[Congressional Record (Bound Edition), Volume 145 (1999), Part 19]
[Senate]
[Pages 27654-27655]
[From the U.S. Government Publishing Office, www.gpo.gov]



             CONGRESSIONAL BUDGET OFFICE LETTER ON S. 1792

  Mr. ROTH. Mr. President, I ask unanimous consent that a copy of a 
letter from Dan L. Crippen, Director of the Congressional Budget 
Office, dated October 29, 1999, be printed in the Record. The letter 
analyzes S. 1792, the Tax Relief Extension Act of 1999.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, October 29, 1999.
     Hon. William V. Roth, Jr.,
     Chairman, Committee on Finance,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 1792, the Tax 
     Relief Extension Act of 1999.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Hester 
     Grippando (for revenues), who can be reached at 226-2720, 
     John R. Righter (for payment to territories of rum excise 
     tax), who can be reached at 226-2860, and Jeane De Sa (For 
     streptococcus pneumoniae vaccine), who can be reached at 226-
     9010.
           Sincerely,
                                                 Barry B. Anderson
                                   (For Dan L. Crippen, Director).
       Enclosure.

      CONGRESSIONAL BUDGET OFFICE COST ESTIMATE, OCTOBER 29, 1999

               S. 1792: Tax Relief Extension Act of 1999

  (As reported by the Senate Committee on Finance on October 26, 1999)


                                summary

       S. 1792 would amend existing tax laws and extend numerous 
     tax provisions that have expired recently or are about to 
     expire. The Joint Committee on Taxation (JCT) estimates that 
     enacting S. 1792 would decrease on-budget governmental 
     receipts by $320 million over the 2000-2004 period, but would 
     increase such receipts by $461 million over the 2000-2009 
     period. By extending through calendar year 2000 the exclusion 
     of employer-provided educational assistance, JCT estimates 
     that the bill also would decrease off-budget revenues by a 
     total of $118 million in fiscal years 2000 and 2001. In 
     addition, CBO estimates that the bill would increase direct 
     spending by $124 million over the 2000-2004 period and by 
     $159 million over the 2000-2009 period. Although the bill 
     would affect both governmental receipts and direct spending, 
     section 301 of the bill specifies that any change in the 
     surplus or deficit resulting from enactment shall not be 
     counted for purposes of enforcing the pay-as-you-go 
     procedures established by the Balanced Budget and Emergency 
     Deficit Control Act.
       JCT estimates that S. 1792 contains one new 
     intergovernmental mandate, the cost of which would not exceed 
     the threshold for intergovernmental mandates ($50 million in 
     1996, adjusted annually for inflation) established in the 
     Unfunded Mandates Reform Act (UMRA). JCT estimates that S. 
     1792 contains 16 new private-sector mandates, and that the 
     costs of those mandates would exceed the threshold 
     established in UMRA ($100 million in 1996, adjusted annually 
     for inflation) in each of fiscal years 2000 through 2004.


                    description of major provisions

       S. 1792 would amend the Internal Revenue Code to:
       Extend to tax years 1999 and 2000 a provision to allow 
     individuals to use nonrefundable personal tax credits to 
     offset their regular tax liability in full (as opposed to 
     limiting such credits to the difference between their regular 
     tax liability and their alternative minimum tax liability);
       Extend the research and experimentation tax credit through 
     December 31, 2000;
       Extend the exemption from Subpart F for active financing 
     income through tax year 2000;
       Extend to tax year 2000 the suspension of income limitation 
     on percentage depletion from marginal oil and gas wells;
       Extend the work opportunity and welfare-to-work tax credits 
     through December 31, 2000;
       Temporarily increase the amount of the excise tax on rum 
     paid to Puerto Rico and the U.S. Virgin Islands from $10.50 
     per proof gallon to $13.50 per proof gallon;
       Add the streptococcus pneumoniae vaccine to the list of 
     taxable vaccines;
       Increase the amount of the estimated tax that individuals 
     must pay based on the amount of their prior year's tax to 
     110.5 percent for tax years beginning in 2000 and to 112 
     percent for tax years beginning in 2004;
       Modify the rules that allow taxpayers to credit the payment 
     of foreign taxes against the payment of U.S. taxes owed on 
     income derived from foreign sources; and
       Prohibit taxpayers who use an accrual method of accounting 
     from also using the installment method of accounting when 
     reporting dispositions of property for income tax purposes.

[[Page 27655]]




                estimated cost to the federal government

       The estimated budgetary impact of S. 1792 is shown in the 
     following table. Estimated spending would fall within budget 
     functions 800 (general government) and 550 (health).

------------------------------------------------------------------------
                                 By fiscal year, in millions of dollars
                               -----------------------------------------
                                 2000     2001     2002    2003    2004
------------------------------------------------------------------------
                           CHANGES IN REVENUES
 
Estimated On-Budget Revenues..     200    -3,738     730     686   1,802
Estimated Off-Budget Revenues      -77       -41       0       0       0
 \1\..........................
                               -----------------------------------------
    Total Changes in Revenues.     123    -3,779     730     686   1,802
 
                     CHANGES IN DIRECT SPENDING \2\
 
Estimated Budget Authority....      85        20       6       6       7
Estimated Outlays.............      85        20       6       6      7
------------------------------------------------------------------------
\1\ Represents a loss of taxes to the Federal Old-Age and Survivors
  Insurance and Disability Insurance Trust Funds from extending through
  calendar year 2000 the exclusion of employer-provided educational
  assistance.
\2\ Implementing the bill would also increase spending subject to
  appropriation, but CBO estimates that such costs would not be
  significant.
 
