[Congressional Record Volume 150, Number 102 (Wednesday, July 21, 2004)]
[House]
[Pages H6475-H6483]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1445
TAX SIMPLIFICATION FOR AMERICA'S JOB CREATORS ACT OF 2004
Mr. PORTMAN. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 4840) to amend the Internal Revenue Code of 1986 to simplify
the taxation of businesses.
The Clerk read as follows:
H.R. 4840
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Tax Simplification for
America's Job Creators Act of 2004''.
SEC. 2. 2-YEAR EXTENSION OF INCREASED EXPENSING FOR SMALL
BUSINESS.
Subsections (b), (c), and (d) of section 179 of the
Internal Revenue Code of 1986 are each amended by striking
``2006'' each place it appears and inserting ``2008''.
SEC. 3. INDEXING OF GROSS RECEIPTS TEST FOR CASH METHOD OF
ACCOUNTING.
(a) In General.--Section 448(c) of the Internal Revenue
Code of 1986 is amended by adding at the end the following
new paragraph:
``(4) Inflation adjustment of gross receipts test.--In the
case of any taxable year beginning in a calendar year after
2003, the $5,000,000 dollar amount in paragraph (1) shall be
increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting
`calendar year 2002' for `calendar year 1992' in subparagraph
(B) thereof.
If any amount as adjusted under the preceding sentence is not
a multiple of $100,000, such amount shall be rounded to the
nearest multiple of $100,000.''.
(b) Conforming Amendments.--
(1) Section 448(b)(3) of such Code is amended by striking
``$5,000,000'' both places it appears in the heading and
text.
(2) Section 448(c) of such Code is amended by striking
``$5,000,000'' in the heading and the first place it appears
in paragraph (1) thereof.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 4. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE
PROVISIONS.
(a) In General.--
(1) General business credits.--Subsection (d) of section 38
of the Internal Revenue Code of 1986 is amended by striking
paragraph (3).
(2) Carryback and carryforward of unused credits.--
Subsection (d) of section 39 of such Code is amended by
striking paragraphs (1) through (8) and by redesignating
paragraphs (9) and (10) as paragraphs (1) and (2),
respectively.
(3) Adjustments based on adjusted current earnings.--Clause
(ii) of section 56(g)(4)(F) of such Code is amended by
striking ``In the case of any taxable year beginning after
December 31, 1992, clause'' and inserting ``Clause''.
(4) Items of tax preference; depletion.--Paragraph (1) of
section 57(a) of such Code is amended by striking ``Effective
with respect to taxable years beginning after December 31,
1992, this'' and inserting ``This''.
(5) Intangible drilling costs.--
(A) Clause (i) of section 57(a)(2)(E) of such Code is
amended by striking ``In the case of any taxable year
beginning after December 31, 1992, this'' and inserting
``This''.
(B) Clause (ii) of section 57(a)(2)(E) of such Code is
amended by striking ``(30 percent in the case of taxable
years beginning in 1993)''.
(6) Great plains conservation program.--Section 126(a) of
such Code is amended by striking paragraph (6) and by
redesignating paragraphs (7), (8), (9), and (10) as
paragraphs (6), (7), (8), and (9), respectively.
(7) Treble damage payments under the antitrust law.--
Section 162(g) of such Code is amended by striking the last
sentence.
(8) Charitable, etc., contributions and gifts.--Section 170
of such Code is amended by striking subsection (k).
(9) Net operating loss carrybacks and carryovers.--
(A) Section 172 of such Code is amended--
(i) by striking subparagraph (D) of subsection (b)(1) and
by redesignating subparagraphs (E), (F), (G), and (H) as
subparagraphs (D), (E), (F), and (G), respectively,
(ii) by striking ``ending after August 2, 1989'' in
subsection (b)(1)(D)(i)(II) (as redesignated by clause (i)),
(iii) by striking ``subparagraph (F)'' in subsection
(b)(1)(G) (as redesignated by clause (i)) and inserting
``subparagraph (E)'',
(iv) by striking subsection (g), and
(v) by striking subparagraph (F) of subsection (h)(2).
(B) Section 172(h)(4) of such Code is amended by striking
``subsection (b)(1)(E)'' each place it appears and inserting
``subsection (b)(1)(D)''.
(C) Section 172(i)(3) of such Code is amended by striking
``subsection (b)(1)(G)'' each place it appears and inserting
``subsection (b)(1)(F)''.
(D) Section 172(j) of such Code is amended by striking
``subsection (b)(1)(H)'' each place it appears and inserting
``subsection (b)(1)(G)''.
(E) Section 172 of such Code, as amended by subparagraphs
(A) through (D) of this paragraph, is amended--
(i) by redesignating subsections (h), (i), and (j) as
subsections (g), (h), and (i), respectively,
(ii) by striking ``subsection (h)'' each place it appears
and inserting ``subsection (g)'', and
(iii) by striking ``subsection (i)'' each place it appears
and inserting ``subsection (h)''.
(10) Research and experimental expenditures.--Subparagraph
(A) of section 174(a)(2) of such Code is amended to read as
follows:
``(A) Without consent.--A taxpayer may, without the consent
of the Secretary, adopt the method provided in this
subsection for his first taxable year for which expenditures
[[Page H6476]]
described in paragraph (1) are paid or incurred.''.
(11) Amortization of certain research and experimental
expenditures.--Paragraph (2) of section 174(b) of such Code
is amended by striking ``beginning after December 31, 1953''.
(12) Soil and water conservation expenditures.--Paragraph
(1) of section 175(d) of such Code is amended to read as
follows:
``(1) Without consent.--A taxpayer may, without the consent
of the Secretary, adopt the method provided in this section
for the taxpayer's first taxable year for which expenditures
described in subsection (a) are paid or incurred.''.
(13) Activities not engaged in for profit.--Section
183(e)(1) of such Code is amended by striking the last
sentence.
(14) Dividends received on certain preferred stock; and
dividends paid on certain preferred stock of public
utilities.--
(A) Sections 244 and 247 of such Code are hereby repealed,
and the table of sections for part VIII of subchapter B of
chapter 1 of such Code is amended by striking the items
relating to sections 244 and 247.
(B) Paragraph (5) of section 172(d) of such Code is amended
to read as follows:
``(5) Computation of deduction for dividends received.--The
deductions allowed by section 243 (relating to dividends
received by corporations) and 245 (relating to dividends
received from certain foreign corporations) shall be computed
without regard to section 246(b) (relating to limitation on
aggregate amount of deductions).''.
(C) Paragraph (1) of section 243(c) of such Code is amended
to read as follows:
``(1) In general.--In the case of any dividend received
from a 20-percent owned corporation, subsection (a)(1) shall
be applied by substituting `80 percent' for `70 percent'.''.
(D) Section 243(d) of such Code is amended by striking
paragraph (4).
(E) Section 246 of such Code is amended--
(i) by striking ``, 244,'' in subsection (a)(1),
(ii) in subsection (b)(1)--
(I) by striking ``sections 243(a)(1), and 244(a),'' the
first place it appears and inserting ``section 243(a)(1)'',
(II) by striking ``244(a),'' the second place it appears,
and
(III) by striking ``subsection (a) or (b) of section 245,
and 247,'' and inserting ``and subsection (a) or (b) of
section 245,'', and
(iii) by striking ``, 244,'' in subsection (c)(1).
(F) Section 246A of such Code is amended by striking ``,
244,'' both places it appears in subsections (a) and (e).
(G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2),
469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and (D) of
section 805(a)(4), 805(b)(5), 812(e)(2)(A),
815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), and 1059(b)(2)(B)
of such Code are each amended by striking ``, 244,'' each
place it appears.
(H) Section 1244(c)(2)(C) of such Code is amended by
striking ``244,''.
(I) Section 805(a)(4)(B) of such Code is amended by
striking ``, 244(a),'' each place it appears.
(J) Section 810(c)(2)(B) of such Code is amended by
striking ``244 (relating to dividends on certain preferred
stock of public utilities),''.
