[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.
                                 ______
                                 
      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.
                                 ______
                                 
      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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