    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

            MEMBER PROPOSALS FOR IMPROVEMENTS TO THE U.S. TAX SYSTEM

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

                                    HEARING

                                   before the

                           SUBCOMMITTEE ON TAX POLICY

                                     of the

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

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 12, 2016

                                   __________

                              Serial No. 114-TP07

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                   U.S. GOVERNMENT PUBLISHING OFFICE

     22-372                 WASHINGTON : 2017
    ____________________________________________________________________
     For sale by the Superintendent of Documents, U.S. Government Publishing Office,
    Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
      Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001

                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
    DEVIN NUNES, California              CHARLES B. RANGEL, New York
    PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
    DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
    CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
    PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
    TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
    VERN BUCHANAN, Florida               MIKE THOMPSON, California
    ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
    LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
    ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
    KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
    DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
    TOM REED, New York                   DANNY DAVIS, Illinois
    TODD YOUNG, Indiana                  LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania
    JIM RENACCI, Ohio
    PAT MEEHAN, Pennsylvania
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    ROBERT J. DOLD, Illinois
    TOM RICE, South Carolina

                         David Stewart, Staff Director

             Janice Mays, Minority Chief Counsel and Staff Director

                                     ______

                           SUBCOMMITTEE ON TAX POLICY

                 CHARLES W. BOUSTANY, JR., Louisiana, Chairman

    DAVID G. REICHERT, Washington        RICHARD E. NEAL, Massachusetts
    PATRICK J. TIBERI, Ohio              JOHN B. LARSON, Connecticut
    TOM REED, New York                   LINDA SANCHEZ, California
    TODD YOUNG, Indiana                  MIKE THOMPSON, California
    MIKE KELLY, Pennsylvania             LLOYD DOGGETT, Texas
    JIM RENACCI, Ohio
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina

                                C O N T E N T S

                                   __________

                                                                       Page

    Advisory of May 12, 2016 announcing the hearing..................     2

                                   WITNESSES

    Panel One

    The Honorable Danny K. Davis, Member of Congress, Washington D.C.    24
    The Honorable Lynn Jenkins, Member of Congress, Washington D.C...    23
    The Honorable Sam Johnson, Member of Congress, Washington D.C....    19
    The Honorable Peter J. Roskam, Member of Congress, Washington
      D.C............................................................    22

    Panel Two

    The Honorable Vern Buchanan, Member of Congress, Washington D.C..    25
    The Honorable Tom Rice, Member of Congress, Washington D.C.......    26
    The Honorable David Rouzer, Member of Congress, Washington D.C...    27

    Panel Three

    The Honorable Robert J. Dold, Member of Congress, Washington D.C.    29
    The Honorable Anna G. Eshoo, Member of Congress, Washington D.C..    32
    The Honorable Patrick Meehan, Member of Congress, Washington D.C.    27
    The Honorable Ted Poe, Member of Congress, Washington D.C........    31

    Panel Four

    The Honorable Ken Buck, Member of Congress, Washington D.C.......    33
    The Honorable Matt Cartwright, Member of Congress, Washington
      D.C............................................................    36
    The Honorable Andy Harris, Member of Congress, Washington D.C....    34

    Panel Five

    The Honorable Rob Bishop, Member of Congress, Washington D.C.....    39
    The Honorable Rodney Davis, Member of Congress, Washington D.C...    37
    The Honorable Keith Ellison, Member of Congress, Washington D.C..    40
    The Honorable Scott H. Peters, Member of Congress, Washington
      D.C............................................................    38
    The Honorable Dana Rohrabacher, Member of Congress, Washington
      D.C............................................................    41

    Panel Six

    The Honorable Dave Brat, Member of Congress, Washington D.C......    42
    The Honorable Peter A. DeFazio, Member of Congress, Washington
      D.C............................................................    54
    The Honorable Scott DesJarlais, Member of Congress, Washington
      D.C............................................................    47
    The Honorable John Fleming, Member of Congress, Washington D.C...    49
    The Honorable Randy Hultgren, Member of Congress, Washington D.C.    47

    Panel Seven

    The Honorable Andy Barr, Member of Congress, Washington D.C......    58
    The Honorable Kevin Cramer, Member of Congress, Washington D.C...    57
    The Honorable Matt Salmon, Member of Congress, Washington D.C....    30
    The Honorable Steve Scalise, Member of Congress, Washington D.C..    56
    The Honorable Terri A. Sewell, Member of Congress, Washington
      D.C............................................................    55

    Panel Eight

    The Honorable Mike Coffman, Member of Congress, Washington D.C...    60
    The Honorable Tom Emmer, Member of Congress, Washington D.C......    59
    The Honorable Janice D. Schakowsky, Member of Congress,
      Washington D.C.................................................    62

    Panel Nine

    The Honorable Erik Paulsen, Member of Congress, Washington D.C...    63

                           SUBMISSIONS FOR THE RECORD

    Coalition to Extend and Improve the 179D Tax Deduction for Energy
      Efficient Buildings............................................    66
    FAIRtax--Benefits of HR-25.......................................    70
    ACRO, Association of Clinical Research Organizations.............    72
    AimBank..........................................................    74
    Alliance for Industrial Efficiency...............................    76
    American Bankers Association.....................................    81
    ATCWG, Adoption Tax Credit Working Group.........................    84
    Alcoholic Beverage Industry......................................    91
    ECG Engineering, PC..............................................    93
    EcoTech Solutions................................................    96
    AGA, American Gas Association, EEI, Edison Electric Institute,
      NEI, Nuclear Energy Institute..................................    98
    Encentive Energy.................................................   100
    Energy Efficiency Pros LLC.......................................   103
    Energy Harness Corporation.......................................   105
    ESP, Energy Solutions Professionals, LLC.........................   107
    EtaGen, Inc......................................................   109
    Geothermal Energy Association....................................   112
    Havtech Inc......................................................   115
    Historic Tax Credit Coalition....................................   117
    Small Businesses Healthcare......................................   123
    International Association of Fire Chiefs.........................   126
    IBAT, Independent Bankers Association of Texas...................   130
    LabCorp, Laboratory Corporation of America.......................   132
    Municipal Bonds for America......................................   134
    NDC, National Development Council................................   137
    Prosperity Through Preservation, Historic Tax Credit Coalition,
      National Trust for Historic Preservation.......................   147
    NVFC, National Volunteer Fire Council............................   155
    NRDC, Natural Resources Defense Council..........................   158
    NGVAmerica.......................................................   162
    NSWA, National Stripper Well Association.........................   172
    OSRAM Sylvania...................................................   177
    Pennsylvania Bio.................................................   179
    PEW Clean Energy Initiative......................................   181
    PPD, Pharmaceutical Product Development..........................   185
    R&D Credit Coalition.............................................   187
    Ralph Abraham, M.D., Member of Congress..........................   193
    Rob Bishop, Member of Congress...................................   195
    Charles W. Boustany Jr., M.D., Member of Congress
      Statement on H.R. 4832.........................................   197
      Statement on H.R. 3846.........................................   199
      Statement on H.R. 928..........................................   201
      Statement on H.R. 1218.........................................   203
    Dave Brat, Member of Congress....................................   204
    Ken Buck, Member of Congress.....................................   210
    Matt Cartwright, Member of Congress..............................   212
    David N. Cicilline, Member of Congress...........................   213
    Thomas A. Barthold, Chief of Staff, Joint Committee on Taxation..   216
    Mike Coffman, Member of Congress.................................   221
    K. Michael Conaway, Member of Congress...........................   223
    Joseph Crowley, Member of Congress...............................   224
    Mike Doyle, Member of Congress...................................   230
    Anna G. Eshoo, Member of Congress................................   232
    John Fleming, Member of Congress.................................   233
    AMAC, Association of Mature American Citizens....................   234
    Americans For Tax Reform.........................................   235
    NTU, National Taxpayers Union....................................   236
    60 Plus Association..............................................   237
    Bill Flores, Member of Congress..................................   238
    Louie Gohmert, Member of Congress................................   240
    French Hill, Member of Congress..................................   243
    Randy Hultgren, Member of Congress...............................   246
    Lynn Jenkins, Member of Congress.................................   275
    Kenny E. Marchant, Member of Congress............................   276
    Bill Pascrell, Jr., Member of Congress...........................   279
    Erik Paulsen, Member of Congress.................................   282
    Ted Poe, Member of Congress
      Statement on H.R. 2883.........................................   283
      Statement on H.R. 5185.........................................   285
    Tom Price, Member of Congress....................................   286
    Dave Reichert, Member of Congress................................   289
    EEI, Edison Electric Institute, NEI, Nuclear Energy Institute,
      NRECA, National Rural Electric Cooperative Association, APPA,
      American Public Power Association & LPPC, Large Public Power
      Council........................................................   290
    Pete Domenici, U.S. Senator, Retired.............................   293
    Tom Rice, Member of Congress.....................................   295
    Mac Thornberry, Member of Congress...............................   300
    Pat Tiberi, Member of Congress...................................   303
    Michael R. Turner, Member of Congress
      Statement on the Brownfields Redevelopment Act of 2016.........   304
      Statement on H.R. 518, H.R. 519, H.R. 520......................   305
      Statement on H.R. 3846.........................................   307
    Jared Huffman and Dana Rohrabacher, Members of Congress..........   309
    John P. Capazzi, AIA.............................................   311
    Subchapter S Bank Association....................................   313
    SCAN, Save the Children Action Network...........................   317
    Siluria Technologies.............................................   321
    Tax Avoidance Research Center....................................   328
    Tax Centric Lighting.............................................   330