(15) Organization expenses.--Section 248(c) of such Code is
amended by striking ``beginning after December 31, 1953,''
and by striking the last sentence.
(16) Amount of gain where loss previously disallowed.--
Section 267(d) of such Code is amended by striking ``(or by
reason of section 24(b) of the Internal Revenue Code of
1939)'' in paragraph (1), by striking ``after December 31,
1953,'' in paragraph (2), by striking the second sentence,
and by striking ``or by reason of section 118 of the Internal
Revenue Code of 1939'' in the last sentence.
(17) Acquisitions made to evade or avoid income tax.--
Paragraphs (1) and (2) of section 269(a) of such Code are
each amended by striking ``or acquired on or after October 8,
1940,''.
(18) Interest on indebtedness incurred by corporations to
acquire stock or assets of another corporation.--Section 279
of such Code is amended--
(A) by striking ``after December 31, 1967,'' in subsection
(a)(2),
(B) by striking ``after October 9, 1969,'' in subsection
(b), and
(C) by striking ``after October 9, 1969, and'' in
subsection (d)(5).
(19) Special rules relating to corporate preference
items.--Paragraph (4) of section 291(a) of such Code is
amended by striking ``In the case of taxable years beginning
after December 31, 1984, section'' and inserting ``Section''.
(20) Tax credit employee stock ownership plans.--Section
409 of such Code is amended by striking subsection (q).
(21) Funding standards.--Section 412(m)(4) of such Code is
amended--
(A) by striking ``the applicable percentage'' in
subparagraph (A) and inserting ``25 percent'', and
(B) by striking subparagraph (C) and by redesignating
subparagraph (D) as subparagraph (C).
(22) Retiree health accounts.--Section 420 of such Code is
amended--
(A) by striking paragraph (4) of subsection (b) and by
redesignating paragraph (5) as paragraph (4), and
(B) by amending paragraph (2) of subsection (c) to read as
follows:
``(2) Requirements relating to pension benefits accruing
before transfer.--The requirements of this paragraph are met
if the plan provides that the accrued pension benefits of any
participant or beneficiary under the plan become
nonforfeitable in the same manner which would be required if
the plan had terminated immediately before the qualified
transfer (or in the case of a participant who separated
during the 1-year period ending on the date of the transfer,
immediately before such separation).''.
(23) Employee stock purchase plans.--Section 423(a) of such
Code is amended by striking ``after December 31, 1963,''.
(24) Limitation on deductions for certain farming.--
(A) Section 464 of such Code is amended by striking ``any
farming syndicate (as defined in subsection (c))'' both
places it appears in subsections (a) and (b) and inserting
``any taxpayer to whom subsection (d) applies''.
(B)(i) Subsection (c) of section 464 of such Code is hereby
moved to the end of section 461 and redesignated as
subsection (j).
(ii) Such subsection (j) of such Code is amended--
(I) by striking ``For purposes of this section'' in
paragraph (1) and inserting ``For purposes of subsection
(i)(4)'', and
(II) by adding at the end the following new paragraphs:
``(3) Farming.--For purposes of this subsection, the term
`farming' has the meaning given to such term by section
464(e).
``(4) Limited entrepreneur.--For purposes of this
subsection, the term `limited entrepreneur' means a person
who--
``(A) has an interest in an enterprise other than as a
limited partner, and
``(B) does not actively participate in the management of
such enterprise.''
(iii) Paragraph (4) of section 461(i) of such Code is
amended by striking ``section 464(c)'' and inserting
``subsection (j)''.
(C) Section 464 of such Code is amended--
(i) by striking subsections (e) and (g) and redesignating
subsections (d) and (f) as subsections (c) and (d),
respectively, and
(ii) by adding at the end the following new subsection:
``(e) Farming.--For purposes of this section, the term
`farming' means the cultivation of land or the raising or
harvesting of any agricultural or horticultural commodity
including the raising, shearing, feeding, caring for,
training, and management of animals. For purposes of the
preceding sentence, trees (other than trees bearing fruit or
nuts) shall not be treated as an agricultural or
horticultural commodity.''
(D) Subsection (d) of section 464 of such Code, as
redesignated by subparagraph (C), is amended--
(i) by striking paragraph (1) and redesignating paragraphs
(2), (3), and (4) as paragraphs (1), (2), and (3),
respectively, and
(ii) by striking ``Subsections (a) and (b) to Apply to'' in
the subsection heading.
(E) Subparagraph (A) of section 58(a)(2) of such Code is
amended by striking ``section 464(c)'' and inserting
``section 461(j)''.
(25) Deductions limited to amount at risk.--Paragraph (3)
of section 465(c) of such Code is amended by striking ``In
the case of taxable years beginning after December 31, 1978,
this'' and inserting ``This''.
(26) Nuclear decommissioning costs.--Section 468A(e)(2) of
such Code is amended--
(A) by striking ``at the rate set forth in subparagraph
(B)'' in subparagraph (A) and inserting ``at the rate of 20
percent'', and
(B) by striking subparagraph (B) and by redesignating
subparagraphs (C) and (D) as subparagraphs (B) and (C),
respectively.
(27) Passive activity losses and credits limited.--
(A) Section 469 of such Code is amended by striking
subsection (m).
(B) Subsection (b) of section 58 of such Code is amended by
adding ``and'' at the end of paragraph (1), by striking
paragraph (2), and by redesignating paragraph (3) as
paragraph (2).
(28) Adjustments required by changes in method of
accounting.--Section 481(b)(3) of such Code is amended by
striking subparagraph (C).
(29) Exemption from tax on corporations, certain trusts,
etc.--Section 501 of such Code is amended by striking
subsection (q).
(30) Requirements for exemption.--
(A) Section 503(a)(1) of such Code is amended to read as
follows:
``(1) General rule.--An organization described in paragraph
(17) or (18) of section 501(c) or described in section 401(a)
and referred to in section 4975(g)(2) or (3) shall not be
exempt from taxation under section 501(a) if it has engaged
in a prohibited transaction.''.
(B) Paragraph (2) of section 503(a) of such Code is amended
by striking ``described in section 501(c)(17) or (18) or
paragraph (a)(1)(B)'' and inserting ``described in paragraph
(1)''.
(C) Subsection (c) of section 503 of such Code is amended
by striking ``described in section 501(c)(17) or (18) or
subsection (a)(1)(B)'' and inserting ``described in
subsection (a)(1)''.
(31) Insurance company taxable income.--
(A) Section 832(e) of such Code is amended by striking ``of
taxable years beginning after December 31, 1966,''.
(B) Section 832(e)(6) of such Code is amended by striking
``In the case of any taxable year beginning after December
31, 1970, the'' and inserting ``The''.
(32) Property on which lessee has made improvements.--
Section 1019 of such Code is amended by striking the last
sentence.
[[Page H6477]]
(33) Involuntary conversion.--Section 1033 of such Code is
amended by striking subsection (j) and by redesignating
subsection (k) as subsection (j).
(34) Property acquired during affiliation.--Section 1051 of
such Code is hereby repealed, and the table of sections for
part IV of subchapter O of chapter 1 is amended by striking
the item relating to section 1051.
(35) Holding period of property.--
(A) Paragraph (5) of section 1223 of such Code is amended
by striking ``(or under so much of section 1052(c) as refers
to section 113(a)(23) of the Internal Revenue Code of
1939)''.
(B) Paragraph (7) of section 1223 of such Code is amended
by striking the last sentence.
(C) Paragraph (9) of section 1223 of such Code is repealed.
(36) Property used in the trade or business and involuntary
conversions.--Subparagraph (A) of section 1231(c)(2) of such
Code is amended by striking ``beginning after December 31,
1981''.
(37) Sale or exchange of patents.--Section 1235 of such
Code is amended--
(A) by striking subsection (c) and by redesignating
subsections (d) and (e) as subsections (c) and (d),
respectively, and
(B) by striking ``subsection (d)'' in subsection (b) and
inserting ``subsection (c)''.
