[Congressional Record Volume 146, Number 65 (Tuesday, May 23, 2000)]
[Senate]
[Pages S4313-S4314]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Roth):
  S. 2608. A bill to amend the Internal Revenue Code of 1986 to provide 
for the treatment of certain expenses of rural letter carriers; to the 
Committee on Finance.


      legislation regarding the taxation of rural letter carriers

 Mr. GRASSLEY. Mr. President, the U.S. Postal Service provides 
a vital and important communication link for the Nation and the 
citizens of my state of Iowa. Rural Letter Carriers play a special role 
and have a proud history as an important link in assuring the delivery 
of our mail. Rural Carriers first delivered the mail with their own 
horses and buggies, later with their own motorcycles, and now in their 
own vehicles. They are responsible for maintenance and operation of 
their vehicles in all types of weather and road conditions. In the 
winter, snow and ice is their enemy, while in the spring, the melting 
snow and ice causes potholes and washboard roads. In spite of these 
quite adverse conditions, rural letter carriers daily drive over 3 
million miles and serve 24 million American families on over 66,000 
routes.
  Although the mission of rural carriers has not changed since the 
horse and buggy days, the amount of mail they deliver has, as the 
Nation's mail volume has continued to increase throughout the years, 
the Postal Service is now delivering more than 200 billion pieces of 
mail a year. The average carrier delivers about 2,300 pieces of mail a 
day to about 500 addresses. Most recently, e-commerce has changed the 
type of mail rural carriers deliver. This fact was confirmed in a 
recent GAO study entitled ``U.S. Postal Service: Challenges to 
Sustaining Performance Improvements Remain Formidable on the Brink of 
the 21st Century,'' dated October 21, 1999. As this report explains, 
the Postal Service expects declines in its core business, which is 
essentially letter mail, in the coming years. The growth of e-mail on 
the Internet, electronic communications, and electronic commerce has 
the potential to substantially affect the Postal Service's mail volume. 
First-Class mail has always been the bread and butter of the Postal 
Service's revenue, but the amount of revenue from First-Class letters 
will decline in the next few years. However, e-commerce is providing 
the Postal Service with another opportunity to increase another part of

[[Page S4314]]

its business. That's because what individuals and companies order over 
the Internet must be delivered, sometimes by the Postal Service and 
often by rural carriers. Currently, the Postal Service has about 33% 
percent of the parcel business. Carriers are now delivering larger 
volumes of business mail, parcels, and priority mail packages. But, 
more parcel business will mean more cargo capacity will be necessary in 
postal delivery vehicles, especially in those owned and operated by 
rural letter carriers.
  When delivering greeting cards or bills, or packages ordered over the 
Internet, Rural Letter Carriers use vehicles they currently purchase, 
operate and maintain. In exchange, they receive a reimbursement from 
the Postal Service. This reimbursement is called an Equipment 
Maintenance Allowance (EMA). Congress recognizes that providing a 
personal vehicle to deliver the U.S. Mail is not typical vehicle use. 
So, when a rural carrier is ready to sell such a vehicle, it's going to 
have little trade-in value because of the typically high mileage, 
extraordinary wear and tear, and the fact that it is probably right-
hand drive. Therefore, Congress intended to exempt the EMA allowance 
from taxation in 1988 through a specific provision for rural mail 
carriers in the Technical and Miscellaneous Revenue Act of 1988. That 
provision allowed an employee of the U.S. Postal Service who was 
involved in the collection and delivery of mail on a rural route, to 
compute their business use mileage deduction as 150% percent of the 
standard mileage rate for all business use mileage. As an alternative, 
rural carrier taxpayers could elect to utilize the actual expense 
method (business portion of actual operation and maintenance of the 
vehicle, plus depreciation). If EMA exceeded the allowable vehicle 
expense deductions, the excess was subject to tax. If EMA fell short of 
the allowable vehicle expenses, a deduction was allowed only to the 
extent that the sum of the shortfall and all other miscellaneous 
itemized deductions exceeded two percent of the taxpayer's adjusted 
gross income.
  The Taxpayers Relief Act of 1997 further simplified the tax returns 
of rural letter carriers. This act permits the EMA income and expenses 
``to wash,'' so that neither income nor expenses would have to be 
reported on a rural letter carrier's return. That simplified taxes for 
approximately 120,000 taxpayers, but the provision eliminated the 
option of filing the actual expense method for employee business 
vehicle expenses.
  The lack of this option, combined with the dramatic changes the 
Internet has and will have on the mail, specifically on rural carriers 
and their vehicles, is a problem I believe Congress can and must 
address.
  The mail mix is changing and already Postal Service management has, 
understandably, encouraged rural carriers to purchase larger right-hand 
drive vehicles, such as Sports Utility Vehicles (SUVs), to handle the 
increase in parcel loads. Large SUVs are much more expensive than 
traditional vehicles, so without the ability to use the actual expense 
method and depreciation, rural carriers must use their salaries to 
cover vehicle expenses. Additionally, the Postal Service has placed 
11,000 postal vehicles on rural routes, which means those carriers 
receive no EMA.
  These developments have created a situation that is contrary to the 
historical congressional intent of using reimbursement to fund the 
government service of delivering mail, and also has created an 
inequitable tax situation for rural carriers. If actual business 
expenses exceed the EMA, a deduction for those expenses should be 
allowed. To correct this inequity, I am introducing a bill today, along 
with Senator Roth, that would reinstate the ability of a rural letter 
carrier to choose between using the actual expense method for computing 
the deduction allowable for business use of a vehicle, or using the 
current practice of deducting the reimbursed EMA expenses.
  Rural carriers perform a necessary and valuable service and face many 
changes and challenges in this new Internet era. Let us make sure that 
these public servants receive fair and equitable tax treatment as they 
perform their essential role in fulfilling the Postal Service's mandate 
of binding the Nation together.
  I urge my colleagues to join Senator Roth and myself in supporting 
this legislation.
                                 ______