            MEMBER PROPOSALS FOR IMPROVEMENTS TO THE U.S. TAX SYSTEM

                                  ----------

                             THURSDAY, MAY 12, 2016

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

        The Subcommittee met, pursuant to notice, at 10:05 a.m., in
    Room 1100, Longworth House Office Building, the Honorable
    Charles W. Boustany, Jr. [Chairman of the Subcommittee]
    presiding.
        [The advisory announcing the hearing follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BOUSTANY. The Subcommittee will come to order. And
    welcome to the Ways and Means Subcommittee on Tax Policy Member
    Day Hearing on Tax Legislation.
        Before I go forward with my statement, I want to, without
    objection, recognize our Ways and Means Committee chairman,
    Chairman Kevin Brady, for a statement.
        Mr. Chairman, thank you for joining us on this important
    hearing.
        Chairman BRADY. Well, thank you, Chairman Boustany, for
    holding this hearing, and for leadership of the newly-renamed
    and muscled-up Tax Policy Subcommittee.
        I am glad to welcome so many of you here today to share
    your ideas and participate in this process. After all, it is
    been years since we have been able to hold a Member Day hearing
    on Tax Code improvements like this one.
        As we all know too well, the annual chaotic process of
    extending temporary tax provisions was time consuming and, when
    extended retroactively, made no sense. Fortunately, with the
    permanent tax relief in the PATH Act, we were able to put to
    rest this decades-old problem. Now we are returning to a
    regular order process. We are deliberately and thoughtfully
    considering improvements to the Tax Code that will grow our
    economy and make our Tax Code fairer, flatter, and simpler.
        Our hearing today is an important step, Chairman, in
    fulfilling our commitment to creating opportunities for
    legislators to be legislators when it comes to tax ideas.
    Today's hearing demonstrates we are serious about considering
    tax legislation through an open and transparent process. We are
    committed to introducing bills, considering them, and moving
    them to the floor. The fact that over 30 Members or more are
    sharing their ideas today is a testament to the new process,
    and to our return after so many years to a regular legislative
    order.
        And our newly renamed and enlarged Tax Policy Subcommittee
    is a sign of our seriousness about good process for developing
    and enacting good tax policy. I look forward to listening to
    your bold, fresh ideas about the best way to fix America's
    broken Tax Code.
        Again, I want to thank you, Chairman Boustany, for your
    strong and your thoughtful leadership of the Subcommittee. I
    yield back.
        Chairman BOUSTANY. Thank you, Mr. Chairman. We appreciate
    you being here. And thank you for your leadership of the full
    Committee, and your commitment to getting tax reform done, and
    also to moving forward with these Member bills today, as we
    look at how we can improve our current Tax Code. So we thank
    you for your leadership.
        Today the Subcommittee will hold a hearing on Member
    proposals for improvements to U.S. tax system. We are honored
    to have a number of our esteemed colleagues join us today to
    present legislation that they have all invested a great deal of
    time and energy to develop. As Chairman Brady mentioned, it is
    encouraging that so many of our fellow Members of the House of
    Representatives have come here today to make a record of their
    priorities for making improvements to our current Tax Code.
        Members of the Subcommittee, followed by our full slate of
    Member witness panels, will have three minutes to discuss their
    current tax legislation priorities. Because of the numerous
    Member interest on this, we are going to stick very strictly to
    the three-minute rule on this. Keeping in mind that a large
    number of Members are testifying, I want the Members to be
    efficient with the testimony, and really focus on why these
    bills are important. What is the impact of these bills, and why
    should we be duly considering these bills?
        I would also like to remind Members of their ability to
    submit written testimony in support of their legislation. Thank
    you again to all the witnesses for taking time from busy
    schedules to be with us today. And we look forward to hearing
    from Committee members and other Member witnesses about these
    various proposals.
        Before I recognize my fellow Subcommittee members, I would
    like to take a moment to highlight a few pieces of legislation
    that I see as addressing critical areas of need in our current
    tax system.
        I would like to begin by talking about H.R. 4297, a bill I
    introduced that provides much-needed protections for U.S.
    companies adversely affected by the country-by-country
    reporting measures that were instigated by the OECD's BEPS
    Project. During our Tax Policy Subcommittee hearing on the BEPS
    Project in December, our witnesses impressed upon us the need
    for companies to be able to file country-by-country reports
    with the IRS for this year to ensure the confidentiality of the
    information that ultimately will be reported to foreign
    countries. They also shed light on the significant competitive
    risk to American companies of being required to provide master
    file reporting, as contemplated by the BEPS project.
        We have expressed these concerns to Robert Stack, Deputy
    Assistant Secretary for International Tax Affairs, stressing
    the need for Treasury to act to protect American company
    interests in the confidentiality of their tax return
    information. I welcome the comments from Treasury in recent
    weeks indicating that they recognize the need for the IRS to
    accept country-by-country reports for 2016. We will continue to
    monitor developments in this area to ensure American companies
    are protected.
        H.R. 4297 also provides a statutory framework to protect
    American companies against countries that may abuse the master
    file reporting requirements, and fail to safeguard the
    confidentiality of taxpayer information. And it requires an
    annual report to Congress on reported abuses of these
    disclosures by foreign countries, to ensure that such proper--
    improper treatment of American job creators is taken seriously.
        Another important piece of legislation before this
    Committee this Congress is H.R. 2911, ``Small Business
    Healthcare Relief Act,'' which I introduced last year, along
    with my friend Mr. Thompson of California. H.R. 2911 is
    bipartisan legislation that will restore flexibility, choice,
    and certainty to small employers and their workers who use
    Health Reimbursement Arrangements. This legislation is
    necessary in the wake of confusing Treasury guidance that has
    subjected many employers to significant tax penalties that may
    not exist today.
        I would also like to briefly mention H.R. 3161, a bill I
    introduced last year that would permanently reform the tax
    treatment of timber.
        And finally, I want to mention a bill by my good friend,
    Mr. Kelly of Pennsylvania. His bill, H.R. 3846, the ``Historic
    Tax Credit Improvement Act,'' which I have co-sponsored would
    reform and enhance the rehabilitation of the historic tax
    credit. I applaud him for taking the lead on this issue.
        And now I would like to yield to the distinguished Ranking
    Member, Mr. Neal, for the purposes of an opening statement.
        Mr. NEAL. Thank you, Mr. Chairman, and thanks for calling
    this Member day hearing on tax reform proposals. This is the
    third Member day meeting that we have had on this precise
    topic. Today we will continue to hear from our colleagues on
    their tax proposals. The Ways and Means Committee has an
    important job to do and broad responsibilities.
        We must take our jurisdictional reach seriously. And as you
    know, historically our Committee has had jurisdiction over
    approximately a quarter of all legislation introduced in the
    House of Representatives. Of the bills referred to the Ways and
    Means Committee, more than half are tax bills.
        We remain the gatekeepers of this House. As such, we must
    make sure that we scrutinize every piece of legislation put
    forward to ensure that only the best ideas move forward. Today
    it is an excellent opportunity to hear from our colleagues and
    to start the process of making sure that only the best ideas
    rise to the top.
        Mr. Chairman, in your introductory remarks, you said that
    ``Members have invested a great deal of time and energy to
    develop legislation that we can use to make our current Tax
    Code work better for all Americans.'' I certainly am in
    complete agreement with you. Many Members of this Committee
    have thoughtful pieces of legislation that have languished in
    legislative purgatory due to Committee inaction. It is time not
    only to have these thoughtful pieces of legislation granted a
    hearing, but to actually act upon them.
        I have a wide and well-known interest in a series of
    credits that have been proposed before the Committee. I, along
    with Speaker Ryan, in fact, have talked about the whole notion
    of what we might do to strengthen the earned income tax credit
    for childless workers. Everybody knows and has great regard for
    the EITC, but we also know that it reduces poverty. And for
    childless workers, they receive virtually no earned income tax
    credit. According to research, Federal income tax and payroll
    taxes pushed 1.2 million childless workers into poverty, and
    another 5.8 million deeper into poverty. There is consensus
    about strengthening the earned income tax credit, and I would
    hope that we would act upon it.
        I also have a broad belief in the whole notion of what we
    might do to give the economy a shot in the arm, investing in
    our community so that we can rebuild and grow economies at the
    same time. It is estimated that there were seven to nine
    million people who are working part-time that are desirous of
    full-time work. The new markets tax credit, the low-income
    housing tax credit, the historic tax credit, and an issue that
    I worked with Alan Krueger on a long time ago that was highly
    successful but left out of tax packages subsequently was the
    Build America Bonds campaign.
        We all know the work that these credits can do in our
    community. New markets helped rebuild and build, in fact, a
    Holyoke Health Center. Holyoke is a stressed city in my
    constituency in desperate need of health care. This new center
    will go a long way in the fight to lower the high mortality
    rate. Build America Bonds is a true success story. The program
    was over-subscribed and every Member of Congress during that
    period of time that had an airport expansion, you could almost
    conclude that it was due to the Build America Bonds campaign.
        Our infrastructure is crumbling, and we need to do
    something about it, and what we did last year is but a step in
    the right direction, and demonstrates how difficult it is in
    the modern Congress to accomplish anything that at one time we
    all broadly agreed upon.
        Finally, retirement security. Ten thousand Baby Boomers are
    retiring every single day. Half the people that get up and go
    to work in the morning every day in America are not in a
    qualified retirement plan. My proposals on the auto IRA and the
    saver's credit address this very issue. Chairman Tiberi was
    formerly the chairman of this Subcommittee. He pointed out to
    me, along with the former chairman, Dave Camp, that they were
    down to one issue and they were still trying to work that
    through.
        Social Security is a mandated savings program. I don't
    understand why we can't embrace the whole notion of mandated
    savings. The statistical data is very clear on that initiative,
    and the American people need a boost in savings and, in
    particular, retirement savings. So, the impending retirement
    crisis is in front of us. It is leveraged in some part by the
    Tax Code, and I hope that we can move forward on those
    proposals.
        The legislation that we have talked about in large measure,
    these are not controversial. And there was a time, again, when
    this Committee was able to move those sorts of initiatives
    forward. We need to build some good will. I think Kevin Brady
    has done a good job of hearing what we have to say on this side
    of the aisle. But removing many of the barriers to greater
    savings is something that we all ought to see as a priority,
    and I hope that we will continue to embrace some initiatives
    that might grow the middle class. So thank you, Mr. Chairman.
        Chairman BOUSTANY. I thank the gentleman.
        Mr. Tiberi.
        Mr. TIBERI. Thank you, Mr. Chairman. I am going to touch on
    three bills and submit written testimony on some others.
        H.R. 4770 would clarify rules relating to the Section 199
    deduction for domestic manufacturing. For years the IRS has not
    been clear about the manner in which they implement the
    domestic manufacturing deduction for companies that use
    contract manufacturing arrangements. Last summer the IRS issued
    regulations that further punished these companies by only
    allowing the contract manufacturer to take the deduction and
    not the principal company who often owns all factors of
    production. The bill I introduced with Mr. Neal would allow
    either the principal company or the contract manufacturer to
    take the deduction based on each party's substantial
    contribution to the manufacturing process.
        The goal of Congress passing the law to implement the
    Section 199 deduction in 2004 was to protect U.S. jobs and
    promote American manufacturing. Instead, the IRS regulations
    will do the opposite, and deter U.S. contract manufacturing.
    This bill will restore the job-creating incentive for companies
    to manufacture their products here in America.
        The second bill, H.R. 3608, would--right or wrong, has
    impacted over 750 businesses in the U.S., including my home
    state of Ohio for more than four years. The bipartisan bill
    simply clarifies that the tax on commercial air transportation,
    also called the ticket tax, does not apply to aircraft
    management services for general aviation flights that do not
    use tickets. The IRS can implement the tax laws, but it can't
    impose a new tax.
        However, in 2012 the IRS's chief counsel released a
    memorandum stating that services provided in support of
    aviation are taxable as if the services are transportation
    itself. The IRS said that the ticket tax applies to businesses
    that supply pilots, mechanics, maintenance, and scheduling in
    navigation, and the other services needed for general aviation
    flights, but don't supply the aircraft along with those
    services.
        For decades it has been clear, and Congress has
    specifically noted that commercial aviation is required to pay
    the ticket tax, while general aviation pays the fuel tax.
    However, the chief counsel of the IRS ignored this and seeks to
    impose a tax where Congress expressly chose not to apply one.
    My bill will restore congressional intent and right the wrong.
        H.R. 5187, the R&D ASC Tax Credit, is a bill that I
    introduced with Congressman Larson, that will go a long way to
    encourage additional investment here, in the U.S. We introduced
    the Research and Experimentation Advances Competitiveness at
    Home, or REACH Act, just this week. The bill builds on the work
    done in the PATH Act at the end of the year that makes the R&D
    tax credit permanent, by increasing the R&D alternative
    simplify credit from 14 to 20 percent [sic]. As the rest of the
    world keeps improving their Tax Code to entice companies to
    locate there, this will do more to encourage companies to
    locate their R&D here in the U.S., and incentivize businesses
    to invest in the U.S., creating jobs and spurring innovation
    here at home.
        Thank you, Mr. Chairman. I yield back my three seconds.
        [Laughter.]
        Chairman BOUSTANY. I thank the gentleman. He is quite
    amazing.
        Mr. Thompson.
        Mr. THOMPSON. Thank you, Mr. Chairman, and thank you and
    Ranking Member Neal for putting on today's hearing. I think it
    is important that our Committee have a forum to hear proposals
    from Members both on the Committee and off the committee.
        I want to use my time to discuss a couple of important
    issues, and I will submit written testimony on a couple of
    others.
        As part of what--the omnibus deal last year we made
    bipartisan progress when we extended the tax credits for wind
    and solar energy for five years. There were strong feelings on
    both sides, but we came together and we made a compromise, and
    we need to build on that foundation.
        I introduced a bill to extend the renewable investment tax
    credit for five years. Representative Reed and I just
    introduced another bill to extend remaining parts of the ITC
    and hope that we can all come together again to get this done
    by the end of the year. This extension would help bring
    renewable energy to the point where it is cost-competitive with
    other sources of energy.
        Another bipartisan bill that would level the playing field
    for renewable energy is the Master Limited Partnership Parity
    Act with cosponsors from both sides of the aisle in both the
    House and the Senate. MPLs are now available to fossil fuel
    projects, but not to renewable energy. This bill would bring
    needed parity.
        The New Markets Tax Credit is also a bipartisan effort to
    stimulate investment and economic growth in low-income urban
    neighborhoods and rural communities. The new market tax credit
    investment totaled over $5.7 billion in California, alone. I
    saw $11.5 million in my district, and I know for a fact that it
    works. This investment creates real jobs in communities that
    wouldn't otherwise have access to capital.
        Last year I worked with the Treasury Department to make it
    easier for BRAC sites such as one in my district, Merritt
    Island, that was closed, to more easily qualify for the new
    market tax credit investment. Expanding the new market tax
    credit creates jobs and economic growth in low-income
    communities, and that is a bipartisan goal.
        I have used my time to talk about bills and issues, but the
    point that I really want to make is that the Committee and this
    Congress should be focusing its intention on legislation that
    helps all of our constituents back home.
        The Chairman mentioned our HRA bill that we have been
    working on helps constituents, helps constituents and makes the
    promise of access to quality, affordable health care for people
    very real. So I hope we can work together and get some of these
    done. And thank you for the time.
        Chairman BOUSTANY. I thank the gentleman.
        Mr. Reed.
        Mr. REED. Well, thank you, Mr. Chairman, and thank you for
    holding this hearing and getting our input. And I know there
    has been a slew of bills that we have brought to your attention
    and will continue to bring to your attention, but I wanted to
    highlight some of the efforts, in particular.
        As I care deeply about our job creators in America and our
    manufacturers, and especially small businesses that are the
    backbone of our American economy, I want to make sure that we
    are promoting policy, tax policy, that provides them with an
    opportunity they need to succeed.
        One area that my colleague, Mr. Thompson, and I have just
    recently joined in, and he mentioned in his testimony, is the
    H.R. 5167, the Technologies for Energy Security Act. I think
    this is a common-sense proposal that should be taken into
    consideration as we go forward, making sure that our tax policy
    reflects a commitment to our energy sector that is not only a
    job creation component of our economy, but also brings national
    security concerns to light, as we deal with the issues around
    the world.
        I would also be remiss if I did not specifically target
    some areas that we are working on in the Tax Code that--to
    target relief for our vulnerable working families and
    vulnerable fellow citizens across the country. In particular, I
    would like to highlight to the chairman the bipartisan work we
    are doing on H.R. 2752. That is the work opportunity tax
    credit, trying to make that permanent as part of this
    discussion going forward, as well as H.R. 3110, our National
    Disaster Tax Relief Act of 2015. To me this sends a clear
    message to our fellow citizens that we want to stand with them
    and make sure that we have a Tax Code that is in the best
    position not only to be fair, but to recognize the difficulties
    that many of our fellow citizens face on a day-to-day basis.
        So I join with you, Mr. Chairman, to work together in order
    to fix our broken Tax Code, and these are but just a few of the
    examples that I would like to bring to your attention, as well
    as a slew of bills that we have submitted to you, and will
    continue to advocate with you and the entire Committee as we go
    forward with tax reform.
        And with that, I yield back.
        Chairman BOUSTANY. Thank you, Mr. Reed.
        Mr. Doggett.
        Mr. DOGGETT. I am going to yield to Ms. Sanchez or Mr.
    Larson.
        Chairman BOUSTANY. Okay.
        Mr. Larson.
        Mr. LARSON. Thank you, Mr. Chairman. And thank Ranking
    Member Neal and Chairman Brady for providing us the opportunity
    to have hearings like this.
        Like Mr. Tiberi, I intend to talk about three bills and
    then provide written testimony on others, including the bill
    that he mentioned, which includes extending the R&D tax
    credits, which has been received with overwhelming popularity
    across the nation, and clearly in my district.
        I have three bills that I would like to discuss. One of
    them this Committee has passed in the past. It is the Volunteer
    Responder Incentive and Protection Act, a bill that many in the
    Committee--many on this Committee support. Mr. Reichert and I
    have introduced the bill again. And, I think as everybody
    knows, especially when it comes to volunteer firefighters and
    EMT personnel, unfortunately, the IRS subjects them--we believe
    unfairly--to tax on incidentals that they receive.
        And if the tax wasn't bad enough for volunteering your
    services and putting yourself in harm's way, it also creates an
    incredible administrative nightmare for a number of these small
    rural agencies that depend so much on our volunteer
    firefighters. Volunteer firefighters comprise--and EMT--more
    than 70 percent of the firefighters that we have across the
    nation. So I hope and--that we can continue to work on this Act
    together.
        The other bill that I would like to talk about is the
    Promise Zone Job Creation Act. This is a bill that I
    introduced, along with Chairman Rogers. Chairman Rogers, in
    fact--and Mrs. Noem on our Committee, as well--have promise
    zones in their district. There are only a handful, but what Mr.
    Rogers has done is demonstrated what you can do on a volunteer
    basis with a promise zone, and expand and reach out to the
    rural poor, combining all segments of the society: the
    volunteer base and the academic base. He is not only fighting--
    he is creating jobs, and he has done this--and the idea is for
    rural and urban areas that are depressed to create job
    incentives through the code with this. So I hope that we can
    continue to work together on the Committee with this.
        And lastly, Mr. Chairman, in my 23 seconds left, we also
    have a bill that would--we call the Philanthropic Enterprise
    Act and--again, that I have introduced with Mr. Reichert. And
    this is a targeted bill that would make a technical fix in the
    Tax Code to ensure that companies that devote all of their
    profits to charity through a foundation--in this case, in my
    home state, like Newman's Own, can continue, going forward.
    This is another bipartisan effort that I believe the Committee
    should take up before the end of the year.
        I associate myself with the remarks of Mr. Neal, and I
    thank Mr. Kelly and Mr. Renacci and Mr. Reichert, Mr. Tiberi,
    for working with us, and look forward to working with you, Mr.
    Chairman and Mrs. Noem, on other legislation that we have.
    Thank you so much.
        Chairman BOUSTANY. Thank you, Mr. Larson.
        Mr. Kelly.
        Mr. KELLY. I thank the Chairman and--for giving us the time
    to actually talk about some of these things. There are several
    pieces, and most of us are actually on these together. H.R.
    5002, the Steel Industry Preservation Act with Mike Doyle, we
    are in that together. We are in the Historic Tax Credit
    Improvement Act, which you highlighted; Preserving Access to
    Orphan Drugs Act with Mr. Neal; and then H.R. 1752, Health Care
    Sharing Ministries, with Danny Lipinski out of Illinois.
        What I want to talk about, and what I think is really
    critical--and this is in honor of Mother's Day and working
    parents--I worked with three working moms, right here, Ms.
    Sanchez, Senator Ayotte, and also Senator Capito, to come up
    with something called the Working Families Relief Act. This is
    H.R. 4867. And we worked with Save the Children to have this
    come into legislation. And I think one of the things we were
    looking at is it has become so difficult for working families
    to actually provide child care.
        So, here is what this Act does. H.R. 4867 expands the pre-
    tax deduction as part of the dependent care assistance program
    to $10,500 a year for married couples and $5,000 for single
    filers. This increase in the tax deduction closely matches the
    average annual cost of child care. And this pre-tax deduction
    is indexed to inflation.
        The bill would also provide employers with a tax credit to
    help with the administrative costs of starting up such a
    program for their associates and it gives employers a $1,000
    tax credit for matching contributions of their associations.
    This is going to encourage more employers to offer this
    flexible spending account for all the folks they work with.
        Now, here are a few facts to consider. Six out of ten
    families with children, both parents are working. And that
    percentage is even higher for single moms, where 7 out of 10
    moms work outside the home to take care of their kids. Working
    moms are much less likely to be living in poverty than their
    counterparts that stay at home. The problem, however, is that
    child care costs have skyrocketed to over $10,500 a year. Child
    care costs have grown almost eight times the rate of family
    incomes, according to most news reports.
        And for example, in Pennsylvania a 2-parent household is
    spending 12 percent of their income on child care. And with the
    average cost of child care coming in at over $10,500 a year, it
    is no wonder families are struggling so hard to make ends meet.
    This is impacting the ability for families to buy a home and
    pay off their student debt.
        The American people feel too often that Washington is out
    of touch with economic realities our nation is facing, and it
    is time for us to get back home with the people that we
    represent, to actually feel what they are going through and
    then reacting to help them. So expanding the dependant care
    assistance program will help more working families participate
    in and afford quality child care without going broke.
        Everyone in America benefits when our children have a
    strong start in life through quality child care. And any
    investment in the next generation of Americans is just, quite
    simply, a very good investment.
        Therefore, it is my sincere hope that the Committee will
    mark up this legislation in the near future for our children's
    family--for our children and for our working families.
        Mr. Chairman, I appreciate it. Ms. Sanchez, thank you so
    much. And Save the Children were absolutely incredible in
    helping us to get to this. So thank you so much. I yield back.
        Chairman BOUSTANY. Thank you, Mr. Kelly.
        Mr. Renacci.
        Mr. RENACCI. Thank you, Mr. Chairman, for holding this
    hearing. I am grateful for many ideas that my colleagues have
    and will present today. Indeed, I am a proud cosponsor of many
    of these bills.
        The premise, though, behind many of these bills is rooted
    in the fact that we have an outdated and anti-competitive tax
    system. Because of that, we continue to try and make changes.
    But it is really time for an overhaul. By not overhauling our
    tax system, the U.S. has fallen drastically behind. Over the
    last three decades, the average marginal corporate income tax
    rate among OECD countries has fallen from 48 percent to under
    25 percent. In fact, since 2000, we are one of only three of 34
    OECD countries that have not cut their corporate tax rate.
        With the highest corporate tax rate in the industrialized
    world, it is no wonder U.S.-based businesses hold back on
    domestic investment and hiring plans, instead choosing to
    invest in other countries with what--much more pro-growth tax
    regimes. Corporate income taxes are the most harmful tax to
    economic growth. That is likely why every OECD member besides
    the U.S. relies more heavily on consumption tax measures which
    raise revenue with less economic damage than the corporate
    income tax.
        I am aware of arguments that--critical of the move to
    drastically reduce the corporate tax rate saying we shouldn't
    join the race to the bottom. Other critics say that
    corporations shouldn't have a lower tax rate than individuals.
    But framing this as a them-versus-us narrative completely
    ignores the incidence of corporate income tax.
        It is so important to understand who bears the burden of a
    high corporate tax rate. I said it before, I will say it again.
    The burden of corporate tax rate does not ultimately fall on
    corporations, it is born by people, customers, workers, and
    investors. Americans are angry with Washington, they want big
    change. I agree that we need big change. That is why I started
    working with my colleagues about a plan I am preparing that
    will make our business tax system the most competitive in the
    world. We can't settle for a corporate tax rate that is the
    middle of the path.
        This pro-growth plan will repeal the corporate income tax
    rate, replace it with a single-digit tax on business
    activities. This will provide a tax platform that fosters
    growth, encourages investment, and ensures a level playing
    field. My plan would also reform the individual tax system to
    ensure that low to middle-income households still see an
    increase in after-tax income, even taking an impact of a
    consumption tax, and as revenue growth on a dynamic basis.
        These are big, bold ideas. While some may say that such a
    plan is too far outside the mainstream of politically viable,
    we are at the point where we need an overhaul, not an oil
    change. Old plans may not be well received by some special
    interest folks, but I feel compelled to show the people of
    Northeast Ohio my commitment to both overhauling our business
    Tax Code to keep more companies' investment in jobs in America,
    and reforming our individual tax system to raise after-tax
    incomes across the board and reduce complexities. Your success
    should be up to you, not the Tax Code.
        I look forward to continuing to meet with Members on both
    sides of the aisle about this plan, and I hope to roll out more
    details in the coming weeks. Thank you again, Mr. Chairman, for
    holding this hearing. I yield back.
        Chairman BOUSTANY. Thank you, Mr. Renacci. Next we will go
    to Ms. Sanchez.
        Ms. SANCHEZ. Thank you, Mr. Chairman, for holding this
    hearing to allow Members to bring their unique perspectives on
    the tax reform debate.
        While it's impossible for me to highlight everything that I
    think should be a priority, I am going to try to mention just a
    few key ideas. The first point that I want to reiterate is a
    point that I have made so many times that I feel like I am back
    to teaching a first-grade classroom, because I have to repeat
    myself, repeat myself, repeat myself. But tax reform needs to
    be comprehensive, and not piecemeal. And so I very much
    appreciate my colleague Mr. Renacci's comments on that
    particular point.
        We can't fix the Tax Code for one group and leave others
    worse off. So my biggest fear in this process has always been a
    final package that would put American workers, the domestic
    businesses that employ them, on even more unequal footing in
    our Tax Code. So we have to be cognizant that we don't
    advantage one group at the peril of another.
        It is not a secret that our Federal Tax Code is woefully
    out of date. But how we get from here to there, I think,
    deserves a lot of thoughtful deliberation for us to really get
    into the nuts and bolts of it and roll up our sleeves.
        The process is also going to require very thoughtful
    feedback from those who are going to be affected by the changes
    that we will eventually make to the code. And equally important
    is the fact that each day we don't keep moving forward on tax
    reform we continue to fall further and further behind other
    jurisdictions.
        The Federal Tax Code needs to be reformed in a way that is
    fair, that is simple, and that provides certainty. Our Tax Code
    reflects our priorities as a country, and creating an
    environment for good-paying jobs to flourish, while allowing
    families to save should be a top priority as we move forward in
    talking about tax reform.
        Family responsibilities are often the greatest joy that
    people experience, but it is often one of the most stressful
    aspects of most people's lives. During my time on this
    Committee I have been proud to work on legislation to help ease
    the burden of child and elder care costs in a bipartisan
    fashion. And for that I am grateful to my colleague, Mr. Kelly,
    for mentioning H.R. 4867, which deals with child dependant
    care. And it is my hope that the Committee will keep these
    unique financial responsibilities in mind as we move forward on
    updating the code.
        Beyond that, I just want to mention that working families
    are only able to meet their needs at home when they are able to
    earn a decent wage at work. In Southern California we are lucky
    to be the home to many domestic industries that pay the types
    of wages that allow working families to thrive and to move up
    on the economic ladder. Our manufacturing sector, in
    particular, has been one of the brightest spots as our economy
    recovered from the Great Recession. So fostering an environment
    for good-paying jobs to flourish in this country should be of
    paramount importance for the Committee.
        A competitive manufacturing sector allows American
    businesses to export their goods all over the world, and will
    help hasten our recovery. So, Mr. Chairman, again, I look
    forward to continuing to work with my colleagues to make sure
    that we get tax reform right, as we move forward.
        And I want to thank you for the time, and I yield back.
        Chairman BOUSTANY. Thank you, Ms. Sanchez. Next we will go
    to Mr. Holding.
        Mr. HOLDING. Thank you, Chairman Boustany. You know, last
    year we took a meaningful step towards tax reform by passing
    the PATH Act. And today we have an opportunity to build on the
    success of that legislation.
        One meaningful provision made permanent last year was the
    IRA charitable rollover provision. In the current law, seniors
    can roll over up to $100,000 from their IRA to an eligible
    charitable organization, tax free. However, as it currently
    stands, this provision excludes contributions to donor-advised
    funds, even though these funds are considered to be qualified
    charitable organizations under the code.
        I have introduced legislation, H.R. 4907, the Grow
    Philanthropy Act, to eliminate this unnecessary exclusion and
    treat all qualified charities equally under the rollover
    provisions.
        Given their ease of use and ability to directly impact
    local communities, donor-advised funds have become one of the
    fastest-growing philanthropic vehicles, and in 2014 alone paid
    out more than $12 billion in grants to charities. Donor-advised
    funds allow individuals, regardless of their means, to set up a
    fund and give to their preferred charities and pass these
    benefits on for years to come. By allowing our seniors to roll
    over contributions from their IRA to a donor-advised fund, we
    not only increase seniors' choice with regard to charitable
    donations, but also encourage increased donations for years to
    come.
        The Grow Philanthropy Act is a simple and straightforward
    fix, and I encourage all my colleagues to join me in supporting
    this.
        In addition to the IRA charitable rollover provision, the
    PATH Act also made the R&D credit permanent. But unfortunately,
    this credit excludes a very important sector of innovative
    researchers. Under current law, Mr. Chairman, if a company
    conducts all of their research in-house, they are able to use
    100 percent of their eligible expenses. However, if they
    contract out their research to a clinical research
    organization, a practice which is extremely common in the life
    science industries, the sponsor of that research is only
    allowed to use 65 percent of their eligible expenses towards
    determining the credit, and the remaining 35 goes unused.
        Additionally, the clinical research organization that has
    contracted to conduct the research is unable to claim the R&D
    credit. This is in stark contrast to other countries. Mr.
    Meehan and I have been working on a bill, H.R. 2481, the
    Domestic Research Enhancement Act, which would fix this
    problem, and I would also encourage my colleagues to support
    this bill.
        Thank you, Chairman Boustany, for the opportunity to
    testify, and I yield back.
        Chairman BOUSTANY. Thank you, Mr. Holding. Next we will go
    to Mr. Reichert.
        Mr. REICHERT. Thank you, Chairman Boustany, for holding
    this important hearing. I want to talk about three bills rather
    quickly. Some have already been mentioned. Others have been
    mentioned that I will not talk about that I am supporting.
        First is the S Corp Modernization Act, includes common-
    sense simplification proposals supported by Members of the
    House and Senate on both sides of the aisle. I would like to
    thank Mr. Kind, especially, for his work with me on this bill
    to encourage growth on Main Street by reforming and repealing
    unnecessary rules and limitations on S Corporations.
        Specifically, one provision in the bill allows non-resident
    foreign individuals to be eligible beneficiaries of an electing
    small business trust. So I have heard from a seventh generation
    family who owned a company and the struggles it has faced,
    based on the nationalities of the spouses of the family
    members, including family members who have had to sell their
    stock in the company because of current restrictions. With the
    number of burdens our business owners face, does it make sense
    to maintain yet another hurdle, simply based on who someone
    decides to marry?
        I am also proud to partner with Ron on the Promotion and
    Expansion of the Private Employee Ownership Act that encouraged
    the creation of employee-owned businesses through S Corporation
    employee stock ownership, known as ESOPs, allowing more hard-
    working Americans to have a stake in their companies and hope
    for a secure future.
        Additionally, Mr. Larson and I, as he has mentioned, have
    been working on legislation near and dear to my heart to
    support the work of philanthropic enterprises that seek to be
    successful businesses and sources of change in communities. One
    such example is a brewer out of Minnesota called Finnegans, and
    then, of course, Newman's Own, mentioned by Mr. Larson. These
    companies donate all of their profits in a quest to eliminate
    hunger. Our bill will encourage the creation of these types of
    businesses committed to donating all the profits to charity,
    and making a difference in our communities across this country.
        So, in conclusion, Mr. Chairman, in Washington we know one
    or two things about beer and about brewing beer, spirits, and
    wine, the number of jobs these growing industries support, and
    I look forward to working with my colleagues on this Committee
    to update and reform our alcohol excise taxes.
        I yield back.
        Chairman BOUSTANY. Thank you, Mr. Reichert.
        Mrs. Noem.
        Mrs. NOEM. Thank you, Mr. Chairman, for holding the
    hearing. It is great that today we are opening up the Committee
    for different ideas on how to improve and simplify the Tax
    Code, something--that is a goal that we share with the American
    people.
        I want to discuss several bills I am working on that I
    believe are common-sense improvements to the Tax Code. And some
    of those bills I am working on have a lot of potential to fix
    some of the issues that we are dealing with in South Dakota.
    The first involves the Federal Government's trust
    responsibility to our native people.
        Native Americans and Alaskans are exempt from the
    individual mandate under the Affordable Care Act because of its
    obligation of the Federal Government to provide for their
    health care. In the haste in which the law was written, tribal
    governments that primarily employ Native Americans and Alaska
    Natives are not exempt from the employer mandate, meaning
    tribes will be forced to offer coverage or pay a tax penalty
    for individuals whose care is already the responsibility of and
    paid for by the Federal Government.
        To solve this problem, I have introduced H.R. 3080, the
    Tribal Employment and Jobs Protection Act, which would exempt
    tribal governments, businesses, and organizations from the
    employer mandate. Without action, tribes fear that they could
    be on the hook for millions of dollars of penalties under the
    mandate. This money will have to be diverted from other vital
    services in Indian Country.
        I would also like to enter into the record a letter from
    the Rosebud Sioux Tribe in support of my bill, Mr. Chairman.
        [No response.]
        Mrs. NOEM. Mr. Chairman, I would like to enter that letter.
        Chairman BOUSTANY. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mrs. NOEM. Thank you. I am pleased to have bipartisan
    support for this legislation, and the support of many of my
    colleagues on this Committee.
        Second, I would like to talk about ways to improve the Tax
    Code to promote economic development in Indian Country. Many
    tribes seek to provide for their members through economic
    development. However, because of IRS rules, tribes are not
    eligible to be shareholders in S Corporations like other tax-
    exempt entities. This can take potential economic development
    opportunities off the table for communities that need them
    most. The Tax Code should not hinder tribes working to improve
    the quality of life for their members. For this reason I am
    working to fix this and I am looking forward to working with my
    colleagues on this issue.
        Finally, I just wanted to mention updating the tax
    incentives for American alternative energy. I will again be
    introducing bipartisan legislation with my colleague from New
    Jersey, Mr. Pascrell, to extend and reform the biodiesel tax
    credit, and to ensure that it is properly focused on American
    production, similar to other energy and manufacturing
    provisions in the code.
        So thank you again, Mr. Chairman, for holding this
    important hearing, and I yield back.
        Chairman BOUSTANY. Thank you, Mrs. Noem. I should state
    also, without objection, all Members' opening statements, as
    well as their written statements will be made part of the
    record.
        I want to thank all the Subcommittee members for their
    participation in this hearing. And now we are going to move on
    to our panel, our first panel, which are members of the full
    Committee, Mr. Johnson of Texas, Mr. Roskam of Illinois, Ms.
    Jenkins of Kansas, and Mr. Davis, also of Illinois. We
    appreciate you being here, and I look forward to your
    testimony.
        Mr. Johnson, you may proceed.