(38) Dealers in securities.--Subsection (b) of section 1236
of such Code is amended by striking ``after November 19,
1951,''.
(39) Sale of patents.--Subsection (a) of section 1249 of
such Code is amended by striking ``after December 31,
1962,''.
(40) Gain from disposition of farm land.--Paragraph (1) of
section 1252(a) of such Code is amended by striking ``after
December 31, 1969,'' both places it appears.
(41) Treatment of amounts received on retirement or sale or
exchange of debt instruments.--Subsection (c) of section 1271
of such Code is amended to read as follows:
``(c) Special Rule for Certain Obligations With Respect to
Which Original Issue Discount Not Currently Includible.--
``(1) In general.--On the sale or exchange of debt
instruments issued by a government or political subdivision
thereof after December 31, 1954, and before July 2, 1982, or
by a corporation after December 31, 1954, and on or before
May 27, 1969, any gain realized which does not exceed--
``(A) an amount equal to the original issue discount, or
``(B) if at the time of original issue there was no
intention to call the debt instrument before maturity, an
amount which bears the same ratio to the original issue
discount as the number of complete months that the debt
instrument was held by the taxpayer bears to the number of
complete months from the date of original issue to the date
of maturity,
shall be considered as ordinary income.
``(2) Subsection (a)(2)(A) not to apply.--Subsection
(a)(2)(A) shall not apply to any debt instrument referred to
in subparagraph (A) of this paragraph.
``(3) Cross reference.--
``For current inclusion of original issue discount, see section
1272.''.
(42) Amount and method of adjustment.--Section 1314 of such
Code is amended by striking subsection (d) and by
redesignating subsection (e) as subsection (d).
(43) Election; revocation; termination.--Clause (iii) of
section 1362(d)(3) of such Code is amended by striking
``unless'' and all that follows and inserting ``unless the
corporation was an S corporation for such taxable year.''.
(44) Affiliated group defined.--Subparagraph (A) of section
1504(a)(3) of such Code is amended by striking ``for a
taxable year which includes any period after December 31,
1984'' in clause (i) and by striking ``in a taxable year
beginning after December 31, 1984'' in clause (ii).
(45) Disallowance of the benefits of the graduated
corporate rates and accumulated earnings credit.--
(A) Subsection (a) of section 1551 of such Code is
amended--
(i) by striking paragraph (1) and by redesignating
paragraphs (2) and (3) as paragraphs (1) and (2),
respectively, and
(ii) by striking ``after June 12, 1963,'' each place it
appears.
(B) Section 1551(b) of such Code is amended--
(i) by striking ``or (2)'' in paragraph (1), and
(ii) by striking ``(a)(3)'' in paragraph (2) and inserting
``(a)(2)''.
(46) Definition of wages.--
(A) Section 3121(b) of such Code is amended by striking
paragraph (17).
(B) Section 210(a) of the Social Security Act is amended by
striking paragraph (17).
(47) Credits against tax.--
(A) Paragraph (4) of section 3302(f) of such Code is
amended--
(i) by striking ``subsection--'' and all that follows
through ``(A) In general.--The'' and inserting ``subsection,
the,
(ii) by striking subparagraph (B),
(iii) by redesignating clauses (i) and (ii) as
subparagraphs (A) and (B), respectively, and
(iv) by moving the text of such subparagraphs (as so
redesignated) 2 ems to the left.
(B) Paragraph (5) of section 3302(f) of such Code is
amended by striking subparagraph (D) and by redesignating
subparagraph (E) as subparagraph (D).
(48) Domestic service employment taxes.--Section 3510(b) of
such Code is amended by striking paragraph (4).
(49) Tax on fuel used in commercial transportation on
inland waterways.--Section 4042(b)(2)(A) of such Code is
amended to read as follows:
``(A) The Inland Waterways Trust Fund financing rate is 20
cents per gallon.''.
(50) Transportation by air.--Section 4261(e) of such Code
is amended--
(A) in paragraph (1) by striking subparagraph (C), and
(B) by striking paragraph (5).
(51) Taxes on failure to distribute income.--
(A) Paragraph (2) of section 4942(f) of such Code is
amended by striking the semicolon at the end of subparagraph
(B) and inserting ``, and'', by striking ``; and'' at the end
of subparagraph (C) and inserting a period, and by striking
subparagraph (D).
(B) Subsection (g) of section 4942 of such Code is
amended--
(i) by striking ``For all taxable years beginning on or
after January 1, 1975, subject'' in paragraph (2)(A) and
inserting ``Subject'', and
(ii) by striking paragraph (4).
(C) Section 4942(i)(2) of such Code is amended by striking
``beginning after December 31, 1969, and''.
(52) Taxes on taxable expenditures.--Section 4945(f) of
such Code is amended by striking ``(excluding therefrom any
preceding taxable year which begins before January 1,
1970)''.
(53) Returns.--Subsection (a) of section 6039D of such Code
is amended by striking ``beginning after December 31,
1984,''.
(54) Information returns.--Subsection (c) of section 6060
of such Code is amended by striking ``year'' and all that
follows and inserting ``year.''.
(55) Canal zone.--Subparagraph (A) of section 6103(b)(5) of
such Code is amended by striking ``the Canal Zone,''.
(56) Abatements.--Section 6404(f) of such Code is amended
by striking paragraph (3).
(57) Failure by corporation to pay estimated income tax.--
Clause (i) of section 6655(g)(4)(A) of such Code is amended
by striking ``(or the corresponding provisions of prior
law)''.
(58) Merchant marine capital construction funds.--Paragraph
(4) of section 7518(g) of such Code is amended by striking
``any nonqualified withdrawal'' and all that follows through
``shall be determined'' and inserting ``any nonqualified
withdrawal shall be determined''.
(59) Valuation tables.--
(A) Subsection (c) of section 7520 of such Code is amended
by striking paragraph (2) and by redesignating paragraph (3)
as paragraph (2).
(B) Paragraph (2) of section 7520(c) of such Code, as so
redesignated, is amended--
(i) by striking ``Not later than December 31, 1989, the''
and inserting ``The'', and
(ii) by striking ``thereafter'' in the last sentence
thereof.
(60) Administration and collection of taxes in
possessions.--Section 7651 of such Code is amended by
striking paragraph (4) and by redesignating paragraph (5) as
paragraph (4).
(61) Definition of employee.--Section 7701(a)(20) of such
Code is amended by striking ``chapter 21'' and all that
follows and inserting ``chapter 21.''.
(b) Effective Date.--
(1) General rule.--Except as otherwise provided in
paragraph (2), the amendments made by subsection (a) shall
take effect on the date of enactment of this Act.
(2) Savings provision.--If--
(A) any provision amended or repealed by subsection (a)
applied to--
(i) any transaction occurring before the date of the
enactment of this Act,
(ii) any property acquired before such date of enactment,
or
(iii) any item of income, loss, deduction, or credit taken
into account before such date of enactment, and
(B) the treatment of such transaction, property, or item
under such provision would (without regard to the amendments
made by subsection (a)) affect the liability for tax for
periods ending after such date of enactment,
nothing in the amendments made by subsection (a) shall be
construed to affect the treatment of such transaction,
property, or item for purposes of determining liability for
tax for periods ending after such date of enactment.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Ohio (Mr. Portman) and the gentleman from Texas (Mr. Sandlin) each will
control 20 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Portman).
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, Americans are frustrated. They are frustrated with their
current Tax Code, and they should be. The mountains of documents that
they face are complicated, confusing, and sometimes contradictory. The
effects of this complex code, by the way, are more than just
frustration for those of us who are taxpayers. They include decreased
levels of voluntary compliance, people cannot figure out the code and
they are less likely to comply with it;
[[Page H6478]]
increased costs, of course, for the entire taxpayer system; reduced
perception of fairness in the Federal tax system; and, of course,
increased difficulties at the Internal Revenue Service as they try to
administer this unwieldy code. Clearly, we need to make our Tax Code
more user friendly, and we should take every opportunity to do so.
