[Congressional Record Volume 144, Number 117 (Tuesday, September 8, 1998)]
[Senate]
[Pages S9974-S9975]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DeWINE (for himself, Mr. Grassley, Mr. Kohl, Mr. Abraham, 
        Mr. Sessions and Mr. Coverdell):
  S. 2242. A bill to amend the Controlled Substances Import and Export 
Act to place limitations on controlled substances brought into the 
United States from Canada and Mexico; to the Committee on the 
Judiciary.


 Repeal of Limitation on Foreign Tax Credit Under Alternative Minimum 
                                  Tax

 Mr. D'AMATO. Mr. President, today I introduce a bill with my 
friend and colleague, Senator Moynihan, that would eliminate a 
fundamental unfairness in the application of the U.S. tax law to 
taxpayers that have income from foreign sources.
  A U.S. citizen or domestic corporation that earns income from sources 
outside the United States generally is subject to tax by a foreign 
government on that income. The taxpayer also is subject to U.S. tax on 
that same income, even though it is earned outside the United States. 
Thus, the same income is subject to tax both in the country in which it 
is earned and in the United States.
  However, the United States allows taxpayers to treat the foreign 
taxes paid on their foreign-source income as an offset against the U.S. 
tax with respect to that same income. This offset is accomplished 
through the foreign tax credit. In other words, the foreign tax paid on 
foreign-source income is treated as a credit against the U.S. tax that 
otherwise would be payable on that same income. Although the details of 
the foreign tax credit rules are extraordinarily complex (as are the 
international provisions of the International Revenue Code generally), 
the basic principle is simple: to provide relief from double taxation.

[[Page S9975]]

  When it comes to the alternative minimum tax (AMT), this basic 
principle of providing relief from double taxation falls by the 
wayside. The AMT was enacted to ensure that individuals and businesses 
that qualify for various ``preferences'' in the tax rules nevertheless 
are subject to a minimum level of taxation. However, the foreign tax 
credit provisions of the AMT operate to ensure double taxation. Under 
these AMT rules, the allowable foreign tax credit is limited to 90 
percent of the taxpayer's alternative minimum tax liability. Because of 
this limitation, income that is subject to foreign tax is subject also 
to the U.S. AMT. The result is double (and even triple) taxation of 
income that is used to support U.S. jobs, R&D and other activities.
  Mr. President, there is no rational basis for denying relief from 
double taxation to that class of taxpayers that are subject to the AMT. 
Accordingly, the bill Senator Moynihan and I are introducing today will 
eliminate the 90 percent limitation on foreign tax credits for AMT 
purposes. By repealing this limitation, relief from double taxation 
will be provided to taxpayers that are subject to the AMT in the same 
manner as it is provided to those taxpayers that are subject to the 
regular tax.
  I would hope that our colleagues on both sides of the aisle will join 
in cosponsoring this necessary legislation.
  I ask unanimous consent that the text of the bill be included in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2242

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

     SECTION 1. REPEAL OF LIMITATION ON FOREIGN TAX CREDIT UNDER 
                   ALTERNATIVE MINIMUM TAX.

       (a) In General.--Section 59(a) of the Internal Revenue Code 
     of 1986 (relating to alternative minimum tax foreign tax 
     credit) is amended by striking paragraph (2) and by 
     redesignating paragraphs (3) and (4) as paragraphs (2) and 
     (3), respectively.
       (b) Conforming Amendments.--Section 53(d)(1)(B)(i)(II) of 
     such Code is amended by striking ``and if section 59(a)(2) 
     did not apply''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
                                 ______