[Congressional Record Volume 145, Number 76 (Tuesday, May 25, 1999)]
[Senate]
[Page S5957]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. NICKLES:
  S. 1116. A bill to amend the Internal Revenue Code of 1986 to exclude 
income from the transportation of oil and gas by pipeline from subpart 
F income; to the Committee on Finance.


             the foreign pipeline transportation income act

  Mr. NICKLES. Mr. President, I rise today to introduce legislation 
which will right a wrong that has been in the tax code for too long. 
This legislation will clarify the U.S. tax treatment of foreign 
pipeline transportation income. This legislation is needed because 
current tax law causes active foreign pipeline transportation income to 
be unintentionally trapped within the anti-abuse tax rules of Subpart 
F. These anti-abuse rules were originally established to prevent 
companies from avoiding payment of U.S. tax on easily movable and 
passive income. Pipeline transportation income, however, is neither 
passive nor easily movable. Pipes are located where the natural 
resources and energy needs are--they cannot be placed just anywhere. 
Further, one a pipe is in the ground, it is tough to move.
  Referring to the legislative history, we find that Congress did not 
intend these anti-abuse rules to target foreign pipeline transportation 
income. Rather, these rules were intended to reach the significant 
revenues derived by highly profitable oil related activities that were 
sourced to a low-tax country as opposed to the country in which the oil 
or gas was extracted or ultimately consumed. Furthermore, it is 
important to note that when these anti-abuse rules were being 
considered and then put into place, pipeline companies were not engaged 
in international development activities, rather they were focused 
solely on domestic infrastructure development.
  Today, pipeline companies are continuing to actively pursue all 
development opportunities domestically, yet they are somewhat limited. 
The real growth for U.S. pipeline companies, however, is in the 
international arena. These new opportunities have arisen from fairly 
recent efforts by foreign countries to privatize their energy sectors.
  Enabling U.S. pipeline companies to engage in energy infrastructure 
projects abroad will result in tremendous benefits back home. For 
example, more U.S. employees will be needed to craft and close deals, 
to build the plants and pipelines, and to operate the facilities. New 
investment overseas also will bring new demands for U.S. equipment. Yet 
before any of these benefits can be realized, U.S. companies must be 
able to defeat their foreign competitors and win projects. 
Unfortunately, current U.S. tax laws significantly hinder the ability 
of U.S. companies to win such projects.
  We must act now if we are to ensure that U.S. companies remain 
competitive players in the international marketplace. There are 
incremental, low cost, reforms that we can and must make. My 
legislation--to clarify that U.S. tax treatment of foreign pipeline 
transportation income--is one such low-cost reform.
  I urge my colleagues to join me in this effort to bring current U.S. 
tax law in line with good tax policy. It is up to us to do all we can 
to keep America competitive in the global economy.
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