[Congressional Record Volume 160, Number 155 (Tuesday, December 16, 2014)]
[Senate]
[Pages S6921-S6924]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. LEVIN:
S. 3018. A bill to amend the Internal Revenue Code of 1986 to reform
the rules relating to partnership audits and adjustments; to the
Committee on Finance.
Mr. LEVIN. Mr. President, today, I am introducing the Partnership
Auditing Fairness Act, a bill designed to improve and streamline the
audit procedures for large partnerships. This bill would ensure that
large for-profit partnerships, like other large profitable businesses,
are subject to routine audits by the Internal Revenue Service, IRS, and
eliminate audit red tape that currently impedes IRS oversight. This
legislation mirrors a provision in the Tax Reform Act of 2014,
introduced earlier this year by Congressman David Camp.
This legislation would fix a problem that has gained only more
urgency with time and the explosion in growth of large partnerships,
including hedge funds, private equity funds, and publicly traded
partnerships. In a September 2014 report, the Government Accountability
Office, GAO, determined that the number of large partnerships, defined
by GAO as those with at least 100 partners and $100 million in assets,
has tripled since 2002, to over 10,000, while the number of so-called C
corporations being created, which include our largest public companies,
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fell by 22 percent. According to the GAO report, some of those
partnerships have revenues totaling billions of dollars per year and
now collectively hold more than $7.5 trillion in assets, but the IRS is
auditing only a tiny fraction of them. According to GAO, in 2012, the
IRS audited less than 1 percent of large partnerships compared to 27
percent of C corporations. Put another way, a C corporation is 33 times
more likely to face audit than partnership.
A recent hearing by the Permanent Subcommittee on Investigations,
which I chair, demonstrated the critical need to audit large
partnerships for tax compliance and abusive tax schemes. Our July 2014
hearing presented a detailed case study of how two financial
institutions developed a structured financial product known as a basket
option and sold the product to 13 hedge funds that used the options to
avoid billions of dollars in Federal taxes. The trading by those hedge
funds was mostly made up of short term transactions, many of which
lasted only seconds. However, the hedge funds recast their short-term
trading profits as long-term option profits, and claimed the profits
were subject to the long-term capital gains tax rate rather than the
ordinary income tax rate that would otherwise apply to hedge fund
investors engaged in daily trading. One hedge fund used its basket
options to avoid an estimated $6 billion in taxes. Those types of
abusive tax practices illustrate why large partnerships like hedge
funds need to be audited by the IRS just as much as large corporations.
During its review, GAO found that large partnerships are often so
complex that the IRS can't audit them effectively. GAO reported that
some partnerships have 100,000 or more partners arranged in multiple
tiers, and some of those partners may not be people or corporate
entities but pass-through entities--essentially, partnerships within
partnerships. Some are publicly traded partnerships, which means their
partners can change on a daily basis. One IRS official told GAO that
there were more than 1,000 partnerships with more than a million
partners in 2012.
GAO also found obstacles in the law. The Tax Equity and Fiscal
Responsibility Act, TEFRA, now 3-decades-old, was enacted at a time
when many partnerships had 30-50 partners; it does not adequately deal
with current realities. That is why I am introducing legislation to
repeal some of its provisions and streamline the audit and adjustment
procedures used for large partnerships so that the IRS can exercise
effective oversight to detect and deter tax noncompliance or tax abuse
schemes.
Three technical aspects of TEFRA create particularly difficult
obstacles to IRS audits and tax collection efforts for large
partnerships. The first requires the IRS to identify a ``tax matters
partner'' to represent the partnership on tax issues, but many
partnerships do not designate such a partner, and simply identifying
one in a complex partnership can take months. Second, notifying
individual partners prior to commencing an audit costs time and money,
yet produces few if any benefits. Third, TEFRA requires that any tax
adjustments called for by an audit be passed through to the
partnership's taxable partners, but the IRS's process for identifying,
assessing, and collecting from those partners is a manual rather than
by electronic process, which makes it laborious, time consuming,
costly, and subject to error. For example, if a partnership with
100,000 partners under-reported the tax liability of its partners by $1
million, the IRS would have to manually link each of the partners'
returns to the partnership return. Then, assuming each partner had an
equal interest in the partnership, the IRS would have to find, assess,
and collect $10 from each partner. That collection effort is not
practical nor is it cost effective. In addition, under TEFRA, any tax
adjustments have to be applied to past tax years, using complicated and
expensive filing requirements, instead of to the year in which the
audit was performed and the adjustment made.
Fixing the technical flaws in TEFRA is critical to ensuring that the
audit playing field is level for all taxpayers. An essential element of
any system of taxation is that it be fair--that is, that all those who
pay taxes have a reasonable expectation that they are being treated in
the same fashion as other taxpayers. Without fairness, not only does a
tax system violate ethical principles, but the system itself fails to
collect taxes owed, arouses resentment and complaints, and can even
spark widespread noncompliance. The current situation in which large
corporations are audited 33 times more than large partnerships is
neither fair nor sustainable.
