[Congressional Record Volume 150, Number 137 (Monday, December 6, 2004)]
[House]
[Pages H10915-H10917]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 AMENDING INTERNAL REVENUE CODE TO MODIFY TAXATION OF ARROW COMPONENTS

  Mr. RYAN of Wisconsin. Mr. Speaker, I move to suspend the rules and 
pass the bill (H.R. 5394) to amend the Internal Revenue Code of 1986 to 
modify the taxation of arrow components.
  The Clerk read as follows:

[[Page H10916]]

                               H.R. 5394

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXCISE TAX ON ARROWS.

       (a) Repeal.--Subsection (b) of section 332 of the American 
     Jobs Creation Act of 2004, and the amendments made by such 
     subsection, are hereby repealed; and the Internal Revenue 
     Code of 1986 shall be applied as if such subsection and 
     amendments had never been enacted.
       (b) Tax on Arrow Shafts.--Paragraph (2) of section 4161(b) 
     of the Internal Revenue Code of 1986 (relating to arrows) is 
     amended to read as follows:
       ``(2) Arrows.--
       ``(A) In general.--There is hereby imposed on the first 
     sale by the manufacturer, producer, or importer of any shaft 
     (whether sold separately or incorporated as part of a 
     finished or unfinished product) of a type used in the 
     manufacture of any arrow which after its assembly--
       ``(i) measures 18 inches overall or more in length, or
       ``(ii) measures less than 18 inches overall in length but 
     is suitable for use with a bow described in paragraph (1)(A),
     a tax equal to 39 cents per shaft.
       ``(B) Adjustment for inflation.--
       ``(i) In general.--In the case of any calendar year 
     beginning after 2005, the 39-cent amount specified in 
     subparagraph (A) shall be increased by an amount equal to the 
     product of--

       ``(I) such amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `2004' for `1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any increase determined under clause 
     (i) is not a multiple of 1 cent, such increase shall be 
     rounded to the nearest multiple of 1 cent.''.
       (c) Arrow Points.--Clause (ii) of section 4161(b)(1)(B) 
     (relating to archery equipment) of such Code is amended by 
     striking ``quiver or broadhead'' and inserting ``quiver, 
     broadhead, or point''.
       (d) Effective Date.--The amendments made by subsections (b) 
     and (c) shall apply to articles sold by the manufacturer, 
     producer, or importer after March 31, 2005.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Wisconsin (Mr. Ryan) and the gentleman from North Dakota (Mr. Pomeroy) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Wisconsin (Mr. Ryan).