      STATEMENT OF THE HONORABLE SAM JOHNSON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. JOHNSON. I appreciate you letting me testify in front
    of you today. I want to discuss my bill, which is H.R. 4381,
    the Service Member Retirement Improvement Act. By way of
    background, last year's defense authorization bill included
    significant retirement reforms. The reforms included a
    reduction in the military pension, but also included, for the
    first time ever, a match for servicemembers' retirement
    contribution to the TSP. This is a 401(k) plan for Federal
    workers and those in the military.
        Unfortunately, as it turns out, these reforms may
    inadvertently harm those guard and reserve forces who happen to
    also participate in the retirement plan in their civilian jobs.
    A problem is that those guard and reserve forces who contribute
    the maximum possible in their civilian jobs can't then
    participate in the TSP. As a result, they don't get the TSP
    match to help make up for the reduction in their pensions. And
    why is that? Because the IRS caps the amount an individual can
    save for their retirement through work. Generally speaking,
    that is $18,000 per year.
        So, what my common-sense bill would do is simply allow
    these servicemen to contribute the maximum to both their
    civilian and military TSP. I would note that the IRS already
    allows state and local workers, as well as teachers, to
    contribute the maximum amount to both the government and
    civilian retirement plans. So if that is the case, why
    shouldn't our brave men and women in uniform be allowed to do
    the same?
        Mr. Chairman, my bill is supported by over 10 major
    military and veterans groups. I would like to submit for the
    record a letter of support from some of those groups.
        Chairman BOUSTANY. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. JOHNSON. As a member of this Committee who fought in
    two wars, I can tell you that those serving in our country
    deserve the best. And the bottom line is they should not be
    penalized when it comes to saving for retirement. Moreover, in
    our increasingly dangerous world we must ensure that our
    military can recruit and retain the best and the brightest.
    This bill would help ensure just that.
        Thank you again for the opportunity to speak in support of
    the bill, Mr. Chairman, and I yield back.
        Chairman BOUSTANY. Thank you, Mr. Johnson, and thank you
    for your service.
        Mr. Roskam.

     STATEMENT OF THE HONORABLE PETER ROSKAM, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. ROSKAM. Thank you, Chairman Boustany and Ranking Member
    Neal. Sitting on this side, it is a good thing we have all got
    good self-images. Because without eye contact, you get a little
    bit unsettled. But thank you very much, just for the chance to
    be before you today.
        I am here to present quickly three bills, and then just
    plant the seed on one concept. The first bill is called the
    Legacy IRS Act, and it was an initiative, actually, of
    Congressman Cramer of North Dakota. And here is what he is
    trying to do. And I am involved in this, along with Mr.
    Blumenauer, Paulsen, and Tiberi on the Committee.
        Currently, you can donate your IRA to a charity, tax-free.
    And you can leave money in your will, tax-free. But if you move
    your IRA into a charitable life income plan, that is taxed. So
    middle-class retirees can't afford the tax hit because they
    need that money to live off of, and what we are trying to do
    then with this bill is simply eliminate the taxation of that
    move from an IRA to a charitable life income plan.
        It is not controversial, I think it makes a lot of sense.
    It is not unlike Congressman Johnson's initiative a minute ago.
    That is the first bill.
        The second bill is this, to stop taxing death and
    disability. And this has been introduced today, along with
    Congressman Kind of the Committee. When a student passes away
    or becomes permanently disabled, their student loan debt is
    forgiven. That is great. The problem is there is a tax
    liability that is attached to that. That is not great. In fact,
    it is ridiculous, and it is absurd. And so, the bill would
    remove that tax liability. Again, very common sense, and it is
    consistent with the theme of removing that tax liability, or
    the underlying liability, itself.
        Third bill, quickly, is called the Free File Act. It makes
    permanent the free file program, 75 cosponsors in the House.
    This is a good public-private partnership to allow people
    access to sophisticated tax software at no cost to themselves.
        And then, finally, an idea--and this is just seed planting
    at this point, but it is a bill that I am working on and will
    intend to move forward, and it is based out of a hearing that
    the Oversight Subcommittee had. And it is this concept. There
    are elements of the Tax Code that relate to enterprises that
    choose to do business with state sponsors of terror. It has to
    do with Section 901(j) of the Internal Revenue Code. There are
    some provisions in place that make it very uncomfortable to do
    business with state sponsors of terror. But we need to make it
    more uncomfortable to do business with state sponsors of
    terror.
        You may have seen in the news Boeing Company is actively
    contemplating this exercise. That is, they are seriously
    thinking about selling planes, a fungible production, to the
    Iranians, when everybody admits that the Iranians are sponsors
    of terror. We need to do what we can, I would argue, in the Tax
    Code and within our jurisdiction. So I will be, at some point,
    presenting that.
        Thank you, and I yield back.
        Chairman BOUSTANY. Thank you, Mr. Roskam.
        Mrs. Jenkins.

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

        Ms. JENKINS. Chairman Boustany, Ranking Member Neal, thank
    you for holding this hearing. Distinguished Members of the
    Committee, thank you for affording me some of your time this
    morning.
        One of the bills I would like to discuss this morning is
    H.R. 5193. It is the 529 Enable Account Improvement Act of
    2016. As you recall, the President used his 2015 State of the
    Union Address to propose taxing 529 college savings
    distributions. In response, my colleague, Congressman Ron Kind,
    and I worked closely on legislation to protect 529 plans. And
    that became law at the end of last year.
        So, H.R. 5193 builds upon this success and further improves
    529 accounts in a variety of ways. First, it takes common-sense
    steps to encourage more employers to provide access to 529 Able
    plans by encouraging employer seed money and extending the
    current $500 tax credit for small employer retirement plan
    start-up costs to small employers establishing new employee
    payroll deduction programs for 529 or Able accounts.
        The legislation also removes barriers that discourage 529
    account savings. I have heard from many families that do not
    set up these accounts because of the 10 percent penalty tax
    that occurs when someone makes a non-qualified distribution.
    This bill addresses these concerns by extending the current
    exception from the 10 percent penalty tax to transfers made
    directly from 529 accounts into IRAs, transfers made from 529
    or Able accounts to charity, and withdrawals from 529 accounts
    to pay for student loans.
        Finally, the legislation would repeal the unnecessary IRS
    interpretation of the investment direction limitation on these
    accounts, as well as allow tax-free rollovers from 529 accounts
    to Able accounts. I encourage my colleagues to support this
    legislation. As a mom with a daughter who is graduating from
    grad school on Saturday and a son in undergrad, I understand
    the importance and urgency here.
        I would like to move on to another important bill, H.R.
    4626, the Building Rail Access for Customers and the Economy
    Act, known as the BRACE Act. Across Kansas, small, privately-
    owned freight railroads move goods and raw materials for our
    constituents. Congressman Blumenauer and I introduced this bill
    to improve the private sector's ability to maintain services by
    permanently extending the Section 45(g) short-line tax
    maintenance tax credit.
        As of today, 260 rail customers with 880 locations and 47
    states have joined saving our service, and are calling on
    Congress to pass the BRACE Act. I highly encourage my
    colleagues to support that legislation.
        And finally, I would like to briefly mention H.R. 4672,
    which would restore and make permanent the suspension of the
    net income limit on percentage depletion for oil and natural
    gas produced from marginal properties. It is important relief,
    it is critical to preserving the production of oil and gas from
    America's smallest producers.
        And with that I yield back. Thank you.
        Chairman BOUSTANY. I thank you, Ms. Jenkins.
        Mr. Davis.

