[Congressional Record Volume 153, Number 6 (Thursday, January 11, 2007)]
[Senate]
[Pages S452-S454]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Mrs. Lincoln, Mrs. Hutchison, and Mr. 
        Kerry):
  S. 271. A bill to amend the Internal Revenue Code of 1986 to provide 
a shorter recovery period for the depreciation of certain improvements 
to retail space; to the Committee on Finance.
  Ms. SNOWE. Mr. President, I rise today to introduce a series of 
proposals that, once enacted, will reduce not only the amount of taxes 
that small businesses pay, but also the administrative burdens which 
saddle small companies trying to comply with the tax laws. Small 
businesses are the engine that drives our Nation's economy and I 
believe these proposals strengthen their ability to lead the way. I am 
pleased to be joined by colleagues from both sides of the aisle as we 
work to move these important initiatives for small businesses from 
legislation to law.
  A top priority I hear from small businesses across Maine is the need 
for tax relief. Despite the fact that small businesses are the real 
job-creators for Maine's and our Nation's economy, the current tax 
system is placing an entirely unreasonable burden on them when trying 
to satisfy their tax obligations. The current tax code imposes a large, 
and expensive, burden on all taxpayers in terms of satisfying their 
reporting and record-keeping obligations. The problem, though, is that 
small companies are disadvantaged most in terms of the money and time 
spent in satisfying their tax obligation.
  For example, according to the Small Business Administration's Office 
of Advocacy, small businesses spend an astounding 8 billion hours each 
year complying with government reports. They also spend more than 80 
percent of this time on completing tax forms. What's even more 
troubling is that companies that employ fewer than 20 employees spend 
nearly $1,304 per employee in tax compliance costs; an amount that is 
nearly 67 percent more than larger firms.
  For that reason, I am introducing a package of proposals that will 
provide not only targeted, affordable tax relief to small business 
owners, but also simpler rules under the tax code. By simplifying the 
tax code, small business owners will be able to satisfy their tax 
obligation in a cheaper, more efficient manner, allowing them to be 
able to devote more time and resources to their business.
  I am introducing legislation today in response to the repeated 
requests from small businesses in Maine and from across the nation to 
allow them to expense more of their investments, like the purchase of 
essential new equipment. My bill modifies the Internal Revenue Code by 
doubling the amount a small business can expense from $100,000 to 
$200,000, and make the provision permanent as President Bush proposed 
this change in his fiscal year 2007 tax proposals. With small 
businesses representing 99 percent of all employers, creating 75 
percent new jobs and contributing 51 percent of private-sector output, 
their size is the only `small' aspect about them.
  By doubling and making permanent the current expensing limit and 
indexing these amounts for inflation, this bill will achieve two 
important objectives. First, qualifying businesses will be able to 
write off more of the equipment purchases today, instead of waiting 
five, seven or more years to recover their costs through depreciation. 
That represents substantial savings both in dollars and in the time 
small businesses would otherwise have to spend complying with complex 
and confusing depreciation rules. Moreover, new equipment will 
contribute to continued productivity growth in the business community, 
which economic experts have repeatedly stressed is essential to the 
long-term vitality of our economy.
  Second, as a result of this bill, more businesses will qualify for 
this benefit because the phase-out limit will be increased to $800,000 
in new assets purchases. At the same time, small business capital 
investment will be pumping more money into the economy. This is a win-
win for small business and the economy as a whole and I am please to 
have Senators Lott, Isakson, Chambliss, and Collins join me as 
cosponsors of this legislation.
  Another proposal that I am introducing with Senator Lincoln, the 
Small Business Tax Flexibility Act of 2007, will permit start-up small 
business owners to use a taxable year other than the calendar year if 
they generally earn fewer than $5 million during the tax year.
  Specifically, the Small Business Tax Flexibility Act of 2007 will 
permit more taxpayers to use the taxable year most suitable to their 
business cycle. Until 1986, businesses could elect the taxable year-end 
that made the most economic sense for the business. In 1986, Congress 
passed legislation requiring partnerships and S corporations, many of 
which are small businesses, to adopt a December 31 year-end. The tax 
code does provide alternatives to the calendar year for small 
businesses, but the compliance costs and administrative burdens 
associated with these alternatives prove to be too high for most small 
businesses to utilize.
  Meanwhile, C corporations, as large corporations often are, receive 
much more flexibility in their choice of taxable year. A C corporation 
can adopt either a calendar year or any fiscal year for tax purposes, 
as along as it keeps its books on that basis. This creates the unfair 
result of allowing larger businesses with greater resources greater 
flexibility in choosing a taxable year than smaller firms with fewer 
resources. This simply does not make sense to me. My bill changes these 
existing rules so that more small businesses will be able to use the 
taxable year that best suits their business.
  To provide relief and equity to our nation's 1.5 million retail 
establishments, most of which have less than five employees, I am 
introducing a bill with Senators Lincoln, Hutchison, and Kerry that 
reduces from 39 to 15 years the depreciable life of improvements that 
are made to retail stores that are owned by the retailer. Under current 
law, only retailers that lease their property are allowed this 
accelerated depreciation, which means it excludes retailers that also 
own the property in which they operate. My bill simply seeks to provide 
equal treatment to all retailers.
  Specifically, this bill will simply conform the tax codes to the 
realities that retailers on Main Street face. Studies conducted by the 
Treasury Department, Congressional Research Service and private 
economists have all found that the 39-year depreciation life for 
buildings is too long and that the 39-year depreciation life for 
building improvements is even worse. Retailers generally remodel their 
stores every five to seven years to reflect changes in customer base 
and compete with newer stores. Moreover, many improvements such as 
interior partitions, ceiling tiles, restroom accessories, and paint, 
may only last a few years before requiring replacement.
  This package of proposals are a tremendous opportunity to help small 
enterprises succeed by providing an incentive for reinvestment and 
leaving them more of their earnings to do just that. I urge my 
colleagues to join me in supporting these proposals.
  I ask unanimous consent that the the text of these bills be printed 
in the Record.
  There being no objection, the texts of the bills were ordered to be 
printed in the Record, as follows:

                                 S. 269

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

     SECTION 1. INCREASE AND PERMANENT EXTENSION FOR EXPENSING FOR 
                   SMALL BUSINESS.

       (a) In General.--Paragraph (1) of section 179(b) of the 
     Internal Revenue Code of 1986 (relating to dollar limitation) 
     is amended by striking ``$25,000 ($100,000 in the case of 
     taxable years beginning after 2002 and before 2010)'' and 
     inserting ``$200,000''.
       (b) Increase in Qualifying Investment at Which Phaseout 
     Begins.--Paragraph (2) of section 179(b) of such Code 
     (relating to reduction in limitation) is amended by striking 
     ``$200,000 ($400,000 in the case of taxable years beginning 
     after 2002 and before 2010)'' and inserting ``$800,000''.
       (c) Inflation Adjustments.--Section 179(b)(5)(A) of such 
     Code (relating to inflation adjustments) is amended--

[[Page S454]]

       (1) in the matter preceding clause (i)--
       (A) by striking ``after 2003 and before 2010'' and 
     inserting ``after 2007'', and
       (B) by striking ``the $100,000 and $400,000 amounts'' and 
     inserting ``the $200,000 and $800,000 amounts'', and
       (2) in clause (ii), by striking ``calendar year 2002'' and 
     inserting ``calendar year 2006''.
       (d) Revocation of Election.--Section 179(c)(2) of such Code 
     (relating to election irrevocable) is amended to read as 
     follows:
       ``(2) Revocability of election.--Any election made under 
     this section, and any specification contained in any such 
     election, may be revoked by the taxpayer with respect to any 
     property, and such revocation, once made, shall be 
     irrevocable.''.
       (e) Off-the-Shelf Computer Software.--Section 
     179(d)(1)(A)(ii) of such Code (relating to section 179 
     property) is amended by striking ``and before 2010''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                  ____


                                 S. 270

       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 ``Small Business Tax 
     Flexibility Act of 2007''.

     SEC. 2. QUALIFIED SMALL BUSINESSES ELECTION OF TAXABLE YEAR 
                   ENDING IN A MONTH FROM APRIL TO NOVEMBER.

       (a) In General.--Part I of subchapter E of chapter 1 of the 
     Internal Revenue Code of 1986 (relating to accounting 
     periods) is amended by inserting after section 444 the 
     following new section:

     ``SEC. 444A. QUALIFIED SMALL BUSINESSES ELECTION OF TAXABLE 
                   YEAR ENDING IN A MONTH FROM APRIL TO NOVEMBER.

