On top of that, we all know the fiscal cliff that we are 
facing at the end of the year and the impact that may have on 
the country's economy.
    I know there are a lot of very significant priorities the 
Committee needs to address, the most important of which, I 
believe, is comprehensive tax reform and avoiding what we face 
at the end of the year.
    To that end, I was one of four Republican co-sponsors along 
with four Democrats of, I think, the first bipartisan budget 
bill that has been before this Congress in my political career, 
and perhaps since the Budget Empowerment and Control Act was 
passed in 1974, so-called implementation of the Simpson-Bowles 
bipartisan tax reform--budget, rather.
    I hope that this Committee along with the Appropriations 
Committee and the other committees whose jurisdictions will 
attend to this priority--that we need to work together to 
resolve the big issues that face this country over the next 
year.
    However, within that context, I think it is important to 
consider that in lieu of comprehensive tax reform, the 
importance of maintaining the production tax credit for 
renewable energy, which has been around now since 1992.
    It lapsed, as was mentioned by a previous member 
testifying, seven times. The last time it lapsed, which was in 
2002-2004, renewable energy, most notably wind production 
installations, fell by 72 percent very quickly. This was 
devastating to the industry.
    My home State of New Hampshire has a renewable portfolio 
standard of 25 percent by the year 2025, and part of that 
involves the installation of some pretty significant wind 
capacity in the state, most notably one project which is under 
construction right now in Groton, New Hampshire.
    It will produce over $81 million in new economy to the 
state. It helps us reach that goal of 25 percent renewable by 
the year 2025. It is important not only for New Hampshire's 
economy and for our own legislative or policy objectives, but 
it is also important for this country to continue to balance 
the need to develop traditional energy resources with 
alternative energy resources.
    As a member of the Energy and Commerce Committee, I will be 
working to that end on the policy side. I hope this Committee 
will continue to support renewal of the renewable energy 
production tax credit because I really believe that is 
important for our nation's energy future.
    I thank the Chairman for his time. I hope you will consider 
this priority.
    Chairman TIBERI. I thank the gentleman for his leadership 
on the issue. The gentleman from California, Mr. Campbell, is 
recognized.

 STATEMENT OF THE HONORABLE JOHN CAMPBELL, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           CALIFORNIA

    Mr. CAMPBELL. Thank you, Mr. Chairman, Ranking Member Neal, 
and Members of the Committee.
    I think I am the only Member of Congress who actually has 
an advanced college degree in taxation. I could comment on a 
bazillion things that are before this Committee, but I am going 
to limit myself to just one minor provision today, which is the 
mutual fund flow through exemption provision, something Mr. 
Neal may have a specific interest in as well.
    Prior to 2004, we had a 30 percent withholding provision 
when foreign investors invest in mutual funds. As a result, 
foreign investors did not invest in mutual funds, because 30 
percent, particularly if you do not make much money on the 
thing, you may wind up with less money after withholding than 
you actually made.
    What they did is they set up what they called ``mirror 
funds'' in foreign countries that would try to mimic the 
investment decisions of U.S. mutual funds so that foreigners 
could sort of participate in the decisions of U.S. mutual 
funds.
    In 2004, we eliminated that withholding provision and 
foreign money flowed back into the U.S. and the U.S. mutual 
funds again.
    That provision expired at the end of 2011. The foreign 
money is running back offshore again into other places.
    What is interesting and unfair about this withholding 
provision is that under current law, because that is what it is 
now, if you invest--if a foreign investor invests in something 
directly, like let's say an interest rate swap or something, 
they do not have to have withholding, even though it is an U.S. 
interest rate swap made by the same company that offers the 
mutual fund.
    If they invest in a mutual fund, which has that swap as a 
part of it, then they have the withholding.
    It totally discriminates and does not allow foreign 
investors to invest in U.S. mutual funds.
    Let me point out, if we extend this exemption and make it 
permanent, which Congressman Paulsen has H.R. 4623 to do, and I 
am a co-sponsor of that, and that is what I would recommend, 
that we just eliminate this 30 percent withholding, but realize 
this does not change that foreign investor's tax liability to 
the U.S. at all.
    This does not change the tax due based on the income they 
derive. This is only about withholding. All it is is changing 
the time at which that tax is paid, but not the total amount of 
the tax which is paid, because it is just a withholding thing.
    I respectfully request that the Committee consider making 
this exemption, if you will, or eliminating this withholding 
provision on mutual funds, because what it is going to do is 
bring a lot more money into U.S. mutual funds which creates 
U.S. jobs both in the mutual fund industry and in the 
industries in which those funds are investing.
    I thank the gentleman very much for his time and yield 
back.
    Chairman TIBERI. Thank you for your testimony.
    With that, the gentleman from Iowa is recognized, Mr. 
Braley.

 STATEMENT OF THE HONORABLE BRUCE BRALEY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IOWA

    Mr. BRALEY. Thank you, Mr. Chairman, Ranking Member Neal, 
and Members of the Committee.
    My job here today is to make you all feel good about what 
you do on this Committee, and that is why I want to talk about 
making adoption of the Affordable Tax Credit bill.
    We have had a great adoption tax credit provision on the 
books, but a portion of it expired at the end of last year, 
having dramatic impact on couples considering adoption, and the 
entire tax credit will expire at the end of this year and 
revert to a much more draconian adoption tax credit that will 
provide disincentives for couples to adopt.
    I want to tell you why this is such an incredible return on 
investment to American taxpayers.
    First of all, you get families like the Craigs, Kalin and 
Johnny Craig, who adopted a beautiful child from Africa, 
Joseph, and brought him back to give him a loving, caring home.
    They were able to take advantage before the end of the year 
of this $13,000 fully refundable tax credit.
    This was a bipartisan effort that came about under both 
President Bush and President Obama. We have seen the number of 
adoptions nearly double in this country since that tax credit 
was strengthened.
    If we do not act, it will revert to a $6,000 level. It will 
only apply to special needs adoptions, and the eligibility 
criteria income-wise will dramatically reduce even further 
those who are eligible for the credit.
    Why does this make sense for taxpayers? We currently spend 
about $47,000 a year in state and Federal benefits to keep kids 
in foster care; $47,000.
    This one-time $13,000 credit is an enormous return on 
investment, puts those kids into loving, caring homes, takes 
away the need to continue to provide state and Federal support 
for them, and is a win-win situation, and that is why it is so 
essential that we act together on an issue that should bring 
Democrats and Republicans together to feel good about our tax 
policy.
    That is why I am asking you to move forward and make that 
permanent and provide that benefit to young children who are 
looking for a loving home.
    I also want to echo the comments of my colleague from New 
Hampshire about the production tax credit. My state ranks 
number two in wind energy production. We lead the country along 
with Texas and Illinois in the number of jobs created by that 
industry.
    We are currently providing power to one-third of our state 
with wind energy. We need to continue to provide certainty and 
predictability to people willing to invest and reducing our 
dependence on foreign oil.
    I thank you for your time.
    Chairman TIBERI. Thank you, Mr. Braley. Thank you for 
bringing up the adoption tax credit. I hail from a district 
that has the Dave Thomas Foundation on Adoption, the late Dave 
Thomas, who was a leader in establishing it, founder of 
Wendy's. I know if he were here, he would be cheering you on. 
Thank you for being here.
    Mr. Marchant is recognized.
    Mr. MARCHANT. Congressman Campbell, could you just explain 
to me, is the 30 percent withholding for distributions and 
dividends, so that even if a capital distribution is made, it 
is automatically 30 percent withheld?
    Mr. CAMPBELL. Yes, that is my understanding of the law. 
Therefore, people can actually wind up having to have their 
entire amount of income withheld if they had any and perhaps 
even if they did not have any income.
    Mr. MARCHANT. They file their tax return?
    Mr. CAMPBELL. Then they get the money back later when they 
file their tax return. That is right.
    Mr. MARCHANT. Thank you.
    Mr. CAMPBELL. Thanks.
    Chairman TIBERI. With that, I would like to thank you five 
for taking time out of your busy schedules to testify today.
    Our third panel is concluded. We will move to our fourth 
panel. We did have a cancellation on the fourth panel. There 
are just two in our next panel. Mr. McGovern and Mr. Grimm, you 
can take a seat.
    I am going to make an executive decision since we only have 
two on this panel. You guys have more time than just three 
minutes if you would like.
    The gentleman from Massachusetts is recognized, Mr. 
McGovern.

STATEMENT OF THE HONORABLE JAMES McGOVERN, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                         MASSACHUSETTS

    Mr. MCGOVERN. Thank you, and even though you are generous 
in offering to give us more time than three minutes, I am going 
to try to stick to three minutes.
    I am happy to be here. Chairman Tiberi, Ranking Member 
Neal, Members of the subcommittee, thank you for the 
opportunity to testify today in support of extending parity for 
the transit benefit.
    As you know, parity expired at the end of the 2011 calendar 
year. Currently, commuters who drive to work and park are 
eligible for up to $240 in pre-tax benefits per month from 
their employer while commuters who take mass transit, such as 
commuter rails, subways, buses, or van pools, are only eligible 
for up to $125 a month.
    Commuters who drive and park were actually eligible for an 
increase in their monthly parking benefit at the start of 2012 
because of an automatic cost of living adjustment.
    At a time of high gas prices and when many families are 
still struggling financially from the recession, it makes no 
sense to penalize commuters who utilize mass transit.
    I reintroduced H.R. 2412, the Commuter Benefits Equity Act, 
to make permanent transit benefit parity. This bill has 74 
bipartisan co-sponsors.
    I want to recognize my colleagues, Congressman Grimm and 
Congressman Blumenauer, for their efforts to extend the transit 
benefit.
    In December of 2011, we organized a bipartisan letter to 
House leaders to extend the transit benefit in the payroll tax 
cut package. It was signed by 50 Members.
    Then again in February, we organized another bipartisan 
letter; this time it was signed by 72 Members, urging that the 
transit benefit be extended in the continuing payroll 
discussions.
    In recognition of the extremely difficult fiscal times in 
which we find ourselves, our letter proposes establishing 
parity at the revenue neutral maximum level of $200 per month 
for parking and transit benefits.
    The Federal transit benefit is a perfect example of how 
targeted and effective Federal policy can benefit both 
employees, as a way to save money on their commute, and 
employers, as an attractive fringe benefit to offer their 
workers.
    Employees and employers receive a pre-tax benefit resulting 
in sound fiscal savings for both.
    It simply makes sense to reestablish parity between parking 
and mass transit benefits. It is good for employers, good for 
employees, good for the environment, helps take cars off our 
congested roads, and I am hopeful you will restore parity in 
the tax extenders package.
    I appreciate the time you have given me here.
    Chairman TIBERI. Thank you, Mr. McGovern.
    The gentleman from New York is recognized, Mr. Grimm.

