[Congressional Record (Bound Edition), Volume 145 (1999), Part 6]
[Extensions of Remarks]
[Page 8000]
[From the U.S. Government Publishing Office, www.gpo.gov]




A BILL TO REPEAL THE LIMITATION ON THE USE OF FOREIGN TAX CREDITS UNDER 
                      THE ALTERNATIVE MINIMUM TAX

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                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                        Thursday, April 29, 1999

  Mr. HOUGHTON. Mr. Speaker, I am pleased to join my colleague from New 
York, Mr. Rangel, together with a number of other colleagues, in 
introducing our bill that would eliminate a fundamental unfairness in 
the application of the U.S. tax law to taxpayers that have income from 
foreign sources.
  A U.S. citizen or domestic corporation that earns income from sources 
outside the United States generally is subject to tax by a foreign 
government on that income. The taxpayer also is subject to U.S. tax on 
that same income, even though it is earned outside the United States. 
Thus, the same income is subject to tax both in the country in which it 
is earned and in the United States. However, the United States allows 
taxpayers to treat the foreign taxes paid on their foreign-source 
income as an offset against the U.S. tax with respect to that same 
income. This offset is accomplished through the foreign tax credit; the 
foreign tax paid on foreign-source income is treated as a credit 
against the U.S. tax that otherwise would be payable on that same 
income. Although the details of the foreign tax credit rules are 
extraordinarily complex (as are the international provisions of the 
Internal Revenue Code generally), the basic principle is simple: to 
provide relief from double taxation.
  When it comes to the alternative minimum tax (AMT), this basic 
principle of providing relief from double taxation falls by the 
wayside. The AMT was enacted to ensure that individuals and businesses 
that qualify for various ``preferences'' in the tax rules nevertheless 
are subject to a minimum level of taxation. However, the foreign tax 
credit provisions of the AMT operate to ensure double taxation. Under 
these AMT rules, the allowable foreign tax credit is limited to 90 
percent of the taxpayer's alternative minimum tax liability. Because of 
this limitation, income that is subject to foreign tax is subject also 
to the U.S. AMT. The result is double (and even triple) taxation of 
income that is used to support U.S. jobs, R&D and other activities.
  There is no rational basis for denying relief from double taxation to 
that class of taxpayers that are subject to the AMT. Accordingly, the 
bill we are introducing today will eliminate the 90 percent limitation 
on foreign tax credits for AMT purposes. With the elimination of this 
limitation, relief from double taxation will be provided to taxpayers 
that are subject to the AMT in the same manner as it is provided to 
those taxpayers that are subject to the regular tax.
  Concern regarding the unfairness of the AMT limitation on the use of 
the foreign tax credits is not new. Indeed, the House in 1995 passed a 
provision repealing the 90 percent limitation as part of a complete 
package of AMT reforms. Overall reform of the AMT, for individuals and 
businesses, remains an important piece of unfinished business. This 
bill to eliminate the 90 percent limitation on foreign tax credits for 
AMT purposes represents an important step in that direction and we urge 
our colleagues to join us in cosponsoring this legislation.

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