[Congressional Record Volume 144, Number 46 (Thursday, April 23, 1998)]
[Senate]
[Pages S3536-S3537]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MURKOWSKI (for himself and Mr. Stevens):
  S. 1974. A bill to amend the Internal Revenue Code of 1986 to exclude 
from gross income any Alaska Permanent Fund dividend received by a 
child under age 14; to the Committee on Finance.


                            tax legislation

  Mr. MURKOWSKI. Mr. President, I rise to introduce legislation that 
would

[[Page S3537]]

alleviate an IRS paperwork hassle that confronts every citizen of 
Alaska who has a child. I am pleased to be joined by the distinguished 
senior Senator from Alaska, Senator Stevens, in introducing this 
legislation.
  Mr. President, when this nation was facing the oil crisis of the 
1970s, Alaskan oil from Prudhoe Bay was in large part responsible for 
allowing our nation to bridge the oil crisis and overcome the blackmail 
the world faced from the OPEC cartel. The state of Alaska made a 
foresighted decision at that time that it would take a portion of the 
oil royalty money and place it into a trust fund for the benefit of the 
citizens of our State.
  This trust fund has grown significantly in the past two decades and 
has allowed the state to issue dividends to every citizen of the state 
each year. Mothers, fathers and children are all entitled to an equal 
share of the dividend. Yet when it comes time to file tax returns, 
every family with a child in Alaska is forced to file a separate tax 
return for the child based on the fact that the child's only income is 
the permanent fund dividend.
  Children under 14 must pay income tax it they have investment income 
of more than $650. If their investment income is greater than $1,400, a 
special ``kiddy tax'' is levied that taxes the child's income at the 
parents' highest tax rate. The kiddy tax was designed for one simple 
purpose: To prevent high income taxpayers from shifting income to their 
children for tax avoidance purposes.
  Mr. President, in the case of nearly every child in Alaska, there is 
no effort for parents to shift income to their children. A two-year old 
is required to file a tax return simply because the state had the 
foresight to invest state oil royalty income for the benefit of all 
it's citizens.
  In recent years, the annual Permanent Fund dividend checks have 
averaged nearly $1,000 per person. For a two-year old child who 
received that dividend, the child's parents are responsible for having 
a tax return prepared for the child that will show a tax liability of 
$52.50. As all of my colleagues know, filling out tax returns has 
become ever more complicated. Fewer and fewer individuals are filling 
out their own returns. Instead, they are having to pay professional 
prepares to fill out these returns.
  In fact, IRS reports that returns filled out by paid prepares are a 
record high this year--54% of all returns filed had been prepared by 
professionals. For an Alaskan family with two children, that means a 
paid preparer must fill out three separate tax forms--one for the 
mother and father and one for each of the two children. How much 
additional cost does the prepare charge for the additional returns? The 
simplest form to file--the 1040 EZ costs $16.50 at the local H&R block. 
For two children that's an additional $33, on top of the costs of the 
parents' return.
  And what does it cost the IRS to process that return? I've heard 
costs that range from $5 to $30. I don't think anyone knows the real 
answer.
  Mr. President, the bottom line is that families with children under 
14 in Alaska are subjected to additional IRS paperwork and filing 
requirements simply because their children's permanent fund dividends 
are subject to a few dollars of federal income tax.
  The legislation we are introducing today would exclude from income 
permanent fund dividends received by children under 14. This will 
eliminate the paperwork burdens that families in our state face simply 
because their children receive a dividend from the state. Although I am 
sure this will be scored as losing a modest amount of revenue, about 
$50 for every Alaskan child, IRS will have to process far fewer tax 
returns from Alaska's children and parents in Alaska will not have to 
incur additional tax preparation fees.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being not objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1974

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. INCOME TAX EXCLUSION FOR ALASKA PERMANENT FUND 
                   DIVIDENDS RECEIVED BY CHILDREN UNDER AGE 14.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically excluded from gross income) is amended by 
     redesignating section 138 as section 139 and by inserting 
     after section 137 the following new section:

     ``SEC. 138. ALASKA PERMANENT DIVIDENDS TO CHILDREN UNDER AGE 
                   14.

       ``Gross income shall not include any Alaska Permanent Fund 
     dividend received by an individual during a taxable year if 
     the individual has not attained age 14 before the close of 
     the taxable year.''
       (b) Conforming Amendments.--
       (1) Section 1(g)(7)(A)(i) of the Internal Revenue Code of 
     1986 is amended by striking ``(including Alaska permanent 
     fund dividends)''.
       (2) The table of sections for part III of subchapter B of 
     chapter 1 of such Code is amended by striking the item 
     relating to section 138 and inserting:

``Sec. 138. Alaska Permanent Fund dividends to children under age 14.
``Sec. 139. Cross references to other Acts.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
                                 ______