 STATEMENT OF THE HONORABLE MICHAEL GRIMM, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEW YORK

    Mr. GRIMM. Thank you, Chairman Tiberi and Ranking Member 
Neal. I do appreciate the opportunity to testify today in 
support of extending the expiring commuter transit benefit.
    I would also like to thank my colleague, Mr. McGovern, for 
his leadership on this extremely important issue.
    As a Member of Congress representing the citizens of Staten 
Island and Brooklyn, who have and face every day the longest 
commute times in the entire nation, seeing this vital program 
extended is of the utmost importance to me and all of my 
constituents.
    The transit benefit is a highly effective tool used by an 
estimated 2.7 million Americans, and that is to help reduce the 
cost of commuting.
    Transit Center, a New York City non-profit, found that when 
transit benefits are introduced to the workforce, 20 percent of 
employees alter their commuting patterns. They use public 
transit or van pools.
    When considering that, a 3 percent reduction in single 
occupancy vehicles can lead to a 25 percent reduction in 
congestion. It is clear that the transit benefit is an 
effective means of reducing traffic.
    While there are additional energy and environmental 
benefits that can be drawn from this, I want to take this time 
to also recognize the role transit benefits have on employers.
    Simply put, the transit benefit makes sense for businesses 
of all shapes and sizes. The provision is a pre-tax benefit not 
only for employees but also for the employers who offer it, 
providing fiscal savings by reducing their payroll tax burden.
    According to corporate service provider Edenred, last year, 
employers who offered the transit benefit saved an estimated 
$311 million in taxes. When we look at this in context, these 
savings could be used to hire 6,200 new workers, providing many 
employers with the additional resources that they need to 
expand their business and do exactly what the Congress wants, 
create new jobs.
    The transit benefit also provides small businesses and job 
creators with a financial incentive to help their employees 
increase their disposable incomes. This is a perfect example of 
how targeted and effective Federal policy can provide employers 
with an opportunity to help their employees save money, 
obviously, on their commute, while saving employers money that 
can be reinvested into their own businesses, again, to create 
new jobs.
    Congress should not continue to promote a tax policy that 
is favoring drivers over commuters and that penalizes 
businesses that are doing the right thing by offering their 
employees incentives to utilize a variety of transportation 
options.
    If we do not act quickly, millions of transit and van pool 
riders will continue to be taxed more than their fellow 
commuters who drive to work.
    This inequity will force many commuters out of trains, 
buses, and van pools and back into their cars, which will lead 
to increasing congestion, fuel consumption, lost productivity, 
and wasted time that could be spent either at productive work 
or home with their families.
    The effort to extend this important benefit has received 
overwhelming bipartisan support here in the House, as evidenced 
by the 107 signatures garnered by the two letters that my 
colleague just mentioned.
    I encourage the Committee to extend parity between the 
transit and parking benefits at a monthly level, providing 
relief from the high cost of commuting to American workers who 
choose public transportation and van pools.
    Again, I thank you for your time. I yield back.
    Chairman TIBERI. Thank you, Mr. Grimm. Thank you, Mr. 
McGovern. You both represent areas of our country where quite a 
bit of mass transit occurs.
    Some of our colleagues are in states where very little mass 
transit occurs.
    If you had to summarize to a colleague on the Committee who 
has very little mass transit the impact of the Congress not 
extending this provision, what would you say?
    First, Mr. McGovern. What would you say would happen in 
Massachusetts to both transit riders and employers?
    Mr. MCGOVERN. They have already seen a reduction in their 
benefit. They have to decide whether it is more economical for 
them to drive to work or take mass transit. If they make the 
decision to drive to work and there are more commuters on our 
highways, our roads need more repair, the cost to the state and 
the Federal government increases.
    I would argue there is an environmental impact of increased 
congestion on our roads.
    I think the nation as a whole benefits from this. Again, I 
do not see why we should provide more incentives for a person 
who drives their car alone to work versus a person who gets on 
a train or bus and goes to work that way, which is better for 
the entire community.
    Chairman TIBERI. What would that incentive be for someone 
who does not have mass transit?
    Mr. MCGOVERN. Right now, people that drive to work and park 
are eligible for up to a $240 pre-tax benefit per month.
    We had tried to create parity in the stimulus bill, and 
then when that ran out, we saw those who actually took mass 
transit to work go from $240 down to $125 in terms of their 
benefit. That is a significant drop.
    Again, it is enough of a drop to make somebody wonder 
whether it is more economical to drive to work than take mass 
transit.
    Again, the more cars on the road, the more wear and tear, 
the more cost of maintaining our highways. Again, at a time 
when we are trying to encourage more people to utilize mass 
transit, letting this benefit expire does not make any sense to 
me.
    Chairman TIBERI. Mr. Grimm, can you give a New York City 
perspective?
    Mr. GRIMM. I certainly can. I think people that are not as 
familiar with my specific district within New York City would 
think I would side with those that have massive mass transit.
    Staten Island, which is more than 70 percent of my 
District, is known for not having mass transit. It is one of 
the biggest problems we have, congestion and traffic because of 
the lack of mass transit.
    However, even in areas, rural areas that do not have mass 
transit, we want to encourage people to van pool and car pool. 
That is what this extension would do. It makes people be more 
efficient so that neighbors can get together, colleagues that 
work in the same general area can come to their own agreements 
to share a car or van pool.
    I think it is very bad precedent for the Congress as a 
whole to pick winners and losers. The country is different. 
There are going to be areas like the heart of New York City, 
Manhattan and Brooklyn, that have a tremendous amount of rail 
and access to transportation, and parts of the city like Staten 
Island that does not.
    I think they should all be at parity and all should be 
equal, but when you look at it, I think the incentives to put 
people in car pools and to be creative, even when there is not 
mass transit, is obvious, and for that reason, I would strongly 
urge parity.
    Chairman TIBERI. Thank you. Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman.
    Mr. Grimm, following that logic that you have laid out 
here, you agree it is okay to incent certain behaviors to 
encourage people to commute rather than have just one person in 
terms of occupancy in a car using more fuel and standing in 
line for a longer period of time?
    Mr. GRIMM. Yes.
    Mr. NEAL. You agree with that. If that is the case, we are 
having the conversation that it is generally a good idea to 
have less reliance upon fossil fuel. Is that an agreement?
    Mr. GRIMM. In general, yes.
    Mr. NEAL. In general. Does the Government not have some 
compelling interest in encouraging use of renewable energies?
    Mr. GRIMM. As long as it is sustainable and practical.
    Mr. NEAL. Would you grant that solar and wind are 
worthwhile given Staten Island's geography?
    Mr. GRIMM. If you are discussing possibly wind turbines as 
opposed to wind mills, then I would say yes. As the studies and 
the science gets better, I think those are going to be options 
for the future.
    If you are asking me based on what it is right now, wind 
mills, I would say probably not. I think it would cost more 
money than what we have now.
    For it to be a real alternative, in my humble opinion, an 
alternative means that it can provide the same service at an 
equal or less cost. If it is more and needs massive Government 
subsidies like say, for example, biofuels, where we have to 
subsidize it at $1 per gallon, that is not a real alternative. 
That is not an alternative. That is the Government just paying 
for something because we do not have the alternative yet.
    Science has to catch up with it, but I think an ``all of 
the above'' approach is what we should be doing as well as R&D.
    Mr. NEAL. If science catches up with it, would you agree 
that before science catches up with it, we might need to build 
a bridge through the Tax Code to encourage science catching up 
with it, as you have described it?
    Mr. GRIMM. To some extent, yes, but again, it has to be 
practical, reasonable and sustainable, and within our means.
    Mr. NEAL. If you want major companies to embrace renewable 
energy, does there not have to be in this transitioning period 
some sort of incentive that is built into the Code to encourage 
that sort of behavior?
    Mr. GRIMM. Well, I think this is a perfect example of an 
incentive. This is a perfect example. Right now, the way it is, 
we are giving an incentive for people to get in their cars, 
single occupancy in cars, as opposed to using public 
transportation. That seems backwards to me.
    Mr. NEAL. The incentive here is clearly as you argue it, to 
encourage the Tax Code to incent that behavior.
    Mr. GRIMM. Yes, or at least to make it equal at a minimum. 
We are asking for parity, not to pick winners and losers. I am 
asking for parity.
    Mr. NEAL. How do you pick winners and losers when it comes 
to wind and sun? Is it not desirable to relieve pressure from 
imported oil?
    Mr. GRIMM. Again, I think that it is based on simply the 
economics and where the science is. If it is not efficient and 
the cost is not sustainable, then I do not consider that an 
alternative.
    Mr. NEAL. If the President says ``all of the above,'' are 
you suggesting that you could build a nuclear power facility 
today without Government guarantees?
    Mr. GRIMM. When you say ``without Government guarantees,'' 
first let me say I do believe nuclear is one of the answers to 
our energy needs.
    Mr. NEAL. Could it be constructed today without Government 
guarantees? Could a plant be constructed?
    Mr. GRIMM. I do not know enough about the subject to be 
completely honest with you to say what that would entail. I 
would say this, that I think nuclear now, for example, in my 
great state and the great City of New York, we have about 25 
percent, do not quote me on the exact number, of our energy 
coming from Indian Point, which has been providing clean, good, 
fairly cost effective energy for New York City for a long time, 
and I am a full supporter of that.
    Mr. NEAL. The short answer here, Mr. Grimm, all I am 
suggesting to you is I am in agreement with you on the commuter 
tax.
    Mr. GRIMM. Great.
    Mr. NEAL. Having said that, my point is when you continue 
it to its manifestation, the issue of what the Government 
nurtures, I think we do not get to renewables without this 
bridge for a short period of time to encourage these 
alternative sources of energy.
    Chairman TIBERI. I thank the two panelists, and just add my 
two cents, Mr. Neal. I would argue that while the President 
talks a good game about ``all of the above,'' his 
Administration, coming from a state that has a lot of natural 
gas, oil, coal, that many small entrepreneurs would argue that 
the Administration has been anything but ``all of the above.''
    We can have that debate another time. I know you have 
mentioned it a couple of times with respect to the President, 
an issue sensitive to me. I would argue we can reduce imported 
oil, imported fossil fuels, by more domestic opportunities in 
the fossil fuels.
    Mr. NEAL. This is a fair discussion. Domestic capacity is 
up by 20 percent. Next year, North Dakota is going to produce 
more oil in Prudhoe Bay.
    Chairman TIBERI. No thanks to the Federal Government.
    Mr. NEAL. My point is many of these incentives one might 
argue have been also brought about because of the Code. We did 
a pretty good energy bill here a few years ago.
    Mr. GRIMM. Ranking Member, if I may, keeping in mind, 
regulations do play a major role in this. When you look at the 
amount of coal plants that are closing, refineries that are 
closing, the fact that our pipelines are antiquated and 
desperately need to be upgraded, and there is a tremendous push 
back through the regulators on those things, it does not seem 
to really be that the Administration wants an ``all of the 
above'' approach.
    Those are just the facts as I have been reading them. 
Again, I am not an expert.
    Chairman TIBERI. We do have our 12:00 panelist here. Just 
to kind of close this, to Mr. Grimm's point, in my State of 
Ohio, a hot topic right now is the fact that--this debate 
occurred during cap and trade, the public utilities are raising 
rates at the same time they are closing coal plants because of 
the Federal Government.
    The alternative fuels that are taking place, and that is a 
policy decision, are raising the rates to homeowners as well as 
businesses, and that is happening right now in our state.
    That is a debate that entails the discussion that you two 
are having.
    There is a consequence to the dollars that are paid by at 
least my constituents in Ohio.
    Mr. NEAL. At the moment though, I think it is fair to say 
as well that we are much less dependent on coal, and part of 
that reason is because many of our international competitors 
are more dependent on coal. It is that export market that is 
driving part of the decision making.
    Chairman TIBERI. In part because coal plants in my state 
are exporting because there is less domestic wanting because of 
Federal regulations.
    Thank you both. We could have this discussion all day. Like 
I said earlier, who said the Tax Code is not fun in terms of 
discussion. We are having a great time today. Thank you both.
    Mr. GRIMM. Thank you. Thank you, Ranking Member.
    Chairman TIBERI. I thank Mr. King and Mr. Costa for their 
patience. They are up next for our 12:00 panel. We have two on 
our 12:00 panel. Welcome to both of you.
    We will begin with the gentleman from the Hawkeye State. 
Mr. King is recognized.

