[Congressional Record Volume 148, Number 4 (Monday, January 28, 2002)]
[Senate]
[Pages S158-S161]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    HOPE FOR CHILDREN ACT--Continued

  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I ask unanimous consent that the pending 
amendment be set aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 2724

  Mr. HATCH. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Utah [Mr. Hatch], for himself and Mr. 
     Bennett, proposes an amendment numbered 2724 to the language 
     proposed to be stricken by amendment No. 2698.

  Mr. HATCH. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

[[Page S159]]

   (Purpose: To amend the Internal Revenue Code of 1986 to allow the 
         carryback of certain net operating losses for 7 years)

       At the end, add the following:

     SEC. __. CARRYBACK OF CERTAIN NET OPERATING LOSSES ALLOWED 
                   FOR 7 YEARS.

       (a) In General.--Paragraph (1) of section 172(b) of the 
     Internal Revenue Code of 1986 (relating to years to which 
     loss may be carried) is amended by adding at the end the 
     following new subparagraph:
       ``(H) Special rule for certain losses.--
       ``(i) In general.--In the case of a taxpayer which has a 
     net operating loss for any taxable year ending during 2000, 
     2001, or 2002, subparagraph (A)(i) shall be applied by 
     substituting `7' for `2' and subparagraph (F) shall not 
     apply.
       ``(ii) Per year limitation.--For purposes of the 6th and 
     7th taxable years preceding the taxable year of such loss, 
     the amount of net operating losses to which clause (i) may 
     apply for any taxable year shall not exceed $50,000,000.''
       (b) Election To Disregard 7-Year Carryback.--Section 172 of 
     the Internal Revenue Code of 1986 (relating to net operating 
     loss deduction) is amended by redesignating subsection (j) as 
     subsection (k) and by inserting after subsection (i) the 
     following new subsection:
       ``(j) Election To Disregard 7-Year Carryback for Certain 
     Net Operating Losses.--Any taxpayer entitled to a 7-year 
     carryback under subsection (b)(1)(H) from any loss year may 
     elect to have the carryback period with respect to such loss 
     year determined without regard to subsection (b)(1)(H). Such 
     election shall be made in such manner as may be prescribed by 
     the Secretary and shall be made by the due date (including 
     extensions of time) for filing the taxpayer's return for the 
     taxable year of the net operating loss. Such election, once 
     made for any taxable year, shall be irrevocable for such 
     taxable year.''
       (c) Temporary Suspension of 90 Percent Limit on Certain NOL 
     Carrybacks.--
       (1) In general.--Subparagraph (A) of section 56(d)(1) of 
     the Internal Revenue Code of 1986 (relating to general rule 
     defining alternative tax net operating loss deduction) is 
     amended to read as follows:
       ``(A) the amount of such deduction shall not exceed the sum 
     of--
       ``(i) the lesser of--

       ``(I) the amount of such deduction attributable to net 
     operating losses (other than the deduction attributable to 
     carrybacks described in clause (ii)(I)), or
       ``(II) 90 percent of alternative minimum taxable income 
     determined without regard to such deduction, plus

       ``(ii) the lesser of--

       ``(I) the amount of such deduction attributable to 
     carrybacks of net operating losses for taxable years ending 
     during 2000, 2001, or 2002, or
       ``(II) alternative minimum taxable income determined 
     without regard to such deduction reduced by the amount 
     determined under clause (i), and''.

       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning before January 1, 
     2003.
       (d) Effective Date.--Except as provided in subsection (c), 
     the amendments made by this section shall apply to net 
     operating losses for taxable years ending after December 31, 
     1999.