The Partnership Auditing Fairness Act would eliminate the existing
audit disparity by streamlining the audit process for large
partnerships. It would simplify audit notification and administrative
procedures. It would no longer require the IRS to waste audit time
trying to find a tax matters partner. It would allow the IRS to audit,
assess, and collect tax from the partnership, rather than passing the
adjustments through to and collecting from each taxable partner. It
would apply any tax adjustments to the tax year in which the
adjustments were finalized, rather than past tax years under audit.
The enormous discrepancy in audit rates between partnerships and
other business forms raises a fundamental question of fairness. If one
type of entity can be nearly free of IRS audits, businesses that do pay
their taxes and are subject to the audit process rightly feel
disadvantaged. That lack of fairness is something we simply can't
tolerate.
For these reasons, in the next Congress, I urge my colleagues to
consider supporting this legislation to fix the large partnership audit
problem.
Mr. President, I ask unanimous consent that a bill summary be printed
in the Record.
There being being no objection, the material was ordered to be
printed in the Record, as follows:
Summary of the Partnership Auditing Fairness Act
The Partnership Auditing Fairness Act would ensure that
large for-profit partnerships, like other large profitable
businesses, are subject to routine audits by the IRS and
eliminate audit red tape that currently impedes IRS
oversight. Specifically, it would reform audit procedures
imposed by the 1982 Tax Equity and Fiscal Responsibility Act,
TEFRA, which are now outdated and contribute to the low audit
rate for large partnerships. The bill mirrors the same
provision addressing this issue in the larger tax reform bill
developed by Congressman David Camp. Key provisions of the
bill would:
Apply streamlined audit rules to all partnerships, but
allow partnerships with 100 or fewer partners, other than
partners that are pass-through entities, to opt out of the
bill's audit procedures and elect instead to be audited under
the rules for individual taxpayers.
Simplify partnership audit participation by having
partnerships act through a designated partnership
representative.
Simplify audit notification and administrative procedures
by repealing the TEFRA and Electing Large Partnership
requirement that the IRS notify all partners prior to
initiating an audit.
Streamline audit adjustments by authorizing the IRS to make
adjustments at the partnership level and apply the
adjustments to the tax year in which the adjustments are
finalized, rather than to the tax years under audit.
Streamline tax return filing by enabling partnerships to
include audit adjustments on their current tax returns for
the year in which the adjustments are finalized, instead of
having to amend prior-year returns.
Eliminate the TEFRA problem of having to find and
separately collect any tax due from each affected partner by
instead collecting the tax at the partnership level.
Enable partnerships to use administrative procedures to
request reconsideration of a proposed under payment of tax by
submitting tax returns for individual partners and paying any
tax due, while retaining the ability to contest all audit
results in court.
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By Mr. LEVIN:
S. 3019. A bill to amend the War Powers Resolution to provide for the
use of military force against non-state actors; to the Committee on
Foreign Relations.
Mr. LEVIN. Mr. President, when the War Powers Resolution was passed
over a Presidential veto in 1973, its supporters expected that the War
Powers Resolution would ensure that a national dialogue takes place
before the employment of the U.S. Armed Forces in hostilities. The
President--then President Nixon--was concerned that the War Powers
Resolution's termination of certain authorities after 60 days unless
extended by Congress would create unpredictably in U.S. foreign policy.
The War Powers Resolution, as a practical matter, has not been
effective. Every subsequent President since
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President Nixon has viewed the War Powers Resolution as an
unconstitutional impingement on the President's powers as Commander in
Chief. So the 60-day trigger in the act has never been used to
terminate hostilities, and the national dialogue envisioned by the
authors of the resolution has failed to come about.
I have a proposal to amend the War Powers Act in those instances
where nonstate actors are the target. We are the target of them. They
must become and should become the target for us to try to deter and
respond to them when they attack us and try to terrorize us.
I have introduced a bill today with a suggested amendment to the War
Powers Act. When the War Powers Resolution was passed over a
Presidential veto in 1973, its supporters expected that the War Powers
Resolution would ensure that a national dialogue takes place before the
employment of the U.S. Armed Forces in hostilities.
The President, on the other hand, argued that the enactment of the
legislation ``would seriously undermine this Nation's ability to act
decisively and convincingly in times of international crisis.'' In his
veto message, President Nixon argued that: ``As a result, the
confidence of our allies in our ability to assist them could be
diminished and the respect of our adversaries for our deterrent posture
could decline. A permanent and substantial element of unpredictability
would be injected into the world's assessment of American behavior,
further increasing the likelihood of miscalculation and war.''
The President was particularly concerned that the War Powers
Resolution's termination of certain authorities after 60 days unless
extended by Congress would create unpredictability in U.S. foreign
policy. The War Powers Resolution requires the President to consult
``in every possible instance'' prior to introducing U.S. Armed Forces
into hostilities and to report to Congress within 48 hours when, absent
a declaration of war, U.S. Armed Forces are introduced into
``hostilities or . . . situations where imminent involvement in
hostilities is clearly indicated by the circumstances.'' After this
report is submitted, the resolution requires that U.S. troops be
withdrawn at the end of 60 days, unless Congress authorizes continued
involvement by passing a declaration of war or some other specific
authorization for continued U.S. involvement in such hostilities.