Over the last few years, we have done that in some cases, for
instance, the expansion of the 10 percent tax bracket, and taking
literally millions of taxpayers off the Internal Revenue Code
altogether.
But today, Mr. Speaker, I would like to commend my colleague, the
gentleman from Illinois (Mr. Crane), for legislation that he has
brought to the floor showing his commitment to tax simplification, and
particularly focusing on the needs of our small businesses.
H.R. 4840, which is before the House today, the Tax Simplification
For America's Job Creators Act, provides provisions that will provide
tax relief and simplification for small businesses and small business
owners as they plan for the economy, which is now growing.
First, the bill will extend the $100,000 expensing amount provided
under what is called section 179 of the Internal Revenue Code. This is
an extremely important incentive which was included in the President's
2003 tax relief bill, the Jobs Growth and Tax Relief Reconciliation
Act.
It allows small businesses to deduct up to $100,000 immediately, to
write that off, not depreciate it over time, as compared to $25,000,
which was in law before the 2003 tax relief act. This is for new
equipment up to 2006. Therefore, we want to expand that, we want to
extend the legislation into 2006 and 2007, and the legislation offered
by the gentleman from Illinois (Mr. Crane) does that.
It also expands the definition of who qualifies. Before 2003, those
companies who qualified were those that had $200,000 or less of capital
purchases per year. We doubled that to $400,000 of capital purchases
per year, making this provision something that is more usable for more
small businesses.
Expensing, of course, allows small businesses to recover the cost of
their investment immediately rather than writing it off over time and
rather than requiring them to keep extensive records and track those
deductions over several years. This helps reduce the cost of capital,
which helps to expand plant and equipment. It also makes it simpler and
less costly, less complicated for our small businesses to be able to
comply with our Tax Code.
Again, today's bill will provide yet another vehicle that we can use
to try to enact this important small business priority that has already
passed the House in some other forms, and I commend the gentleman from
Illinois (Chairman Crane) for it.
Second, his bill also begins adjusting an important standard which
affects small businesses' ability to use the cash accounting system.
The cash accounting method is simpler, and it provides under this
legislation to convert from the current $5 million threshold to $10
million. So we are expanding the amount that can be indexed for
inflation, so that more and more small businesses are not forced into
using the accrual method each year.
It is important to understand that forcing businesses into the
accrual accounting method has real consequences for smaller companies.
Not only must they begin calculating taxes using a different accounting
method; they must actually pay tax on the difference in income as
measured by the accrual and the cash methods. The bill before us
rectifies this situation by indexing the limit so inflation will not
force more and more small businesses into the accrual method.
This does not change the $5 million threshold. Mr. Speaker, I correct
myself. Rather, it indexes that going forward to inflation to be able
to increase that amount. This change will provide $120 million in tax
relief to smaller businesses during the coming decade.
Finally, the bill eliminates a number of outdated references in the
code. These are so-called ``deadwood provisions.'' This is also very
important both because these deadwood provisions that have been
identified by the Joint Tax Committee, by the Treasury Department, by
others in their reports are important to get out of the code because
they do not need to be in it, do not make any sense; but it also
creates confusion at the IRS and confusion among taxpayers and has
created downstream problems that are difficult to address.
H.R. 4840, in the end, Mr. Speaker, will cut taxes by approximately
$1.2 billion for our small businesses, and that figure is over the next
decade.
The bill is well within our House-passed budget, and I believe it is
very worthy of our support as an important simplification method. I
urge my colleagues to support this legislation to help our small
businesses, our job creators, our risk takers, who are out there
ensuring that this economic recovery continues, and continues strongly.
Mr. Speaker, I reserve the balance of my time.
Mr. SANDLIN. Mr. Speaker, I yield myself as much time as I may
consume.
I thank my friend from Ohio for his work on this bill. Mr. Speaker, I
rise today in support of tax simplification. There can be little doubt
that taxpaying individuals and American businesses, particularly small
businesses, spend far too much time, not just preparing their tax
returns and paying their taxes, but in even figuring out just how to
file or which forms to fill out, what tax preferences they qualify for,
what they can deduct, and what elections they should make to best serve
the interests of the business, its employees, and themselves.
On top of that is the anxiety that many small business owners
experience when confronting the daunting complexity of the Tax Code and
trying to make sound business and tax planning decisions with the
prospect of taking a wrong turn in a numbing maze that makes tax
lawyers and accountants shudder. Such complexity is both unnecessary
and unhealthy, Mr. Speaker, for small business and our Nation's
economy.
So, Mr. Speaker, I wholeheartedly support meaningful efforts to
reform our tax system and to reduce an extreme burden on our small
businesses and individuals and to ensure efficiency.
Moreover, I am pleased to rise in support of the legislation
introduced by the gentleman from Illinois (Mr. Crane). I am pleased to
be a cosponsor of the legislation that somewhat eases the burden borne
by America's small businesses, truly the engine that drives our
economy.
Mr. Speaker, at a very modest cost, H.R. 4840 provides two valuable
benefits to our Nation's small businesses.
First, the bill extends enhanced section 179 expensing for small
businesses for 2 years. Last year Congress passed and President Bush
signed into law legislation that increased the amount of equipment that
small businesses may expense from $25,000 annually to $100,000
annually. The 2003 law also increased the phase-out range from $200,000
of capital expenditures to $400,000, significantly expanding the number
of small businesses that qualify for section 179 expensing. Both
amounts are indexed for inflation.
The bill the House considers today extends these improvements to
section 179 for 2 additional years through 2007, thereby providing
much-needed relief as our economy continues to recover and to grow.
Second, H.R. 4840 eases the accounting burden on small businesses by
preserving the cash accounting method for more small businesses.
Generally, under current law, businesses with $5 million or more in
gross receipts must switch from the cash method of accounting to the
accrual method. The bill offered by the gentleman from Illinois (Mr.
Crane) preserves the value of the $5 million limit by indexing it for
inflation so that more small businesses will not be forced to use the
more complicated accrual method.
Finally, but less directly beneficial, H.R. 4840 cleans up the Tax
Code by eliminating outdated, rarely used and unnecessary provisions of
the code. Repealing these deadwood provisions certainly has the effect
of reducing clutter in our code, but its practical effects and benefits
to small business are somewhat limited.
Mr. Speaker, H.R. 4840 is a fine bill. It is a good first step, and I
am proud to support it. However, this Congress needs to do more to
relieve the burden borne by America's small businessmen and -women and
individuals.
[[Page H6479]]
Mr. Speaker, I reserve the balance of my time.
Mr. PORTMAN. Mr. Speaker, I appreciate the comments of my colleague
from Texas. I agree with them.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Illinois (Mr. Crane), the author of this legislation on tax
simplification.
(Mr. CRANE asked and was given permission to revise and extend his
remarks.)
Mr. CRANE. Mr. Speaker, I thank my distinguished colleague from the
Committee on Ways and Means, the gentleman from Ohio (Mr. Portman), for
yielding this time to me and for helping me in getting this bill
explained and passed.
Mr. Speaker, I rise in strong support of H.R. 4840, the legislation I
have introduced that will simplify the Tax Code for small businesses.
Nearly seven in 10 new jobs are created by small businesses, which
are the backbone of our economy. The Tax Simplification For America's
Job Creators Act helps small businesses in three ways:
First, it extends section 179, small business expensing, for 2 years,
through 2007. This provision allows small businesses to immediately
deduct the cost of up to $100,000 in expenditures for new equipment.
Failure to extend this provision will result in an effective tax
increase of about $1 billion on small businesses seeking to make
critical investments that expand their businesses and create jobs.
Second, my legislation will allow small businesses to take advantage
of the cash method of accounting. Under current law, subchapter C
corporations cannot use cash accounting, which allows them to deduct
expenses in the year paid and report income in the year received, if
their gross receipts exceed $5 million. H.R. 4840 indexes the $5
million threshold for inflation, which ensures that more small
businesses are not forced to use the more complex, costly, and time-
consuming accrual method of accounting. This provision saves business
taxpayers roughly $120 million.