  Mr. HATCH. Mr. President, on behalf of myself and Senator Bennett, I 
have sent this amendment to the desk. This is an amendment to the 
underlying bill.
  The amendment we offer today would add a provision that is much 
needed for any economic stimulus bill--a temporary enhanced net 
operating loss carryback provision. Simply stated, this amendment would 
help distressed American companies, including a number of them in my 
home State of Utah, deal with losses they have been experiencing as a 
result of the terrorist attacks and as a result of the economic 
slowdown. And it will help those employees who are going to lose their 
jobs unless we help these distressed companies.
  Over the past months, as both Houses of Congress have worked toward 
developing various legislative packages to stimulate the economy, there 
is one provision that has been common to practically every plan--a 
provision to enhance the net operating loss carryback to make it more 
beneficial to distressed companies and their employees.
  This provision was in both of the House-passed stimulus plans, it was 
in the Democratic plan passed out by the Finance Committee last 
November, and it was in the compromise plan developed by the Senate 
Centrists. In short, the concept of temporarily increasing the 
carryback period for net operating losses to get quick relief to 
corporations that have paid taxes in recent years but are now losing 
money is one that is widely supported on both sides of the aisle. It is 
supported because it helps these distressed companies and their 
employees, who are likely to lose their jobs if we do not do something.
  There are two major differences--which we consider improvements--
between the net operating loss amendment we are offering today and the 
provision that is included in all the other economic stimulus plans. 
The first difference is in the length of time that the net operating 
loss can be carried back to previous years. This period is 5 years in 
the other stimulus bills, compared with a 2-year carryback period 
allowed by current law.
  Our amendment would go further and allow a 7-year net operating loss 
carryback. This is important for distressed companies with large losses 
or that have been losing money for several years because of the 
economic slowdown and various other matters that are beyond their 
control. Companies such as these often have no taxable income within 
the past 5 years to which they can reach back and offset losses. For 
these companies, a 5-year carryback simply provides no relief. Allowing 
them to go back 7 years offers them a better chance to immediately 
offset these losses and get the quick relief they need.
  The second difference between this amendment and the other net 
operating loss provisions is that, for the 6th and 7th years of the 
carryback period, our provision includes a $50 million cap per company 
per year on how much net operating loss can be carried back.
  In other words, the amendment limits the amount of immediate tax 
refund that a distressed company is able to get from going back beyond 
5 years to $50 million. This limitation both keeps the estimated 
revenue loss of this provision down to a reasonable level and also 
eliminates the suggestion that these companies might be getting a 
windfall in refunds from these earlier years.
  A few commentators have argued that a net operating loss relief 
provision does not belong in an economic stimulus bill. I strongly 
disagree. Companies that are losing money face some very hard choices. 
One option that is a very difficult one, but one that is being turned 
to more and more as the economic slowdown continues, is that of laying 
off workers.
  Such layoffs, of course, are devastating to the families involved and 
to our entire economy. One reason for this is these displaced workers 
begin to slow down their consumer spending in order to conserve their 
money. Moreover, layoffs have the effect of lowering the confidence of 
other consumers who become worried that their jobs could also be lost.
  One of the best ways to prevent layoffs, in my view, would be to help 
distressed companies that are experiencing losses through an enhanced 
net operating loss carryback provision. By allowing these companies to 
get immediate refunds of their previously paid taxes can keep some of 
these businesses viable, so they do not need to turn to layoffs for 
relief. Extra cash in the form of tax refunds can help these companies 
ride out the recession storm.
  The Internal Revenue Code has long included provisions allowing 
taxpayers to offset losses with gains in other tax years. This is only 
fair because the designation of the tax year, whether a calendar year 
or a fiscal year, as the proper measurement period for computing tax 
liability is purely arbitrary.
  Many companies have business cycles that exceed a year in length, and 
some have shorter cycles. Any kind of limit we place on the ability of 
businesses to carry back or carry forward the loss they might incur in 
1 year to another year where taxes were paid artificially reduces the 
fairness of the tax system.
  Because of the realities of administering the tax system, it is 
obvious that we must have some kind of limits on the number of years to 
which we can carry the losses, but there is nothing magical about the 
current law limitation of 2 years for carrybacks and 20 years for 
carryforwards. Indeed, the carryback period was 3 years until the 1997 
tax act shortened it to 2 years. Thus, if we can increase fairness and 
help distressed companies by allowing them to carry tax losses back 7 
years, rather than 2, we certainly ought to do so.
  This amendment does not add a permanent extended net operating loss 
provision carryback period to the Internal Revenue Code. Rather, it is 
designed to help alleviate losses incurred

[[Page S160]]

by taxpayers only in tax years that end in 2000, 2001, and 2002. After 
this period, the carryback period would revert to the 2 years now in 
the law.
  I might add, that the revenue effects of timing changes such as these 
are relatively short-term. For example, the estimated loss to the 
Treasury for the 5-year net operating loss provision passed by the 
House in December was about $1.6 billion. However, the 10 year loss was 
estimated to be only $271 million. This is because most of the loss 
reverses itself within the 10-year budget window. While the Joint 
Committee on Taxation has not yet estimated the cost of the 7-year 
carryback provision in this amendment, it is also likely to be largely 
reversed within 10 years.
  In conclusion, this is a common-sense amendment that adds a provision 
that is in every other economic stimulus plan, and that has support 
from both sides of the aisle. If we want to help distressed companies 
avoid the layoff option, this is an excellent place to start. In 
addition, this amendment would increase tax equity. I urge all of our 
colleagues to support it.
  It is in the best interests of the distressed companies, those 
companies that have had a difficult time over the last number of years. 
It is in the best interests of the employees of those companies because 
those employees will stand a much better chance of not being laid off. 
Third, it is in the best interests of everyone because it will 
stimulate the economy.
  This is a good amendment. I hope our colleagues will support it. I 
hope it will win by an overwhelming margin.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maine.
  Ms. COLLINS. I ask unanimous consent the pending amendment be set 
aside and I be permitted to speak in favor of amendment No. 2717.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 2717