       ``(a) General Rule.--A qualified small business may elect 
     to have a taxable year, other than the required taxable year, 
     which ends on the last day of any of the months of April 
     through November (or at the end of an equivalent annual 
     period (varying from 52 to 53 weeks)).
       ``(b) Years for Which Election Effective.--An election 
     under subsection (a)--
       ``(1) shall be made not later than the due date (including 
     extensions thereof) for filing the return of tax for the 
     first taxable year of the qualified small business, and
       ``(2) shall be effective for such first taxable year or 
     period and for all succeeding taxable years of such qualified 
     small business until such election is terminated under 
     subsection (c).
       ``(c) Termination.--
       ``(1) In general.--An election under subsection (a) shall 
     be terminated on the earliest of--
       ``(A) the first day of the taxable year following the 
     taxable year for which the entity fails to meet the gross 
     receipts test,
       ``(B) the date on which the entity fails to qualify as an S 
     corporation, or
       ``(C) the date on which the entity terminates.
       ``(2) Gross receipts test.--For purposes of paragraph (1), 
     an entity fails to meet the gross receipts test if the entity 
     fails to meet the gross receipts test of section 448(c).
       ``(3) Effect of termination.--An entity with respect to 
     which an election is terminated under this subsection shall 
     determine its taxable year for subsequent taxable years under 
     any other method that would be permitted under subtitle A.
       ``(4) Income inclusion and deduction rules for period after 
     termination.--If the termination of an election under 
     paragraph (1)(A) results in a short taxable year--
       ``(A) items relating to net profits for the period 
     beginning on the day after its last fiscal year-end and 
     ending on the day before the beginning of the taxable year 
     determined under paragraph (3) shall be includible in income 
     ratably over the 4 taxable years following the year of 
     termination, or (if fewer) the number of taxable years equal 
     to the fiscal years for which the election under this section 
     was in effect, and
       ``(B) items relating to net losses for such period shall be 
     deductible in the first taxable year after the taxable year 
     with respect to which the election terminated.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified small business.--The term `qualified small 
     business' means an entity--
       ``(A)(i) for which an election under section 1362(a) is in 
     effect for the first taxable year or period of such entity 
     and for all subsequent years, or
       ``(ii) which is treated as a partnership for the first 
     taxable year or period of such entity for Federal income tax 
     purposes,
       ``(B) which conducts an active trade or business or which 
     would qualify for an election to amortize start-up 
     expenditures under section 195, and
       ``(C) which is a start-up business.
       ``(2) Start-up business.--For purposes of paragraph (1)(C), 
     an entity shall be treated as a start-up business so long as 
     not more than 75 percent of the entity is owned by any person 
     or persons who previously conducted a similar trade or 
     business at any time within the 1-year period ending on the 
     date on which such entity is formed. For purposes of the 
     preceding sentence, a person and any other person bearing a 
     relationship to such person specified in section 267(b) or 
     707(b)(1) shall be treated as one person, and sections 267(b) 
     and 707(b)(1) shall be applied as if section 267(c)(4) 
     provided that the family of an individual consists of the 
     individual's spouse and the individual's children under the 
     age of 21.
       ``(3) Required taxable year.--The term `required taxable 
     year' has the meaning given to such term by section 444(e).
       ``(e) Tiered Structures.--The Secretary shall prescribe 
     rules similar to the rules of section 444(d)(3) to eliminate 
     abuse of this section through the use of tiered 
     structures.''.
       (b) Conforming Amendment.--Section 444(a)(1) of the 
     Internal Revenue Code of 1986 is amended by striking 
     ``section,'' and inserting ``section and section 444A''.
       (c) Clerical Amendment.--The table of sections for part I 
     of subchapter E of chapter 1 of the Internal Revenue Code of 
     1986 is amended by inserting after the item relating to 
     section 444 the following new item:

``Sec. 444A. Qualified small businesses election of taxable year ending 
              in a month from April to November.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

                                 S. 271

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

     SECTION 1. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN 
                   IMPROVEMENTS TO RETAIL SPACE.

       (a) 15-Year Recovery Period.--Subparagraph (E) of section 
     168(e)(3) of the Internal Revenue Code of 1986 (relating to 
     15-year property) is amended by striking ``and'' at the end 
     of clause (vii), by striking the period at the end of clause 
     (viii) and inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(ix) any qualified retail improvement property.''.
       (b) Qualified Retail Improvement Property.--Subsection (e) 
     of section 168 of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(8) Qualified retail improvement property.--
       ``(A) In general.--The term `qualified retail improvement 
     property' means any improvement to an interior portion of a 
     building which is nonresidential real property if--
       ``(i) such portion is open to the general public and is 
     used in the trade or business of selling tangible personal 
     property or services to the general public; and
       ``(ii) such improvement is placed in service more than 3 
     years after the date the building was first placed in 
     service.
       ``(B) Certain improvements not included.--Such term shall 
     not include any improvement for which the expenditure is 
     attributable to--
       ``(i) the enlargement of the building,
       ``(ii) any elevator or escalator, or
       ``(iii) the internal structural framework of the 
     building.''.
       (c) Requirement to Use Straight Line Method.--Paragraph (3) 
     of section 168(b) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new subparagraph:
       ``(I) Qualified retail improvement property described in 
     subsection (e)(8).''.
       (d) Alternative System.--The table contained in section 
     168(g)(3)(B) of the Internal Revenue Code of 1986 is amended 
     by inserting after the item relating to subparagraph 
     (E)(viii) the following new item:

``(E)(ix).....................................................39''.....

       (e) Effective Date.--The amendments made by this section 
     shall apply to qualified retail improvement property placed 
     in service after the date of the enactment of this Act.
                                 ______