[Congressional Record Volume 154, Number 85 (Thursday, May 22, 2008)]
[Senate]
[Page S4803]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. LINCOLN (for herself, Mr. Hatch, Mr. Cardin, and Mr. 
        Smith):
  S. 3063. A bill to amend the Internal Revenue Code of 1986 to provide 
for S corporation reform, and for other purposes; to the Committee on 
Finance.
  Mrs. LINCOLN. Mr. President, I am very pleased to rise today to 
introduce the S Corporation Modernization Act of 2008 with my good 
friend, Senator Orrin Hatch. I also want to say a special thanks to our 
cosponsors, Senators Gordon Smith of Oregon and Ben Cardin of Maryland. 
This legislation makes needed changes to the tax code to help small and 
family-owned businesses across this Nation. It is my hope that these 
policy changes will provide them the opportunity to grow their 
businesses, create jobs and stimulate the economy.
  In my home State of Arkansas, as in so many rural States across the 
country, the vast majority of our businesse are small businesses. They 
are the local insurance agency, the flower shop, the coffee shop--and 
they are most often organized as so-called ``S corporations.'' In fact, 
our country has more than four million S corporations nationwide. These 
businesses and their employees are truly the engines of our rural 
economies. We must do all we can to ensure they can continue to compete 
in a global economy that is becoming steadily more competitive.
  Because Congress has not updated many of the rules governing S 
corporations--such as allowing better access to capital--I am concerned 
that these privately-held businesses are not in the best position to 
deal with the current downturn in the economy. We must modify our 
outdated rules so that these businesses that are starved for capital 
have the means to expand and create jobs. Current law--particularly the 
punitive built-in gains tax penalty--not only limits the ability of S 
corporations to attract new equity investors, but also effectively 
forces businesses to sit on `locked-up' capital that they cannot access 
and put to use to grow their business.
  The S Corporation Modernization Act would update and simplify our S 
corporation tax rules. It increases access to capital, encourages 
family-owned businesses to stay in the family, eliminates tax traps 
that penalize unwary but well-meaning business owners, and encourages 
charitable giving.
  A strong economic recovery will depend on the health and strength of 
our small business sector--our S corporations. It is absolutely 
imperative that we work to ensure our tax rules that govern this sector 
are fair, simple and encourage growth. I look forward to working with 
my colleagues on the Senate Finance Committee to ensure these important 
changes are made.
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