  Ms. COLLINS. Mr. President, I have always been a very strong 
supporter of small business, the engine of our economy. According to 
the Small Business Administration, it is our smaller firms that account 
for three-quarters of our Nation's economic growth and almost all of 
the net new jobs that are created. These are good jobs, jobs that make 
our communities strong. Indeed, small businesses are often the last to 
lay off employees because the employees tend to be their neighbors, 
their family members, and their friends. They will go to great lengths 
to try to retain employees while a larger corporation might cut without 
much thought.
  More than 95 percent of all the businesses in the United States are 
considered small businesses. Yet the economic recovery plan put forth 
by the distinguished majority leader does not assist this critical 
sector of our economy.
  I support much of what is in Senator Daschle's package. For example, 
I have long proposed extending unemployment compensation to help those 
workers who have exhausted their State unemployment benefits yet have 
been unable to find new work because of the poor economy. I also 
support the provisions in Senator Daschle's plan to have stimulus 
checks go to those taxpayers and other citizens who did not receive 
rebate checks last summer and fall.
  While I support much of what is in the majority leader's package, it 
does virtually nothing for small businesses. I think that is a serious 
mistake because if we can get the small business sector booming again, 
we will increase employment and stimulate our economy. That is why I 
have offered, with my good friend from Missouri, Senator Bond, the 
ranking member of the Senate Small Business Committee, an amendment 
that gives small businesses the boost they need to grow, to create new 
jobs, and to energize our sluggish economy. I included a very similar 
provision as part of an economic recovery bill I introduced on October 
4.
  I ask unanimous consent two more cosponsors be added to the Bond-
Collins amendment, Senator Bennett and Senator Hutchinson of Arkansas.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. COLLINS. Mr. President, our amendment is as straightforward as it 
is effective. Under section 179 of the Internal Revenue Code, a small 
business can deduct up to $24,000 of the cost of qualifying property 
placed in service in any given year. The deduction is phased out for 
taxpayers that invest more than $200,000 per year in qualifying 
property. For the rest of this year and for all of next year, the Bond-
Collins amendment permitted small businesses to expense up to $40,000 
in new equipment purchases per year. So the limit would go from $24,000 
to $40,000. It would also increase the total investment limit from 
$200,000 to $325,000.
  The purpose of our amendment is to encourage small businesses to make 
important investments that create jobs. It would allow them to write 
off more of their new equipment purchases immediately. Many small 
businesses have put on hold investments in equipment that they were 
planning to make in the wake of the September 11 attacks and because of 
the poor economy. This tax incentive would help encourage them to go 
ahead with these critical investments.

  Direct expensing allows small businesses to also avoid the 
complicated rules of depreciation as well as the unrealistic recovery 
periods for many assets. For example, under current law a computer must 
be depreciated over 5 years, even though we all know from the 
experience in our offices that the useful life of most computers is 2 
to 3 years.
  Our amendment would also help to address a critical need of small 
businesses to access more capital. As the Small Business Administration 
has noted:

       Adequate financing for rapidly growing firms will be 
     America's greatest economic policy challenge for small 
     business in [this] century.

