[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.
____________________