  STATEMENT OF THE HONORABLE STEVE KING, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IOWA

    Mr. KING. Thank you, Mr. Chairman and Members of the 
Subcommittee. I appreciate the privilege to testify here today.
    I think I will dispense with my prepared remarks. I know 
you study them well, as does the staff. Bring this to a few 
points that I think are important to be emphasized.
    I am here to testify in support of the protection of tax 
credit for wind generation of electricity. I would point out 
that Iowa has the second highest percentage of our electricity 
generated from wind of the states. South Dakota is ahead of us. 
Also, we have developed an industry there over the years.
    As I was in the State Senate 15 years ago, I sat down and 
received a briefing on the future of the wind generation of 
electricity in Iowa and across the country.
    That briefing identified that our costs were at 15 cents 
per kilowatt hour. Of course, that seemed pretty high at the 
time and illogical, but they said we will get these costs down 
to three cents. We think we can get them to three cents.
    I have been watching it along the way. Those costs have 
ratcheted down from 15 cents down to the most reliable number I 
have, 5.2 cents. They have cut it more in half in the last few 
years, the cost of electrical generation by wind.
    The central piece of the point that I would like to 
emphasize is that when we come up with new renewable energy or 
any kind of energy, you have to find a way to have market 
access.
    I was involved in the ethanol industry early, involved in 
the biodiesel industry, now the wind industry.
    My Congressional District produces more renewable energy 
than any other Congressional District out of all 435 in 
America, and with the new District, the new 4th District, which 
will be 39 counties across Northern Iowa, we will be far and 
away the largest renewable energy producing district in 
America.
    I go back to sometime in the 1970s when we first began with 
these endeavors. One of the challenges, of course, is 
technology.
    A normal wind turbine back in those earlier years would 
produce about one-sixth of the electricity that a single wind 
turbine does today, a typical, but it has always been the 
technology, the engineering, is one challenge, and the next 
challenge is market access.
    Ethanol, for example, you could not get that in a gas 
station. You had to find a way to provide market access.
    We have gone through this process in each of these 
renewable energy components and provided a way to kind of crack 
into the market access, if you will. Now we are on the edge of 
blenders pumps for ethanol, and they have come to us and said 
we will let go of the blenders credit because we are ready to 
compete in the industry now, we just need a little more help 
with market access.
    A similar thing is taking place with wind, which is why I 
bring up the ethanol relation to wind. We have a tremendous 
infrastructure that has been built. That infrastructure has to 
have a little paydown on the return on investment before it can 
sustain itself.
    I watched as 100 bases were put in place before the credit 
was extended several years ago. It was about the fourth or 
fifth of December when the Ways and Means Committee moved the 
production tax credit for wind. From that date in December 
until the 31st, 100 towers were stood up, 100 turbines were put 
up, and they were on line.
    It was the only company in the country that took advantage 
of the credit that year.
    We need to have some support to extend this so that we can 
phase this support down. I would go to the industry and ask 
them how soon. I do not want to go on record as saying how 
soon.
    I would very much like to see an extension here, and if 
that extension becomes a condition, that they come back with a 
proposal on how long it would take to phase that down, I think 
that is an appropriate and responsible thing for us to do.
    I see I have run out of time, and I appreciate your 
attention, and I yield back.
    Chairman TIBERI. I thank the gentleman from Iowa. Mr. Neal 
would like to make a point.
    Mr. NEAL. Thank you, Mr. King, for your testimony. That is 
the point I have been making all morning, that you need it 
until you phase it down. That is precisely the point I have 
been trying to make.
    You made the argument that but for the production credit, 
those turbines would not have been up and running. Is that 
correct?
    Mr. KING. Correct.
    Mr. NEAL. You can use this Democrat's endorsement back 
there, and I am sure it will be very helpful to you.
    Chairman TIBERI. Wow.
    [Laughter.]
    Mr. KING. We have a good bipartisan bill out before us with 
a lot of Democrat endorsement. I would like to see some more 
Republicans of that mindset.
    Chairman TIBERI. Let the record show Congressman Steve King 
and Congressman Richard Neal agree.
    [Laughter.]
    Chairman TIBERI. With that, we will turn to the gentleman 
from California, Mr. Costa.
    You are recognized.

   STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. COSTA. Thank you very much, Chairman Tiberi and Ranking 
Member Neal, for hosting this Subcommittee effort. You have a 
difficult task today.
    We have a number of expiring tax measures before the House, 
the Ways and Means Committee as well as the Congress.
    They all have varying degrees of merit, and obviously as we 
look at comprehensive tax reform, which I suspect we will not 
do until next year is my view, all of these interim tax 
measures obviously have to be addressed in some fashion.
    I would like to talk about a few of them in my testimony 
this morning or this afternoon I should say.
    Obviously, there are a number of benefits to companies and 
small businesses around the country. In my District, a number 
of these tax measures provide incentives for biodiesel and 
renewable diesel. Some of the renewable portfolio that my 
colleague was just speaking of.
    Empowerment tax incentives, extensions of renewable 
electricity and production, percentage for the depletion for 
oil and gas, marginal wells. In Kern County, we have a lot of 
oil production, and others.
    I would like to focus today on one tax extension, which has 
been helpful to our constituents in the San Joaquin Valley, and 
that is the new market tax credits.
    I am pleased to join with over 60 of my colleagues on a 
bipartisan basis to co-sponsor H.R. 2655, the New Market Tax 
Credit Act of 2011.
    H.R. 2655 extends those credits for five years. I would 
urge the Committee to consider this measure and adopt it as 
part of whatever overall package you produce.
    At the national level, between the start of the program in 
2003, going back to the Bush administration, the new market tax 
credits investments totaled $20.9 billion.
    The costs for the financed projects during that time, it 
was $45 billion around the country. I think that is a pretty 
good leverage in terms of investments that were made of 
significant capital from other sources.
    This financing was mostly located in high distressed 
communities throughout the country, around 60 percent were 
located in communities where the unemployment rates were at 
least 1.5 times the national average.
    In my Congressional District, the new market tax credit 
investments totaled $60 million, and total project costs came 
to a value of over $114 million, over almost a two to one 
ratio.
    This is significant investments in areas where capital 
investment is badly needed.
    The leverage, I think, across the country and including my 
District is good.
    Recognizing the value of these new market tax credits in 
San Joaquin Valley that I represent, I introduced H.R. 2740 
last year, a bill that would help spur economic development in 
low income communities.
    I am aware of two situations that I want to bring to the 
attention of the Subcommittee, and I will close, that are 
adjacent to universities, both at Fresno State and the 
University of California in Merced, where no one has lived in 
certain Census tracts at the time of the last Census.
    Now, with the new Census that is taking place, people live 
adjacent to these universities. There was no information on 
income available from the last Census that was taken in 2001. 
Now, there is.
    There is an important student population that has taken 
residence adjacent to the universities. They are posed to 
continue development in that area to provide services to these 
students and to the university community.
    H.R. 2740 allows the new market tax credits to apply to 
where Census tract information is not available or where a 
tract adjacent to two or more low income communities did not 
exist.
    I would urge the consideration of this measure as a part of 
the larger effort that the Subcommittee will undertake. It 
would benefit in this case these two university communities 
that are important to the education of our future, both at UC 
Merced as well as Fresno State.
    I would be prepared to answer any questions the 
Subcommittee might have at this time.
    Chairman TIBERI. Thank you, Mr. Costa, and thank you for 
your information on the new markets tax credit, which has been 
pretty impactful in my District as well, and Mr. Neal has been 
a leader in the Congress on that issue.
    Do we have any comments for our panelist?
    [No response.]
    Chairman TIBERI. All right. You guys did well. Thank you 
both so much. Appreciate it.
    Mr. COSTA. Iowa and California.
    Chairman TIBERI. There you go. King and Costa. Sounds like 
a ticket.
    Mr. COSTA. Thank you very much.
    Chairman TIBERI. Unfortunately, we have had a couple of 
cancellations. We have a little bit of time here. I am going to 
just recess. We will reconvene at the call of the Chair for our 
next panel.
    Everyone can grab a cup of coffee or some lunch if they 
like, and we will just recess for a little bit.
    [Recess.]
    Chairman TIBERI. Since we have most of the 12:40 panel here 
and one crasher, maybe two crashers, we are going to go ahead 
and get started.
    Starting on my far left, no pun intended, Mr. McDermott.
    [Laughter.]
    Mr. MCDERMOTT. When your Clerk brought me up here, I find I 
was being put on the left.
    Chairman TIBERI. A distinguished member of our Ways and 
Means Committee will go first, Mr. McDermott from the great 
State of Washington.

 STATEMENT OF THE HONORABLE JIM McDERMOTT, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           WASHINGTON

    Mr. MCDERMOTT. Thank you, Mr. Chairman. I want to thank the 
Chairman and the Ranking Member, who I am sure will be here in 
a moment, for holding today's hearing.
    Certainly, it is a critical component of our Tax Code, and 
making this hearing on expiring tax provisions is really in my 
view long overdue because businesses want to know what is going 
on, and a lot of people want to know.
    I come to talk about two specific tax provisions that if 
not extended will significantly impact taxpayers and 
homeowners.
    The first is the reduction for state and local sales tax. 
This provision brings tax equity to taxpayers living in states 
with no income tax. There are a number of them. My State of 
Washington is one of six states that do not have an income tax. 
This has been in and out of the law several times during my 
time in the Congress. It is time for it to be permanent, but 
here we are again.
    Currently, taxpayers may deduct their state income taxes, 
but if you do not live in a state with any income tax, you lose 
a whole deduction.
    Without a corresponding deduction, the taxpayers will 
shoulder most of the Federal tax program themselves. More than 
800,000 Washingtonians alone would be subject to this unequal 
treatment if the deduction is not extended. That is true for 
Texas and a lot of other places, Florida, that do not have 
income taxes.
    Last December, my colleague, Mr. Brady, and I, along with 
68 bipartisan members of the House sent a letter to the 
Committee requesting an extension of this, and I request 
unanimous consent to enter this letter into the record.
    [The prepared statement of The Honorable Jim McDermott 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Mr. MCDERMOTT. The second provision is the exclusion from 
income for mortgage debt discharge. This provision provides 
critical tax relief to struggling homeowners that are lucky 
enough to get their lender to agree to principal reduction.
    In February, 49 state AGs and five major banks recently 
agreed to a $26 billion settlement, a portion of which will go 
to reducing principal. Hundreds of thousands of homeowners will 
get this relief, but if this exclusion is not extended, these 
homeowners will be hit with a tax bill on money they never 
received.
    I introduced the Homeowner Tax Fairness Act along with my 
Democratic colleagues on the Committee that not only extends 
the exclusion but ensures that every bit of relief for our 
state attorney generals that has been agreed to goes to the 
homeowners and the Service members that need it most.
    I am looking forward to working with my colleagues on the 
Committee to extend these provisions and the other necessary 
provisions that were made outside the scope of this hearing.
    I sincerely hope the Committee considers every extender but 
not just those that were extended in 2010. To pass effective 
tax law that is in the best interest of this country, we ought 
to go back beyond 2010.
    I thank the Chairman, and I yield back my time.
    Chairman TIBERI. Thank you. I thank you for being here to 
testify. With that, we will go to our third Hawkeye today, from 
Iowa.
    Mr. Latham. I am more known as a Cyclone, actually, but 
from the Hawkeye State.
    Chairman TIBERI. From the Hawkeye State. Mr. Latham is 
recognized.

  STATEMENT OF THE HONORABLE TOM LATHAM, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IOWA

    Mr. LATHAM. I wish to really express my appreciation to the 
esteemed Chairman, Mr. Tiberi, and Mr. Neal, for holding this 
hearing to discuss the fate of several expiring tax provisions.
    I have long been a supporter of domestic energy resources 
as a means to support American jobs, decrease our dependency on 
foreign oil, and to ensure our own energy independence.
    As you review the tax extenders, I would urge you to 
consider extending the production tax credit for wind energy. 
The PTC serves as an important function to help diversify our 
energy resources. The tax credit, which is based solely on 
project performance, has been a proven benefit to consumers and 
the nation.
    Since 2005, the PTC has been the catalyst for private 
investment in wind energy generating over $75 billion of 
private investment in U.S. wind projects over the last seven 
years, and $13 billion this last year alone.
    An extension of the PTC will provide much needed certainty 
for the wind industry to continue its contribution to 
increasing our supply of domestic energy. In the past five 
years, domestic manufacturing facilities have flourished, 
adding nearly 500 manufacturing facilities, and providing good 
paying manufacturing jobs to 30,000 people.
    In all, the wind energy supports 75,000 jobs, some 4,000 to 
5,000 in my home State of Iowa alone.
    However, I fear that if the tax credit is allowed to 
expire, many of these jobs will be put in jeopardy, 
particularly in the manufacturing sector.
    Companies in my home District have already indicated they 
are planning employee layoff's without an extension, and has 
predicted that 2,000 to 3,000 Iowa jobs are at risk of being 
lost immediately without the extension.
    Investment and jobs aside, the PTC just makes sense to 
increase our domestic energy supply. Over the span of five 
years, wind energy has provided 35 percent of all new power 
generation in the United States, and is still growing.
    Through incentives like the PTC, my home state has become a 
leader in the wind energy industry and generates 20 percent of 
the state's electric needs, powering over one million homes.
    Estimates indicate the U.S. as a whole is capable of 
growing to Iowa's level of wind power generation by 2030, and 
at that level, the industry would support 500,000 jobs.
    If my home state is any indication for the potential for 
U.S. wind energy, then I know the future for American wind 
energy is bright, but in order for the industry to grow to its 
full potential, long term certainty from Congress is necessary, 
and the extension of the protection tax credit will provide 
that certainty. It is necessary to continue that investment.
    Mr. Chairman, I encourage you to consider extending the 
production tax credit for wind energy, and I appreciate very 
much the chance to testify here today.
    Chairman TIBERI. Thank you. I thank the gentleman. The 
gentlelady from the U.S. Virgin Islands is recognized.
    Ms. Christensen. Close.

STATEMENT OF THE HONORABLE DONNA CHRISTENSEN, A REPRESENTATIVE 
                IN CONGRESS FROM THE U.S. VIRGIN
                            ISLANDS

    Ms. CHRISTENSEN. Thank you, Mr. Chairman and Ranking Member 
Neal, for the opportunity to present testimony in support of 
H.R. 4374, legislation I introduced with Resident Commissioner 
of Puerto Rico, Pedro Pierluisi, to extend the rum tax cover 
over provision for the next two years.
    I would like to explain what the rum tax cover over is and 
what it is not. It is not a tax credit nor is it a tax benefit 
for businesses or individuals.
    The cover over does not increase taxes nor does it decrease 
taxes. The tax policy behind the cover over is not temporary 
nor is it new.
    Rather, the cover over is part of the fundamental tax 
relationship between the United States and its territories that 
goes back over 100 years, before there was even an income tax.
    When the United States acquired Puerto Rico and the Virgin 
Islands at the turn of the last Century, Congress generally 
exempted these new territories from the application of the U.S. 
Internal Revenue laws, including Federal excise taxes on 
manufactured goods.
    To protect domestic manufacturers from untaxed territorial 
manufacturers, Congress from the very beginning imposed on 
products manufactured in Puerto Rico and the Virgin Islands a 
tax that is ``Equal to the Internal Revenue tax imposed in the 
United States upon like articles of domestic manufacture.''
    Thus, the tax imposed on rum manufactured in the Virgin 
Islands and Puerto Rico and shipped to the United States is not 
an ordinary excise tax. It is not intended to raise revenue for 
the U.S. but rather as the courts have recognized, it is an 
equalization tax intended to regulate commerce between the 
territories and the United States, and to preserve a level 
playing field for the mainland distillers.
    Accordingly, the Act that governs the relationship between 
the United States, Virgin Islands and Puerto Rico provided that 
all of such equalization taxes be returned or covered over to 
the Treasuries of the respective territories.
    These fundamental principles have been enforced since 1900. 
In 1984, Congress increased the excise tax on rum from $10.50 
per proof gallon to $12.50 per proof gallon, but also provided 
for the first time in the history of the territorial 
relationship that these proceeds of the increase of the rum 
equalization tax would be retained by the United States.
    Congress later increased the rum tax to $13.50 per proof 
gallon, but it was not until more than a decade later that 
Congress restored the cover over policy that existed for the 
greater part of the past Century.
    In 1999, Congress increased the cap on rum tax cover back 
to territories of $13.25, but for budget reasons, only did it 
for a two year period.
    The so-called ``Rum tax extender'' has been regularly and 
seamlessly extended ever since.
    Today, the Virgin Islands Government issues bonds backed by 
these rum taxes to finance the construction of schools, 
hospitals, and other essential public works in the territory, 
and any funds that are not encumbered to support the general 
expenses of the Government and to modernize the rum industry.
    In addition to maintaining the Federal territorial tax 
relationship, this cover over legislation is critical to the 
Government's efforts to resolve our fiscal crisis.
    Extension of the rum cover over rate will also help to 
mitigate significant revenue losses associated with the closure 
of HOVENSA oil refinery on St. Croix, which is the largest 
private sector employer in the territory and one of the largest 
refineries in the world.
    Accordingly, I strongly urge the support of the 
Subcommittee for the timely extension of the rum tax cover over 
rate, and I thank you again for the opportunity to testify.
    Chairman TIBERI. Thank you for testifying today. Our 
colleague from Puerto Rico was here earlier testifying.
    The gentleman from California is recognized.