Every subsequent President has viewed the War Powers Resolution as an
unconstitutional impingement on the President's powers as Commander in
Chief. As a result, the 60-day trigger in the Act has never been used
to terminate hostilities, and the national dialogue envisioned by the
authors of the Resolution has failed to come about.
At this very moment, our troops have been engaged in hostilities in
Iraq and Syria for more than 60 days, without the enactment of an
authorizing resolution by Congress. Some believe that the continuing
hostilities are a violation of the War Powers Resolution. Others argue
that the War Powers Resolution has not been triggered, because our
military actions can be justified under earlier authorizations. Either
way, it is clear that the 60-day limitation in the resolution has had
no more force and effect in the case of the battle against ISIS than it
did in earlier actions in Bosnia, Kosovo, and elsewhere.
I believe that the War Powers Resolution needs to be modernized to
make it more relevant to the situations our military is likely to face
in the 21st century--in particular, the ongoing struggle against new
and evolving terrorist groups.
Today, I filed a bill that would amend the War Powers Resolution to
authorize the President to act against non-state actors like ISIS,
where he judges it necessary to address a continuing and imminent
threat to the United States, subject to a resolution of disapproval by
Congress under the War Powers Resolution. This approach would allow the
President to take decisive action to address imminent terrorist
threats, while reserving a clear role for Congress through a resolution
of disapproval. I believe that this approach would provide for a
national dialogue on the use of military force with respect to non-
state actors like ISIS, while avoiding the dead end provided unworkable
requirement of the current War Powers Resolution, under which
congressional inaction could require U.S. troops to suddenly disengage
from the enemy while in harm's way.
My amendment would provide that the authority to use U.S. Armed
Forces against non-state actors would terminate after 60 days unless
either: 1, the President's actions are based on a law providing for the
use of military force against a non-state actor; or 2, the President
notifies Congress that continued use of military force is necessary
because the non-state actor poses a ``continuing and imminent threat''
to the United States or U.S. persons, and Congress does not enact a
joint resolution of disapproval under expedited procedures.
Expedited procedures under the War Powers Resolution would ensure
that Congress considers the issue. Under these procedures, if a
resolution of disapproval is filed in a timely manner by any Senator,
the Senate Foreign Relations Committee would have 15 calendar days to
report the resolution or be discharged. The Senate would then have 3
days to consider the Resolution, with time equally divided between
proponents and opponents of the measure. As with any joint resolution,
the measure could be vetoed, and such a veto would be subject to an
override vote in Congress.
I believe this approach would provide greater clarity for the
Executive and Legislative branches and I hope a future Senate will
consider it.
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By Mr. HARKIN:
S. 3020. A bill to establish the composition known as America the
Beautiful as the national anthem; to the Committee on the Judiciary.
Mr. HARKIN. Mr. President, today I am introducing one last bill as a
United States Senator. It is on an issue I have long wanted to tackle,
changing our national anthem to one I believe is more representative of
the amazing country and people that make up our United States of
America. I believe that from its very first line, ``Oh beautiful for
spacious skies'' America the Beautiful captures the spirit of our
democracy and our shared commitment to liberty and freedom far better
than our current anthem.
Now some might say but the Star Spangled Banner has always been our
national anthem, but that's not true. In fact its only been the anthem
since 1931 and its only been in popular use during the last 100 years.
It first became popular with the military, particularly the Navy.
But the bottom line is that the Star Spangled banner commemorates a
single battle, just one of the many historic battles and wars that we
have fought to create and protect our great country. I think to me the
thing that best captures my concern with the Star Spangled Banner, in
addition to the fact that it is hard as heck for a layperson to sing,
is that it doesn't actually mention the word ``America.''
In contrast, America the Beautiful celebrates not just the amazing
geography and wonder of our country--from amber waves of grain to
purple mountains--from sea to shining sea, but also captures something
of our national spirit when we sing ``A thoroughfare of freedom beat,
across the wilderness.''
Moreover, unlike the Star Spangled banner, America the Beautiful,
like our coins, like our daily invocation here in the Senate
acknowledges a higher power and calls upon god to guide us, to shed
grace upon us, while also celebrating the heroism of those who have
sacrificed their lives to create and preserve our democracy.
I am well aware that this legislation to redesignate the national
anthem to ``America the Beautiful'' is not going to pass today, one of
my final days in the Senate, but I would ask those who follow me to
keep in mind the importance of symbols like the national anthem in
reminding us what is great about this country--equality of opportunity,
geographic diversity and majesty, shared commitment to individual
liberty--and give serious thought to this proposal.
America the Beautiful is an anthem that far better embodies both the
land and the principles that are the unifying beliefs of our democracy
and for which we all stand together: freedom, liberty, and progress.
For these reasons I believe that ``America the Beautiful'' should
replace ``The Star Spangled Banner'' as the national anthem and I hope
that my colleagues will come to share this view.
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