[Congressional Record Volume 140, Number 101 (Thursday, July 28, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 28, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                    TAX RELIEF FOR INJURED CHILDREN

                                 ______


                       HON. SHERWOOD L. BOEHLERT

                              of new york

                    in the house of representatives

                        Thursday, July 28, 1994

  Mr. BOEHLERT. Mr. Speaker, quickly and easily, Congress can act to 
protect children victimized by current tax laws.
  I am introducing legislation today, modifying the Tax Code for 
children who earn income from personal injury awards.
  Under current law, these children pay taxes on this income at the 
marginal rate of their parents. The Tax Reform Act of 1986, which 
sought to discourage incentives to shift income-producing assets among 
family members, overlooked this unique and unfortunate situation.
  The parents of Kristen Parisi bravely brought this matter to my 
attention. Peter and Anita Parisi of Whitesboro, NY, reported that 
their 9-year-old daughter was left paraplegic as a result of a 
devastating automobile accident in 1990. By 1992, she was awarded a 
settlement to help pay for medical and extraordinary living expenses 
she will incur as she gets older.
  Kristen's settlement was constructed to accrue interest to provide 
for her future living expenses. Yet, Kristen must pay Federal income 
tax on this interest based on the salaries of her parents.
  This is policy that is unfair and incognizant of the very special 
needs that Kristen and children like her have. The tax policy punishes 
families who are responsible preparing for the future. These families 
are trying to keep themselves solvent, while constructing a durable 
settlement that grows with their children and contributes to expenses 
associated with their rehabilitation or survival.
  Moreover, in this case, the Parisi's are not trying to camouflage 
assets by pouring them into their children's account. This is an insult 
to any family of modest means whose child has been permanently injured 
through no fault of his or her own.
  The law must be changed. Even the Internal Revenue Service [IRS] is 
sympathetic to this situation and is asking for legislative action to 
remedy it. I am attaching a copy of its letter to me explaining the 
need for narrowly drafted legislation to help these children.
  I understand that our tax committees in Congress are exceedingly busy 
with the health care challenge in the coming weeks. But before this 
session ends, we should at least be able to adopt reasonable measures 
to revise the Tax Code and provide for fundamental fairness for our 
children in need.
  I am also soliciting the support of the Children's Defense Fund, the 
American Bar Association, and other groups interested in tax reform, 
children, and disabilities.


                                   Department of the Treasury,

                                     Washington, DC, May 23, 1994.
     Hon. Sherwood Boehlert,
     Member of Congress, Utica, NY
       Dear Mr. Boehlert: This is in further response to your 
     letter to the Internal Revenue Service enclosing 
     correspondence from your constituents, Mr. and Mrs. Peter 
     Parisi, regarding the tax treatment of their daughter's trust 
     fund.
       Before the Tax Reform Act of 1986, if income-producing 
     assets were transferred to a minor child, income earned on 
     those assets was taxed to the child at the child's rate. 
     Congress believed those rules provided inappropriate tax 
     incentives to shift income-producing assets among family 
     members. In particular, under prior law parents whose income 
     would be taxed at a high marginal rate were encouraged to 
     transfer income producing property to a child to ensure that 
     the income was taxed at the child's lower marginal rates. In 
     order to reduce the opportunity for tax avoidance through 
     transfers of income producing property to minor children, 
     Congress enacted a provision as part of the 1986 Act to tax 
     the unearned income of a minor child under age 14 at the 
     parent's marginal rates. This also reflects the belief that 
     the family, in particular parents and dependent children, is 
     the appropriate unit for determining tax liability.
       We are aware of situations such as your constituents' 
     daughter's where the minor child's unearned income is not 
     attributable to property transferred by family members. We 
     are sympathetic to her situation. Unfortunately, legislation 
     would be required to provide an exception from the general 
     rule for unearned income received by a minor.
       We hope that this information is helpful to you in 
     responding to your constituent. Please let us know if we can 
     be of further assistance in this matter.
           Sincerely,

                                              Michael B. Levy,

                                               Assistant Secretary
     (Legislative Affairs).

                          ____________________