                             General Leave

  Mr. RYAN of Wisconsin. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks and include extraneous material on the subject of H.R. 
5394, the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Wisconsin?
  There was no objection.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself such time as I may 
consume.
  (Mr. RYAN of Wisconsin asked and was given permission to revise and 
extend his remarks.)
  Mr. RYAN of Wisconsin. Mr. Speaker, I briefly just want to describe 
what this bill does.
  I, along with the gentleman from Utah (Mr. Matheson), introduced H.R. 
5394, which will correct an unintended new tax on arrows. The American 
Jobs Creation Act closed the loophole that allowed imported arrows to 
avoid the excise tax paid on domestically produced arrows. 
Unfortunately, the IRS identified an unintended consequence that will 
require 8,000 retailers to collect and remit a small part of this 
excise tax.
  The provision of this bill designed to protect the double taxation of 
arrows inadvertently moves the incidence of a very small part of the 
tax on arrows from manufacturers to retailers. This language will 
require every retailer to determine the difference between the tax paid 
on the components that they buy and the tax due on arrows that they 
assemble and sell. Therefore, 8,000 retailers will be required to file 
and remit the excise tax quarterly for an amount of about $100,000.
  Clearly, Congress did not intend to impose a new tax on thousands of 
small businesses and retailers. This legislation fixes that. It amends 
the archery excise provision to impose a flat fee on the first sale of 
all arrow shafts. This legislation protects thousands of retailers by 
keeping the incidence of the tax on manufacturers, not on retailers; 
treats domestic and foreign manufacturers equally; and protects the 
Federal Aid in Wildlife Fund.
  Mr. Speaker, I reserve the balance of my time.
  Mr. POMEROY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to commend my colleague the gentleman from 
Wisconsin (Mr. Ryan). He has worked very diligently on this issue. I 
know he personally is an avid sportsman and takes, therefore, more than 
passing interest in these matters. He also does very well representing 
the constituents involved in the domestic manufacture of arrows.
  This has been a hard one to get right. We first passed it in 1997, 
trying to address this issue. The language in the FST bill that passed 
just a few weeks ago we thought took care of it. We had the joint tax 
and Treasury Department involved in getting that language correct, and 
only now we are finding that it is going to be a new tax to be 
collected by about 10,000 sports retailers.
  Mr. Speaker, we want to fix this, and we want to fix this one right, 
quick. So I am going to ask for support on this motion today.
  I would like to, in the course of my remarks, however, address an 
issue raised by the gentleman from New York (Mr. Rangel), the ranking 
member of the Committee on Ways and Means, and his statement will be 
made a part of the Record.
  He had offered for the chairman a deal to bundle in a unanimous 
consent package the bow and arrow fix, plus a provision to address the 
circumstances of the Virgin Islands and other territories under the 
corporate tax reform bill, the FST bill mentioned earlier, as well as 
something to address the devastation in Haiti, and so I would just read 
a couple of paragraphs from his statement because I think it is 
appropriately before the body.
  The ``Ways and Means Committee Chairman Thomas knows that the bows 
and arrows correction could have been handled by unanimous consent.'' 
There had been a request that a correcting provision from the FST/ETI 
bill also be included to assist the Virgin Islands and some attention 
provided to the devastation affecting the people of Haiti.
  ``The recently enacted FST/ETI legislation contains a provision that 
will adversely affect the economic development programs of the Virgin 
Islands and other possessions.
  ``The provision denies the Virgin Islands the ability to provide 
economic incentives to companies doing business in the Virgin Islands 
if they have some U.S. source income.''
  It is also clear that House leadership is unwilling to provide 
assistance to poverty-stricken Haiti. ``Obviously, our neighbor in this 
hemisphere is not viewed as so urgent that it cannot wait. I am talking 
about a country that is so poor they bake clay and pretend it is bread.
  ``It is unclear to me why'' the Haiti trade preferences bill could 
not have been brought up by year end.
  I agree that, to summarize the ranking member's feelings, it is fine 
to address this bow and arrows provision, absolutely fine. We have some 
issues we also wanted addressed, circumstances about possession under 
FST/ETI and something to be done to address the pathetic circumstance 
of Haiti, and that would have been our preference also at year end.
  Having now stated what our preferences would have been, let me again 
summarize the minority position on this bill. It needs to be corrected. 
We want it corrected. We do not think it should have taken three times 
to get right, but here we are. We are willing to get it right this 
time.
  I again salute the gentleman from Wisconsin's (Mr. Ryan), my 
colleague, efforts who have been untiring and in the end will today 
prevail in getting this right.
  Mr. Speaker, I yield back my time.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself such time as I may 
consume.
  I first want to just thank my colleague from North Dakota, a 
wonderful State I have enjoyed hunting in, and his archers, I think, 
will be pleased with his support today.
  We are finally getting this thing fixed. We thought the tax experts 
figured it out the last time. That was not necessarily the case. We 
have got this fix in place. So, again, we are not going to be pushing 
jobs overseas. We are not going to be draining precious resources from 
the Pittman-Robertson Fund. We are fixing that loophole.
  Mrs. CHRISTENSEN. Mr. Speaker, today the House is considering H.R. 
5394, a bill

[[Page H10917]]

sponsored by my colleague Paul Ryan of Wisconsin to amend a section of 
the recently passed American Jobs Creation Act of 2004 as it relates to 
the Federal excise tax on the sale by a manufacturer, producer or 
importer of any bows or arrows of a certain weight.
  While I do not expressly support or oppose H.R. 5394, I rise to 
express my disappointment that the people of my district, the U.S. 
Virgin Islands, are not afforded a similar opportunity to address 
certain changes to the provisions of the Jobs Act as they relate to the 
residence and source rules applicable in U.S. possessions.
  It is the longstanding policy of the United States, as reaffirmed in 
the Tax Reform Act of 1986, to promote the economic development of the 
U.S. Virgin Islands through tax policies that grant the Virgin Islands 
exclusive taxing jurisdiction over its residents and the right to tax 
the income of non-residents that is either sourced in the Virgin 
Islands or attributable to Virgin Islands businesses.
  The American Jobs Creation Act of 2004, which was signed into law on 
October 22, 2004, significantly changed the Federal tax rules that form 
the foundation of Virgin Islands economic incentive program, the 
Economic Development Commission (EDC). Unless the changes made to this 
program by the Jobs Act is amended or appropriately modified by 
regulation, they have the potential to cause substantial damage to the 
Virgin Islands EDC program and cause significant losses to the 
Government of the Virgin Islands beyond those attributable to the EDC 
program.
  While the statement of the managers accompanying the conference 
report for the Jobs Act indicates that Congress was concerned about 
U.S. citizens inappropriately claiming benefits as residents of a 
possession while continuing to live and work in the United States, the 
provisions of the new IRS Code section 937 would have much broader 
impact, affecting individuals who never resided in the United States 
and also place restrictions on the different economic development 
programs that go far beyond identified abuses.
  It is for these reasons Mr. Speaker, that the government of the 
Virgin Islands sought to have these changes narrowed and clarified 
through legislation similar to H.R. 5394, but we were unsuccessful in 
our efforts to date. Accordingly, I beseech my colleagues, the chairman 
of the Ways and Means Committee and you, Mr. Speaker, to work with me 
when we return next Congress to address these concerns and avert a 
potential economic catastrophe for the Government and people of the 
Virgin Islands.
  Mr. RANGEL. Mr. Speaker, H.R. 5394 is the Republican's third attempt 
to provide correct statutory language for the purpose of providing 
domestic and foreign manufacturers and retailers of bows and arrows 
with a level playing field.
  The original provision was enacted into law in 1997. A correction to 
that language was included in this year's Foreign Sales Corporation/
Extraterritorial Income Replacement, FSC/ETI, which resulted in another 
needed correction--as provided in H.R. 5394. Apparently, the most 
recent drafting error would cause about 10,000 new retailers to begin 
collecting excise taxes on a quarterly basis due to an unintended new 
point of tax collection created for arrow components costing less than 
a dollar. I hope that this time the Republicans got it right.