STATEMENT OF THE HONORABLE JOHN GARAMENDI, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           CALIFORNIA

    Mr. GARAMENDI. Mr. Chairman and Ranking Member Neal, I want 
to address three policies that would create economic 
opportunity in my District, in California, and across the 
nation.
    First, the Federal renewable energy production tax credit. 
Second, extending the conservation easement incentives, and 
third, extending the 100 percent bonus depreciation for capital 
investments that are made in the United States.
    First, let me take up the renewable energy production tax 
credit. Since its adoption in 1992, this financial incentive 
has provided stability in the energy market.
    Over the past five years, the production tax credit has 
helped the wind energy sector grow at an average of 35 percent 
a year. Some 75,000 jobs are supported by this across the 
nation. In my own District, there are 4,000 to 5,000 jobs, both 
in my District and in California.
    There should be added to the production tax credit, should 
it be extended, a ``Make it in America'' provision such as 
found in H.R. 487, which would require that our tax money be 
spent on American made equipment.
    It seems to me that if we are going to provide a tax credit 
or a tax subsidy, we ought to provide that subsidy to American 
made equipment and American workers, not some foreign import.
    Secondly, I would like to voice my full support for the 
Conservation Easement Incentive Act of 2011. This bill would 
permanently extend the deductions for land owners who dedicate 
their land to development protection through conservation 
easements.
    I know that members of your committee, Mr. Gerlach and Mr. 
Thompson, have worked long and hard on this. They are on the 
right track. This supports farmers and ranchers staying in 
business and protecting our landscape, a very, very important 
provision.
    Third, I want to voice my support for the 100 percent 
depreciation for capital investments that is found in your 
bill, Mr. Chairman. I applaud you for your wisdom and urge you 
to carry on and succeed.
    This bill does create jobs in the United States. Again, I 
would suggest that you add to it, since we are using our tax 
money for this particular purpose or reducing taxes for this 
purpose, that you build into it a ``Make it in America'' 
provision, so that the provision applies more to those who are 
actually buying American made capital equipment, and in any 
case, only for capital improvements within the United States.
    There you have it. The production tax credit, the 
conservation easements, and the 100 percent capital write-off. 
I urge your support of all three of them. Thank you.
    Chairman TIBERI. Thank you for your testimony today. The 
gentlelady from Washington State.

      STATEMENT OF THE HONORABLE JAIME HERRERA BEUTLER, A 
    REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

    Ms. HERRERA BEUTLER. Thank you, Mr. Chairman and Ranking 
Member. Thank you so much for giving me the opportunity to 
advocate on behalf of extending the state and local sales tax 
deduction for the families in Southwest Washington and 
individuals across our state, as well as all seven states who 
do not have an income tax.
    We all understand that folks in this economy are 
struggling. We often hear about fairness and about certainty 
for hard working taxpayers and for those job creating 
businesses.
    I stand firmly behind both principles, which is why I have 
worked diligently to ensure that folks in Southwest Washington 
can deduct their state and local sales tax from their Federal 
income tax.
    In fact, I am joined by colleagues on both sides of the 
aisle and in both bodies who believe we should permanently etch 
this provision into our Tax Code.
    Mr. Chairman, we have the opportunity to keep millions of 
dollars in Washington State's economy at a time when struggling 
businesses in Longview, Vancouver, in Olympia and in Chehalis 
need it most.
    We have double digit unemployment now going on three years.
    This deduction allows the average family that I serve to 
keep $500 a year in money that they have earned. It is their 
money. That is a lot of groceries and a few tanks of gas. It 
gives the family savings account a much needed cushion. It is 
small but it is needed, as folks struggle to find employment 
and to make their mortgage payments.
    Unfortunately, the folks in Southwest Washington and in 
these other states have become accustomed to an 11th hour 
extension for this common sense deduction, and I am hopeful 
that we can prevent that this go around.
    It should be simple. Let's extend the state and local sales 
tax deduction for folks in Southwest Washington who have 
already dutifully paid their taxes, and let's work to make this 
a permanent solution.
    I will continue to be a champion for this cause until we 
reach that goal. Thank you both for your time.
    Chairman TIBERI. Thank you. The gentleman from Florida is 
recognized.

STATEMENT OF THE HONORABLE THEODORE DEUTCH, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. DEUTCH. Thank you, Mr. Chairman, Mr. Ranking Member, 
for the opportunity to testify about the production tax credit.
    You might wonder why a member from the Sunshine State cares 
about wind. The truth is the PTC has made it possible for wind 
energy to be relevant for communities all across the country, 
like the one I represent in South Florida.
    The credit had made investments in domestic renewable 
energy production a cost effective venture. It should serve as 
a working example of how the Federal Government can be an ally 
to the private sector, promoting growth and creating jobs.
    The $3 billion invested through the production tax credit 
has generated 10 to $20 billion of annual private sector 
investment.
    With more competition, wind only gets better. Since 
enactment of the PTC, wind energy has become 30 percent more 
efficient and 30 percent cheaper.
    Extending the production tax credit will continue this 
incredible progress and is vital to the industry's continued 
success.
    Even as we discuss these issues, the plans for an inland 
wind project in my home of Palm Beach County, Florida are 
moving forward. This development would have been laughable a 
decade ago. The technology just was not there.
    Once the turbines in Palm Beach County start turning, 
Floridians will benefit from what the breeze brings in, 
affordable wind energy means lower utility bills and more money 
in families' pockets.
    I am also pleased to say the largest developer of wind 
energy in the country and the second largest in the world, 
NextEra, calls Florida home.
    Wind supports over 2,000 Florida jobs and counting. It is 
even propelling our manufacturing sector forward with 15 
Florida companies building component parts for wind.
    Through the PTC, the Federal Government transformed wind 
energy from a green dream to a competitive reality. If we were 
foolish enough to abandon this initiative, the great progress 
we have made towards a competitive wind market will come 
undone.
    Creation of a completely new energy sector is not easy 
business. Wind production often takes a year and a half to get 
off the ground, finding a site, navigating regulations, 
securing manufacturers, and completing installation. All of 
this must occur before a company even qualifies for the credit.
    Just the possibility of the expiration of this incentive is 
freezing projects and costing jobs.
    NextEra has not placed a single manufacturing order for 
2013 because of the pending expiration.
    The suspension of growth endangers 37,000 manufacturing 
jobs throughout America, including North Florida, home to a 
major turbine manufacturer.
    Wind means lower cost for consumers, new jobs in every 
field imaginable, enhanced national security, and a healthier 
environment, but for the American people to reap these 
benefits, energy policy must be stable and continuous.
    Clean domestic energy and low rates can go hand in hand. 
Florida Power and Light, the utility providing electricity for 
most of my constituents, has one of the cleanest emissions 
profiles in the country with rates below the national average.
    The question before this Committee is whether you are 
willing to make the proper investments now to reap the rewards 
of cleaner, cheaper American energy today and for decades to 
come. I respectfully urge the Committee to extend the 
production tax credit as soon as possible, and I yield back the 
balance of my time.
    Chairman TIBERI. Thank you. Thank you all for being here 
today to testify. The Ranking Member and I were just talking 
about the number of people today, not just at this hearing, 
three out of six, who brought up the production tax credit.
    Anybody here care to answer this question, whether you 
testified on it or not? We have some colleagues who believe 
that the production tax credit picks winners and losers. Any 
comments?
    The gentleman from California.
    Mr. GARAMENDI. Actually, it does not. The production tax 
credit does pick among in this case the wind turbine industry, 
no winner or loser. Anyone that is capable of putting up a 
turbine and producing energy, the key here is actually 
producing energy. It is on the production that they get the 
credit.
    It may pick winners and losers between solar, wind, nuclear 
and the rest, but the ``all of the above'' strategy would 
require the production tax credit to be in place for the wind 
industry and hopefully a similar one for the solar industry.
    Chairman TIBERI. The gentleman from Florida.
    Mr. DEUTCH. I would just add it has absolutely picked 
winners. The winners are the American people. Tens of thousands 
of jobs and 10 to $20 billion of private sector investment, 
that is a winner for the American people.
    The wind industry is not asking for the production tax 
credit to go on indefinitely. We are at the point where the 
industry has been able to move to the point where it has been 
successful and with the extension for a limited amount of time, 
they will be in a position to ensure that this kind of growth 
can continue for the future.
    Chairman TIBERI. Thank you. Mr. Latham.
    Mr. LATHAM. I would just echo what my two colleagues said. 
It is about production. That is what you get the credit on. It 
is not just the wind energy. It is also, like the gentleman 
from Washington here mentioned, although land owners and people 
who get income from this very efficient today source of energy, 
clean, renewable, and it is something that has to continue.
    The industry is looking for certainty. If there is a phase 
out of the credit over time where they can plan, then in fact 
it will work.
    Right now, this cutoff is just devastating to the industry. 
Like I mentioned, it is going to cost--in Iowa already jobs are 
being terminated because of no purchase orders for next year, 
for the next calendar year.
    It is absolutely critical that we extend this credit.
    Chairman TIBERI. Mr. Neal.
    Mr. NEAL. That is precisely the point, Mr. Latham, we have 
been making today and during these hearings.
    For us what is fascinating is left, right and center, 
members who have testified today have put ideology aside and 
emphasized the success that the production tax credit has had. 
I think that is what is notable about this hearing.
    I might just ask Ms. Beutler a question. The gentlelady 
testified about the sales tax deduction for Southwest 
Washington. Might I infer your entire----
    Ms. HERRERA BEUTLER. My entire state would benefit, as 
would the seven other states that do not have a Federal income 
tax.
    Mr. NEAL. I knew that is what you meant. I just wanted to 
get that on the record.
    Ms. HERRERA BEUTLER. I am really focused on the folks at 
home, but Mr. Chairman, Ranking Member, can I weigh in on the 
production tax credit?
    Chairman TIBERI. You may.
    Ms. HERRERA BEUTLER. As someone who does not necessarily 
have a dog in this fight, I am ``all of the above'' when it 
comes to energy.
    I would ask that this Committee consider, and it is going 
to be a little out of step with everyone sitting here, but in 
the Great Northwest, we have a tremendous opportunity with our 
hydro system.
    It is a low cost form of energy that is incredibly 
efficient and carbonless. It is very renewable.
    We have companies that have located in Southwest Washington 
from other nations, manufacturing jobs, high paying jobs, 
because of our access to affordable energy.
    As we are moving forward, one of the challenges that we 
have had, and again, I am not anti-wind, I support wind, but 
because they get this credit for producing, they are forcing 
the issue with the Bonneville Power Administration to require 
that ratepayers use their energy because they only get the 
credit if they produce, which requires us to spill more water 
over dams and endanger salmon that ratepayers in our region are 
spending billions of dollars to protect.
    I guess I say all that to say it is not a perfect system 
and there are unintended consequences that drive up the costs 
for businesses.
    I mentioned the double digit unemployment, so for those 
seeking work in my area.
    As we move forward, let's move with caution and make sure 
Congress does not pick winners and losers.
    Chairman TIBERI. Thank you. You talk about fish. I think of 
Mr. Nunes when I think of this Committee and fish.
    Thank you all for spending time with us today.
    We have most of the panelists from our last but not least 
panel. I would ask Mr. Pompeo, Mr. Blumenauer, Mr. Reed, Mr. 
Boren, and Mr. Reichert to come up.
    I thank the five of you for being so punctual. We are 
running a little bit behind. We have plenty of time since you 
are the last panel.
    I will start to my far left, Mr. Reed, the gentleman from 
New York, and our distinguished member of the Committee, is 
recognized to testify.