Third, H.R. 4840 eliminates from the Tax Code a number of dead-letter
provisions, which serve no purpose other than to clutter an already
overly complex set of laws.
My constituents tell me that passage of this legislation will mean
more jobs and increased economic growth in the Chicagoland area. I am
also pleased that some of the Nation's leading small business
associations, including the National Federation of Independent
Businesses, the NFIB, the U.S. Chamber of Commerce, and the Associated
Builders and Contractors, strongly support the bill.
Mr. Speaker, my legislation is not a panacea for small business. The
government can only do so much. As always, it is the hard work and
ingenuity of the American people that lead to expanded growth, job
creation, and prosperity. However, taxpayers with business income pay
about 55 percent of all income taxes. This bipartisan legislation will
not only simplify the Tax Code; but by returning over $1 billion to
business taxpayers, it will also let our job creators know that
Congress means business when it comes to lowering their tax burden. It
is the least we can do.
While I am extraordinarily pleased that we are acting today on much-
needed simplification for small business, I want to take a moment to
mention the need for greater simplification in the tax laws. I, for
one, intend to be dogged in my pursuit of this goal.
To give one example, I have long championed an effort for many years
to address a complex and unfair provision in the consolidated return
rules. These rules were enacted so that corporate groups could pay tax
on the net income of all their affiliated companies. Generally, the
rules accomplish this goal, unless one of the affiliated corporations
in the group is a life insurance company.
Twenty Members of the Committee on Ways and Means have cosponsored
legislation I have introduced, H.R. 2228, that reforms the consolidated
returns to address this inequity. Similar legislation passed both the
House and Senate in 1999 as part of a larger tax bill that,
unfortunately, was vetoed by President Clinton. I would expect that
with the appropriate amount of effort, this legislation, as well as
other meritorious simplification, can and will be enacted in the near
future.
Finally, Mr. Speaker, to continue on the theme of tax simplification,
in 2002, the IRS issued Revenue Procedure 2002-28 to allow subchapter S
corporations to use cash accounting if their gross receipts do not
exceed $10 million. That ruling provided useful clarification for
taxpayers. I believe the service should go one step further and make
this guidance a formal regulation so that in the future America's small
business owners can rely on a simple method of accounting.
Mr. Speaker, I include for the Record a copy of the NFIB's petition
to the IRS asking for a final rule to address this issue.
NFIB Legal Foundation,
Washington, DC, July 20, 2004.
Petition for Rulemaking Before the Internal Revenue Service
Hon. Mark W. Everson,
Commissioner, Internal Revenue Service,
Washington, DC.
Dear Mr. Commissioner: The National Federation of
Independent Business Legal Foundation (``NFIB Legal
Foundation'') submits this petition to the Internal Revenue
Service (IRS) pursuant to 5 U.S.C. Sec. 553(e) of the
Administrative Procedure Act, 5 U.S.C. Sec. Sec. 551 et seq.
Petitioners request a rulemaking to incorporate Revenue
Procedure 2002-28, with three requested modifications, into a
formal regulation. Pursuant to 5 U.S.C. Sec. 555(e),
petitioners request prompt consideration and response to this
petition.
The NFIB Legal Foundation, a 501(c)(3) public interest law
firm, is the legal arm of the National Federation of
Independent Business (NFIB), which is the nation's oldest and
largest organization dedicated to representing the interests
of small-business owners throughout all 50 states. The
approximately 600,000 members of NFIB own a wide variety of
America's independent businesses from restaurants to hardware
stores to bowling alleys.
REVENUE PROCEDURE 2002-28
Revenue Procedure 2002-28 allows qualifying small business
taxpayers with gross receipts of less than $10 million to use
the cash receipts and disbursements method of accounting.
This relieves qualifying small businesses from the more
complex inventory and accrual method of accounting. Revenue
Procedure 2002-28 also provides for qualifying businesses to
obtain automatic consent to change from accrual accounting to
cash accounting.
the proposed regulation--incorporation of revenue procedure 2002-28
into a final rule.
Petitioner requests that the IRS convert Revenue Procedure
2002-28 into a formal regulation. A formal rule would provide
stability and prevent long-term confusion and wide-ranging
interpretations of the current revenue procedure. While there
are numerous revenue procedures that have been in effect for
many years, nothing prevents a subsequent administration from
modifying or withdrawing a revenue procedure. Incorporation
into a formal regulation would make the components and intent
of Revenue Procedure 2002-28 a more permanent fixture of the
tax law thereby maintaining a predictable environment in
which small businesses may operate.
further changes are needed in a final rule
Petitioner applauds the IRS Small Business/Self-Employed
Division's outreach to small business owners on this matter.
In doing so, Revenue Procedure 2002-28 addressed many small
business owners' concerns and provided much needed tax
simplification for many taxpayers. Nevertheless, there are
some outstanding issues that Petitioner would like to see
incorporated into a final rule.
1. Provide one-year grace period to adjust income ratio or
change accounting method
Section 4(.01) of Revenue Procedure 2002-28 allows a
qualifying small business taxpayer to use a cash method of
accounting for all of its trade or business if ``the taxpayer
reasonably determines that its principal business activity is
the provision of services, including the provision of
property incident to those services.'' A taxpayer may
determine its principal business activity using either (1)
the gross receipts for its prior taxable year, or (2) the
average annual gross receipts for its three most recent prior
taxable years.
We support the inclusion of the three-year average test in
Revenue Procedure 2002-28 for determining if a small business
qualifies for use of cash accounting methods. By using a
three-year average, qualifying businesses can maintain their
customary cash accounting methods if, in one year, their
service-to-produce income ratio changes to 55/45 rather than
60/40. Revenue Procedure 2002-28 addresses this issue in
Example 6 by showing that a business with 57% of its income
from services still qualifies for the cash accounting method.
This practice is both practical and fair, and petitioner
requests that the procedure and examples used in Revenue
Procedure 2002-28 are incorporated into a regulation.
In addition, however, we request that a business should not
be forced to immediately switch from cash accounting to
accrual accounting when the business' principal business
activity income ratio falls below the 60/
[[Page H6480]]
40 threshold percentage provided in the Revenue Procedure
examples. Instead, businesses should be provided a one-year
grace period to either adjust their income ratios or to
change accounting methods. Allowing such a grace period would
enhance stability and certainty for small business taxpayers
by providing them with an opportunity to avoid having to
switch from cash to accrual accounting from one year to
the next.
2. Provide notice of changes to NAICS
Revenue Procedure 2002-28 applies to qualifying taxpayers
who fit within the $1 million to $10 million gross receipts
threshold. Businesses qualify if they derived their largest
percentage of gross receipts in the prior tax year from an
activity other than one in the following North American
Industry Classification System (NAICS) codes: mining
activities within NAICS codes 211 and 212, including oil and
gas extraction; manufacturing within NAICS codes 31-33;
wholesale trades within NAICS code 42; retail trade within
NAICS codes 44 and 45; and information industries within
NAICS codes 5111 and 5122, including newspaper, periodical,
book, and database publishers and sound recording. The cash
accounting method does not apply to farming businesses or
those prohibited from using cash accounting by IRC Sec. 448.
Changes made to NAICS codes could obviously impact the
ability of a business to qualify for the cash accounting
method under Revenue Procedure 2002-28. The IRS should
provide some form of notification to affected businesses when
NAICS codes are changed, to ensure that business taxpayers
remain aware of the impact on their accounting procedures.
3. Provide one-year grace period to businesses affected by
changes to NAICS
Petitioner also requests that the IRS provide businesses
affected by changes to the NAICS codes a one-year grace
period to switch their accounting systems from cash
accounting to accrual accounting. A grace period would
provide business taxpayers time to adjust their business
practices and change their accounting procedures.
authority of the commissioner
The enhanced sense of permanence associated with a formal
regulation as described above would provide certainty and
stability for thousands of small businesses nationwide,
allowing the business owners to do what they do best--run the
businesses that are the backbone of our economy. Federal law
provides ample authority to grant this petition and issue the
requested final rule.