      STATEMENT OF THE HONORABLE DANNY DAVIS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. DANNY DAVIS OF ILLINOIS. Thank you for the opportunity
    to highlight a few of my priorities for improving our tax
    system.
        First, the Julia Carson Responsible Fatherhood and Healthy
    Families Act would help close the gap in the earned income tax
    credit by expanding it to childless workers and non-custodial
    parents, the only group that the Federal tax system taxes into
    poverty. The earned income tax credit is an amazing pro-work
    success story, and it currently excludes millions of low-income
    young men who face low and falling labor force participation. I
    am pleased that both Speaker Ryan and President Obama have
    supported this critical expansion to promote work and reduce
    poverty.
        In addition, the Fatherhood Act would lower the age of the
    earned income tax credit eligibility to 18 for foster youth.
    Currently, the earned income tax credit disadvantages former
    foster youth who enter the workforce earlier, experience higher
    rates of poverty, attend college less often, and receive less,
    if any, financial support from parents than their peers.
    Lowering the age of the earned income tax credit eligibility
    for former foster youth promises to promote economic well-
    being, reduce poverty, and increase labor force participation
    for these vulnerable youth.
        Secondly, my VITA Act would permanently authorize the
    community volunteer income tax assistance matching grant
    program that funds critical tax preparation, taxpayer outreach,
    and related financial services for tens of thousands of low-
    income families.
        Finally, I ask that the Subcommittee hold a hearing on the
    Adoption Tax Credit Refundability Act that I led with
    Representatives Black, McDermott, Franks, Marino, Langevin, and
    Bass. This bill would restore the refundable element of the
    credit, and help thousands of low-income families. Half of the
    youth adopted from foster care live in families at or below 200
    percent of the Federal poverty level who receive limited
    benefits from this credit. Our bill is supported by the 150
    member organizations of the adoption tax credit working group,
    and the hearing would provide an excellent legislative history
    to prepare this bill for consideration next year.
        I thank you for this opportunity and yield back the balance
    of my time.
        Chairman BOUSTANY. Thank you, Mr. Davis. I want to thank
    all four of you for bringing these important tax proposals
    before the Subcommittee. And they will be taken under
    consideration. Thank you so much.
        We will call our next panel up: Mr. Buchanan, Mr. Rice, and
    Mr. Rouzer. This panel will also include Mr. Meehan. So it is
    Mr. Vern Buchanan, Tom Rice, Mr. Rouzer, and Mr. Meehan.
        [Pause.]
        Chairman BOUSTANY. Mr. Buchanan, you may proceed.

     STATEMENT OF THE HONORABLE VERN BUCHANAN, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Mr. BUCHANAN. Thank you, Mr. Chairman. I also want to thank
    the Ranking Member and the Committee today. I have four bills
    that will help grow the economy and create jobs.
        My first bill is a pass-through bill that simply says small
    businesses shouldn't pay more than corporations, or big
    corporations. We need to lower the tax on corporations. There
    has been discussion about 35 to 25, 28 percent. I am supportive
    of that. But today the average business in Florida, a pass-
    through, is 43 percent. Big corporations are at 35. Many places
    in the country, state and Federal, it is over 50 percent. My
    bill simply says lower those tax rates to the same--nothing
    higher than corporate rates, going forward. That is my pass-
    through bill.
        My second bill is a start-up bill. Simply, we have got more
    businesses that are closing than opening for the first time in
    our history, and I want to take the write-off for a start-up
    from $5,000 to $20,000, which would be 4 times what it is
    today. It would encourage more start-ups. It is a bipartisan
    bill. There are many businesses I have seen over the years
    starting in their garage, and you end up with an Apple
    computer. We need to encourage more start-ups, this bill will
    do that.
        Also, I have a retirement bill. I read the other day, 62
    percent of Americans--I couldn't believe it when I read it. It
    is true, I guess, 62 percent of Americans don't have $1,000 in
    the bank. The idea is to let small businesses work together to
    lower your administrative costs to put retirement plans in
    place. That is what that bill will do.
        My last bill is a bill on--a citrus bill. In Florida we
    have been impacted. Ninety-nine percent of the trees have a
    disease called citrus greening. In Texas it is 50 percent. And
    what my bill will do will allow investors to get the same
    write-offs, working with farmers, to get those deductions that
    they need. We need to be replacing these trees. When you think
    of Florida you think of orange juice, and we are completely at
    risk in that industry.
        And again, I want to thank you and the panel for the
    opportunity today.
        Chairman BOUSTANY. Thank you, Mr. Buchanan.
        Mr. Rice, you may proceed.

       STATEMENT OF THE HONORABLE TOM RICE, A REPRESENTATIVE IN
               CONGRESS FROM THE STATE OF SOUTH CAROLINA

        Mr. RICE. Thank you, Mr. Chairman. Chairman Boustany and
    Ranking Member Neal, thank you for hosting today's hearing to
    hear Members' tax proposals and priorities. I would like to
    discuss an issue that is of great importance to the Southeast:
    providing appropriate clarity for the nuclear production tax
    credit.
        Eleven years ago Congress included the nuclear production
    tax credit within the Energy Policy Act of 2005. As the last
    domestic nuclear power reactor was built decades ago, Congress
    designed the nuclear PTC to encourage investment in advanced
    nuclear energy projects.
        South Carolina and Georgia heard this call loud and clear.
    These states are building 4 new nuclear units, the first in 40
    years, in America. As the cost of construction for advanced
    passive nuclear power facilities is understandably expensive,
    both public and private entities were required for the
    facilities' development. In each unit one of the partners is a
    not-for-profit entity owning approximately 50 percent, both in
    South Carolina and in Georgia.
        According to the current Treasury Department guidance, the
    not-for-profit entities cannot efficiently utilize the credits,
    and therefore, cannot pass the savings on to their customers.
    As the guidance reads, the savings from the nuclear production
    tax credit will not be passed to ratepayers in South Carolina,
    Georgia, Florida, and Alabama who have helped shoulder the cost
    of the unit's construction.
        Interestingly, the ratepayers for the for-profit companies
    get the credit, but the not-for-profits, like the
    municipalities and the states, don't get the credit. The
    Treasury's interpretation creates inequities among the
    project's stakeholders that must be corrected for the program
    to work, as Congress originally intended. Other energy
    technologies are able to efficiently use their credits with
    public-private partnerships. Nuclear energy should have the
    same consideration.
        For the purpose of this hearing I will use an amendment I
    introduced last year. The amendment would allow all owners
    within an advanced nuclear public-private partnership to be
    eligible to efficiently capture the value of their allocated
    credits. The credit would be provided to private entities that
    own or assist the development of the project. The reallocation
    of the credit will be passed on to the ratepayers of these
    public entities. The Joint Committee on Taxation has stated
    this clarification offers minimal cost, $12 million--not
    billion, $12 million--over 10 years.
        In the last few months I have worked closely with Chairmen
    Brady and Boustany to share my continued interest in providing
    an appropriate fix for this oversight. I am grateful for the
    many hours the Ways and Means tax staff has dedicated to
    assisting me in finding a solution that works both for this
    body and the Senate. I will continue to work on this issue
    until we are able to pass these savings on to South
    Carolinians, Georgians, Floridians, and Alabamans.
        Thank you again for your time.
        Chairman BOUSTANY. Thank you, Mr. Rice.
        Mr. Rouzer, you may proceed.

     STATEMENT OF THE HONORABLE DAVID ROUZER, A REPRESENTATIVE IN
               CONGRESS FROM THE STATE OF NORTH CAROLINA

        Mr. ROUZER. Thank you, Mr. Chairman. I appreciate the
    opportunity to be here before the Committee to discuss H.R.
    5015, which is the Combat Injured Veterans Tax Fairness Act. At
    the outset I think it is important to note that there is a
    Senate companion of this bill that has been reported out of the
    Senate Finance Committee.
        On background, in 1991 a Federal district court case, St.
    Clair versus United States, determined that one-time lump sum
    disability severance payments received for injuries resulting
    from active service should be excluded from taxable income,
    similar to monthly disability payments. The only problem is
    that is not what has happened. Despite this court decision and
    the resulting regulatory guidance, taxes on combat-related
    disability severance payments have been withheld improperly for
    many years.
        Now, veterans are typically not even aware that their
    benefits were improperly reduced. Most have surpassed the
    three-year period in which a taxpayer can file an amended tax
    return with the Internal Revenue Service and, therefore, are
    unable to recover the improperly-withheld compensation. And
    that is what this bill, this legislation, aims to fix.
        The Combat Injured Veterans Tax Fairness Act of 2016
    directs the Department of Defense to identify veterans who,
    since January 1991, when the Gulf War began, have been
    separated from armed service for combat-related injuries, and
    who have received a severance payment; identify instances of
    improper withholding; and determine how much the combat wounded
    veterans are owed.
        Now, in terms of number of veterans this would affect, we
    are looking at approximately 14,000 from all 50 states, as well
    as the District of Columbia. The Joint Committee on Taxation
    has stated that the effect on receipts is less than 500,000 per
    year for Fiscal Year 2017 and 2018, as well as, in the
    aggregate, over the 2016 to 2026 budget window.
        I want to thank the National Veterans Legal Services
    Program for identifying this problem. And Mr. Chairman and
    Members of the Committee, I urge us to move forward on this. I
    think this is good common-sense legislation that would be one
    more win, one more thing that we can do to help our veterans
    who are in need.
        Thank you, Mr. Chairman, I yield back.
        Chairman BOUSTANY. Thank you, Mr. Rouzer.
        Mr. Meehan, you may proceed.

      STATEMENT OF THE HONORABLE PAT MEEHAN, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. MEEHAN. I want to thank the Chairman, and the Ranking
    Member and the full Subcommittee for this opportunity, and I am
    here to speak about three legislative priorities. These are
    going to create jobs, they are going to enhance the promotion
    of alternative energy and, most importantly, they are going to
    also help us promote better investment and health outcomes.
        First I would like to urge support of H.R. 5172, which
    amends the Tax Code to extend and phase out the energy tax
    credit for all Section 48 technologies. Congress acted in
    December 2015 to renew the phase-out--renew and phase out the
    investment tax credit for investment and manufacturing of solar
    energy technologies, but it left out the rest of the advanced
    energy technologies in Section 48, which include fuel cells,
    CHP, micro-turbines, geo-thermal heat pumps, and small wind.
        This was a drafting error. It has resulted in Congress
    inadvertently picking winners and losers, and the leadership in
    both chambers have acknowledged that fixing this oversight is a
    priority. My bill would extend the investment tax credit to all
    Section 48 technologies, and under a phase-out as soon as and
    as quickly as possible. We are just trying to give those other
    technologies the exact same treatment as we gave solar, and we
    are phasing out this credit at the end of 2021, just like we
    did with solar. It levels the playing field and prevents
    Congress from picking winners and losers.
        I would like to talk about 2841, the Domestic Research
    Enhancement Act of 2015. It is a piece that I have worked on
    with my colleague, George Holding. It ensures the United States
    remains a leader in medical innovation, and encourages
    employment in the high-wage research sector. Specifically, the
    bill would modernize the R&D tax credit to recognize the
    important role that research plays in the development of
    innovative new medical products.
        Currently, providers of what they call contract research
    services aren't eligible to receive any portion of the R&D tax
    credit. And also, when the sponsor of the research, generally a
    bio-pharma company, contracts with a clinical research
    organization, its eligible expenses for the credit are reduced
    from 100 percent to 65 percent. The remaining 35 percent just
    vanishes.
        Our bill would expand the R&D tax credit to enable the CROs
    to be eligible for the 35 percent of the credit that currently
    disappears when the work is contracted out. And by enabling
    contract research organizations to capture a portion of the
    research and development tax credit, it is currently--this
    legislation will promote better health outcomes and allow us to
    remain competitive, globally.
        Lastly, I am pleased to have bipartisan support for Mr.
    Kelly, Mr. Larson, Mr. Neal, and Mr. Kind on H.R. 2179, the
    PARTNER Act. It deals with early-stage research by
    incentivizing investment in R&D-focused small business. America
    and our life sciences workers lead the world in medical
    research. They are at the tip of the spear in their efforts to
    find new treatments and cures. But right now the Internal
    Revenue does not permit high-tech research pass-through
    exemptions from the definition of ``passive activity'' under
    the passive loss tax rules.
        The bipartisan bill permits an exemption for small
    businesses where more than half of its business is qualified
    research, and only those entities. The rules have the effect of
    blocking private investors from partnering with a merging pre-
    revenue high technology small businesses [sic]. Our bipartisan
    bill lowers that bar and gives the research a chance.
        It is estimated that $10.3 billion a year would be invested
    and create about 156,000 additional jobs. I appreciate the time
    and consideration for each of these bills, and I thank you, Mr.
    Chairman.
        Chairman BOUSTANY. Thank you, Mr. Meehan, and I want to
    thank all four of you for your testimony and bringing these
    important tax propositions forward. And we look forward to
    examining them further.
        And with that, you can--we are done with you for now, and
    we will call up the next panel.
        We have Mr. Dold, Mr. Poe, Ms. Eshoo, and Mr. Salmon.
        [Pause.]
        Chairman BOUSTANY. I thank our colleagues for joining us
    today.
        Mr. Dold, you may proceed.

       STATEMENT OF THE HONORABLE BOB DOLD, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. DOLD. Thank you, Mr. Chairman. I certainly appreciate
    the opportunity to highlight a couple of important bills that I
    believe are worthy of the Committee's further consideration.
        H.R. 4165 is the Mechanical Installation Incentive Act of
    2015. It encourages facility and building owners to increase
    the use or maintenance of mechanical insulation by offering a
    30 percent tax credit in the fiscal year in which the
    mechanical insulation was put in service, or the maintenance
    completed. This bill will increase energy efficiency, while
    also creating thousands of good-paying jobs. This tax credit
    will be available for five years, giving ample time to
    implement the necessary installation or maintenance.
        My second piece of legislation, Mr. Chairman, is one that
    is near and dear, I think, to many of our hearts. As anybody
    that is talking to constituents lately, talks to students, one
    of the questions that comes out of their mouths is, ``How am I
    going to be able to afford to pay for college,'' or, ``How am I
    going to be able to afford the student loan debts that I
    have?''
        H.R. 5191, the Help for Students and Parents Act, will make
    paying for college much more accessible to students. Over the
    last three decades, the average tuition for a four-year college
    has more than tripled, while the typical family income has
    barely budged. The result is that college seniors, as they
    prepare to graduate this spring, will have an average debt of
    about $30,000.
        Whenever I talk with these students and the parents that I
    hear from they are saying, ``Paying for college is getting
    further and further out of reach.'' And we need to be able to
    do something if we want to enable them to be able to go to
    school or get another education, whether it be becoming a
    skilled welder, or whatever it may be. We want to make sure
    that they are actually getting the education they want.
        My legislation proposes an important yet common-sense shift
    in the way that our country approaches student loan debt.
        Under current law, if an employer pays an employee's
    student loan debt, the amount received by the employee is
    taxable income. The Help for Students and Parents Act would
    change this by excluding from the graduate's income the amount
    that an employer contributes towards the employee student's
    loan repayment, up to a cap of $250.00, which stands in current
    law today.
        The exclusion from income to the employee would greatly
    help with maximizing the dollars earned that go towards paying
    off one's student loans. To encourage employers to adopt this,
    the bill also provides a small tax credit to employers, based
    off the amount that they contribute to help with the employee's
    loan repayment.
        The second part of the bill increases our focus on parents
    who want to save for their children's education. On this front,
    the bill provides an exclusion from family's income for
    employer contributions to 529 plans. And a small tax credit is
    given to the employer to encourage the employer's contributions
    towards college savings accounts that an employee sets up for
    their children.
        This legislation will allow graduates to pay back their
    loans faster at a lower overall cost. Our bill aims to
    dramatically increase the uptake of employer-sponsored plans.
    For employers or employees, right now, they only participate
    about three percent of the time. And that becomes a--much more
    of a problem as we look at what students want to do. They are
    not saving for retirement and, therefore, we want them to get
    into the process of actually saving. The faster they pay on
    their student loans, the faster they can start saving for their
    own retirement.
        I recognize my time has expired, but I also want to commend
    Rodney Davis for his work on this particular issue. But I do
    believe this is an area that we can come together in a
    bipartisan way to really start tackling the student loan debt
    problem.
        I thank you and yield back.
        Chairman BOUSTANY. Thank you, Mr. Dold.
        Mr. Salmon, you may proceed.