   STATEMENT OF THE HONORABLE TOM REED, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEW YORK

    Mr. REED. Thank you very much, Mr. Chairman and Ranking 
Member Neal. Thank you for allowing me the opportunity to 
testify today.
    I would like to briefly discuss four provisions important 
to both New York's 29th Congressional District and New York 
State overall.
    First is H.R. 4336, a bill I introduced with several other 
Committee members. It is a straight one year extension of a tax 
relief provision which ensures that when lenders forgive a 
portion of a borrower's mortgage obligation, the homeowner is 
not required to pay tax on the amount of the forgiven debt.
    If this extension is not enacted, homeowners who are in 
short sales or foreclosures, and even those who are able to 
restructure existing loans and keep their homes, will be 
required to pay income tax on cash which they never actually 
had.
    Unfortunately, the housing crisis persists. This relief, 
which passed initially on a vote of 386-27, is still needed.
    I would also like to speak in support of H.R. 3087, the 
Motor Sports Fairness and Permanency Act, which makes permanent 
the classification of motor sports complexes as one single 
asset. Motor sports tracks, small and large, have used the 
present system of depreciation for decades.
    Congress codified the policy that made this classification 
clear and permanent as part of the American Jobs Creation Act 
of 2004.
    The policy was made temporary by the House and Senate 
Conference Committee on that bill, but it was always intended 
to be permanent.
    The importance of the annual NASCAR Race at Watkins Glen, 
New York, in my District to my constituents cannot be 
understated. It is the economic equivalent of the Super Bowl 
for us.
    However, this provision has been mischaracterized as a tax 
break for NASCAR. In fact, NASCAR tracks account for only a 
small fraction in the motor sports tracks around the country 
affected by this provision.
    These tracks exist in every state, in most of our 
Districts, and conduct motorcycle races, dirt track races, and 
more. They are mostly in small rural communities and support 
fans that support the local economy, sustain local jobs, and 
fill the diners and hotels throughout the area.
    Uncertain tax treatment for motor sports facilities 
threatens jobs.
    I also wish to comment on the CFC look through. I am a co-
sponsor of H.R. 2735, the bipartisan bill introduced by Mr. 
Boustany and Mr. Kind to make this provision permanent.
    Look through merits inclusion in any extenders package. It 
helps our economy by leveling the playing field for U.S. 
companies operating abroad.
    The final provision I want to speak on is the active 
financing exception under Subpart F or the AFE Rule. This 
provision simply extends to financial services companies the 
same deferral rule that applies to manufacturers with respect 
to active income earned in foreign markets.
    Equal treatment for financial services income should be a 
normative principle we follow on a permanent basis in any tax 
system, whether it be worldwide or territorial.
    I am proud to be a co-sponsor of legislation introduced by 
Chairman Tiberi and Ranking Member Neal to make the AFE Rule 
permanent.
    Again, Mr. Chairman, thank you for the opportunity to 
testify today, and I look forward to any thoughts or questions 
you may have.
    Chairman TIBERI. Thank you for your testimony.
    The gentleman from Kansas is recognized to testify.

  STATEMENT OF THE HONORABLE MIKE POMPEO, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF KANSAS

    Mr. POMPEO. Thank you, Chairman Tiberi, thank you, Ranking 
Member Neal, for giving me this opportunity today.
    You know, in preparing this testimony, I looked at the list 
of credits that you had and the enormous scope and span reminds 
us all about the importance of tax reform.
    I want to applaud you all and Chairman Camp for efforts to 
get rid of particular tax credits and deductions and flatten 
our Tax Code.
    I have echoed this sympathy in a piece of legislation that 
Chairman Camp is pursuing related to energy tax credits in 
particular.
    I think it is consistent with a vision of a fair and 
simpler Tax Code that aims to stop picking winners and losers 
in the energy marketplace.
    I would argue that one of the most if not the most 
egregious example of our Tax Code failures lies in these energy 
tax credits.
    You all have a big challenge. My Energy Freedom and 
Prosperity Act gets rid of every energy tax credit in the 
entire Federal Internal Revenue Code. It is industry neutral. 
It impacts natural gas and oil tax credits. It impacts the 
entire panoply.
    The savings are small, but any savings that are generated 
as a result of that to the Federal Treasury go to lowering tax 
rates, the perfect model both for good energy policy and tax 
reform.
    I think it is common sense and it is being actively 
supported by small Government conservative organizations like 
Americans for Tax Reform, the National Taxpayers Union, 
Heritage Action, the Club for Growth, Freedom Actions, 
Americans for Prosperity, and many others.
    They understand that trying to solve energy problems 
through our Tax Code is the wrong approach.
    We saw that not in the Tax Code, but in the Committee I sit 
on, we saw when you try to pick a particular winner, the 
negative outcomes that can happen for taxpayers.
    I have heard comments today on the wind production tax 
credit in particular. It is of great interest. I know it 
expires at the end of this year.
    I do not predict the doom and gloom for the wind energy 
that these folks speak of. I actually have more faith in the 
wind folks. I am incredibly pro-wind. I think it will work.
    We saw what happened when the ethanol tax credit expired at 
the end of last year. We still have very successful ethanol 
projects moving forward all across the country in spite of the 
fact that the industry said without it, we will vanish.
    I think the same good things will happen because the wind 
energy folks are so innovative, creative and talented.
    I know it is the tradition in this Committee and the 
Congress to treat the Tax Code as a base of support for 
specific industries.
    No one knows wind like someone from the Kansas 4th 
Congressional District. We have both the manufacturing side and 
the production side of the wind energy industry present in my 
District.
    When I think about job creation, I do not think about 
things like temporary stimulus programs. I think they fail. I 
see these series of tax credits for the energy industry much as 
various stimulus programs are, they are temporary, they are 
constantly up for renewal.
    Industry will tell you I just need one more year, and then 
one year later be back saying I need two or four or six 
additional years.
    Eventually, these companies have to take the training 
wheels off. These industries have to go compete and provide 
affordable energy for American citizens.
    I am confident they will, and if we stop trying to use our 
Tax Code to pick one against another, we will get a lot further 
down that road, and we will be much closer to solving the 
nation's deficit problems that we face today.
    I thank you for the time this morning.
    Chairman TIBERI. I thank the gentleman for his testimony.
    The gentleman from Oregon is recognized.

