[Congressional Record Volume 145, Number 45 (Monday, March 22, 1999)]
[Senate]
[Pages S3059-S3060]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 SENATE RESOLUTION 71--EXPRESSING THE SENSE OF THE SENATE REJECTING A 
       TAX INCREASE ON INVESTMENT INCOME OF CERTAIN ASSOCIATIONS

  Mr. ABRAHAM (for himself, Mr. Crapo, Mr. Santorum, Mr. Gramm, and Mr. 
Inhofe) submitted the following resolution; which was referred to the 
Committee on Finance:

                               S. Res. 71

       Whereas the President's fiscal year 2000 Federal budget 
     proposal to impose a tax on the interest, dividends, capital 
     gains, rents, and royalties in excess of $10,000 of trade 
     associations and professional societies exempt under section 
     501(c)(6) of the Internal Revenue Code of 1986 represents an 
     unjust and unnecessary penalty on legitimate association 
     activities;
       Whereas at a time when the Government is projecting on-
     budget surpluses of more than $800,000,000,000 over the next 
     10 years, the President proposes to increase the tax burden 
     on trade and professional associations by $1,440,000,000 over 
     the next 5 years;
       Whereas the President's association tax increase proposal 
     will impose a tremendous burden on thousands of small and 
     mid-sized trade associations and professional societies;
       Whereas under the President's association tax increase 
     proposal, most associations with annual operating budgets of 
     as low as $200,000 or more will be taxed on investment income 
     and as many as 70,000 associations nationwide could be 
     affected by this proposal;
       Whereas associations rely on this targeted investment 
     income to carry out exempt-status-related activities, such as 
     training individuals to adapt to the changing workplace,

[[Page S3060]]

     improving industry safety, providing statistical data, and 
     providing community services;
       Whereas keeping investment income free from tax encourages 
     associations to maintain modest surplus funds that cushion 
     against economic and fiscal downturns; and
       Whereas corporations can increase prices to cover increased 
     costs, while small and medium-sized local, regional, and 
     State-based associations do not have such an option, and thus 
     increased costs imposed by the President's association tax 
     increase would reduce resources available for the important 
     standard-setting, educational training, and professionalism 
     training performed by associations: Now, therefore, be it
       Resolved, That it is the sense of the Senate that Congress 
     should reject the President's proposed tax increase on 
     investment income of associations as defined under section 
     501(c)(6) of the Internal Revenue Code of 1986.

 Mr. ABRAHAM. Mr. President, I am joined today by Senator Crapo 
in introducing a Sense of the Senate Resolution rejecting a new tax 
proposed by the Clinton administration. As part of the administration's 
fiscal year 2000 budget proposal, this tax would be levied on the 
investment income earned by nonprofit trade associations and 
professional societies. This proposal, which would tax any income 
earned through interest, dividends, capital gains, rents and royalties 
in excess of $10,000, imposes a tremendous burden on thousands of 
small- and mid-sized trade associations and professional societies 
currently exempt under 501(c)(6) of the Internal Revenue Code.
  The administration would like us to believe that this tax is targeted 
to a few large associations, affecting only those ``lobbying 
organizations'' which exist as tax shelters for members and to further 
the goals of special interests. Mr. President, nothing could be further 
from the truth.
  This new tax would affect an estimated 70,000 registered trade 
associations and professional societies. The bulk of these associations 
operate at a state and local level, many of whom perform little, if 
any, lobbying function. In fact, associations rely on investment income 
to perform such vital services as education, training, standard 
setting, industry safety, research and statistical data, and community 
outreach. Through association-organized volunteer programs, Americans 
contribute more than 173 million volunteer hours per year, at a value 
estimated at over $2 billion annually.
  These organizations already contribute millions in taxes for any 
activities which place them in competition with for-profit businesses. 
Yet the administration would like to impose a new tax on income earned 
outside of the competitive business environment, income which is used 
to fund functions serving the public welfare. Unlike for-profit 
corporations, investment income does not go to shareholders, 
individuals, or other companies. Associations do not have the liberty 
of simply raising prices, as do ordinary corporations, to cover 
increased costs.
  Mr. President, faced with an additional increase in taxes of $1.44 
billion over the next five years, many associations will be forced to 
cut back on important services, and some may not survive an economic 
downturn without the small cushion their investments provide.
  Without such services provided by associations, the Government will 
be forced to step in, increasing expenditures and creating additional 
Government programs and departments.
  During a time when the Government is projecting on-budget tax 
surpluses of more than $800 billion over the next 10 years, it is 
unconscionable that we allow the administration to levy a new tax on 
these nonprofit organizations.

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