      STATEMENT OF THE HONORABLE MATT SALMON, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF ARIZONA

        Mr. SALMON. Thanks for holding this important hearing on
    tax legislation. As the Committee knows well, tax policy
    affects just about every part of American life.
        Of course we all want to ensure that the Tax Code is fair,
    it incentivizes beneficial behaviors that strengthen the nation
    and our economy. But we can always improve.
        When I returned to Congress I noticed part of the current
    Tax Code that is actually punishing those who wish to protect
    their hearing when hunting in the outdoors and while target
    shooting. Today a Depression-era antiquated and, frankly,
    oppressive tax provision instituted under FDR is restricting
    the ability of law-abiding Americans to access basic hearing
    protection equipment for firearms.
        In fact, not only is it part of the Tax Code, it is much
    more difficult for American sportsmen to protect their hearing
    while hunting, but it is also making it more difficult to
    purchase a suppressor--essentially, a muffler. In fact, I
    believe the same gentleman that invented the muffler invented
    the suppressor--than it is to buy an actual firearm--that is
    kind of ridiculous--such as an AR-15 or a semi-automatic
    shotgun. It doesn't make sense.
        As one who suffers from hearing loss myself, due in large
    part to my many years as an avid sportsman, I can tell you it
    is an important issue that we don't make it harder for folks to
    protect their hearing.
        As you may know, a suppressor is a common-sense piece of
    safety equipment which protects hearing of sportsmen and
    observers alike. While suppressors do not even come close to
    silencing the sound--in fact, Hollywood myth, I think,
    sometimes guides our policy. If you actually participate in
    shooting with a suppressor, you will find that it significantly
    reduces the sound, but you still know that a shot has been
    fired.
        Again, like I said, they don't even come close to
    silencing, they just reduce the sound to levels below just 140
    decibels. And 140 decibels is comparable to a thunder clap, a
    rock concert, a jack hammer, or a jet engine at about 100 feet,
    and is the maximum level permitted in the workplace by OSHA.
        By reducing the noise to more tolerable levels, we also
    reduce the disruptive effects that firearm noise has on wild
    game populations. In short, the use of suppressors makes things
    better and safer. In fact, Mr. Chairman, I think a lot of other
    nations are a little bit more progressive on this than we are.
    In fact, they require--countries that have very strict firearms
    laws require that you hunt with suppressers because of noise
    safety.
        And I am going to just wrap up, because I think it was
    included in the 1933 Act because a lot of the fish and game
    people felt that it would increase poaching. Well, 39 states
    have laws that allow hunting with suppressors, and there hasn't
    been a greater incidence of suppressors [sic]. And if using
    that logic makes a lot of sense, maybe we should make everybody
    go through the class three process with ATF when you buy a bow
    and arrow, because that makes no noise.
        And so, I think it is a ludicrous policy. We have close to
    70 cosponsors, bipartisan, and I think it is an idea whose time
    has come. The industry is doing very, very well. What is wrong
    with protecting your hearing if you are an avid sportsman? I
    think it is a common sense.
        Chairman BOUSTANY. Thank you, Mr. Salmon.
        Mr. Poe, Judge Poe.

        STATEMENT OF THE HONORABLE TED POE, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. POE. I want to thank the Chairman and the Ranking
    Member for allowing me to testify today. I am here to discuss
    H.R. 2883, the Master Limited Partnership Parity Act. This bill
    is a bipartisan bill. And I also want to thank Representative
    Thompson for being a coauthor of the bill, and Senator Coons
    and Senator Moran have the same bill over in the Senate.
        The bill will go a long way to encourage energy development
    domestically in the United States. This Master Limited
    Partnership Act is a simple bill that expands the MLP tax
    structure to include all forms of renewable, domestically-
    produced energy.
        Right now, MLPs are a successful tax structure that is used
    by many oil and gas companies. The structure has been very
    successful for U.S. companies such as Enterprise, which is
    based in Houston, Texas, and other companies. The structure has
    allowed these capital-hungry companies to track investments
    they need to grow, investments that may otherwise not have
    gotten without the structure.
        So the bill would allow clean energy projects to utilize
    MLPs as a beneficial tax structure that taxes a project like a
    partnership, but that trades its interest like a corporate
    stock, a C Corp. This allows access to liquidity and equity
    markets, and prevents double taxation. For the last 30 years
    MLPs have given natural gas and coal industries access to
    private capital at lower cost. And so, this is not a subsidy or
    a tax credit, this is a corporate tax structure that treats all
    energy producers the same, and promotes domestic energy.
        I also want to discuss another piece of legislation. It is
    based on a hearing that I had in the Terrorism Subcommittee
    last month. We found out that many individuals who work for
    501(c)(3) organizations that funded Hamas now work for other
    U.S.-based organizations: American Muslims for Palestinians, or
    AMP. The Holy Land Foundation for Relief and Development, Kind
    Hearts for Charitable Humanitarian Development, and the Islamic
    Association for Palestine are all guilty of financing Hamas.
        And what has happened, people who work for those
    organizations have moved to another organization that is a
    501(c)(3). It is called AMP. And that organization is right now
    involved in trying to have--boycott investment and sanctions
    movement against the country of Israel.
        And so, workers associated with these organizations or
    implicated in terror finance are free to work wherever they
    want to in other charities. This bill, all it does is require
    charities to be more transparent and give information if any of
    these new people come to work for that organization, so that
    the public and the donors know, and the government knows that
    these people are just moving from charity to charity under--I
    mean, under the guise of a 501(c)(3) organization, but are
    involved in supporting terrorist organizations.
        Thank you, Mr. Chairman.
        Chairman BOUSTANY. Thank you, Judge Poe.
        Ms. Eshoo, you may proceed.

      STATEMENT OF THE HONORABLE ANNA ESHOO, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. ESHOO. Thank you, Chairman Boustany and Ranking Member
    Neal and Mr. Larson, all the Members of the Committee. I really
    appreciate your opening up the Committee to have other Members
    that are not part of your committee to come in and share ideas
    with you. It is a very good idea, and I hope that what we bring
    forward will create some sparks and some benefits for our
    country.
        I am here to talk to you about a bill that I have
    introduced. It is a bipartisan bill, H.R. 4696, the Helping Our
    Middle-Income Earners Act, the HOME Act. It really is a simple
    piece of legislation. It would allow homeowners who live in a
    community association who make up to $115,000 in annual income
    to deduct up to $5,000 in community association assessments
    from their Federal tax liability.
        Community associations, which include condominium
    associations, homeowner associations, and housing cooperatives
    have grown substantially in recent decades, and offer
    affordable housing opportunities for our mutual constituents in
    countless communities across our country. Today over 65 million
    Americans reside in 27 million housing units within a community
    association.
        For example, in my Silicon Valley congressional district
    alone, 260,000 housing units are in a homeowner's association.
    We know that middle-class families are struggling to keep up
    with the rising cost of living. And the purpose of this
    legislation is to provide these homeowners with tax relief to
    help them stay ahead, financially.
        The HOME Act also recognizes the community association
    assessments and fund infrastructure and services that would
    traditionally be provided by the homeowner's local municipality
    and paid for through their property taxes. These services
    include street and sidewalk maintenance, trash and snow
    removal, storm--water management, among other services. Because
    these homeowners pay property taxes and community association
    assessments, they are effectively taxed twice for local
    service.
        This problem was recently highlighted in articles on May
    4th in the Washington Post and in the Chicago Tribune on my
    legislation.
        So I again thank and commend the Subcommittee for listening
    to the priorities of your colleagues who are not Members of the
    Committee. And I also hope that you will give this bill a fair
    consideration as you look to broader changes to our nation's
    Tax Code over the remainder of this Congress and continuing
    into the next one.
        Thank you.
        Chairman BOUSTANY. Thank you, Ms. Eshoo. I want to thank
    all four of our colleagues for bringing these important tax
    proposals forward, and we will certainly look at them. Thank
    you.
        Well, next call up our--one more panel of our colleagues:
    Mr. Buck, Mr. Harris, Mr. Meadows, and Mr. Cartwright.

       STATEMENT OF THE HONORABLE KEN BUCK, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF COLORADO

        Mr. BUCK. Thank you, Mr. Chairman, and thank you for
    holding this hearing and allowing us to give you some input in
    the Committee.
        Mr. Chairman, I want to thank you for the opportunity to
    speak on behalf of H.R. 4220, the Water and Agricultural Tax
    Reform Act. Throughout rural America, residents cite the rising
    cost of water as one of their greatest challenges. I see it
    happening in Colorado. When farmers can't afford water their
    crops lie withering in the fields, and the entire community
    suffers, from the farmer and his family to the towns and cities
    that rely on the agricultural industry for food and jobs.
        The Water Act empowers rural America. It keeps water
    affordable, while allowing farmers to have a stake in the
    resources they use every day. The Act specifically reforms the
    IRS rules applying to mutual irrigation reservoir and water
    companies. These entities are member-owned farmer cooperatives.
    They maintain water storage and delivery systems in much of
    rural America. The cooperatives can qualify as tax-exempt
    entities, provided that 85 percent of their income comes from
    member shareholders. These members include farmers, ranchers,
    and rural water users who purchase water from the cooperative.
        It has become increasingly difficult for mutual irrigation
    reservoir and water associations to stay in business because of
    costly water infrastructure maintenance. Under current law, if
    one of these cooperatives receives more than 15 percent of its
    income from non-member sources such as recreational leases or
    crossing fees, it will lose its tax-exempt status. This forces
    rural water users to bear the burden of operations and
    maintenance costs in the form of high water assessments, just
    to maintain their tax exemption.
        This common-sense legislation excludes certain revenue
    streams from the 85 percent member income test. By requiring
    the proceeds from the extra revenue to be used exclusively for
    the operations and maintenance of the water companies, we can
    assure that these funds are reinvested in rural water
    infrastructure. This will support local economies, promote more
    efficient use of water, and help agricultural workers across
    the country.
        This legislation is supported by the American Farm Bureau
    Federation, the Family Farm Alliance and rural water
    associations in many states. I urge the Committee to empower
    rural America by moving the Water and Agricultural Tax Reform
    Act forward.
        Another important tax priority for me is H.R. 2903, the
    Craft Beverage Modernization and Tax Reform Act. This bill
    modernizes excise tax rates for brewers and importers. Colorado
    is home to hundreds of brewers, from local micro-breweries to
    major Colorado employers like MillerCoors and Anheuser-Busch.
    This bill has brought together brewers of all sizes, and the
    tax relief afforded under this bill will provide the capital
    necessary for these businesses to grow. Thank you.
        Chairman BOUSTANY. Thank you, Mr. Buck.
        Dr. Harris, you may proceed.

      STATEMENT OF THE HONORABLE ANDY HARRIS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MARYLAND

        Mr. HARRIS. Thank you very much. What I am going to
    describe today is H.R. 5308, the Asset Act, which is another
    pathway to a state tax reform.
        You know, the bottom line is we pass the estate tax repeals
    through the House, nothing happens to it. So we really should
    begin to think if we can never pass estate tax repeal, of some
    way to mitigate the effect of estate tax.
        We all know what happens to a successful business or farmer
    or rancher, you know, they work hard, they accumulate things
    through their lifetime. The estate tax sits, and a lot of times
    they have to dissolve the business or the entity. If not, it is
    a tremendous inefficient allocation of capital during the
    course of doing business, because you are spending your time
    figuring out how to avoid the estate tax.
        So what this does, this bill, the Asset Act, permits
    individual taxpayers to opt in to a new system in which death
    would no longer be a taxable event. By taking the uncertainty
    of death out of the question of how and when assets should be
    liquidated, the Asset Act will contribute to economic growth
    and preserve the stability of these companies, which are
    frequently family-owned companies.
        Small business owners, farmers, ranchers, and others don't
    have to live their life fearing the tax liability imposed under
    the existing state tax, and won't have to dismantle profitable
    companies, sell farms and ranches, over-purchase life
    insurance, and waste their money on lawyers and accountants
    with sheltering strategies while they're alive.
        The key is that it gives the individual taxpayer the right
    to determine his or her destiny and to provide vital businesses
    and jobs at a time when we need them most.
        Under our proposal, individuals would essentially pay--have
    the ability to pay their estate taxes during--pre-pay them
    during their earnings years, and the government would then, on
    their death, would forego traditional Federal and estate tax
    and only collect capital gains taxes when those assets are sold
    at a time of the heir's choosing.
        The taxpayer would have to opt into the approach by
    agreeing to pay an additional tax on his or her adjusted gross
    income every year while they are earning money and accumulating
    the estate for the life of the taxpayer. The bill has it as one
    percent of adjusted, but we want to make it revenue neutral so
    that, in the end, it is a revenue neutral bill. No tax will be
    levied against the estate of a taxpayer on their death. Again,
    only the capital gains will be paid when the heirs to the
    decedent decide to sell the assets in the estate.
        The taxpayers would have to pay the fee for a minimum
    period of time. In the bill we have seven years but, again, it
    may need to be adjusted to make it revenue neutral. And the
    choice is irrevocable, once a taxpayer chooses this system.
        So what it would mean is that you give the business owner a
    second, predictable way to deal with estate taxes. Again,
    forgoing the need to liquidate estates at the time of death and
    spending inordinate amounts of money--and again, capital--
    inefficient spending of--allocation of capital during the
    business's productive life. Thank you very much.
        Chairman BOUSTANY. Thank you, Dr. Harris.
        Mr. Meadows, you may proceed.

      STATEMENT OF THE MARK MEADOWS, A REPRESENTATIVE IN CONGRESS
                    FROM THE STATE OF NORTH CAROLINA

        Mr. MEADOWS. Thank you, Chairman Boustany and Members of
    the Subcommittee. It is refreshing to have this kind of open
    environment to discuss possible legislation, and so I want to
    applaud the Subcommittee on your willingness to entertain this
    type of dialogue.
        I want to encourage the Subcommittee to endorse and support
    H.R. 210, which is the Student Worker Exemption Act. The
    genesis of this particular piece of legislation actually came
    from a chancellor of a university in my district as I was
    meeting with him. Not wanting to be political, he said, ``there
    is one thing that would really help us out as it relates to the
    Affordable Care Act.''
        Knowing that the Affordable Care Act can conjure up all
    kinds of rhetoric on both sides of the aisle, he said that the
    particular provision in the Affordable Care Act that requires
    universities to cover their student workers under the employer
    mandate was having a chilling effect on the amount of hours
    that they could give people who were wanting to work their way
    through college. And indeed, what was happening is that if they
    work for more than 30 hours for 3 weeks--so that would include
    summer time--they were actually having to put forth the expense
    and cover them under the employer mandate when, indeed, the
    Affordable Care Act actually required those who are 25 years of
    age and younger to be covered under the parents' plan or other
    types of insurance.
        So this was essentially a double insurance plan that was
    defeating the purpose of student workers on college campuses.
    We introduced that particular piece of legislation, we offer it
    here for your consideration.
        I can tell you that it has been endorsed by a number of
    university associations that would normally not endorse a piece
    of legislation that comes from someone with conservative
    pedigrees, such as myself. And I say that it has had tremendous
    support by Democrats, those in higher institutions. I think it
    is something we can all get behind, and it is certainly a
    common-sense approach to addressing some of the unintended
    consequences of the Affordable Care Act, and I certainly offer
    it up for your consideration. Thank you so much.
        Chairman BOUSTANY. Thank you, Mr. Meadows.
        Mr. Cartwright, you may proceed.

    STATEMENT OF THE HONORABLE MATT CARTWRIGHT, A REPRESENTATIVE IN
                CONGRESS FROM THE STATE OF PENNSYLVANIA

        Mr. CARTWRIGHT. Thank you, Chairman Boustany and all
    Members of the Subcommittee for holding this Members Day. I
    join Representative Meadows in thanking you for doing this, and
    encourage you to continue this sort of dialogue. I am here
    talking about H.R. 1100, the Military Spouse Job Continuity
    Act, which I introduced along with Representative Rob Wittman.
        This bill represents a small tax credit that could have a
    big impact on American military families. Every year, over a
    million servicemembers, receive change of station orders often
    requiring moves across state lines. Military spouses move along
    with them, and many times put their careers on hold when
    relocating. H.R. 1100 simply seeks to alleviate that burden
    borne by military spouses who must re-license or re-certify in
    order to continue working in their chosen profession when they
    move with their servicemember spouse.
        Specifically, the bill provides for a tax credit of $500
    for the renewal or transfer of an active duty servicemember
    spouse's professional license. It applies only to the
    administrative fees owed to state licensing boards or
    certificate granting institutions. Currently there is no
    Federal program covering this.
        The numbers speak to the need of this tax credit. Nearly 35
    percent of military spouses in the labor force are in
    professions that do require licenses or certifications for
    employment. The top three occupations of military spouses all
    require licensing or certification. We are talking about
    teachers, child care workers, and registered nurses.
        A military spouse's ability to continue in his or her own
    chosen profession impacts the military's ability to do business
    and retain its servicemembers. Nearly 70 percent of married
    servicemembers reported that their decision to re-enlist was
    largely or moderately affected by their spouse's career
    prospects.
        This bill enjoys wide support from military organizations,
    including the National Military Family Association, the
    Military Officers Association of America, and the National
    Guard Association of the U.S. In fact, the Military Officers
    Association of America has included that in their voting score
    card for this Congress.
        H.R. 1100 has strong bicameral and bipartisan support with
    144 cosponsors in the House and 14 cosponsors in the Senate for
    Senate Bill 210, introduced by Senator Bob Casey from my state.
        These men and women uproot their families and relocate in
    order to meet the needs of our national defense, and the
    government should be doing everything possible to make that
    transition seamless.
        Thank you again, Mr. Chairman, and thank you, all the
    Members of the Subcommittee.
        Chairman BOUSTANY. Thank you, Mr. Cartwright. Well, I want
    to thank all four of you, our colleagues, for bringing these
    very important tax proposals forward. We will look at them, and
    we thank you for your testimony today.
        Let's call up our next panel: Mr. Rodney Davis, Mr. Scott
    Peters, Chairman Rob Bishop, Mr. Keith Ellison, and Mr. Dana
    Rohrabacher.
        [Pause.]
        Chairman BOUSTANY. Just take your time, Mr. Davis.
        [Laughter.]
        Chairman BOUSTANY. You may proceed with your testimony.