Respectfully submitted this 20th day of July 2004,
Karen R. Harned, Esq.,
Executive Director.
{time} 1500
Mr. SANDLIN. Mr. Speaker, I yield myself such time as I may consume.
We appreciate the efforts of the gentleman from Illinois (Mr. Crane)
and clearly, there is a need for tax simplification. Today, the IRS now
prints more than 1,000 publications, forms, and instruction booklets,
and while the Tax Code was a mere 500 pages in 1913, financial
publisher CCH says its Standard Federal Tax Reporter, which is the
guidance for tax preparers, has grown to more than 60,000 pages today.
The cost to individuals and business in America of the complexity of
our code are staggering.
More than $100 billion a year in accounting fees and the value of
taxpayers' time to complete their returns, according to Joel Slemrod of
the University of Michigan, are used up each year. This is roughly
equivalent to what our Nation spends to operate the Departments of
Education, Homeland Security, and the Department of State each year.
According to the IRS, small business owners are required to devote 60
hours, almost 8 full work days each year, to prepare their taxes.
While the bill we debate today is a good piece of legislation, it
will not do enough to reduce this burden, and we must do more, working
together.
Mr. Speaker, I yield 5 minutes to the gentleman from Washington (Mr.
McDermott.)
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Mr. Speaker, we are getting close to election again.
The gentleman from Texas (Mr. DeLay) Congress says it is time for
simplifying the Tax Code. But, Mr. Speaker, my colleagues know that
``tax simplification'' is just the term the Republicans use to start
talking about the need for a flat tax or a sales tax. Every year at
this time it comes up.
The Committee on Ways and Means had a host of hearings about this
same issue in the mid-1990s under Chairman Archer. At one point during
the hearings in 1995, the chairman said he was convinced that the Tax
Code needed to go to a flat tax. He even said he was going to introduce
legislation to do it. But, after all the hearings and all of the
rhetoric, he never even introduced a bill.
Mr. Speaker, we can do two things with money: We can save it or we
can spend it. Now, rich people have more to save than do poor people.
If all that we do is impose taxes when people spend money, then poor
people are going to spend the larger share of their paycheck on taxes
than rich people are. I mean, anybody knows that. Poor people spend
every dime of every paycheck; rich people spend some and then they put
a whole bunch in the bank or in the stock market or in something else.
A system based on consumption taxes hardly is fair at all.
Legislation has been introduced in the past to convert our tax regime
to one that relies solely on consumption taxes. The gentleman from
Georgia (Mr. Linder) has introduced legislation to abolish the IRS,
abolish it, and force the Federal Government to rely on a national
sales tax, a proposal that the majority leader supports. This proposal
would be a boon to the wealthy elite. His proposal would tax all
purchases on goods and services in our economy, including food, health
care, home rents, and new home purchases.
The Joint Committee on Taxation did an analysis of the Linder
proposal. The study indicated that in order for the bill to be revenue
neutral over 10 years, the estimated national sales tax rate would be
between 36 and 57 percent. In other words, the price of blood
transfusions, prescription drugs, and a pair of sneakers would increase
between 37 and 57 percent. Does that sound fair to my colleagues?
How do we sell this proposal to simplify tax structure to the baby
boomers of this country who are about to go onto a fixed income? We
have this big bulge of people who are just about, in 2008, going to
start going onto Social Security. You cannot, and that is why they call
it tax simplification. It sounds like a good idea.
The Health Insurance Association of America states that one of the
consequences of a flat tax bill is likely to be a rapid increase in the
number of people without private health insurance coverage. One
economist estimated that there would be 8 million more people without
health benefits if a flat tax proposal were enacted.
James Poterba, an economist at MIT, estimated that eliminating the
current tax law benefits for purchasing homes could result in a 17
percent decline in the value of the U.S. housing market.
Now, what about the payroll taxes? A flat tax proposal may eliminate
the deduction that employers pay for their payroll taxes, amounting to
a massive tax increase on businesses of all sizes.
The American public is not naive, Mr. Speaker. They know that when it
is election time and the Republicans start talking about tax
simplification, it really means they want a flat tax. If you just give
us one more chance, we did not simplify it over the last 10 years that
we have been in control. Give us another chance and we will get our
flat tax in.
Now, when are they going to be honest about these goals for the
people? When are they going to be honest and tell the American people
that the Tax Code has only become more complex since they controlled
the Congress and its tax-writing committees. They have 105 more days to
run this charade, but it is coming. There is going to be a change, and
not in the Tax Code, but in who runs this House.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
I appreciate my friend from Washington's discussion on general tax
relief. I suppose at the end he would say he supports this legislation
before us because it is not a flat tax, it is not a sales tax, it is
not even a fundamental reform. Rather, it is simplification and good,
common-sense simplification at that, this one focused on small
businesses. The next piece of legislation we will take up focuses more
on individuals.
But it is hard to defend the current code. Again, my friend from
Texas talked earlier about the compliance costs and referenced
Professor Joel Slemrod's reports from the University of Michigan. I
think the number is somewhere between 50 and 100 billion now. That is
the consensus number; 85 seems to be the one most people are using. Mr.
Speaker, $85 billion a year in compliance costs, and over 3 billion
compliance hours.
[[Page H6481]]
Another interesting statistic is that every year now, tax compliance
accounts for about 80 percent of the paperwork burden of the Federal
Government. So we do need to do something.
Today is not the silver bullet, but it is a start. It is going into
the current code and changing some unfair aspects of the code; in the
case of section 179, helping businesses to be able to not just write
off their purchases more quickly for equipment, but also to be able to
reduce their compliance costs, because they do not have to keep those
depreciation schedules over time.
It also takes out some deadwood provisions which come from the Joint
Committee on Taxation recommendations, as well as Treasury Department
recommendations, which say that these provisions of the code that have
not been removed over time, and it must be done by statute by the way,
not only cause confusion and complexity, but actually cause some
taxpayers to make mistakes that then cause tremendous cost to the tax
system over time.
This legislation also again helps some smaller businesses to be able
to take advantage of cash accounting rather than the accrual method,
which is a complexity. Therefore, this is a simplification as well.
So I appreciate the gentleman's comments, and what I would say is
what we are doing today is, we are taking a very responsible step
towards simplification. We are not providing again for the silver
bullet. We need to continue to work on that, as we will every year, and
I know as we are going forward in this Congress, should we be here on
this congressional floor next year talking about these issues,
hopefully we will have a more fundamental reform that we can agree on
on a bipartisan basis, as we will agree today, I believe, on a
bipartisan basis, on these simplifications.
Mr. Speaker, I reserve the balance of my time.
Mr. SANDLIN. Mr. Speaker, I yield such time as he may consume to the
gentleman from Washington (Mr. McDermott).
Mr. McDERMOTT. Mr. Speaker, I want to thank the gentleman for
yielding me a couple more minutes. After listening to the gentleman
from Ohio (Mr. Portman), I always can think of things to say.
The gentleman tells us that this bill, that I am probably for it; the
gentleman is right. This is nothing. This bill does not do anything
except do what the gentleman told us he was not going to do. The
gentleman said he was going to make the expensing for a while and then
stop it. Now my Republican colleagues are making it permanent. It is
just one more of those things.
But the real point here is, you say this is a start. It is not much.
It is a start on the way to what?
I yield to the gentleman from Ohio (Mr. Portman).
Mr. PORTMAN. Mr. Speaker, I appreciate the gentleman yielding.
I certainly never heard anybody say that section 179 expensing was
temporary. What we said was that the bonus depreciation provision was
temporary. Section 179, on our side, we have always intended to be
permanent and we would certainly hope that it will be made permanent.
