[Congressional Record Volume 141, Number 2 (Thursday, January 5, 1995)]
[Extensions of Remarks]
[Page E54]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                  ALTERNATIVE MINIMUM TAX LEGISLATION

                                 ______


                           HON. BILL EMERSON

                              of missouri

                    in the house of representatives

                        Thursday, January 5, 1995
  Mr. EMERSON. Mr. Speaker, I would like to bring to your attention 
legislation that I am introducing today to correct a little-known 
provision in the Tax Code that has caused a great deal of hardship and 
frustration to certain farmers in this country. To make matters worse, 
this tax provision occurred at a time during the late 1970's and 1980's 
when farmers where experiencing hard times economically due to the farm 
crisis of that period. Today, I am introducing legislation proposing 
that the effective date of section 13208(b) of the Consolidated Omnibus 
Budget Reconciliation Act of 1985 [COBRA] be changed from 1981 to 1978.
  Varying domestic and international economic conditions in the late 
1970's and early 1980's contributed to the worst farm crisis this 
country has seen since the Great Depression. Many farmers, through no 
fault of their own, were forced into insolvency. During this time, 
there was speculation that the family farm would soon become extinct, 
and that the face of American agriculture would be forever changed.
  Farmers who became insolvent were often forced to sell their farms 
under foreclosure. All of the proceeds of the sale went to the 
creditors; sometimes, despite the sale of the farm, they remained in 
debt. Yet the sale of the farm was treated as a preference item and, 
therefore, triggered the Alternative Minimum Tax [AMT].
  As we know, Congress enacted the individual AMT in 1978 to take 
effect January 1, 1979. The AMT applied to all capital gains regardless 
of whether the sale was voluntary or involuntary. What this meant for 
insolvent farmers was that these folks were suddenly hit with a large 
tax bill that they owed--a bill which they could not pay--on what may 
be termed as ``ghost income.''
  Congress recognized this gross inequity in the Tax Code and the 
provision was amended in the 1985 COBRA law. Farmers who sold or 
exchanged their farms to their creditors in order to cancel their debt 
were allowed to reduce the amount of their tax preference. However, for 
some reason, the law afforded relief only to land transfers made after 
December 31, 1981.
  This effective date left a 3-year open window, from 1979 through 1981 
during which the AMT was in full force. The farmer who suffered the 
misfortune of bankruptcy in December of 1981 was in a very different 
and difficult position than the farmer who held on for just 1 
additional month. The latter individuals are covered by COBRA's relief; 
the former individuals suffer the burden of an unfair tax.
  According to an estimate from the Joint Committee on Taxation, 
enactment of this date change would cost less than $5 million. This is 
a proposal which would be enacted in the interest of fairness.


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