[Congressional Record Volume 146, Number 3 (Wednesday, January 26, 2000)]
[Senate]
[Page S88]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BURNS (for himself, Mr. Nickles, Mr. Roberts, Mr. Grams, 
        and Mr. Allard):
  S. 2005. A bill to repeal the modification of the installment method; 
to the Committee on Finance.


            repeal of a tax on the sale of small businesses

  Mr. BURNS. Mr. President, today I introduce a bill that will repeal a 
little-noticed, yet extremely detrimental, installment tax provision on 
small businesses.
  This provisions, enacted at the end of last year's congressional 
session as part of the conference report of H.R. 1180, the Ticket to 
Work and Work Incentives Improvement Act of 1999 was placed into effect 
on December 17 when President Clinton signed the bill.
  According to this provision, many small-business owners who sell 
their businesses will now have to immediately pay in one lump sum all 
capital gains taxes resulting from the sale, even if the sale's 
payments are spread out in installments over a period of several years. 
Under previous treatment, the capital gain tax payment could be spread 
over the life of the installment note.
  An unintended consequence of this provision has been to adversely 
affect the sale of small businesses. Most sales of these businesses use 
the installment sales method. Larger publicly traded corporations are 
not impacted as they tend to use other financing methods involving cash 
or stock transactions.
  According to the National Federation of Independent Business (NFIB), 
it is possible that most of the 200,000 small business sales which 
occur each year will be adversely affected by this provision. Some 
estimates show that, depending upon the circumstances, this provision 
could reduce the sale price of a business by 5, 10, 20 percent or more.
  My legislation will repeal the elimination of this provision giving 
small business owners the opportunity to defer over the period of 
payments the capital gains tax on the sale of their business.
  Mr. President, the American public is aware of this tax. I have seen 
press releases, newspaper articles and even a story on a national news 
network. This will effect not only the liquidity and price a seller is 
required to accept for a business.
  We're not talking about major corporations--rather, we are talking 
about small businesses--a local hamburger joint, a laundromat, a car 
wash, the businesses that support a community.
  I encourage my colleagues to support the small business owner by 
cosponsoring this legislation.
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