[Congressional Record Volume 143, Number 44 (Tuesday, April 15, 1997)]
[Senate]
[Page S3201]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ABRAHAM (for himself and Mr. Levin):
  S. 574. A bill to delay the application of the substantiation 
requirements to reimbursement arrangements of certain loggers; to the 
Committee on Finance.


                    TAX RELIEF FOR MICHIGAN LOGGERS

  Mr. ABRAHAM. Mr. President, April 15 is a day that generally is 
viewed with consternation throughout the Unided States. For many 
loggers in Michigan's Upper Peninsula, however, tax day is synonymous 
with bankruptcy. This is because the IRS insists on enforcing a little 
known, and less understood, tax law affecting loggers in my State.
  For nearly three decades, businesses in the timber industry have used 
an accounting plan that allocated a percentage of loggers' wages as 
rental for the use of the loggers' chain saws, thereby excluding this 
portion of their wages from income tax withholding, FICA, and FUTA 
taxes. This practice was acceptable to the IRS until the Family Support 
Act of 1988 required that an employee business expense reimbursement 
not be excluded from an employee's income unless it is paid under an 
accountable plan. The timber industry's traditional accounting 
procedure was not an accountable plan.
  Unaware of the change in policy, the timber industry continued to use 
their old accounting plan in violation of the new law. Many small 
logging operations and loggers have now been assessed penalties and 
interest by the IRS because of their violation of this obscure law. It 
should be noted that most of the timber industry was in line with the 
new policy by tax year 1993 and continues to abide by the correct 
accounting procedure policies. Nonetheless, some loggers face fines of 
$20,000 or more. Mr. President, many loggers in Michigan's Upper 
Peninsula earn less than $20,000 per year.
  To add to the frustration, IRS headquarters has stated that each 
district operation has the authority to decide the effective date of 
the requirement for accountable plans, and in other States, the IRS has 
decided to have an effective date for this accounting procedure as it 
relates to the timber industry of January 1, 1993. The IRS office in 
Michigan, however, will not agree to the January 1, 1993 date which is 
being used in other parts of the country. Michigan is the only State in 
which the IRS will not accept this date.
  Mr. President, relief for these loggers is long overdue, and today 
Senator Levin joins with me to introduce legislation that will change 
the Tax Code and make permissible the qualified logger reimbursement 
arrangement for loggers in any taxable year prior to January 1, 1993. 
It will also provide for a refund or credit of any overpayment of tax 
accrued during these years. This correction is long overdue and I hope 
for swift adoption during this session of Congress.
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