[Congressional Record Volume 154, Number 154 (Friday, September 26, 2008)]
[Senate]
[Pages S9568-S9569]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                  AMT

  Mr. GRASSLEY. Mr. President, there is a provision in the bill we 
passed Tuesday on taxes with only two dissenting votes that hasn't been 
discussed much, and I wish to refer to that provision. It is a 
modification of the alternative minimum tax credit allowance against 
incentive stock options. So the important words there are ``incentive 
stock options.'' Because of how stock options are treated by the AMT, 
the economic downturn in 2000 created a situation where many 
individuals owed tax on income they never realized. This is because 
they owed tax on the value of their stock options when they were 
exercised and not on what the value of the stock actually was when the 
shares were sold. Many people owed tax that was several times their 
actual income. Congress acted to remedy this situation through past 
legislation, but that did not completely

[[Page S9569]]

solve the problem. Many families are still facing an IRS bent on 
collecting liabilities owed now, despite the fact that those 
liabilities would be offset by credits in the near future. This means 
that the IRS was--and could, in the future--be working to seize assets 
such as family homes to satisfy present tax liabilities that would be 
eliminated within the next few years under current law.
  One Iowa family caught in this AMT trap is the Speltz family of Ely, 
IA, near Cedar Rapids. Ron and June Speltz found themselves in the 
crosshairs of the IRS after Ron used stock options to purchase several 
shares of stock of his employer. I ask unanimous consent that an 
editorial printed in the Des Moines Register on July 24, 2006, that 
describes the Speltz family ordeal be printed in the Record.
  There being no objection, the material was I ordered to be printed in 
the Record, as follows:

            [From the DesMoinesRegister.com, July 24, 2006]

                  Congress Should Fix Unfair Tax Quirk

                   (By the Register Editorial Board)

       The U.S. government has ruined the financial lives of Ron 
     and June Speltz of Ely.
       Here's how it happened: In 1992, Ron took a job with 
     McLeodUSA, then a small telecommunications start-up. 
     Compensation included stock options, which he saved for a 
     family nest egg. In 2000, he and June consulted a financial 
     adviser on the best way to cash out the stock. The adviser 
     told them to exercise the stock options and hold the stock 
     for a year to take advantage of low tax rates on capital 
     gains.
       Then the stock price fell. What was once worth about 
     $700,000 became worth about $2,000. Yet, they owed more than 
     $250,000 in state and federal taxes due to a quirk in the 
     Alternative Minimum Tax law that targets Incentive Stock 
     Options (ISO-AMT).
       When we wrote about the Speltzes and other Iowans in 
     similar straits earlier this year, we received a few letters 
     to the editor stating it was their greed and desire to avoid 
     paying taxes that landed them in such a predicament.
       Yes, they tried to take full advantage of tax law. Who 
     doesn't? But at the end of the day, Americans should not have 
     to pay taxes on money they never collected. It amounts to the 
     U.S. government taking money from people it shouldn't be 
     entitled to. It's hard to believe Congress intended such 
     consequences for people whose employers, like McLeod, go 
     bankrupt.
       It's devastating families and driving them into bankruptcy, 
     too. The Speltzes have had to borrow money from banks and 
     family members to try to pay the tax. They have lost 
     everything they had saved for retirement and their children.
       But perhaps the greatest tragedy is that they have taken 
     every possible step to get the government to respond to their 
     case. And they're still waiting for help.
       They've traveled to congressional hearings in Washington, 
     repeatedly contacted members of the Iowa delegation, and gone 
     round and round with the Internal Revenue Service. They even 
     took their case to the 8th Circuit Court of Appeals, which on 
     July 14 affirmed a judgment from the United States Tax Court 
     that the Speltzes owe the tax.
       ``This is one more time that our court system has placed 
     the issue in the hands of Congress,'' Ron wrote in an e-mail 
     to the Register. ``We are in desperate need'' of Congress'' 
     help.
       Here's a glimmer of hope: When we checked with Sen. Charles 
     Grassley's office last week, his aide, Jill Kozeny, said the 
     senator was ``working to get included some ISO-AMT relief for 
     middle-income taxpayers'' in what's called the ``extenders'' 
     tax bill being negotiated in a conference committee.
       ``Obviously this is the biggest thing that's happened in 
     five years,'' said the Speltzes' pro-bono attorney, Tim 
     Carlson. He hopes it provides relief to the thousands of 
     Americans, including scores of Iowans who worked for McLeod, 
     who have been adversely affected by this quirk in tax law.
       We hope so, too. The senator is the Speltzes' last hope.

  Mr. GRASSLEY. Mr. President, despite the previous stock option 
alternative in minimum tax relief enacted earlier, the IRS is still 
after the Speltz family. In fact, this past June, Ron and June received 
a notice from the IRS announcing their intent to levy certain assets. 
After stating that the IRS intends to levy any State tax refunds, the 
notice continued: ``In addition, we will begin to search for other 
assets we may levy.''
  I think anyone would be terrified to receive something such as this 
in the mail, especially when the outstanding liability derives from 
income never actually realized, and Congress has already decided that 
it shouldn't happen.
  In July, I sent a letter with 26 of my colleagues in the Senate and 
the House to IRS Commissioner Shulman asking that he use the discretion 
provided to him by effective tax administration to suspend collection 
efforts to collect incentive stock option alternative minimum tax 
liabilities in order to give us a chance to fix this problem once and 
for all. Commissioner Shulman gave us that chance by agreeing that the 
IRS would not undertake any collection enforcement action through the 
end of the fiscal year. The end of the fiscal year is next Tuesday.
  If the House does not stop playing politics with the taxpayers and 
instead pass the Senate extenders package that we passed with only two 
dissenting votes, Commissioner Shulman promises in his letter that 
``the IRS will then continue to administer programs in accordance with 
current law.'' That means the Speltzes and probably a lot of other 
people spread around Iowa, California, and other places where high-tech 
was a big thing in the 1990s, their assets will be needlessly seized 
from them if we do not fix this problem.
  This is not a political issue either. The original legislation to fix 
this problem was introduced in the Senate by Senator Kerry, and in the 
House by Congressman Chris Van Hollen. Both bills were cosponsored by 
Members of both parties. Even the National Taxpayer Advocate, in her 
Fiscal Year 2009 Objectives Report, agreed that this problem demanded 
immediate action.
  Commissioner Shulman has given us the window we need to prevent 
additional taxpayers from being crushed in the grip of incentive stock 
option AMT liability. Any delay in enacting the Senate-passed 
legislation is to aid and abet the seizure of the Speltz family's 
assets and those of many other families.
  According to the latest Small Business Administration report, issued 
in December 2007, all net new private sector jobs in 2006 were created 
by small businesses. According to the National Federation of 
Independent Business, almost half of those job-creating businesses are 
owned by taxpayers who are targeted with a marginal rate increase of 17 
percent to 33 percent. Since these small businesses are likely to 
create or retain new jobs, maybe we could get a bipartisan agreement 
not to raise their taxes on small business.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator's time has expired.
  The senior Senator from Oklahoma is recognized for 10 minutes.

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