     STATEMENT OF THE HONORABLE RODNEY DAVIS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. RODNEY DAVIS OF ILLINOIS. Sorry, we go the other way in
    Ag, I apologize. Not used to sitting on this end of the witness
    table.
        Mr. Chairman, thank you for your time, and to the
    esteemed--our esteemed colleagues on this Committee. I
    appreciate the opportunity to talk about a very important
    issue: student loan debt.
        The average student graduates with nearly $30,000 in debt,
    and Americans owe more than $1.3 trillion in student loans.
    Student loan debt now represents the second-highest form of
    consumer debt, only behind mortgage debt. Not surprisingly, the
    student loan debt crisis has forced many recent college
    graduates to delay buying a home and saving for retirement.
        According to the Institute for College Access in Success in
    2012, 1.3 million students graduated with student loan debt;
    153,400 of those students have since defaulted on their loan,
    costing taxpayers $4.5 billion in default liabilities. And that
    is just one recent graduating class.
        Employers like PriceWaterhouse Coopers and others are
    looking at new ways to help solve the student loan crisis. But
    it is time Congress does its part. I propose legislation that
    would offer tax incentives to private businesses to help
    employees repay student loans, much in the same way it
    currently works when an employer provides tuition assistance.
        The Federal Government already does this, and I know many
    congressional staffers take advantage of the student loan
    repayment assistance program here on the Hill. But as of now,
    assistance an employee receives from their employer counts
    toward their gross income, and only three percent of American
    employers in the private sector provide some sort of student
    loan repayment benefit.
        We need the existing tax incentives employers receive for
    tuition assistance to be applied to student loan repayment, and
    not to be counted as gross income for employees. My bill, H.R.
    3861, the Employer Participation and Student Loan Assistance
    Act, would do just that, helping companies recruit and retain
    young talent.
        Although the cap of $5,250 per year would remain the same,
    I believe this is a clean and simple fix that has a lot of
    support from both students and employers. And it is important
    to keep in mind the tangible benefits helping to reduce default
    rates would have on our economy.
        Recently my colleague next to me, Scott Peters, who has a
    similar bill, and I agreed to work together on this issue to
    help reduce the burden of student loan debt. We look forward to
    continuing to work with our colleagues in Congress, educational
    institutions, the private sector, and, most importantly,
    students to push for common-sense solutions to the ever-growing
    problem of student loan debt.
        And I want to end, Mr. Chairman, by reminding this panel
    that in one graduating class alone--one graduating class,
    153,400 former students have defaulted on their loans, leaving
    a potential $4.5 billion hit to the Federal taxpayers. We need
    to act.
        Chairman BOUSTANY. Thank you, Mr. Davis.
        Mr. Peters, you may proceed.

     STATEMENT OF THE HONORABLE SCOTT PETERS, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. PETERS. Thank you, Mr. Chairman, Mr. Neal, for
    convening this hearing and for giving me the opportunity to
    discuss an innovative, bipartisan proposal that would reduce
    the burden of student loan debt. And I thank Mr. Davis for his
    acknowledgment. We are trying to see if we can't combine these
    ideas, because they are pretty similar, as you will hear.
        Affordable higher education for hard-working Americans is
    central to future generations achieving the American Dream and
    to our nation's competitiveness. So we should be making it
    easier and more affordable for students to go to college, not
    keeping it financially out of reach for more and more families.
        Substantial student loan debt not only is a burden for
    graduates, but it is diminishing purchasing power and severely
    limiting lifetime earnings. The Wall Street Journal reported
    that the average debt for a 2015 graduate was just over
    $35,000. A study by DIMOS recently found the average student
    debt for a dual-headed household with bachelor's degrees leads
    to a lifetime loss of nearly $208,000 in income, and student
    loans, as Mr. Davis said, recently surpassed credit card debt
    to become the second-biggest source of personal debt in the
    United States.
        In our dynamic new economy, high-quality jobs now require
    far more formal education and mid-career learning than in the
    past, which can be expensive. Employers have an incentive to
    help their employees pay for education that adds value to their
    business.
        My bill, the Bipartisan Student Loan Repayment Assistance
    Act, would give borrowers relief from their student loan debt
    burden through incentivizing employers to offer student loan
    repayment assistance. It encourages employer-employee matching
    programs to repay student loans, similar to a matching 401(k)
    plan and the student loan assistance we offer to staffers and
    the House of Representatives. Employer and employee student
    loan contributions made through a repayment agreement would not
    be taxed as income, and the contributions wouldn't be sent
    directly to the lender.
        Students will be able to make investments that grow the
    economy, like buying a home, starting a family, and putting
    away money for retirement. Businesses will be able to attract
    and retain high-skilled employees and well-qualified graduates,
    and a more skilled workforce will allow America to compete
    better in the global economy.
        Congress must embrace the opportunities to invest in our
    nation's future as we work to reduce America's student loan
    debt and unleash our economic growth.
        I thank the Committee for its consideration, look forward
    to working with you and my colleagues to move this policy
    forward, and certainly welcome any of your questions. Would
    yield back the balance of my time.
        Chairman BOUSTANY. Thank you, Mr. Peters.
        Chairman Bishop, I assure you I'm not going to ask any
    questions about Puerto Rico. You may proceed.
        Mr. BISHOP. Yes, right, right, sure.

      STATEMENT OF THE HONORABLE ROB BISHOP, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF UTAH

        Mr. BISHOP. Gentlemen, it is good to be here. I have a
    statement for the record, if indeed you have a record. We can
    introduce that later.
        I have long been involved on the study group on Germany. I
    am past Chairman of it. And I remember one time I was over
    there talking with Senator Coats, who was then the ambassador
    to Germany, and we recognized that in western and southern
    Germany, where there is a great deal of interface with American
    military, positive attitude towards America was understandable.
        In East Germany, where that contact was less, so their
    attitude was less. And we agreed at that time that one of the
    best things we could do for foreign policy was to get more
    interaction between people knowing about America, having that
    personally there. And one of the best ways of doing that was
    with foreign exchange students.
        Look, when the Iraq War broke out, Chancellor Schroder
    decided to use that as part of his campaign attacking the
    United States. One of the members of his party that helped us
    the most was a gentleman in the Bundestag by the name of Hans-
    Ulrich Klose, who was always stating that in 1957 he spent a
    year as a foreign exchange student in Clinton, Iowa. Those kind
    of friendships that we develop through foreign exchange
    programs have an amazing amount of help in our foreign policy
    on the grass roots level.
        In the 1960s a deduction was given to those who were
    hosting these students of $50. The bill that I have, which is
    4296, or something like that, would simply change that to $900,
    which is the rate of inflation since the 1960s. It hasn't
    happened since that time.
        Anything we could do to encourage this kind of student
    interchange has a long-term impact on the foreign policy. You
    could do something in this Committee that would have a great
    impact on a committee that is not part of your jurisdiction. I
    have hosted these kids. So, actually, if you wanted to pass
    this and make it retroactive, that would be cool, I could live
    with that.
        [Laughter.]
        Mr. BISHOP. But it has an impact, and it is a positive
    impact, and it is one of the things that we could do to try and
    express the idea of getting people over here so they understand
    America and they can go back home and they can promote and be
    friends of America in the future. I think it is a small step
    that could have enormous impact later on.
        Thanks.
        Chairman BOUSTANY. Thank you, Chairman Bishop.
        Mr. Ellison, you may proceed.

     STATEMENT OF THE HONORABLE KEITH ELLISON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MINNESOTA

        Mr. ELLISON. Thank you, Mr. Chairman and Ranking Member and
    all the Committee members.
        Last week I met with a formerly homeless veteran with a
    service-connected injury who now is living in Fort Snelling,
    which is a old fort in Minnesota which is now home to veterans
    housing. And he said this to me. He said, ``Congressman
    Ellison, you can't get clean on the street. You can't hold a
    job on the street. We need housing.''
        And, you know, I hear from young people every day who want
    to buy a home, but see most of their income disappear to cover
    rent. Crushing rent, college debt--as already been mentioned--
    make it difficult that they will ever be able to establish a
    downpayment to afford to buy a home. They may, but it may be a
    long time.
        Yesterday nearly three dozen Realtors stopped by my office
    to urge me not to make any changes to the $70 billion mortgage
    interest deduction. And these are my friends, and I appreciate
    them a lot. But as much as I want to see things the way my
    friends do in this--in the Realtor community, I cannot ignore
    the pressing housing needs of Americans and the current
    problems that the current mortgage interest deduction causes.
        The status quo means giving significant tax breaks to
    families that earn more than $100,000 a year, while giving a
    little bit either in home ownership or rental housing to people
    with lesser income. That is why I introduced the Common Sense
    Housing Investment Act. This bill replaces the regressive and
    badly-targeted mortgage interest deduction with a 15 percent
    flat rate credit. The 15 percent credit my bill proposes would
    help more than 16 million current homeowners. And there are at
    least a third of these homeowners with a mortgage that don't
    even itemize their taxes.
        Future homeowners will also benefit. They will know what
    the future tax benefit would be. And by converting to a credit
    and lowering the cap on the amount of the mortgage interest
    from one million to 500,000, we raise $200 billion in 10 years.
    With that money we can provide tens of millions of affordable
    new homes, and can fund the National Housing Trust Fund, move
    families off decades-long waiting lists, expand the low-income
    housing tax credit, and Section 8, and upgrade our public
    housing.
        H.R. 1662 doesn't provide enough revenue to end our
    affordable housing crisis. My other bill, the Inclusive
    Prosperity Act, can kick in some additional funds. The
    Inclusive Prosperity Act enacts a wafer-thin tax on the sale of
    stocks, bonds, and derivatives. The revenue would support
    education, child care, and pollution cleanup and other
    investments. Financial transaction taxes are not a radical
    idea; 40 nations have or have had financial transactions tax.
    The financial transactions tax raises revenue for investment
    and curbs dangerous high-frequency trading.
        The Common Sense Housing Investment Act and the Inclusive
    Prosperity Act are examples of better choices for working
    families in our future, and I urge the Committee to support
    both. Thank you.
        Chairman BOUSTANY. Thank you, Mr. Ellison.
        Mr. Rohrabacher.

     STATEMENT OF THE HONORABLE DANA ROHRABACHER, A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. ROHRABACHER. Well, thank you very much, Mr. Chairman
    and Ranking Member and Members of the Committee. I appreciate
    this opportunity to bring H.R. 4577 to your attention. That is
    the Expanding Employee Ownership Act of 2016, which I
    introduced with Rep. Collin Peterson as my cosponsor, as
    coauthor back in February 12th of this year.
        This bill, I believe, will be the most bipartisan-supported
    bill that ever has come to the floor of the House, if we permit
    it to come to the floor of the House for a vote. It is--
    basically wants to expand the ownership of--by employees of
    stock in the companies in which they work.
        The proposal would be like ESOPs on steroids. This is where
    every time a company would give a distribution of stock to its
    employees--it has to be a general distribution--those
    employees, if they keep that stock for five years, do not have
    to pay income tax on the stock. So it is tax-free to them. If
    they hold it for 10 years, another provision kicks in where,
    after that 10-year period, a capital gains tax will begin to be
    eliminated, and that is phased in over a 10-year period. So
    after 20 years an employee will have no capital gains tax on
    the stock that he has been given, and no income tax, as well.
        I believe that would--what we are talking about would
    dramatically expand the employee ownership and--of their own
    stock and their own companies, which would bring about more
    cooperation between management and labor, a much longer view of
    decisions by labor--by the management, knowing that the
    employees had to be taken into consideration because, after
    all, they are owners of the company, as well.
        So I am--I would ask that this be made--would be brought to
    the floor, and I--as I say, I think this reflects a bipartisan
    commitment of both Republicans and Democrats not just to
    empower big businessmen, but let the average person in this
    country start to benefit from capital ownership. And the reason
    we have such a large dichotomy now, and wealth ownership in our
    country, is that so many people don't own any capital. And it
    is capital that actually creates wealth. And so we have cut
    them off.
        This would encourage that type of broad ownership, help
    working people, help our companies have stable employment with
    good employees. It is a win-win for everybody.
        Chairman BOUSTANY. Thank you, Mr. Rohrabacher. I want to
    thank our colleagues for bringing these very important tax
    proposals forward, and we will take them all into
    consideration. We thank you.
        Let's call up the next panel. Mr. Brat, Dr. DesJarlais, Mr.
    Hultgren, Dr. Fleming, and Mr. DeFazio.
        [Pause.]
        Chairman BOUSTANY. Ranking Member Neal has to chair a
    different event, he will be back shortly. I just want to have
    that recorded in the record.
        [Pause.]
        Chairman BOUSTANY. We thank our colleagues. And Mr. Brat,
    you may proceed.

       STATEMENT OF THE HONORABLE DAVE BRAT, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

        Mr. BRAT. Thank you, Mr. Chairman. Encouraging personal
    savings is more important now than ever. We need to make it
    easier for the American people to work, save, invest, and live
    the lives they want. That is why Senator Jeff Flake and I
    introduced the Universal Savings Account Act.
        Universal savings accounts would be like Roth IRAs, but far
    more flexible. American adults could contribute post-tax income
    up to $5,500 per year. Savings could be invested like IRAs and
    earnings would grow tax-free. Withdrawals wouldn't be taxed at
    all. Anyone who doesn't contribute the full amount in a year or
    who makes withdrawals could backfill it later. These accounts
    would let people save for any of life's challenges and
    opportunities with the knowledge that their resources will be
    there when they need them.
        They could also supplement retirement savings, but they
    could also be used for a car, college, downpayment on a house,
    and much more.
        Other options already exist, but they have complicated
    rules and restrictions. Many Americans won't risk putting their
    hard-earned income into restricted accounts that penalize
    general withdrawals. Universal savings accounts are simple and
    easy to use. Canada and Great Britain have had something
    similar for years. Canada's accounts were established in 2009,
    and only 6 years later, 48 percent of Canadians had one,
    including many middle-income families. These accounts would
    create opportunity by reducing double taxation and expanding
    national savings.
        The U.S. personal savings rate is only 5.5 percent,
    currently, much lower than it should be, and much lower than it
    was in the 1970s or 1980s. In Macro Economics 101, which I used
    to teach for 20 years, students learn that savings equals
    investment at the macro level, and per capita income growth
    requires capital investment. With a growth rate of only 0.7
    percent in the fourth quarter of 2015, we clearly need to boost
    both savings and investment.
        These accounts would also help reform Federal and state
    programs, with minor changes that could be used for education
    savings accounts, Roth health savings accounts, cash-based
    income support programs, and more. Our proposal has been
    endorsed by Americans for Tax Reform, the National Taxpayers
    Union, and the Association of Mature American Citizens.
        My Virginia constituents like it, regardless of their
    political leanings. I hope we can all work together on ideas
    like this to help our constituents face life's challenges and
    opportunities.
        I ask unanimous consent to insert supplemental materials
    about the bill into the record.
        Chairman BOUSTANY. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. BRAT. Thank you, Mr. Chairman.
        Chairman BOUSTANY. I thank the gentleman.
        Mr.--Dr. DesJarlais, you may proceed.

     STATEMENT OF THE HONORABLE SCOTT DESJARLAIS, A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF TENNESSEE

        Mr. DESJARLAIS. Thank you, Mr. Chairman and Members of the
    Committee. I want to thank you for inviting me to come before
    you today to discuss H.R. 2874, the Andrew P. Carpenter Tax
    Act. I am truly humbled to have had the honor of introducing
    this bill.
        On February 19, 2011, Marine Lance Corporal Andrew
    Carpenter passed away from fatal wounds sustained while on a
    combat mission in the Helmand Province of Afghanistan. A
    resident of Columbia, Tennessee, Andrew enlisted in the United
    States Marine Corps in 2007, and went--was on his second tour
    of duty in Afghanistan when he laid down his life for his
    country, leaving behind his wife, Chrissy and then soon-to-be-
    born son, Landon.
        Three years prior to his tour of duty, Andrew had taken out
    a private student loan, which the loan company ultimately
    forgave following Andrew's death. However, as hard as it is to
    believe, the pain and anguish of his family was exacerbated
    upon learning that the amount of this discharged loan, by law,
    would be factored into their gross taxable income for that
    year, a nearly $1,800 tax bill.
        Having already sacrificed so much for our country, it is
    simply wrong to require our military families to pay taxes on
    loans already forgiven. This is why I have reintroduced this
    bill.
        Simply, this bill amends Section 108 of the Internal
    Revenue tax-exempt private student loan forgiveness from being
    categorized as gross taxable income for families of veterans
    who have lost their lives while serving on active duty in the
    United States armed forces. This legislation attempts to shield
    the families of American fallen soldiers from ever having the
    IRS add to their loss by callously presenting them with a tax
    bill. The only thing these parents should receive is a flag and
    the admiration of the American people.
        This bill, which passed unanimously in the House during the
    112th Congress, has received the support of the National Guard
    Association of the United States and the Veterans of Foreign
    Wars. I am truly humbled to have had the honor of introducing
    this bipartisan bill, and look forward to working with this
    Committee to fix this problem, and would humbly ask that you
    consider bringing this to the floor. And it would be an awful
    kind gesture to do it before Memorial Day--not that I am asking
    much.
        Chairman BOUSTANY. Thanks, Dr. DesJarlais.
        Mr. Hultgren, you may proceed.

