[Congressional Record Volume 145, Number 128 (Tuesday, September 28, 1999)]
[Extensions of Remarks]
[Page E1980]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




IN OPPOSITION TO PROPOSED TAX INCREASE ON ASSOCIATION INVESTMENT INCOME

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                            HON. JIM RAMSTAD

                              of minnesota

                    in the house of representatives

                      Tuesday, September 28, 1999

  Mr. RAMSTAD. Mr. Speaker, as the fiscal year draws to a close, I 
think we can be grateful for some of our accomplishments, including 
good ideas that were implemented and bad ideas that were stopped in 
their tracks.
  One of those bad ideas was the administration's proposed tax increase 
on the investment income of tax-exempt 501(c)(6) organizations. I and 
several of my colleagues on the Ways and Means Committee expressed our 
bipartisan opposition to this misguided proposal, and the Ways and 
Means Committee heard excellent testimony as to why this idea should be 
rejected.
  As Congress continues to consider tax measures, I thought it would be 
worthwhile to remind my colleagues why this proposal would be harmful 
to people in my home State of Minnesota and throughout the country who 
are served by America's trade and professional organizations.
  I urge my colleagues to heed the excellent words that follow, written 
by my friend and former constituent, Ralph J. Marlatt.

 An Association Executive Speaks Out On the Administration's Proposed 
                              Tax Increase

       The Clinton Administration's fiscal year 2000 budget calls 
     for a massive tax increase on associations exempt from tax 
     under section 501(c)(6) of the Internal Revenue Code. The 
     Administration's proposal would tax so-called ``investment'' 
     income of 501(c)(6) associations--income that associations 
     receive from interest, dividends, rents, capital gains and 
     royalties. Under the plan, the first $10,000 that an 
     association earns from these sources will not be taxed, 
     however, all income earned over $10,000 will be subject to 
     the unrelated business income tax (UBIT).
       As Past President of the Minnesota Society of Association 
     Executives and former President and CEO of the Insurance 
     Federation of Minnesota, I have first-hand knowledge of the 
     devastating effect this would have on the more than 800 
     associations in the state of Minnesota.
       Associations put the synergistic power of a group to work 
     in solving mutual problems and attaining mutual goals. More 
     than 300,000 Minnesota individuals and firms support the 
     activities of associations through membership and take 
     advantage of the many benefits and services offered by 
     associations. Thousands of Minnesotans are directly engaged 
     in the management of voluntary non-profit trade, professional 
     and educational associations and societies.
       Contrary to assertions made by the Clinton administration, 
     this levy would hit thousands of small and mid-sized trade 
     associations and professional societies exempt from tax under 
     Section 501(c)(6). Under this proposal, most associations 
     with an annual operating budget of $200,000 or more would be 
     taxed on the income they receive from interest, dividends, 
     capital gains, rents, and royalties.
       Unlike other corporations, the money associations receive 
     from investment income, royalties and rents do not go into 
     the pockets of shareholders, individuals or other 
     corporations. Rather, these funds go into the associations' 
     operating budgets to help further their exempt purposes--such 
     as improving industry safety, training individuals to adapt 
     to the changing workplace, and providing continuing adult 
     education.
       According to a Hudson Institute Report on the Value of 
     Associations, associations spend more on product standards 
     and safety than the U.S. Government. Associations spend more 
     on education than all the states except California. Community 
     service and voluntarism provide 330 million hours valued at 
     $3.3 billion annually.
       Associations and professional societies annually contribute 
     nearly $10 million directly into Minnesota's economy and 
     nearly $50 billion nationally. As a Board Member of the 
     American Society of Association Executives (ASAE), and a 29-
     year veteran of the association business, I join my 
     colleagues in opposing this negative tax on associations.--

       Ralph J. Marlatt, CAE, Executive Vice President, Olson 
     Management Group, Inc.

     

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