STATEMENT OF THE HONORABLE EARL BLUMENAUER, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. BLUMENAUER. Thank you, Mr. Chairman, Ranking Member 
Neal. I appreciate this opportunity. You have been hearing from 
a variety of folks.
    I respect my colleague from Kansas. I think there is some 
significant differences. Ethanol, for example, had benefitted 
from years and years and years of massive subsidy, which has 
also been lavished on other sources of energy production.
    What we are talking about here with wind and other 
renewables is allowing them to get the same foothold.
    There is a reason for the production tax credit and why it 
has been extended seven times since 1992. I will be submitting 
a letter from some of my Democratic colleagues, but I would 
note strong bipartisan support, and pleased to be a co-sponsor 
with my friend from Seattle, Mr. Reichert.
    We spend billions of dollars abroad every year to fuel our 
economy. That is the tip of the iceberg in terms of billions 
more spent protecting the oil supply militarily.
    Being able to invest in the PTC is a much better investment 
to unlock a nearly unlimited source of domestic energy while 
supporting a market that is projected to grow to more than $2 
trillion by 2020.
    We are starting to get some market based orientation, a 
number of states not only have utility scale wind projects, 
they have utility frameworks like Kansas that require renewable 
energy to be purchased.
    I have never heard the wind energy people say give me just 
one year. What they are looking for is certainty and a glide 
path to sustainability.
    Every conversation I have had with the industry for the 
years I have been in Congress talks about giving them a 
framework, giving them a path that is sustainable over time, 
and not giving them this Russian Roulette.
    We are already seeing contraction in the industry because 
of uncertainty going forward. It is absolutely essential that 
we give some certainty for the investment, to provide the 
ability to come to scale and reduce costs.
    We have seen significant progress in this area, and I think 
with your help, a little certainty, we can do more in the 
future.
    It levels the playing field for other sources of energy 
that have received far more in the past, most of which continue 
to get it now, even past when they need it.
    It gives the private sector the confidence it needs to 
continue investing in renewables.
    I am looking forward to working with this Subcommittee, 
with our committee, on the hard task of reform of the tax 
system. It is not going to be easy, but it is not about picking 
winners and losers, it is about being able to discern where it 
makes sense and where it does not.
    The production tax credit, I think, is one area that makes 
sense. It will for the foreseeable future, but it does not need 
to be permanent and in fact, should not be, but it should not 
be pushed off the cliff this year.
    Thank you. I appreciate the chance to testify and would 
welcome comments or questions later.
    Chairman TIBERI. I thank the gentleman from our committee 
as well who just got appointed to the Transportation Conference 
Committee. Congratulations.
    Mr. BLUMENAUER. Thank you.
    Chairman TIBERI. The gentleman from Oklahoma is recognized.

   STATEMENT OF THE HONORABLE DAN BOREN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF OKLAHOMA

    Mr. BOREN. Thank you, Mr. Chairman, thank you, Ranking 
Member Neal, for giving me this opportunity to speak with you 
all about the extension of two tax measures, credits for the 
renewable energy production and for businesses on former Indian 
lands.
    H.R. 1039 is a bill to permanently extend the Indian 
employment tax credit in the depreciation rule for property on 
former Indian lands.
    Because of Oklahoma's Native American heritage, two-thirds 
of the state and my entire District qualifies for a tax 
incentive for businesses located on former Indian lands.
    With Tribal unemployment rates soaring to 80 percent in 
some regions, this tax credit is especially important because 
it encourages businesses to employ Native Americans.
    It also encourages businesses to increase wages, helping to 
fight the Native American poverty rate, which is at about 26 
percent, over double that of non-Natives.
    This tax credit is absolutely vital to the continued growth 
and development of Tribal communities. It has the support of 
the entire Oklahoma Delegation, and I wholeheartedly ask for 
your deepest consideration of its extension.
    Another very important issue at the top of America's agenda 
is energy independence. As an outspoken critic of our nation's 
dependence on foreign oil, I ask for an extension of the 
renewable energy production tax credit.
    This bill has 93 bipartisan co-sponsors ranging from Mr. 
Markey as the Ranking Member of the Natural Resources 
Committee, to a fellow oil and gas supporter, like me, Mr. 
Young.
    In short, whether we agree on energy policy or not, this 
tax credit is widely accepted as a positive step toward a self-
sustaining energy infrastructure.
    This five year extension is a proven way to keep 
electricity prices low, using clean domestic sources of energy.
    We must extend and stabilize this tax credit to ensure 
continued investment and encourage further research in this 
important field.
    Again, thank you very much for allowing me to speak today 
on these two credits, and I would be happy to answer any 
questions. Thank you.
    Chairman TIBERI. I thank the gentleman for his testimony.
    Last but not least, the distinguished member of this panel, 
the gentleman from Washington is recognized.

STATEMENT OF THE HONORABLE DAVID REICHERT, A REPRESENTATIVE IN 
                   CONGRESS FROM THE STATE OF
                           WASHINGTON

    Mr. REICHERT. Thank you, Chairman Tiberi and Ranking Member 
Neal, and Mr. Paulsen. Thank you for the opportunity to testify 
today.
    I am proud to be a part of the ongoing effort and work that 
our committee, the Ways and Means Committee, is doing on 
comprehensive tax reform, both in the corporate world and in 
the individual tax reform world, so that American businesses 
can better compete in the global economy, and American families 
can keep more of their hard earned money.
    Today's review of tax extenders is critical to tax reform, 
as you all know, and I appreciate the chance to offer my 
suggestions today on how this tax extenders package might be 
put together and formed for our committee and the country that 
we serve.
    As a representative from Washington State, no statement on 
taxes can begin without reminding you of a tax incentive that 
affects every single taxpayer, Mr. Neal, in the State of 
Washington, not just in Southwestern Washington, as you 
mentioned earlier.
    Mr. NEAL. Would the gentleman yield? I am glad you picked 
up on that. I was concerned.
    [Laughter.]
    Mr. REICHERT. I am sure she meant the entire state also. 
The state sales tax deduction is so critical to that handful of 
states across our country that has the state sales tax versus 
the state income tax.
    For us, it is a matter of fairness. Those states that have 
the income tax, of course, that law is in law. They do not have 
to ask for a tax extender. This is an important and critical 
thing for our taxpayers in Washington State to have equality 
and fairness really across the board and across this country.
    It would really be a tremendous tax relief for our 
citizens. I urge your consideration.
    I encourage the Committee to consider two other tax 
extenders, one would leverage maximum private sector capital, 
and the other that I would like to talk about would also create 
jobs and sustain American jobs.
    Two tax extenders. One is the production tax credit that 
has been talked a lot about today. It has leveraged $15 billion 
in private sector capital in the wind industry alone.
    It includes wind, hydro, geothermal, landfill waste, 
biomass, so it is not just about wind, but it has all those 
other components to it.
    That is nearly 12 times the revenue estimated for the bill, 
$15 billion, 12 times the revenue estimate.
    The investment supports an increasing number of 
manufacturing jobs, not to mention the services jobs, that 
design and finance these capital intensive energy projects.
    It puts Americans to work, lowering energy costs for other 
Americans, and is worthy of an extension as has been said many 
times today.
    I am pleased there is such strong support in Congress and 
in the Ways and Means Committee for extending the production 
tax credit. That includes a majority of the members on this 
Subcommittee, 14 members of the Full Committee, and 95 Members 
of Congress representing 32 states who have co-sponsored the 
bill I introduced with Mr. Blumenauer.
    An estimated 37,000 American jobs are at risk if the PTC is 
not extended. If Congress is truly committed to pursuing the 
``all of the above'' energy policy and bringing needed 
certainty to the economy for job creators, extending the PTC 
can achieve both.
    I am pleased to submit a letter from several House 
Republicans who agree.
    [The prepared statement of The Honorable Dave Reichert 
follows:]

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    Mr. REICHERT. A second bipartisan extender I introduced 
with Mr. Kind from Wisconsin is the reduced holding period for 
built in gains. Simply put, this common sense bill enables S 
corporations to access their own capital sooner.
    Fifty-six percent of the private sector jobs in Washington 
State are in small businesses across this country. We all hear 
from these businesses in our districts. They are struggling to 
access capital.
    My bill is an easy way to help them do just that.
    I would also like to submit a letter from 13 organizations 
representing millions of small businesses across America who 
support this provision.
    [The prepared statement of The Honorable Dave Reichert 
follows:]

