[Congressional Record Volume 145, Number 105 (Thursday, July 22, 1999)]
[Senate]
[Page S9077]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH:
  S. 1415. A bill to amend the Internal Revenue Code of 1986 to provide 
for S corporation reform, and for other purposes; to the Committee on 
Finance.
  Mr. HATCH. Mr. President, today I am introducing legislation that 
would provide critical and direct improvements to the competitiveness 
of the over 2.1 million S corporations nationwide. The vast majority of 
S corporations operate as small businesses. By 1995, they comprised 48 
percent of all corporations. In my home state of Utah, S corporations 
make up half of the 21,600 corporations in the state.
  Despite the reforms that were enacted in 1996 and in previous years, 
the tax laws that currently govern S corporations remain too 
restrictive, complex, and burdensome, particularly in comparison with 
the laws that are imposed on other entities. As a result, Mr. 
President, many of these small businesses are unable to attract 
sufficient capital and to grow to their full potential.
  For example, the inability to issue preferred stock denies S 
corporations access to badly needed senior equity. Capital is also 
eliminated by a requirement that prevents straight debt from being 
converted into stock. Substantial reforms need to be enacted to ensure 
better competition for small businesses in today's increasingly 
sophisticated and global economy.
  Mr. President, the current law is threatening the multi-generational 
family business in our country. Law allows only for 75 shareholders 
under an S corporation, and each member of a family is currently 
treated as a single, distinct shareholder. In addition, nonresident 
aliens are not allowed as shareholders. This ban on nonresident alien 
shareholders is an outmoded restriction dating back to the creation of 
Subchapter S. Since that time, partnerships have been allowed to 
involve nonresidential aliens. And, as the economy becomes more global, 
S corporations will be at a disadvantage relative to the more flexible 
partnerships. Mr. President, this bill would eliminate these outdated 
provisions and allow for all family members to be counted as one 
shareholder for purposes of S corporation eligibility, as well as 
permitting nonresident aliens to be shareholders.
  Mr. President, I urge my colleagues to review and support the 
Subchapter S Revision Act. This legislation will help American families 
pass their businesses from one generation to the next and to create a 
level playing field for small business. We should not allow the more 
than 10,000 S corporations in my home state, as well as the many others 
across the country, to be subject to rules and regulations that limit 
their competitiveness. I am looking forward to working with my fellow 
members of the Finance Committee in enacting this bill.
  I ask that a description of the bill's provisions be in included in 
the Record.
  The description follows:

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