                               Priorities

  What really concerns me today is not bows and arrows. Rather, I 
question the priorities of the Republicans in the House.
  The Republicans enjoy talking about their values--but their actions 
simply do not meet their words. According to Republican values, tax 
breaks for makers of bows and arrows are an urgent matter that must be 
addressed today.
  Of course, Ways and Means Committee Chairman Thomas knows that the 
bows and arrows correction could have been handled by unanimous consent 
last month. At that time, I asked that a correcting provision from the 
FSC/ETI bill also be included to assist the Virgin Islands--as it is 
for the arrow component manufacturers--and that some attention be 
provided to the devastation facing the people of Haiti.


                             Virgin Islands

  It is obvious that the House Republican Leadership and Chairman 
Thomas are unwilling to provide a little helping hand to the Virgin 
Islands and the other U.S. possessions. The recently enacted FSC/ETI 
legislation contains a provision that will adversely affect the 
economic development programs of the Virgin Islands and other 
possessions.
  The provision denies the Virgin Islands the ability to provide 
economic incentives to companies doing business in the Virgin Islands 
if they have some U.S. source income. There are many circumstances 
where companies engaged in business activities in the Virgin Islands 
can have U.S. source income, even though they engage in no activities 
in the United States.
  Everyone recognizes that the FSC/ETI legislation overreached. The 
provision was adopted without any hearings in either House, and without 
a serious examination of what it does. So the simple solution is to fix 
the problem. The Republicans' response is to wait for Treasury to 
address the situation. There is no guarantee when, or if, Treasury will 
do so.

  The provision in the bill already took effect, and is currently 
creating a problem for the Virgin Islands economic development program. 
This is a time-sensitive issue, that could be easily resolved with a 
delay in the effective date to permit the Treasury to act.
  This House has found time today to correct an error for arrow 
component retailers. I had hoped that at the same time we could have 
corrected the provision harming the Virgin Islands. It is obviously a 
question of the Republicans' priorities.


                                 haiti

  It also is obvious that the House and committee Republican leadership 
are unwilling to provide a little assistance to a poverty stricken 
Haiti. Obviously, our neighbor in this hemisphere is not viewed as so 
urgent that it cannot wait. I am talking about a country that is so 
poor that they bake clay and pretend it is bread.
  It is still unclear to me why--other than pure meanness, stinginess 
and a lack of real values--that a Haiti trade preferences bill could 
not be brought up before the end of the year. Chairman Thomas and I 
reached agreement on a compromise bill--a bill that did not present any 
threat to the U.S. industry but that would have meant the world to the 
people of Haiti.
  House Democrats were prepared to support our bill--and I know we had 
ample Republican support for it, thanks to the efforts of my friend 
Clay Shaw, and my long-time friend and colleague, Phil Crane. I also 
know that Senators Bob Graham and Mike DeWine would have been able to 
get passage in the Senate--had we sent them something. They had already 
passed a much better, more generous bill.
  I want everyone to understand that our failure to act on Haiti today 
has real consequences for a country already devastated by natural 
disasters, years of domestic political turmoil, and foreign 
interference.
  At the end of this year global textiles and apparel quotas terminate. 
Everyone expects China to dominate, taking market share and jobs not 
just from workers in the U.S., but also from workers in poor, 
vulnerable developing countries. And there is no country so threatened 
or so dependent on access to our market as Haiti.
  Apparel is the only thing these people make--it is 90 percent of what 
the Haitians send to us. And because we are not acting, those exports 
are threatened. And you know what will replace those exports of 
sweaters and pants? Exports of people.
  I will fight again for Haiti next year, and I pray it will not be too 
late.


                               conclusion

  I want to compliment my colleague, Representative Paul Ryan, for his 
diligence in correcting the drafting error for the 1997 bows and arrow 
tax relief provision and, again today, for correcting the correction in 
the FSC/ETI bill. One would have thought that drafting a simple bill, 
like bows and arrows, could be handled right the first time. But, I 
understand that things happen.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield back the balance of my 
time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Wisconsin (Mr. Ryan) that the House suspend the rules 
and pass the bill, H.R. 5394.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

                          ____________________