Sources: Congressional Budget Office and Joint Committee on Taxation.

                           basis of estimate

       Revenues: All revenue estimates were provided to CBO by 
     JCT.
       Direct Spending: Payment to Territories of Rum Excise Tax. 
     Under current law, a tax of $13.50 per proof gallon is 
     assessed on distilled spirits produced in or brought into the 
     Untied States. The treasuries of Puerto Rico and the Virgin 
     Islands receive $10.50 of the tax assessed on rum 
     manufactured in either territory. In addition, the 
     territories receive payments, at a similar rate, on all rum 
     imported into the United States from any foreign country. 
     Those payments to Puerto Rico and the Virgin Islands are 
     recorded as outlays in the budget.
       Under the bill, the governments of Puerto Rico and the 
     Virgin Islands would receive the full $13.50 per proof gallon 
     for assessments made between July 1, 1999, and December 31, 
     2000. Based on recent tax and payment data, CBO estimates 
     that increasing the territories' share of the excise tax 
     would increase direct spending by $85 million in fiscal year 
     2000 (including $18 million in retroactive payments for 
     fiscal year 1999) and $16 million in fiscal year 2001.
       Streptococcus Pneumoniae Vaccine. S. 1792 would add 
     conjugate vaccines against streptococcus pneumoniae to the 
     list of taxable vaccines and thus would allow for federal 
     payments to individuals for injuries related to those 
     vaccines from the National Vaccine Injury Compensation Trust 
     Fund. CBO estimates that this provision would increase 
     outlays for compensation to individuals by $4 million over 
     the 2000-2004 period. This provision also would increase 
     federal Medicaid outlays by $21 million over the 2000-2004 
     period because Medicaid would be required to pay the excise 
     tax on purchases of vaccines against streptococcus 
     pneumoniae. The federal government purchases about one-half 
     of all vaccines through its Vaccines for Children Program.
       In addition, this provision would increase the cost of 
     vaccines purchased under section 317 of the Public Health 
     Service Act. Section 317 would authorize grants to states for 
     the purchase of vaccines under federal contracts with vaccine 
     manufacturers. We estimate that any increase in spending 
     under this section would not be significant and would be 
     subject to the availability of appropriated funds.


                      pay-as-you-go considerations

       The Balanced Budget and Emergency Deficit Control Act sets 
     up pay-as-you-go procedures for legislation affecting direct 
     spending or receipts. The net changes in outlays and 
     governmental receipts that are subject to pay-as-you-go 
     procedures are shown in the following table. For the purposes 
     of enforcing pay-as-you-go procedures, only the effects in 
     the budget year and the succeeding four years are counted.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             By Fiscal Year, in Millions of Dollars
                                                               ---------------------------------------------------------------------------------------------------------------------------------
                                                                    2000         2001         2002         2003         2004         2005         2006         2007         2008         2009
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in receipts...........................................          200       -3,738          730          686        1,802       -1,000          468          427          445          441
Changes in outlays............................................           85           20            6            6            7            7            7            7            7            7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Section 301 specifies that any change in the surplus or 
     deficit resulting from enactment of S. 1792 shall not be 
     counted for purposes of enforcing the pay-as-you-go 
     procedures.


        estimated impact on state, local, and tribal governments

       JCT has determined that the provision that would add 
     streptococcus pneumoniae to the list of taxable vaccines is 
     an intergovernmental mandate. JCT estimates that the cost of 
     this mandate would not exceed the threshold specified in UMRA 
     ($50 million in 1996, adjusted annually for inflation).


                 estimated impact on the private sector

       JCT has determined that the following provisions of the 
     bill contain private-sector mandates: (1) clarify the tax 
     treatment of income and losses on derivatives, (2) add 
     certain vaccines against streptococcus pneumoniae to the list 
     of taxable vaccines, (3) expand reporting of cancellation of 
     indebtedness income, (4) impose limitation on prefunding of 
     certain employee benefits, (5) limit conversion of character 
     of income from constructive ownership transactions, (6) 
     modify installment method and prohibit its use by accrual 
     method taxpayers, (7) limit use of nonaccrual experience 
     method of accounting, (8) deny charitable contribution 
     deduction for transfers associated with split-dollar 
     insurance arrangements, (9) prevent duplication or 
     acceleration of loss through assumption of certain 
     liabilities, (10) require consistent treatment and provide 
     basis allocation rules for transfers of intangibles in 
     certain nonrecognition transactions, (11) limits 
     distributions by a partnership to a corporate partner of 
     stock in another corporation, (12) prohibit allocations of 
     stock in an S corporation employee stock ownership plan, (13) 
     impose 10 percent vote on value test for real estate 
     investment trusts (REITs), (14) change treatment of income 
     and services provided by taxable REIT subsidiaries, with 20 
     percent asset limitation, (15) modify treatment of closely 
     held REITs, and (16) modify estimated tax rules for closely 
     held REITs.
       JCT estimates that the costs of the private-sector mandates 
     would exceed the threshold established in UMRA ($100 million 
     in 1996, adjusted annually for inflation) in each of fiscal 
     years 2000 through 2004, with the amount of such costs 
     ranging from a low of $383 million in 2004 to a high of 
     $1,042 million in 2001.
       Estimate prepared by: Revenues: Hester Grippando (226-
     2270), Payment to Territories of Rum Excise Tax: John R. 
     Righter (226-2860), Streptococcus Pneumoniae Vaccine: Jeanne 
     De Sa (226-9010).
       Estimate approved by: Peter H. Fontaine, Deputy Assistant 
     Director for Budget Analysis; G. Thomas Woodward, Assistant 
     Director for Tax Analysis.

                          ____________________