    STATEMENT OF THE HONORABLE RANDY HULTGREN, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. HULTGREN. Thank you, Chairman, thank you Members of the
    Committee. I really appreciate this opportunity.
        As you all know better than most, our Tax Code reaches into
    every sector of our economy and every home across America. I
    support having a tax system that allows for everyone to keep as
    much of their hard-earned money as possible. Americans and
    their representatives in Congress agree it is time to simplify
    the Tax Code.
        It naturally follows that we should analyze how that
    simplification will affect the country. Here is one item that I
    think is working: the current tax-exempt status provided to
    municipal bonds. This is why I recently partnered with
    Congressman Ruppersberger to create the Municipal Finance
    Caucus.
        While serving in local government in Illinois I saw
    firsthand the benefits provided by this reliable option for
    financing community development. I am talking about the roads
    we drive on, schools for our children, affordable family
    housing, water systems that supply safe drinking water,
    hospitals and clinics to treat the sick, airports and ports
    that help move product domestically and overseas, and utility
    plants that power our homes, businesses, and factories.
        In 2013 a study by local government groups found that if
    the tax exemption is eliminated or capped, that it is more
    costly to issue the debt. These costs are real. Building the
    Red Gate Bridge over the Fox River in St. Charles in 2011 would
    have cost the City of St. Charles, Illinois an additional
    $619,000 in interest costs, without the exemption. Will County
    wants to build a new courthouse and law enforcement complex
    affordably.
        Washington disagrees on how to strengthen our
    infrastructure, but I believe decisions made by local
    communities handling local projects tend to be more efficient
    than one-size-fits-all policy from Washington, D.C. I like to
    think of this as fiscal Federalism, and our colleagues agree.
    Last year Congressman Ruppersberger and I were joined by 122 of
    our colleagues, Republicans and Democrats, in a letter to the
    House leadership, saying as much. And I plan to submit this for
    the record.
        Mr. Chairman, this impacts all of our districts, and I know
    even in your own district, the St. Martin Parish School
    District issued bonds last year to build new schools and
    improve existing ones. The issuance would have cost an
    additional $1.2 million if the tax exemption were capped, as
    called for in the President's budget. Ranking Member Neal,
    Springfield, Massachusetts, recently completed an issuance used
    to fund 22 separate projects, including school renovation, road
    improvement, HVAC work at City Hall, and would have cost the
    city and its taxpayers almost another $7 million.
        U.S. municipal securities market is now a robust $3.7
    trillion. Unfortunately, the media likes negative stories. It
    is frustrating to see breathless articles on the latest debt
    collapse. Certainly we need to make sure debt is being used and
    issued and managed responsibly, but there are also thousands of
    successful infrastructure projects across our great country. We
    must keep telling their stories.
        We should also be thinking of other ways that state and
    local government can partner with the private sector to support
    job growth.
        I would ask the opportunity to be able to submit the rest
    of my testimony.
        Chairman BOUSTANY. Without objection.
        Mr. HULTGREN. With that, I would yield back.
        Chairman BOUSTANY. Thank you, Mr. Hultgren.
        Dr. Fleming, you may proceed.

     STATEMENT OF THE HONORABLE JOHN FLEMING, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF LOUISIANA

        Mr. FLEMING. Thank you, Mr. Chairman. Today I am here to
    testify on H.R. 1397, the Seniors Tax Simplification Act, which
    would save millions of taxpayers money, but not cost the
    revenue one cent.
        Every day and every day for the next 14 years, 10,000
    Americans will celebrate their 65th anniversary--excuse me,
    65th birthday. In 2010, about 13 percent of the national
    population was 65 years old or older. That percentage is
    expected to grow to 18 percent by 2030. Recent IRS statistics
    tell us that about 23 million seniors file taxes. That is
    nearly 16 percent of all tax filers. Millions of these senior
    filers claimed a pension or annuity and social security
    benefits. There is no doubt that the American senior population
    is increasing and, in all likelihood, the number of senior
    filers will increase, as well.
        What is concerning and unique to this segment of the
    population is the fact that seniors, by virtue of their age and
    type of income, are precluded from using Form 1040 EZ, the
    easiest and most basic individual income tax return form
    available.
        Earning social security retirement--excuse me, H.R. 1397,
    the Seniors Tax Simplification Act, remedies this dilemma by
    providing a brief, easy-to-read form called Form 1040SR,
    specifically designed for older American taxpayers earning
    social security retirement benefits, interest, and capital
    gains.
        The new Form 1040SR would not limit taxpayers by age or
    taxable income levels. H.R. 1397 would grant Americans over 65
    years old access to a straightforward tax form, and one that is
    tailored to their specific income needs.
        Under my legislation, seniors would no longer be
    categorically excluded from the option of easy filing. In 2015,
    income tax filers had a choice between three tax forms: Form
    1040EZ, Form 1040A, and Form 1040. All forms allow taxpayers to
    claim the earned income tax credit. Each form, however, becomes
    incrementally laborious, based on a taxpayer's age, taxable
    income, and tax deductions and credits. The new Form 1040SR
    would mirror Form 1040EZ, with the exception that anyone over
    65 could use the form, and tax filers would not be limited by a
    taxable income.
        Like Form 1040EZ, Form 1040SR would not allow taxpayers to
    itemize deductions or claim any tax credits, with the sole
    exception of the earned income tax credit. My legislation
    provides seniors with a choice. Like all tax filers, seniors
    will need to decide which form is best suited for their unique
    financial complexity. The easiest tax form is not always the
    best, but at least seniors will have the ability to decide that
    for themselves.
        I would note for the record that H.R. 1397 has received
    broad coalition support, and I ask unanimous consent to submit
    letters from AMAC, Americans for Tax Reform, National Taxpayers
    Union, and 60-plus associations as part of my testimony here
    today.
        Chairman BOUSTANY. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. FLEMING. Thank you. An enactment of H.R. 1397 is not
    expected to cost the taxpayers any money. It could actually
    save seniors time, energy, and resources. And thank you very
    much.
        Chairman BOUSTANY. Thank you, Dr. Fleming.
        Mr. DeFazio, you may proceed.

     STATEMENT OF THE HONORABLE PETER DEFAZIO, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF OREGON

        Mr. DEFAZIO. Thank you, Mr. Chairman. Thanks for this
    opportunity to be here today. Mr. Chairman, I am the co-chair
    of the House Small Brewers Caucus created in 2007. We now have
    207 Members representing 43 states.
        For the first time since Prohibition we have more breweries
    in the United States than at any time in our history, 4,300.
    These small businesses, for the most part, support nearly half-
    a-million jobs. And yet they are one of the most highly
    regulated and taxed business sectors in the country. Craft
    brewers paid $307 million in Federal excise taxes last year.
    Small brewers who produce less than two million barrels a year
    pay $7 for the first 60,000. After that they pay $18 per
    barrel.
        Our colleague, Representative Paulsen, has introduced H.R.
    2903, the Craft Beverage Modernization Tax Reform Act, which
    would reduce the excise tax from $7 per barrel to $3.50 per
    barrel on the first 60,000 barrels brewed, and it would reduce
    the tax from $18 to $16 for all brewers, large and small, on
    the first 6 million barrels.
        This is a very modest proposal which would do a great deal
    to grow America's small businesses. It is very expensive to
    start and to expand a small brewery, and this reduction in
    excise taxes would be used to purchase equipment, much of which
    is manufactured in the United States, and produce more jobs
    here in the U.S. And ultimately, the craft breweries,
    obviously, are helping us with our trade deficit, since the two
    largest brewers in America are now foreign-owned. So there are
    many, many benefits to recommend it.
        This bill has more than 200 bipartisan cosponsors. It is
    supported by the Brewers Association, Beer Wholesalers
    Association, Wine Institute, many other organizations. You
    know, I will admit that there is some self-interest, since my
    state of Oregon will benefit greatly from the bill, we have
    nearly 1,000 craft breweries, wineries, and distilleries that
    contribute $6 billion to our economy.
        I think this is a very common-sense proposal that would
    stimulate a tremendous amount of growth in small businesses,
    and I recommend it to the Committee.
        Chairman BOUSTANY. Thank you, Mr. DeFazio. I want to thank
    all our colleagues for bringing these important tax provisions
    forward, and we will take them under consideration. Thank you
    very much.
        We will now move to our next panel: Majority Whip Steve
    Scalise, Mr. Cramer, Mr. Barr, and Ms. Sewell.
        [Pause.]
        Chairman BOUSTANY. We thank you for joining us today, and
    we will start with Ms. Sewell.

     STATEMENT OF THE HONORABLE TERRI SEWELL, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF ALABAMA

        Ms. SEWELL. Thanks, Mr. Chairman. Thank you for the
    opportunity to come before you today to present the Workforce
    Development Tax Credit Act, H.R. 1781, a bill designed to
    increase apprenticeships through a new Federal tax credit for
    employers. I introduced this bill in response to the feedback I
    received from employers who participated in our first job fair
    in Birmingham, Alabama.
        In a breakout session, employers expressed deep concern
    about the shortage of skill, talent, and its relationship to
    unemployment. They reported that positions remained unfilled,
    and they were unable to expand because they couldn't find
    employees with the skills needed to help their businesses
    remain competitive. These employers predicted, then, that these
    shortages will only grow worse if we do not better equip our
    young and unemployed people with the skills needed to succeed
    in the workforce.
        According to the Manufacturing Institute, the skills gap is
    expected to contribute to 2 million of the 3.5 million
    manufacturing jobs expected to open in the next decade.
    Apprenticeship programs, both domestically and internationally,
    have proven effective in combating the skills gap, while
    increasing middle-class wages, reducing income inequality, and
    expanding social mobility. There are--they are among the best
    pathways to provide American workers with the skills and
    knowledge needed to acquire good-paying jobs and to grow the
    economy.
        Studies suggest that for every dollar spent on
    apprenticeship programs, employers may get an average of $1.47
    back in increased productivity, reduced waste, and greater
    front line innovation.
        With the proven value of apprenticeship programs in mind,
    we crafted legislation modeled after a bill in the South
    Carolina legislature that created one of our country's most
    successful apprenticeship programs. It was called
    Apprenticeship Carolina. The funding provided by the state is
    modest, yet the incentives has increased apprenticeships in the
    state sixfold since it was first created in 2009.
        International companies often cite an inadequate number of
    skilled workers for intermediate technical occupations among
    reasons for not expanding operations in the United States.
    These companies from Germany and Switzerland among them have
    made skills training a top priority.
        In 2014 we worked with our governor's office in Alabama to
    attract an international copper company, Golden Dragon, to its
    first U.S. plant in the most economically depressed county in
    the State of Alabama in my district. Less than two years have
    passed, and the company is already experiencing concerns that
    local employees do not have the skills needed to achieve the
    productivity and quality required in today's global competitive
    marketplace. This is an indictment of our nation's
    disinvestment in skills training.
        If we fail to properly train our young people for jobs in
    the 21st century, we will put both them and our country at a
    disadvantage for generations to come. We can and must do better
    by investing in these training programs.
        I look forward to working with this Committee to advance
    this and other tax legislation that encourages companies to
    invest in America's workforce. In so doing, we can revitalize
    our manufacturing sector and increase our global
    competitiveness. Thank you.
        Chairman BOUSTANY. Thank you, Ms. Sewell. We will next go
    to our distinguished Majority Whip, Mr. Scalise.

     STATEMENT OF THE HONORABLE STEVE SCALISE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF LOUISIANA

        Mr. SCALISE. Thank you, Mr. Chairman. I appreciate the
    opportunity to come and testify before the Committee. I want to
    also talk about H. Con. Res. 89, the resolution to oppose a
    carbon tax.
        As the Members of the Committee know, the two most
    important policy areas impacting our country are taxes and
    trade. And that is why I am here today to discuss a tax that
    will negatively impact American families and, by extension,
    trade and American competitiveness. My concurrent resolution
    expresses the sense of Congress that a carbon tax would be
    detrimental to American families and businesses, and is not in
    the best interest of the United States.
        In some ways, we have seen this before. I am humbled that
    in the 113th Congress, with over 150 cosponsors, the House
    passed a version of this concurrent resolution as an amendment
    to the REINS Act. Now, the REINS Act is another initiative that
    I believe we should continue to promote. It is the idea that
    unelected bureaucrats in Washington who want to come up with
    some crazy regulation that has negative impacts on the economy
    should not be able to move forward with those regulations
    unless they have come before the elected representatives of the
    people, where they ought to be able to state their case on
    CSPAN, in front of our elected representatives, and provide the
    data. And if it is a good idea, we will pass it, and if it is a
    bad idea, we defeat it. But we should be held accountable, not
    some unelected bureaucratic who is not held accountable for
    that. But, of course, that is a discussion for another day.
        Let's go back to H. Con. Res. 89. In July of 2013, the
    House passed the Anti-Carbon Tax Resolution as an amendment to
    the REINS Act by a 237 to 176 vote, which, by the way, was a
    bipartisan vote in support of the legislation.
        I hope that my testimony here today will lend additional
    support to revisiting this effort in the near future. I
    reintroduced this legislation in the 114th Congress because I
    believe it is critically important for the House of
    Representatives to be on record when it comes to a carbon tax.
    Here is why.
        A carbon tax, which is defined in the resolution as a
    Federal tax on carbon released from fossil fuels, is really an
    energy tax and an energy tax that includes taxing most means of
    electricity generation, gasoline, natural gas, and home heating
    oil that will negatively impact American families. With
    stagnant wages in the middle class over the last decade,
    increased electricity and transportation costs are not the
    right policy solution for hardworking Americans.
        The higher transportation and electricity costs will then
    lead to an increase in the cost of all goods and services, with
    the massive amount of regulations and red tape that has been
    proposed and finalized by this Administration--by the way, that
    will also raise the price of all goods--a carbon tax would
    further devastate our economic potential.
        I have said that a carbon tax will raise energy prices
    across the board, and it will. But what should also be noted is
    that it will disproportionately affect those at the lower end
    of the economic spectrum, and those on fixed incomes. The
    reason is that our lower income citizens spend a larger
    percentage of their household budget on energy costs. So a tax
    that targets low-income families and seniors is not one that I
    believe the American people support.
        So I want to thank the Chairman for the invitation today,
    and I also want to thank the several organizations that have
    sent letters of support for this concurrent resolution. As a
    side note, Chairman Brady, the full Committee Chairman, was the
    first cosponsor we picked up after introducing this
    legislation.
        I will continue to work with my colleagues to have this
    measure considered on the House floor because the American
    people deserve to know where everyone stands on a carbon tax.
        Thank you for consideration, Mr. Chairman. I yield back.
        Chairman BOUSTANY. I thank the distinguished majority whip.
        Mr. Cramer, you may proceed.

     STATEMENT OF THE HONORABLE KEVIN CRAMER, A REPRESENTATIVE IN
                CONGRESS FROM THE STATE OF NORTH DAKOTA

        Mr. CRAMER. Thank you, Mr. Chairman, for the opportunity to
    present today H.R. 5171, the Legacy IRA, introduced by Ways and
    Means Oversight Committee Chairman, Mr. Roskam.
        You know, since its enactment in 2006, the charitable IRA
    rollover has helped thousands of donors--millions of donors,
    really--contribute millions of dollars to thousands of American
    charities as they feed the hungry, find housing for the
    homeless, provide all kinds of services for the American
    citizens, including caring for the sick.
        Under current law, as you know, the individuals aged 70-
    and-a-half years or older are allowed to make direct
    contributions from an IRA of up to $100,000 per year to public
    charities, and to private operating and conduit foundations
    without having to report the IRA distributions as taxable
    income. And, you know, this used to be part of the extender
    package every couple of years or so. And, fortunately, we were
    able to make it permanent law last year in the PATH Act.
        In an effort to build on this momentum and really expand
    the opportunity both for donors and charities, as I said,
    Chairman Roskam, Representative Blumenauer, Paulsen, Tiberi,
    and I have recently introduced H.R. 5171. This bipartisan
    legislation expands the charitable IRA rollover to provide
    middle and lower-income individuals and families more
    opportunities to give to a charity or a cause that they
    support.
        Specifically, the bill authorizes tax-free IRA rollovers
    for gifts which benefit charities and provide taxable
    retirement income for donors called charitable life income
    plans--things like annuities. Many IRA owners want to make
    charitable gifts, but are also in need of the retirement
    income. And the life income IRA rollover is a way for donors of
    more modest resources to combine charitable gifts with
    retirement income.
        Let me just give an example. I mean if you were a middle-
    income family, you reach, as the wage earner, the age of 65,
    you retire, and never in your wildest dreams did you think you
    could make a $100,000 contribution to your alma mater, but you
    have this IRA. At the age of 65, if this legislation becomes
    law, you can make that $100,000 contribution to your alma
    mater, they could put it into an annuity that pays you, say,
    $5,000 per year income that you need, which is obviously good
    for the charity, obviously good for the donor, who now has
    $5,000 a year they didn't have before, good for the economy
    because that income is now rolling around the economy. And, for
    those that care, it is also good for the government, because
    that $5,000 per year is now taxable, generating revenue.
        There are lots of good reasons to incent contributions in
    charity, not the least of which is charity actually replaces
    the need for government services, in many cases, and delivers
    those services in a much more compassionate way than the
    government ever can or ever would.
        Without going into the details, I think that the merits are
    obvious, and I look forward to working with Chairman Roskam and
    others on the Committee to bring this bill to the floor and
    hopefully pass it. Thank you, Mr. Chairman.
        Chairman BOUSTANY. Thank you, Mr. Cramer.
        Mr. Barr, you may proceed.