  As our economy has slid into recession, capital has become 
increasingly scarce for smaller companies. Indeed, venture capital 
investment in the third quarter of 2001--which is the latest data 
available--represents a 31-percent decline from the previous quarter 
and a 73-percent decline from just 1 year ago. So our small businesses 
are having great difficulty in accessing the capital they need. 
Moreover, the capital gap disproportionately affects minority-owned and 
women-owned businesses.
  By raising the section 179 expensing limit by two-thirds, our 
amendment will, in effect, free up more capital for small businesses to 
purchase more equipment. These purchases in turn will stimulate other 
industries that produce that new equipment.
  As Federal Reserve Chairman Alan Greenspan has pointed out, enacting 
temporary expensing provisions would have the ``most immediate impact'' 
on our economy of all the provisions and proposals that have been 
advanced. It is the right medicine and it is the right tonic for our 
economy today.
  I have spoken with entrepreneurs in my home State of Maine about what 
the impact would be on their particular business if we were to increase 
the expensing allowance. They have told me, without exception, that our 
amendment is needed and that it will help to stimulate our sluggish 
economy. Let me give an example by quoting Terry Skillins of Skillins' 
Greenhouses, a fourth-generation Maine family business founded in 1885. 
Skillins' employs between 70 and 120 employees, depending upon the 
season, in its landscaping, greenhouse, and floral businesses. Terry 
told me that Skillins' is looking to expand but that to do so is 
expensive. It takes money. From tractors to conveyor belts to machines 
that fill flowerpots automatically, the equipment that Skillins' needs 
to expand is expensive. Terry says raising the small business expensing 
limit to $40,000 would help his company a lot.
  He told me something else that I think is very important and telling. 
Terry said that it is very important for the increased expensing to 
last through next year. He told me it often takes more than 1 year for 
a small business to carry out an expansion plan and if the increased 
expensing were available for 2 years, his ability to grow his business, 
Skillins' Greenhouses, would be far greater.
  I think we should heed Terry's advice and help our small businesses, 
just as they will help drive our economy back to prosperity.
  We also must not lose sight of the human side to this amendment. As 
Mark Carpentier, the owner of a small media business in Portland, ME, 
recently told me, increasing the expensing limit will provide his 
business with

[[Page S161]]

more cash, cash he could use to hire another employee, to pay his 
employees more, or to purchase them better health insurance--a major 
problem for many small businesses as premiums continue to soar.

  It seems to me that a true consensus package, a package that is going 
to make a real difference to our economic recovery, should and must 
include a provision like the Bond-Collins amendment to help small 
businesses pull through these difficult times and to give them the 
boost they need so they can be, once again, the engine of our economy.
  Indeed, an increase in the small business expensing limit is a 
provision that is common to pretty much every economic recovery package 
other than the one advanced by the majority leader. Increased small 
business expensing was included in both the economic recovery packages 
that passed the House, the Centrist Coalition proposal--which I, along 
with my colleague from Maine, with Senator Voinovich, and three of our 
colleagues on the other side of the aisle joined together to draft--and 
the Senate Finance Committee bill which was reported with unanimous 
Democratic support in committee.
  The help that our amendment would provide comes at a relatively 
modest cost to the Treasury. It is needed by small businesses across 
the Nation. I believe it would make a real difference.
  A survey by the National Federation of Independent Business, our 
Nation's largest small business advocacy group, showed that the 
September 11 attacks and the economic downturn have significantly 
damaged small business economic activity. According to the NFIB's 
members, 34 percent of those responding reported that their sales are 
lower since September 11; 13 percent reported that business investment 
plans had been postponed or canceled altogether.
  The Senate, tomorrow, will have the opportunity to put the investment 
plans of our Nation's small businesses back on track. This is a modest 
step we can take, but it is a step that will make a real difference to 
our small businesses and to the millions of employees for whom they 
provide good jobs. I urge my colleagues to support this amendment which 
the NFIB considers to be a key one in favor of small business.
  In that regard, I ask unanimous consent a letter from the NFIB, 
endorsing the Bond-Collins amendment, be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                      NFIB Key Small-Business Vote


  small business needs help now!! Vote yes on bond-collins expensing 
                               amendment

       Dear Senator: On behalf of the 600,000 members of the 
     National Federation of Independent Business (NFIB), I urge 
     you to support Senator Kit Bond's and Senator Susan Collin's 
     amendment increasing for two years the amount of equipment 
     purchases that small businesses may expense each year from 
     the current $24,000 to $40,000.
       Many small businesses are currently struggling to cope with 
     the recession and the events of September 11. Increasing the 
     expensing limit would provide small and growing firms with 
     the funds to make critical investments and keep their firms 
     running and growing, creating new jobs.
       The Bond amendment will also help small business by 
     eliminating burdensome record keeping involved in 
     depreciating equipment. And it adjusts the investment limit 
     on expensing from 200,000 to $325,000.
       Small business is the major job generator for the economy. 
     Let's give them the tools to grow, hire more employees, and 
     lead this country out of recession. Support the Bond-Collins 
     expensing amendment. Votes on or related to this amendment 
     will be an NFIB Key Small-Business Vote for the 107th 
     Congress.
           Sincerely,

                                                   Dan Danner,

                                            Senior Vice President,
                                                    Public Policy.

  Ms. COLLINS. I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Carper). Without objection, it is so 
ordered.
  Mr. REID. Mr. President, I ask unanimous consent I be allowed to 
speak in morning business for up to 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________