[Congressional Record Volume 146, Number 10 (Tuesday, February 8, 2000)]
[House]
[Page H239]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               THE INSTALLMENT TAX CORRECTION ACT OF 2000

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New York (Mr. Sweeney) is recognized for 5 minutes.
  Mr. SWEENEY. Mr. Speaker, I would like to take this opportunity to 
thank my colleagues, the gentleman from California (Mr. Herger) and the 
gentleman from Tennessee (Mr. Tanner), for joining me today as we 
introduce the very important piece of legislation, the Installment Tax 
Correction Act of 2000.
  This is indeed important legislation, as I said, introduced earlier, 
which is intended to correct an egregious error committed as part of 
the tax reconciliation legislation passed last year.
  This matter affects hundreds of thousands of small business owners 
throughout America, and makes it a high priority for this coming 
congressional legislative session. That is evidenced by the fact, Mr. 
Speaker, that over 70 of our colleagues have already joined as 
cosponsors in this legislation.
  This legislation is intended to restore an important tax tool for 
small businesses, to allow small business owners to be able to transfer 
their businesses more correctly and equitably. Under the accrual method 
of accounting, owners of small businesses utilize installment payments 
to spread the capital gains tax burden of selling their business over a 
number of years, and are common for situations where the sellers 
continue to stay involved in the business.
  In many instances, the current Section 536 adversely affects the sale 
of closely-held businesses. With many business sales, bank financing is 
either unavailable or not cost-effective, so often the seller will act 
as a bank for a portion of the total sales price and carry the note, 
receiving installment payments over a number of years.
  Under Section 536, this is still possible, but the IRS requires the 
capital gains they realize on the sale to be reported in 1 year, rather 
than over the life of the note. Sadly, sales of businesses across the 
country have already been disrupted. Without the use of installment 
arrangements, small business owners who seek to sell or transfer their 
businesses have had to decrease their asking price. In many cases, the 
tax bill exceeds the first year's payment, and as a result, sellers 
cannot afford to pay, and often find themselves abandoning their sales 
entirely.
  Mr. Speaker, many owners rely on the sale of their business to 
finance their retirement. Without the installment sales option, they 
have to postpone their retirement dreams. In fact, I know this 
firsthand. Immediately after we recessed last session of Congress, I 
received a number of calls from constituents complaining of this very 
effect.
  Mr. Speaker, the loss of installment sales is not only detrimental to 
hundreds of thousands of small businesses in the country, or the tens 
of thousands of small businesses upon which my district is built, but 
it in fact has affected the real ability for those folks to transfer 
their businesses and move on with commerce.
  In fact, Mr. Speaker, 90 percent of all businesses in my district are 
small businesses, including Mr. and Mrs. Long of Salt Point, New York, 
who currently feel the onerous effect of this provision.
  Several months ago, Dorothy and George Long arranged for the sale of 
their resort, located in beautiful Lake George, New York. 
Unfortunately, they are now suffering the consequences of this 
provision in a real and immediate way.
  Mr. and Mrs. Long were relying on this sale to finance their 
retirement, and are now faced with one of three options: one, they take 
a loan out in order to pay for the capital gains tax; or two, they 
break their contract and face a lawsuit; or three, they suffer the 
consequences of nonpayment of taxes. Talk about being put in between a 
rock and a hard place.
  What my colleagues and I are proposing is a 556 fix. It is essential 
that we work together to stop the damage to our local economies, its 
effect on the hardworking people throughout America.
  Mr. Speaker, I want to thank my colleagues here today for taking the 
first step with me towards fixing this inequity. I ask now that we move 
expeditiously so that the further damage that we have already caused on 
the small working businesspeople throughout America is mitigated.

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