       STATEMENT OF THE HONORABLE ANDY BARR, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. BARR. Thank you, Chairman Boustany and Members of the
    Subcommittee, for hosting this listening session and providing
    me an opportunity to relay the tax priorities of my
    constituents before the Subcommittee on Tax Policy.
        Kentucky's sixth congressional district has the great
    fortune of having a very diverse economy, from manufacturing to
    agriculture, health care, education, and high-tech start-ups.
    With that said, let's be honest. People think of Kentucky, they
    think about our world-class horse racing and breeding industry
    and Kentucky bourbon. And that is what I would like to discuss
    with this Subcommittee today.
        First, horses. On the heels of last year's triple crown
    with American Pharaoh, and last Saturday's Kentucky Derby
    champion, Nyquist, there is much to celebrate about our sport.
    But this is more than just a sport. It is a dynamic, job-
    producing industry with an annual economic impact on the United
    States of $39 billion. And so I would like to commend to your
    attention H.R. 3671, the Race Horse Cost Recovery Act. This
    would make the three-year depreciation for race horses
    permanent. We have been able to include this in the tax
    extenders package for a number of years. It is time to make
    this permanent. And it is not just a benefit to this industry.
    It is sound tax policy because the useful life of this asset is
    three years, once a race horse is put into service.
        Now, bourbon. Kentucky's distilling industry has been an
    economic driver for generations. This is true now more than
    ever, as Kentucky and many other states across the country have
    witnessed an explosive growth in craft-distilled spirits. One
    could argue bourbon has never been more popular. In fact, there
    are currently more barrels of bourbon aging in Kentucky than we
    have citizens in the entire commonwealth. American whiskey and
    bourbon also enjoy a growing share of the global liquor market,
    accounting for over $1 billion of the $1.5 billion in total
    exports of distilled spirits.
        That is why I want to bring to your attention legislation I
    have introduced. H.R. 867, the Aged Distilled Spirits
    Competitiveness Act of 2015. This bipartisan legislation would
    correct a provision in the Tax Code that leaves American
    bourbon and whiskey distillers at a competitive disadvantage
    against other sectors of the liquor industry, particularly
    foreign competitors.
        As you may know, Section 263(a) of the Internal Revenue
    Code requires bourbon producers to capital interest expenses
    incurred to finance the production of bourbon and whiskey
    during the long aging process, which can be anywhere from 2 to
    23 years. This interest expense is not deductible for tax
    purposes until the bourbon or whiskey is sold years later,
    after the aging process. Aging can be thought of as part of the
    manufacturing process. Bourbon that has not aged is not yet
    bourbon, and therefore should not be considered inventory under
    the Tax Code. This tax treatment is unique to the United
    States, as other countries allow for the immediate expensing of
    aging spirits, causing a competitive disadvantage to U.S.
    distillers.
        H.R. 867 would provide a level playing field for U.S.
    bourbon and whiskey producers by allowing immediate deduction
    of interest expenses related to aging bourbon and whiskey. This
    simple change would promote the bourbon industry that brings in
    billions of dollars in economic activity and supports over
    9,000 jobs, producing significantly more state and Federal
    revenue than foreign-produced competitors.
        I appreciate your consideration of these two important
    measures for a growing economy in both the horse and bourbon
    sectors. Thank you.
        Chairman BOUSTANY. Thank you, Mr. Barr. We appreciate you
    bringing your testimony forward. All of our colleagues, for
    that matter. And these tax proposals will be given
    consideration. Thank you.
        Let's call up our next panel. We have Mr. Emmer, Mr.
    Coffman, Ms. Schakowsky, and Mr. Woodall.
        [Pause.]
        Chairman BOUSTANY. We thank our colleagues. Mr. Emmer, you
    may proceed.

       STATEMENT OF THE HONORABLE TOM EMMER, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MINNESOTA

        Mr. EMMER. Thank you, Chairman Boustany. Thanks to you and
    the Members of the Subcommittee on Tax Policy for inviting us
    today.
        It is a privilege to represent the people of Minnesota, and
    I know they are pleased to see that Washington is working on
    comprehensive tax reform that will help lift Americans out of
    poverty, put more money back in the pockets of families, and
    enable businesses to flourish.
        At 39 percent, the United States has the highest corporate
    income tax rate in the developed world. This puts us, America,
    at a tremendous disadvantage, sending jobs, companies, and tax
    dollars overseas to countries which have far more business-
    friendly rates.
        In my home state of Minnesota, we recently lost two
    companies to foreign countries. Sadly, as we all know, it isn't
    just Minnesotans who have been harmed by the developed world's
    most uncompetitive and dated corporate tax system. Since 2000
    there has been a 28 percent reduction in U.S.-headquartered
    companies in the global Fortune 500.
        Many countries have caught on to the negative effects of
    high corporate income tax rates. In fact, our neighbor to the
    north, Canada, our largest trading partner, recently reduced
    their rate to 15 percent. The United States's second, third,
    fourth, and fifth largest trading partners--China, Mexico,
    Japan, and Germany--have corporate tax rates of 25 percent, 30
    percent, 24 percent, and 15 percent.
        The Create Jobs Act, which we have introduced, will ensure
    the United States has a competitive corporate income tax rate
    by setting our rate five percentage points lower than the
    average corporate tax rate of the other Organization for
    Economic Cooperation and Development countries. These are 33
    free-market countries that American often trades with and, in
    fact, competes with.
        It also creates a mechanism for Congress to recalibrate the
    corporate tax in a timely manner. Under the Create Jobs Act,
    every five years, by November 1st, the U.S. Treasury will
    calculate the new corporate tax rate. If the formula suggests
    it should go up, then a majority of both the House and the
    Senate must approve the new rate by December 30th. If the
    formula calls for a decrease, that will occur automatically.
        If the Create Jobs Act was enacted today with the average
    OECD corporate tax rate at about 25 percent, the U.S. corporate
    income tax would be reduced to about 20 percent. According to
    the Tax Foundation, a 20 percent U.S. corporate income tax
    would create more than 640,000 jobs, increase GDP by 3.3
    percent, and increase wages by 2.8 percent over the next 10
    years. Clearly, this legislation would have a profoundly
    positive impact on the citizens of this great country. If
    signed into law, American corporations would have a predictable
    tax system to plan for the future, but also a system flexible
    enough to remain competitive in the 21st century.
        I want to thank you all again for this opportunity to
    present testimony to you about the Create Jobs Act. And it is
    my hope that it will be included in the Ways and Means's highly
    anticipated comprehensive tax reform package. Thank you.
        Chairman BOUSTANY. Thank you, Mr. Emmer.
        Mr. Coffman, you may proceed.

     STATEMENT OF THE HONORABLE MIKE COFFMAN, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF COLORADO

        Mr. COFFMAN. Thank you, Mr. Chairman and members of the
    Ways and Means Subcommittee. Today I want to talk about H.R.
    4969, the EARNIT Act, which is the Enhancing Advancement,
    Reducing Non-Compliance, and Improving Trust Act.
        What this is is it involves an expansion of the earned
    income tax credit and a way to pay for it. And in 2014
    President Obama talked about increasing the Federal minimum
    wage to $10.10 an hour, and the non-partisan Congressional
    Budget Office did an analysis of the economic impact of that.
    And they said, yes, you would lift 900,000 Americans out of the
    poverty line, as defined by the Federal guidelines. But you
    would also cost the economy 500,000 jobs.
        And so, what I--in looking at the earned income tax credit,
    it is heavily, heavily weighted towards individuals with
    children, as opposed to individuals without children. And so,
    what this legislation does is, number one, it lowers the
    eligibility for the earned income tax credit across the board,
    whether you have children or not, from age 25 to age 21. And
    then, secondly, it pluses up the EITC benefit for childless,
    low-wage, low-income workers. And so, I think this is very
    positive.
        So how it pays for this is that the IRS did an analysis in
    2003-2005 [sic] on the earned income tax credit and found that
    there was a lot of individuals that were receiving it that did
    not have their child living with them in their residence. And
    so, in a--so, what the--and they came up with a better
    verification process that has never been implemented, and that
    is--to have a third party, whether it be a social worker, a
    lawyer, employer, or other public official verify that there is
    a child living with that low-wage worker, in terms of their
    eligibility.
        And so, the--there was an analysis done by the--oh, the Tax
    Foundation, I believe, that is a part of the Congress--I am
    trying to get the specific name for it here. And so--oh, the
    Joint Committee on Taxation estimated that there would be a
    net--if you had that requirement, that there would be a net
    increase in Federal revenues--i.e. not paying out the tax
    credit to those who were not eligible--of $3.7 billion over a
    10-year period, which is more than enough to pay for the
    proposed expansion of the earned income tax credit under my
    proposal.
        And with that, Mr. Chairman, I am respectful of the time,
    and I yield back. Thank you.
        Chairman BOUSTANY. Thank you, Mr. Coffman.
        Mr. Woodall, you may proceed.

      STATEMENT OF THE HONORABLE ROB WOODALL, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF GEORGIA

        Mr. WOODALL. Thank you, Mr. Chairman, and thank you for
    having us today. I have watched this Committee for most of my
    adult life, and I have never been more optimistic that we are
    going to get to actual fundamental tax reform with the hours
    that this Committee has invested and the seriousness with which
    it is taking it.
        But the truth is we have had hours of conversation today
    about fixes to the Tax Code. We could have hours more tomorrow
    and hours more the next day. At some point we have to confess
    this Tax Code cannot be fixed, and we have to throw it out, and
    start over again. There is not a member of this body, if they
    could write the right Tax Code to govern America, that they
    would write this one.
        We have got to start all over again from scratch. The power
    to tax is the power to destroy, and an income tax destroys
    productivity. I think we have won the debate that a consumption
    tax is the way to get the economic engine restarted here, in
    this country.
        A group of activists, a group of economists, folks in a
    group called Americans for Fair Taxation, said, ``If we started
    from scratch, what Tax Code would we write?'' And what they
    came up with was a plan called The Fair Tax. It is H.R. 25. It
    is the most widely cosponsored fundamental tax reform bill in
    this Congress. And it throws the Tax Code out. It begins with
    the point of view that businesses don't pay taxes, businesses
    just collect taxes. And I don't want to have a Tax Code for job
    creators in this country that is just a little bit worse than
    everybody else's. I don't want to have a Tax Code for job
    creators in this country that is on par with the rest of the
    world. I want to have a Tax Code in this country that leads the
    rest of the world.
        I want to take our corporate income Tax Code from worst in
    the world to first in the world. Fair Tax does that by
    admitting that businesses don't pay taxes, they simply collect
    taxes, abolishes the corporate income tax and requires that
    they collect a point of sale retail sales tax on all of the
    final consumer goods.
        I want to make sure that individuals don't have to fight
    with their government for the privilege of paying their taxes.
    There is absolutely no sense that every April 15th dread seeps
    in to every American family across this land. The Fair Tax
    recognizes that you shouldn't have to have a law degree or an
    accounting degree to pay your taxes. Simple point of sales
    retail sales tax, every American consumer would pay their taxes
    with every purchase that they make. The average American family
    would never see the IRS again.
        I don't want to make it easier to file your income tax
    statement; I want to get you out of the business of filing your
    income tax statement.
        Mr. Chairman, we have an opportunity here, because we all
    recognize a problem, because there is no Member defending the
    current code to do the big things. We have tried nibbling
    around the edges for years at the time. I applaud this
    Committee for the work to get to that next big idea, and I
    encourage you to take a look at H.R. 25, the Fair Tax.
        And with that, I would welcome any questions and yield
    back.
        Chairman BOUSTANY. Thank you, Mr. Woodall.
        Ms. Schakowsky, you may proceed.

    STATEMENT OF THE HONORABLE JANICE SCHAKOWSKY, A REPRESENTATIVE
                 IN CONGRESS FROM THE STATE OF ILLINOIS

        Ms. SCHAKOWSKY. Now for some different ideas. I thank you,
    Mr. Chairman, for allowing me to testify before this Committee
    on two pieces of legislation I have introduced to improve the
    fairness of our tax system: H.R. 389, the Fairness in Taxation
    Act; and H.R. 2619, the Patriot Employer Tax Credit Act.
        We are the richest country in the world at the richest
    moment in history, yet we operate here in an environment of
    austerity, unable to pay--to afford things like quality
    education and infrastructure investment and security in a
    social safety net that our country needs. Today we simply don't
    raise sufficient revenue to meet today's needs or invest in our
    future.
        My Fairness in Taxation Act would update tax brackets for
    the highest-income Americans. Right now, there are seven
    brackets that end at $450,000 of income, and absolutely none
    after that. So someone making $450 million pays the same as
    someone that makes $450,000. My bill would create new tax
    brackets, beginning at $1 million in income, ratcheting up to
    $1 billion in income--and, yes, there are Americans that make
    that.
        It would also stop special tax breaks for millionaires on
    their capital gains and dividends. These changes would raise
    $800 billion over the next decade, which would then be injected
    back into education and infrastructure, research and
    development, et cetera, and support a strong middle class.
        We also need to improve tax fairness for our businesses.
    Right now our Tax Code rewards the wrong behavior. In recent
    years we have seen a wave of U.S.-based companies move their
    headquarters overseas to dodge U.S. taxes through tax
    inversions. Meanwhile, too many workers struggle with low wages
    and retirement insecurity.
        My Patriot Employer Tax Credit Act would reward companies
    for doing the right thing. It would provide a tax credit for
    the first $15,000 on qualified wages for employers that invest
    in American jobs, avoid tax inversions, pay fair wages, provide
    quality health insurance, contribute to their workers'
    retirement, and support jobs for active duty military veterans
    and those with disabilities. And we would pay for these tax
    credits by closing an existing loophole that allows companies
    to deduct interest expenses used to invest overseas. I think
    that is a sensible idea. Stop tax provisions that encourage
    overseas investment to reward companies that invest in good
    jobs here at home.
        These bills are the type of tax reform that I believe we
    desperately need, reforms that raise revenue, increase
    fairness, and invest in quality American jobs. I urge you to
    advance this legislation, and thank you once again for the
    opportunity to testify.
        Chairman BOUSTANY. I thank our colleagues on this panel for
    bringing these important tax proposals forward, and we will
    take them under consideration. We thank you.
        And we will conclude now with our final panel, which will
    be Mr. Paulsen, a member of the Ways and Means Committee.
        [Pause.]
        Chairman BOUSTANY. I thank my colleagues. Mr. Paulsen, you
    may proceed.

     STATEMENT OF THE HONORABLE ERIK PAULSEN, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MINNESOTA

        Mr. PAULSEN. Thank you, Mr. Chairman. I know we have heard
    a lot of great testimony today about important tax initiatives,
    many of which I support. And while Members of Congress do all
    that we can to represent our constituents and advocate on their
    behalf, we simply aren't qualified in the same way that they
    are to discuss issues important to them and to their
    businesses. And that is why I would like to yield some of my
    time today to Mr. Clint Roberts. He is the chief marketing
    officer of Surly Brewing Company in Minneapolis. And Clint will
    speak about his brewery and what passage of legislation that I
    have introduced, the Craft Beverage Modernization and Tax
    Reform Act, would do to help their ability to invest in Surly
    and hire more Minnesotans.
        Clint, if you would like to, come forward.
        Chairman BOUSTANY. Welcome, sir.
        Mr. ROBERTS. Thank you, Chairman. Thank you, Representative
    Paulsen and thank you to the Committee for the opportunity to
    testify today. My name is Clint Roberts. As Erik mentioned, I
    am the chief marketing officer at Surly Brewing Company in
    Minneapolis, Minnesota.
        For almost a decade, the Brewers Association and the
    brewing industry have been working with Congress to try and
    pass legislation that recalibrates the Federal excise tax to
    reflect the makeup of the craft brewing industry, and to spur
    additional growth. The Craft Beverage Modernization and Tax
    Reform Act, introduced this Congress by Representatives Paulsen
    and Kind, would lower the Federal excise tax for the brewing
    industry, as well as the wine and distilled spirits industries,
    and make the alcohol beverage excise tax system more
    progressive for smaller producers.
        It is legislation like this that would have a major impact
    on Surly, as well as other craft brewers. In Minnesota, we have
    seen firsthand how laws that are supportive of the craft
    brewing industry help foster growth.
        In 2011 we set out to tweak state legislation to allow
    production breweries to sell pints of their own beer, so we
    could build our destination brewery, complete with two
    restaurants, an event center, and a beer garden, in addition to
    the production facility. When we set to change the law, there
    were 35 breweries in the state. Now there are 105 breweries
    that employ more than 8,600 Minnesotans. The Craft Beverage
    Modernization and Tax Reform Act is the type of legislation
    that would have a similar impact on our community, as well as
    other members of the beverage alcohol industry.
        We have seen firsthand that legislative advancements like
    this can be incredibly important to the craft community and
    local economies. It has created a phenomenon of sorts that
    shows no sign of slowing.
        In December 2014 we opened our $34 million destination
    brewery. Last year we brewed almost 65,000 barrels of beer, and
    this year we hope to brew 80,000. We have the capacity to brew
    almost 100,000. Once we near capacity, we will have important
    decisions to make. The demand for our beer is there, but
    additional growth requires continued investment in our brewery.
        In total, our company employs almost 300 employees, a full-
    time equivalent number of 159. We had lofty job creation
    numbers as we dug in on our destination brewery, but this
    number has exceeded those goals. It has been great for our
    local economy, and it has helped us to expand into other
    states. We opened in three new states just last week.
        We look to continue to invest in our operation, which will
    create a range of jobs and broad economic impact. If we are
    able to get our Federal tax liability reduced, we will put the
    money back into our company. We have to. The craft beer climate
    is unbelievably competitive, because of recent growth. Our
    consumers want more and expect more. We are ever evolving to
    meet the demands of our consumers.
        I can only speak to how this bill would impact the craft
    brewing industry. But if it has a similar impact on other
    alcohol producers, it is no surprise that this bill has had
    broad, widespread bipartisan support from not just the alcohol
    industry, but also agricultural and manufacturing associations.
    Passing the Craft Beverage Modernization and Tax Reform Act
    would be good for the brewers in Minnesota and the brewers
    located in your states and across the country.
        This is a big issue for our small business. We have seen
    firsthand the tangible success stories from enterprising
    legislation.
        Thank you again to the Committee for taking the time to
    learn about this important issue, and to Representative Paulsen
    for his support of the craft brewers in Minnesota and across
    the country.
        Chairman BOUSTANY. Thank you, Mr. Roberts.
        And Mr. Paulsen, thank you for bringing this testimony
    forward.
        Mr. PAULSEN. Thank you, Mr. Chairman, for your time and
    attention today, and I am happy to yield back.
        Chairman BOUSTANY. Thank you. I would like to thank all of
    our esteemed colleagues for appearing before us today. It is
    clear from the testimony that you all have put a great deal of
    time and consideration into these improvements to our current
    Tax Code. And I am pleased that we have had an opportunity to
    make a record of those priorities.
        Keep in mind that, while we are looking at these current--
    these improvements to the current Tax Code, we are still
    committed to comprehensive, full tax reform, as a Committee.
        As we continue to formalize the record, we encourage you to
    have any stakeholders that also care about these issues to
    submit statements for the record. Please be advised that
    Members will have two weeks to submit written questions to be
    answered later in writing. Those questions and your answers
    will be made part of the formal hearing record.
        And with that, the Subcommittee stands adjourned.
        [Whereupon, at 12:42 p.m., the Subcommittee was adjourned.]

                           Submissions for the Record

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]