What we are doing today is, we are extending it for 2 more years, in
2006 and 2007, that is as compared to bonus depreciation, which was
meant as a stimulus, just to correct the gentleman on those two
depreciation provisions.
Mr. McDERMOTT. Mr. Speaker, reclaiming my time, does the gentleman
realize he just put everybody to sleep, who is watching this, with that
stuff? You guys come out here to pass a bill because you cannot get
through the military construction bill, and this is nonsense.
Every time we have had, since 1994 we have Archer talk about
simplification, we had the majority leader, Mr. Armey, who campaigned
against the tax system and said he was going to rip it out by the roots
and have a flat tax. I mean, we have been hearing this stuff, and today
we have this little bitty thing, and it does not do any harm, really;
it does not do any good, really.
I mean, surely everybody would like to have their taxes cut, whoever
they are, but the real issue is the working people of this country.
They are paying payroll taxes, and nobody is talking about them. Nobody
is talking about the fact that we took the tax structure and gave the
bulk of the benefits to people above $1 million, or above $100,000, for
that matter. Nobody is talking about that. Why do my Republican
colleagues not talk about what you are doing for people on the bottom?
In India they ran a campaign and they said that ``India is shining.''
That was the theme of the campaign in India. And the Congress Party ran
one with a symbol that said, ``The hand of Congress is with the common
man.'' And, lo and behold, in spite of an 8.2 percent growth rate in
India, they threw out the ``India is shining'' because it was not
shining on the people at the bottom.
And you people have got to understand that. You can keep doing this
kind of stuff and telling people, we are going to simplify, we are
going to simplify. They do not believe you. They do not believe you.
They have watched what you did for 10 years. So you can say it as many
times as you want, but they have to figure out their taxes, and they
know that it is not simplification.
So I know it is election time, and I appreciate that you have control
of the Committee on Rules and can bring this kind of stuff out, but it
is not making it any better for the common man in this country.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume
just to respond to my friend from Washington.
For him to say, this does not matter and does not help anybody, I
hope he will talk to the small business people in the State of
Washington as well as in the State of Ohio that I represent. This does
help them.
I was with one of those small business people today talking about
section 179 expensing and the importance of being able to plan. And he
was absolutely delighted that this Congress is going to pass, once
again, legislation to be sure that he can plan for being able to
immediately write off not $25,000 a year, but $100,000 a year of new
purchases in equipment. This is extremely important.
If the gentleman chooses to vote ``no,'' that is his right, but for
him to say it does not affect anybody, I think is inaccurate. That is
not to mention the other provisions the gentleman from Illinois (Mr.
Crane) talked about, which are also important to small businesses.
To say that this is a bill that does not matter and that it is just
something that we do around election time, I think, is not consistent
with the fact that in 2003, this same legislation was passed by this
Congress. We could not do it for as long a period of time as we wanted
to, frankly, because of our friends on the other side of the aisle who
did not believe that this legislation should be made permanent.
We would like to make it permanent. It is extremely important to our
small business community. It is extremely important to the risk-takers,
to the entrepreneurs, who, after all, are creating most of the jobs out
there right now. And I would hope that on a bipartisan basis we could
at least agree to these simplifications.
We can have the debate later as to whether the gentleman would like
to defend the current code and continue to have, again, 3 billion hours
a year in compliance costs, $85 billion a year in expenses related to
compliance; or whether we do want to look at more fundamental reforms.
That would be more controversial and they will need, again, the same
kind of bipartisan work that has gone into this legislation here.
But at a minimum, let us at least go into the current code and make
some responsible changes to make it simpler for small businesses, which
is this legislation before us.
Mr. Speaker, I reserve the balance of my time.
Mr. SANDLIN. Mr. Speaker, I yield 4 minutes to the gentleman from
Illinois (Mr. Emanuel).
Mr. EMANUEL. Mr. Speaker, I thank the gentleman for yielding me this
time.
It is interesting, to my colleague, the gentleman from Ohio, in the
last 3\1/2\ years, while they have been in control, they have had 326
changes to the Tax Code, adding 10,000 pages to the Tax Code. So in his
effort today at simplification, let us have a rendezvous
[[Page H6482]]
with the record: 10,000 new pages to the Tax Code and addendums.
{time} 1515
That has been your record; and if you are in the business of being a
tax lawyer, a tax accountant, there is a treasure chest out here in
George Bush and the Republican majority's Tax Code. For middle-class
families, it has become more complicated, burdensome, and unfair; and
the complexity of this Tax Code directly relates to the inequities in
this Tax Code. And that is what has happened to our middle-class
families as we have shifted more and more of the tax burden onto work
and people who work for a living rather than people who open up
dividend checks for a living.
Let us see what has happened in the last couple of years to typical
families. It now takes since 1994, since you have been in the majority,
7\1/2\ hours longer to fill out the tax form. Thanks for the
contribution to simplification.
The child tax credits now on the code have five different breaks for
families and children, each with a different definition. Now, I have
three kids, and I will tell them there is only one definition for a
child. We do not need five definitions for what a child is, but their
Tax Code has done wonders in complicating the code.
Education tax credits, with a child in college, parents have to
choose between two nonrefundable tax credits, the Hope or the Lifetime
Learning, all the while in complicated forms that are long and
duplicative. But guess what? If you are a corporation and you are
filling out the Export-Import Bank loan, a page and a half. A kid
filling out the FAFSA form trying to get a Pell grant, 108 questions.
Now, what makes a corporation more important to America's future than
that child? That corporation on average gets $200 million. That child
gets $2,500. That child is as important to America's future, and it
should be easier to get a college loan than it is to get an Export-
Import loan agreement.
Increased tax preparation costs: as middle-class families struggle
with the wage and benefit recession, costs for gasoline and food are
going up. The last thing they need to deal with is tax preparation
costs. Since 1995, 15 more million Americans have needed to hire a
professional tax preparer to deal with the Tax Code and its increased
complexity. The average cost is between $100 and $150. It can be a full
day's pay for millions of Americans. If someone is an attorney or an
accountant in the tax business, the Bush Tax Code is like Christmas
every year. The abusive tax shelters used by corporations and the
wealthy have increased exponentially in the last few years as the
burden on middle-class families have grown increasingly.
The tax gap that is underreported by corporations and wealthy
individuals is nearly $311 billion. Underreporting accounted for $249
billion. And that is the majority's refusal to work on this and crack
down on this. Even their Treasury Department has asked for new
enhancements in the laws.
Tax shelters have a corrosive effect, stacking the deck against
ordinary taxpayers. While the special interests win shelters,
loopholes, middle-class families have to play by the rules and are
buried under a crushing burden by the IRS. The public's distaste for
the current Tax Code is a direct result of the inequity.
And now they want towards election time this holy picture by passing
this legislation. I will vote for it. It is their first step after
adding 10,000 pages to the code and 326 changes to trying to do
something for simplification.
I have offered my own piece of legislation to simplify family credit
that condenses the child tax credit, the earned income tax credit and
the dependent care into a single credit. It takes 200 pages down to 12
questions. It puts the Tax Code on behalf of work, on behalf of middle-
class families trying to raise their children, and gives the same
energy to those families that you have given to the wealthy and special
interest in this country; and that is where we should put the Tax Code
on behalf of the working families of our country.
Tax reform is more than a fiscal issue. It is also about our
priorities. Our tax system should respect the values and the interests
of the middle-class families.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
I would remind my colleague from Illinois that some of the very
issues that he raises are currently under consideration by the
Congress, including the definition of a child. As he may know, I have
introduced legislation to consolidate those definitions into one
definition that is currently in the child tax credit conference between
the House and the Senate. I fully expect he will have the opportunity
to vote on that legislation in this Republican-controlled Chamber, if
not this week, then in September; and that will be a major
simplification.
