[Congressional Record Volume 142, Number 98 (Friday, June 28, 1996)]
[Senate]
[Page S7307]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEVIN:
  S. 1928. A bill to amend the Internal Revenue Code of 1986 to 
eliminate tax incentives for exporting jobs outside of the United 
States, and for other purposes; to the Committee on Finance.


                 tax incentive elimination legislation

  Mr. LEVIN. Mr. President, I rise today to address the continuing loss 
of U.S. manufacturing jobs by introducing a bill to eliminate tax 
incentives for companies to export such jobs.
  For too many years and in too many cases, we have seen U.S. 
manufacturers shut down business in the United States, lay off workers, 
and set up shop overseas. Although the Bureau of Labor Statistics does 
not maintain statistics on the export of United States jobs, we learned 
at a hearing of my Governmental Affairs Subcommittee 3 years ago that 
at least 200 United States plants had moved to Mexico alone over the 
previous decade.
  A company's decision to move its operations overseas is usually an 
economic decision, based on factors like the availability of cheap 
labor and unregulated access to natural resources. While I wish that 
some U.S. companies would exercise better citizenship and recognize an 
ongoing responsibility to their long-time employees as well as their 
shareholders, I know that the Federal Government cannot force them to 
do so.
  However, there is no reason why the U.S. taxpayers should be 
subsidizing companies that choose to move their operations overseas. 
Yet that is what we have been doing. When a U.S. company decides to 
shut down a plant in the United States and move its operations 
overseas, we reward them--through the Tax Code--for the decision.
  Last year, I joined Senator Dorgan and others to introduce a bill--S. 
1355--addressing one provision of the Tax Code which provides such a 
subsidy. The Dorgan bill would eliminate the ability of companies who 
move their operations overseas to defer the payment of Federal income 
tax on the profits from those operations.
  Today, I am introducing a bill to address two more provisions of the 
Tax Code which provide taxpayer subsidies to companies that move their 
operations overseas.
  First, section 162 of the Internal Revenue Code permits a deduction 
for ``all the ordinary and necessary expenses paid or incurred during 
the taxable year in carrying on any trade or business.'' This provision 
has been interpreted to allow a deduction for moving expenses in the 
case of a company that moves part or all of its operations overseas, as 
long as the company continues to sell its product in the United States 
and can argue that the overseas operations are related to the U.S. 
source income. As a result, the U.S. taxpayers are underwriting the 
moving expenses of companies who choose to move capital equipment 
previously used in U.S. operations, and the associated jobs overseas.
  My bill would reverse this policy by prohibiting a company from 
deducting the cost of transporting capital equipment previously used in 
U.S. operations overseas when it is in the process of closing or 
downsizing U.S. plants. Because the export of such capital equipment 
and the associated jobs is more likely to reduce U.S.-source income 
than to increase it, this provision is entirely consistent with the 
intent of section 162 to permit the deduction of ordinary and necessary 
business expenses incurred in connection with such income.
  Second, section 367 of the Internal Revenue Code allows a company to 
avoid paying capital gains taxes on its capital assets, if these assets 
are moved overseas and included in an active business in a corporate 
reorganization. Because no capital gains tax is paid at the time of the 
reorganization, and because the U.S. loses jurisdiction over the assets 
after they are shipped overseas, the company is able to avoid the tax 
altogether. The company is able to obtain an unwarranted tax advantage 
by transferring appreciated assets to a corporation that is not subject 
to U.S. residence jurisdiction--and the taxpayers are left paying yet 
another subsidy to companies that choose to move their operations 
overseas.
  My bill would reverse this policy by eliminating the active business 
exception in section 367 of the Internal Revenue Code and subjecting 
corporate assets to the capital gains tax at the time they are 
transferred overseas in any reorganization.
  Mr. President, some companies may still choose to overlook their 
responsibility as citizens and the needs of their long-timer employees 
by moving jobs overseas, but we should not be subsidizing such 
decisions.
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