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    Mr. REICHERT. These are the two extenders that leverage 
private capital to create jobs, both that face looming 
expirations, and both deserve the Committee's consideration on 
tax extenders.
    I appreciate your time. Thank you.
    Chairman TIBERI. Thank you. I thank you all for your 
testimony and time today. With that, I will recognize the 
Ranking Member, Mr. Neal.
    Mr. NEAL. Thanks, Mr. Chairman. These hearings have been 
instructive. The panelists have really been good. It is a 
pretty good snapshot of why tax reform will be so difficult.
    We have had Members of Congress here left, right and 
center, who have all argued for their favorite tax preference.
    I will say, Mr. Pompeo, and this may be helpful to you in 
your own constituency, you are the only Member of Congress 
today who has made the argument for getting rid of all the 
production credits.
    I dare say there are not many Members of Congress more 
conservative than Mr. King, and he made a pretty aggressive 
argument today.
    Chairman TIBERI. Mr. King of Iowa as opposed to Mr. King of 
New York.
    Mr. NEAL. Right. Although I know him, and he can make some 
pretty good arguments.
    [Laughter.]
    Mr. NEAL. The point that I raise is that the discussion we 
have had here today really centers upon incenting people, as 
many of the panelists have said, not permanently but through 
the stage of infancy as the technology grows and improves.
    We heard Mr. Latham suggest, for example, that his 
constituency, without that production credit, many potential 
investors as well as those who hire people are about to serve 
notices on them that they are going to be laid off.
    My own experience tells me in this stage of development, we 
are going to continue to need some sort of support inside of 
the Code for that purpose.
    I would use the argument as many panelists have said, ``all 
of the above,'' that is a pretty easy position to rally to, but 
also to acknowledge that without Government guarantees, you are 
not going to build any nuclear power plants.
    If you embrace the position I think of ``all of the above'' 
or in your instance, ``none of the above,'' apparently, in 
terms of using the Tax Code, I am just curious as we talked 
about it, would you apply that to large oil companies as well?
    Mr. POMPEO. Absolutely.
    Mr. NEAL. Your legislation does not.
    Mr. POMPEO. It does, indeed. It has two tax credits, the 
marginal oil well tax credit and the enhanced oil recovery tax 
credit, each of which apply to the petroleum industry, the 
natural gas and oil folks.
    This is industry neutral. I agree with your point. We could 
absolutely create more wind jobs. We could make the production 
tax credit 90 percent. I am confident there would be more 
capital drawn to that. It is probably the case.
    We could make it 99 percent or 150 percent and probably 
create additional jobs and investment. We could do that for any 
energy industry.
    My notion is America is not at a place where we can afford 
to do that any more, protect the wind, it has been 20 years. 
That is a long time in my books.
    Mr. NEAL. For the purposes of intermural discussion, why do 
I not let Mr. Reichert take your argument on.
    [Laughter.]
    Mr. REICHERT. That would be just great. Appreciate your 
recognizing me to comment.
    I do agree with the gentleman that ``all of the above'' is 
really the answer to not only economic security but to national 
security.
    I think the disagreement, of course, is we believe there 
should be incentive from the Government to help on some of 
these fledgling technologies.
    Again, this bill that Mr. Blumenauer and I have authored 
together includes more than just wind.
    The wind energy folks, again, I guess I would agree with 
the gentleman one more time, in that they are very innovative. 
Innovation, they are not only thinking about the technology, 
around the science of collecting wind energy, but they are also 
thinking about how they can transition themselves out of a tax 
extender.
    This is one of the very few groups that I think you have 
talked about and heard from today in this Committee that have 
actually started the process and started to think about a phase 
out of the tax extender, because they have confidence enough in 
the equipment, material and people that work in this industry 
to begin to have that discussion where others have not.
    Mr. NEAL. Mr. Boren, would you like to comment?
    Mr. BOREN. I just want to say with Mr. Pompeo, I think he 
deserves a lot of credit for being at least intellectually 
honest.
    I disagree with his position. That is why I am here 
promoting the production tax credit. I support a lot of those 
oil and gas industry tax credits that he is wanting to get rid 
of.
    So many people come up to these committees and say well, 
you know, do this but do not do this. At least he is being 
intellectually honest and saying you know, I want to get rid of 
all of it. As a friend and a colleague, I think he does deserve 
a lot of credit for having the courage to come up here where a 
vast majority of the people oppose his viewpoint.
    I just want to say that to a friend, and say I disagree 
with you, but good job for being here and being intellectually 
honest.
    Chairman TIBERI. Just a comment to the three of you, if any 
of you would like to comment on this. Mr. Pompeo has said, and 
he is not alone in saying this, he may have been alone in 
saying it today, but he is not alone in saying that if we get 
rid of all these tax credits on the energy side, and you 
alluded to it, there would still be an industry out there, pick 
the industry. It will still happen in the marketplace.
    Why is that thought process, if you three would like to 
comment on that, wrong?
    Mr. Blumenauer.
    Mr. BLUMENAUER. What is ignored is the sunk costs that we 
have had in these other sources. If you look at the extent to 
which we have subsidized the nuclear industry, I mean this is 
hundreds of billions of dollars.
    We have subsidized the production of oil and gas for over a 
century. I think we have reached the point where much of this 
is not needed, but it was absolutely necessary when drilling 
techniques were very scattered, expensive, and we did not have 
a petroleum industry, and we were trying to build it.
    In terms of, my word, the production of ethanol, we mandate 
that it be purchased, for Heaven's sakes, and we massively 
subsidized the production of corn.
    If you look at all the other investments, to help them come 
to scale, and then compare it to wind energy, which has been 
working for approximately 20 years, not uninterrupted by the 
way, but look at what has happened to the cost curve, we have 
had a very significant return on the investment.
    What Mr. Reichert mentioned is they are not asking, unlike 
most of the others, permanently being hooked up to the Federal 
Treasury, but having it come to scale and have a little bit of 
the investment that was given to nuclear, to hydro, to oil and 
gas is not, I think, unrealistic, and I think it is a good 
investment for these renewables, and not just wind. It is 
solar, geothermal.
    I think there is a strong case to be made to help them get 
to the takeoff point.
    Chairman TIBERI. Mr. Boren, I can tell you are itching to 
comment.
    Mr. BOREN. Let me touch on oil and gas just a little bit. 
We are actually in agreement on this wind or the production tax 
credit, not just wind, but as you mentioned, all the other, 
hydropower and everything else.
    Going back to oil and gas, oil and gas is a very complex 
industry. Most people think of oil and gas as just the big five 
oil companies.
    You will remember my former boss who was a member of this 
Committee, Wes Watkins, would talk about the mom and pop oil 
and gas producers.
    Most of the oil and gas production in the United States is 
by independent small producers. We have not always had $100 a 
barrel oil or $125, whatever it is on the market today. A lot 
of our production is very mature, so we have what is called 
``stripper well production.''
    You may have five to ten barrels of oil a day coming from a 
well, not thousands of barrels of oil.
    We give incentives for those small wells so that they stay 
alive. If they are not alive, you have to plug them, and that 
means our domestic production goes down and people like the 
Venezuelans and Saudi Arabia and other countries have a bigger 
market share.
    For us to be energy independent, we have to give incentives 
to our domestic industry, not big companies that are drilling 
in other parts of the world, but companies that are in the 
United States.
    I also believe we have to have an ``all of the above'' 
approach. We have to have wind. We have to have coal. We have 
to have nuclear. We have to have natural gas, which is clean 
domestic, and we have a Nat Gas Act.
    We have to do all of that. It is so complex, instead of 
just saying oh, big oil or big this or big that, it is much 
more complex.
    I think Mr. Neal kind of hit this on the head. You really 
have to peel back the onion. You have to look at these 
industries, and it is not as easy as just black and white. 
There is a lot of gray and there is a lot of looking at the 
long term, these investments in wind, making sure there is a 
marketplace for this to survive for a long period of time.
    You cannot use wind for baseload generation. You have to 
have it there to offset gas and coal and everything else.
    Thank you.
    Chairman TIBERI. Mr. Reed, you have a comment, I can tell.
    Mr. REED. Yes. Thank you very much, Mr. Chairman. I would 
like to throw into this conversation a very important point 
when it comes to the energy tax policy for our nation.
    I think the primary motivating factor for that energy 
policy, tax policy, should keep in mind my priority in that 
arena, that it is a national security issue that we are trying 
to address with an ``all of the above'' approach, not only the 
environmental benefits, and we can get into that argument, but 
what we are talking about, and that is why oil and gas has to 
be part of that conversation, because there is a national 
security implication on this policy as a result of our 
dependency issues on foreign sources of energy.
    I would encourage the Chairman and the Ranking Member to 
look at this issue, not only from an environmental point of 
view and an economic point of view, which are very good points 
and issues, but primarily from the perspective of a national 
security issue when it comes to energy independence. That can 
never be lost in this debate.
    With that, I yield the balance of time.
    Chairman TIBERI. Mr. Reichert?
    Mr. REICHERT. Thank you, Mr. Chairman. If I can just play 
off most of what was said here, and there is a lot of agreement 
as you have heard.
    Number one, we all agree we want to be energy independent. 
Number two, that means getting off Mideastern oil and not being 
dependent upon that as our source.
    Number three, if that is accomplished, it really does 
enhance our ability to produce jobs here in America, but as Mr. 
Reed said, it also enhances our ability to make our nation safe 
and secure.
    Even before we start to talk about jobs, you have to talk 
about the national security. If our nation is not secure and 
safe, jobs become a topic of non-discussion.
    This point that Mr. Reed touched on is very critical for us 
to keep in mind as we move forward in this discussion of tax 
credits.
    The other thing that we agree on, I think, is yes, the free 
market is the place for these things to work. I think we did 
get a little bit side tracked as has also been mentioned over 
the years.
    I think initially these tax credits and incentives for 
certain energy producers were meant to be those sort of 
Government aids and assistance, and to help you get started, 
mature and grow into the companies, the private companies that 
we need you to be, strong enough to hold this country together 
and keep us safe and independent.
    We have gotten to the point today where those have become 
expected subsidies and expected credits. That is why I want to 
point out once more that the wind energy--the PTC, including 
more than wind, is a group of innovative people who have 
already said we are so far ahead in thinking, that we have 
already started to develop a plan to phase out the tax credits.
    I think that a lot of these other industries that we have 
talked about need to be thinking into the future as well. Let 
the free market work. Phase out of these tax credits, but they 
need to be helped today. Today is the wrong time to pull that 
money from wind and the rest of the energies that are included 
in the bill.
    I appreciate the time to respond and testify today, and I 
thank you.
    Chairman TIBERI. Any other thoughts?
    Mr. REICHERT. One more thought. I am sorry. We have sort of 
done the same thing when it comes to the medical field.
    If you look at NIH, we are funding all kinds of 
technologies, sciences, and cures for cancer, et cetera, by 
subsidizing in grants and funding to help those things that 
help the people in this great country.
    Not permanent, moving toward the future, and encouraging 
these new sciences and new technologies, I think, is a benefit 
to everyone who lives in this great country.
    Chairman TIBERI. Thank you. Great testimony, great 
discussion, folks. We want to thank all our colleagues today 
from the very first panel to the last panel for a great 
discussion. Thanks for your time and your testimony.
    I want to also thank the Ways and Means staff, the 
Subcommittee staff, for preparing for today's hearing. They did 
a great job.
    I want to remind anyone in the audience or our colleagues 
that they have until May 10, two weeks from today, to submit 
written statements for the official record.
    With that, this hearing is adjourned.
    [Whereupon, at 1:38 p.m., the Subcommittee was adjourned.]
    [Member Submissions for the Record follows:]
                      Rep. Aaron Schock, Statement

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