I would also remind the gentleman that this complication of the Tax
Code, which I agree with him on, is not just the province of one
administration. I can remember when he was in the Clinton
administration working on the Hope credit, working on the Lifetime
Learning credit, working on many other ways to use the Tax Code to
achieve social purposes which further complicated the code
dramatically; and I would remind him that one of the pillars of the
Bush administration tax relief was not just lowering rates for
everybody, which is a simplification, not just lowering rates on
capital gains which is a simplification, lowering rates on dividend
which is a simplification, but also extending this 10 percent tax
bracket.
That has focused exactly on the taxpayers that my colleagues are
talking about. Lower-income taxpayers they say have got no benefit.
Their benefit is total simplification, because 3 or 4 million Americans
who are lower-income Americans now are no longer on the tax roles at
all. They do not have to look over their shoulder at the IRS because
they are off the Federal tax rolls. They pay no income tax at all, and
that is simplification that George Bush put through this House and that
most of us voted for on this side of the aisle.
With regard to EITC, I would remind my friend that we have actually,
in the 2001 bill, streamlined the EITC, not as much as I would like, as
we know, because we have talked about that; but their income tax credit
has actually in this administration under this Congress been
simplified.
So just to put a little bit of clarity around it and some
perspective, today we are talking about section 179. We are talking
about the expensing, the need to simplify that. I would remind him that
the bonus depreciation provision that his colleague from Washington
talked about as being temporary, that was also a simplification and
simplification not just for small businesses but for all businesses.
So we have done our part in terms of making the code more
complicated, both parties over the years; but if he looks back at the
record over this Congress and over this administration, there are a
number of items which have been very positive in terms of
simplification, the most important of which is to take people off the
rolls altogether, not having to worry about income taxes and the
legislation before us today, again, bringing us back to where we are,
taking us from the abstract to the practical.
We have an opportunity on a bipartisan basis to make some sensible
changes to our Tax Code, to make it simpler for small businesses to
comply with taxes. These are the risks takers. These are the people we
want to help, and I commend my colleague from Illinois for bringing
this legislation to the floor today.
Mr. Speaker, I reserve the balance of my time.
Mr. SANDLIN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from Illinois (Mr. Emanuel).
Mr. EMANUEL. Mr. Speaker, I do want to acknowledge one thing. The
gentleman is right. We use the Tax Code to let middle-class families
afford college education and lifetime learning so they can go back to
community colleges, and the gentleman has used the Tax Code to ensure
that people who want to buy Hummers get a tax deduction. The gentleman
has used the Tax Code to ensure that a corporate executive gets only
$300 for using a plane; and, yet, his corporation writes $30,000 off
for using a corporate jet. Which is it, $30,000 that the taxpayers have
to pick up, or $300 that the CEO gets to deduct from their taxes?
The gentleman is right. We have had our differences in how we have
used the
[[Page H6483]]
Tax Code, one for higher education and access to college education, and
another for corporate executives who want to discount their corporate
jet use. So when it comes to complexity, I am glad that the gentleman
is still working on simplification; but since 1995, they have been in
control, and they have had many opportunities to reduce and simplify
the code; and they have made it more complicated, more difficult for
middle-class families, while they have alleviated the burden for the
wealthy and the special interests in this town.
Mr. SANDLIN. Mr. Speaker, I yield myself as much time as I consume.
In 1996, then-Speaker Newt Gingrich stated the Tax Code over the
years has become increasingly politicized and is seen less as a simple
tool for raising revenues than as an instrument for social and economic
engineering, exponentially increasing the complexity of the code.
The current system is indefensible. Clearly, the small business
community in America has been subject to more tax law complexity year
after year. For example, the Small Business Job Protection Act of 1996
makes 657 Tax Code changes which expanded the Tax Code by more than 50
pages. The Jobs and Growth Tax Relief Act of 2003 made 51 Tax Code
changes and expanded the Tax Code by 12 pages. The IRS estimates that
the average taxpayer with self-employed status has the greatest
compliance burden in terms of preparation, 59 hours. And this is about
10 hours longer than in 1994.
Even the House-passed version of the FSC/ETI bill from this year has
109 tax changes. This will encompass at least 200 additional Tax Code
lines and at least 50 new pages of statutory language and footnotes.
Mr. Speaker, America's small businesses are the engine powering the
largest, most robust and most innovative economy in the world. They
deserve a more meaningful effort by this Congress to ensure that
valuable time and resources are better invested in the success of their
business and not wasted in preparation of returns and to make sure that
our business people, entrepreneurs, are not raked over the coals by a
Tax Code that requires a lawyer, a CPA and a computer programmer to
understand it. We can and must do better by our small business men and
women and individuals in this country.
Mr. Speaker, again, I am proud to support and cosponsor this fabulous
piece of legislation. I urge my colleagues to join with me in casting a
vote for small business owners and their employees across this Nation.
At the same time, however, I am hopeful that this legislation is the
beginning of meaningful reform and not the end of the line.
Mr. Speaker, I yield back the balance of my time.
Mr. PORTMAN. Mr. Speaker, I think this has been a helpful debate to
talk about the need for simplification. I am glad to see some of my
colleagues on the other side of the aisle are agreeing with us with
regard to this underlying legislation with regard to small businesses
but also with the need to simplify our code. We have taken steps to
simplify, and we need to continue to do that.
It is on the heels of major tax relief in 2001, 2002, and 2003 this
administration inherited a failing economy, moving into recession. Then
the tragedy of 9/11, the shock of the corporate scandals, the stock
market boom busting, a lot of challenges to our economy. And our first
focus was economic recovery; and, therefore, the stimulus and the
economic recovery tax legislation provided needed tax relief to small
businesses, to families, and to individuals around this country.
Now we are focused on that, as well as simplification; and it is very
important given the fact that we do have an increasingly complex Tax
Code and that the burden of compliance with that code is greater and
greater, that we on a bipartisan basis focus on this compliance cost
and, therefore, on simplifying the code.
Before us today we have a great piece of legislation. It is not the
silver bullet, does not do it all; but it helps and it tells small
businesses that if they want to go out there and buy new equipment to
be able to expand their plant, to hire new people, to keep this economy
moving, we are adding jobs, we have economic growth that is the best we
have had in 20 years in this country, that we will enable them to write
off $100,000 worth of new purchases rather than $25,000 worth of new
purchases.
We are telling them that businesses that are a little bit smaller
than the very smallest businesses would be able to take advantage of
this as well by being sure that the definition of what businesses can
qualify is expanded.
Now, this is good legislation. We are also telling small businesses
they can use the cash accounting method, which saves them money, which
saves them complexity in not having to hire accountants and additional
professionals, rather than going to the accrual method. So we are
saying we are going to index that to inflation to help small
businesses. And, finally, we are saying that our Tax Code has too many
provisions that are no longer relevant, deadwood provisions that cause
complexity and confusion. We are going to get rid of those provisions
in the code, particularly as they affect small businesses.
So, again, I commend my colleague from Illinois for bringing this
legislation before us today. This is the first step in a long march
towards simplifying our Tax Code, and I would hope that we will have
support across the board on a bipartisan basis for this legislation.
Mr. BARRETT of South Carolina. Mr. Speaker, I rise in strong support
of H.R. 4840 which encourages investment and simplifies bookkeeping and
tax reporting requirements for small business owners. This legislation
will not only allow small businesses to continue to expense $100,000
instead of dropping back down to $25,000, but will also allow more
small businesses to be eligible.
We should be encouraging small businesses to buy technology,
machinery, and other equipment so they can expand their businesses and
in turn create more jobs. H.R. 4840 removes some of the redtape that
increases the cost of doing business.
Mr. Speaker, it is the private sector, the small businesses
throughout the Nation that create jobs, wealth and innovation. In fact,
small businesses are responsible for creating two out of every three
net new jobs.
Low taxes and sensible regulations are essential to helping the 25
million small businesses in America; that's why I urge my colleagues to
vote in favor of H.R. 4840.
Mr. PORTMAN. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Simpson). The question is on the motion
offered by the gentleman from Ohio (Mr. Portman) that the House suspend
the rules and pass the bill, H.R. 4840.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. SANDLIN. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________