[Congressional Record Volume 143, Number 36 (Wednesday, March 19, 1997)]
[Senate]
[Pages S2572-S2573]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                HOME-BASED BUSINESS FAIRNESS ACT OF 1997

 Mr. BURNS. Mr. President, as an original cosponsor of the 
Home-Based Business Fairness Act of 1997, introduced yesterday by 
Senate Small Business Committee Chairman Bond, I rise in strong support 
of this measure and urge the Senate to approve it as soon as possible.
  This legislation is composed of three vitally important provisions, 
and together they make this measure one of the most important the 
Senate will consider during this Congress. First, this legislation will 
increase the health insurance deduction for self-employed individuals 
to 100 percent from the current 40 percent. Second, it will restore the 
home-office tax deduction where a taxpayer performs essential business 
functions in a home office used exclusively for business purposes. 
Finally, it will clarify when a worker is an employee versus an 
independent contractor, removing the uncertainty of the IRS's current 
test which can hit small businesses retroactively with liability for 
back taxes, interest, and penalties. These measures are especially 
important in Montana, where 98 percent of our businesses are small 
businesses, accounting for 72.7 percent of all employment in our State. 
This 72 percent is considerably higher than the 53 percent for the 
United States as a whole. And we're growing: Montana leads the Nation 
in new business incorporations. So when we talk about small business 
issues such as the home-office tax deduction, the health insurance 
deduction for the self-employed, the independent contractor 
classification, and other issues, these are the issues affecting 
Montana businesses.
  Many of today's workers spend part of their time working at home, 
often performing administrative duties such as billing. These workers 
either have no permanent office or perform their main duties in an 
unconventional environment, such as an operating room. For them, the 
work performed in a home office is an essential part of their job, even 
though it may not be the main part of their job. Back in 1993, the 
Supreme Court in Commissioner versus Soliman created a restrictive test 
for determining eligible home-based functions. Functions such as 
billing, though essential, do not meet the Soliman test. The Court went 
well beyond congressional intent and even beyond the IRS's own 
interpretation of the law.
  Shortly after the Soliman decision, I introduced the Home Office Tax 
Deduction Bill, and I've been pushing for it

[[Page S2573]]

ever since. We must allow a tax deduction for essential activities, 
such as billing, performed in the home when that is the only available 
place for such activities. As the law now stands, workers like Dr. 
Soliman who spend 15 hours per week doing billing in an exclusive home 
office are denied the deduction. That's not right. Home offices that 
are used regularly and solely for business purposes--whether it's by 
physicians, salespeople, or mothers working at home--should be an 
allowable deduction. I am proud to be a cosponsor of Sen. Hatch's bill 
which, like this bill, will restore the deduction for essential 
functions.
  I was very pleased that last Congress we enacted an increase in the 
health insurance tax deduction for the self-employed to 80 percent by 
2006. This is a positive first step, but why should not small 
businesses receive a 100 percent deduction just like big businesses? 
Health care costs are one of the main barriers to successful self-run 
businesses, and this modest proposal will go a long way toward helping 
these businesses survive and thrive.
  Finally, the top priority of small businesses is clarification of the 
independent contractor definition. The current 20-part test used by the 
IRS to determine who is an employee, for which, of course, employers 
must pay Federal taxes, is confusing and imprecise. The law is tough to 
follow when it is unpredictable from case to case. This bill simply 
clarifies who is an independent contractor by applying a clear three-
part test. Businesspeople need a simple rule to follow, and this will 
provide it. No business should be subject to the whim of the IRS.
  I thank Chairman Bond for his leadership on this bill and I look 
forward to working with him to get it to the President's desk.

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