[Congressional Record (Bound Edition), Volume 149 (2003), Part 6]
[Extensions of Remarks]
[Pages 8570-8571]
[From the U.S. Government Publishing Office, www.gpo.gov]




   INTRODUCTION OF BILL TO ASSIST OWNERS OF CERTAIN FAMILY BUSINESSES

                                 ______
                                 

                            HON. MARK UDALL

                              of colorado

                    in the house of representatives

                        Thursday, April 3, 2003

  Mr. UDALL of Colorado. Mr. Speaker, today I am introducing a bill to 
make it easier for people who share ownership of an unincorporated 
business with a spouse to comply with the tax laws and also receive 
Social Security and Medicare benefits they have earned. The problems 
the bill addresses arise from the fact that under current law an 
unincorporated business owned by a married couple is classified as a 
partnership for purposes of the federal income tax. That means the 
business is subject to complex record-keeping requirements and the 
owners are supposed to file a partnership income-tax return.
  However, the Internal Revenue Service estimates that it can take a 
partnership as much as 200 hours to complete and file that kind of tax 
return--enough work to keep a person who works a 40-hour week busy for 
more than a month. And this has to be done every year. When we think of 
everything else they have to do to keep their businesses running, it is 
not surprising that many of these couples take what looks like an 
attractive shortcut. They do that by filing as if their businesses were 
sole proprietorship--a kind of filing that the IRS estimates can take 
as little as 2 hours. But, attractive as that shortcut seems, it can 
lead to serious trouble.
  First, of course, it is a technical violation of the tax laws, which 
means a couple taking that shortcut could be subject to penalties for 
failing to file as a partnership. But that's not the worst part. 
Because spouses who own and run a business are self-employed, they need 
to complete self-employment tax forms to report and pay their Social 
Security and Medicare taxes. But to file as if their business were a 
sole proprietorship, they must report all income from the business 
under the name of just one spouse--and, if they do that, only that 
named spouse can receive credit for paying into Social Security and 
Medicare. That means the other spouse--the one not named as the ``sole 
proprietor''--should become disabled, he or she would not qualify for 
Social Security disability benefits. It also means that if the 
``unnamed'' spouse dies, the named spouse and his or her children would 
not qualify for Social Security survivor benefits. And it means that 
the ``unnamed'' spouse would not qualify for Medicare.
  Further, in the event of a divorce, it can be very difficult for an 
``unnamed'' spouse to prove that he or she owns a share of the business 
for purposes of dividing the assets.
  My bill will help couples like these to avoid these problems by 
enacting several recommendations outlined by Nina E. Olsen, the 
National Taxpayers Advocate, in her most recent annual report to 
Congress.
  Under the bill, if a married couple filing a joint tax return are the 
only owners of an unincorporated business, they could decide what part 
of the business's profits or losses each spouse would claim, and that 
share would be taken into account in determining their self-employment 
earnings. That way, each spouse could receive some credit for Social 
Security and Medicare. And, depending on state law, this also could 
facilitate more equitable divisions of property in the event of 
divorce.
  The Taxpayer Advocate's report indicates that while this change in 
the law would mean a major reduction in the record-keeping requirements 
applicable to many people, it would have little or no effect on federal 
revenues.
  I am not sure how many people in Colorado stand to benefit from this 
bill. However, according to the IRS, it appears that more than 2,000 
Colorado couples who operate ranching or farming businesses would be 
covered by its provisions, and that it could also assist thousands of 
other Colorado couples who operate other kinds of unincorporated 
businesses.
  So, considering that Colorado is far from the most-populous State, I 
am not surprised that the Taxpayer Advocate's report indicates there 
could be as many as 2 million couples across the country who could 
benefit from enactment of this legislation.
  In short, while my bill would make only a relatively simple change in 
the tax laws, it has the potential to help many people and cut a lot of 
red tape at the same time. I greatly appreciate the Taxpayer Advocate's 
bringing it to our attention, and I think it deserves the support of 
every Member of the House.
  For the benefit of our colleagues, Mr. Speaker, I am attaching an 
excerpt from the report of the Taxpayer Advocate that explains the 
recommendation upon which my bill is based.

                     Explanation of Recommendation

       The National Taxpayer Advocate recommends that Internal 
     Revenue Code section 761(a) be amended to allow husband and 
     wife co-owned businesses to elect out of Subchapter K--
     Partners and Partnerships. At this time, we recommend that 
     the election be made available only to married couples who 
     file joint income tax returns. By making the election, the 
     business would be exempt from the application of the complex 
     rules of subchapter K and the husband and wife would be 
     entitled to file a Schedule C instead of a Form 1065, (U.S. 
     Return of Partnership Income). Internal Revenue Code section 
     761(a) already allows certain categories of taxpayers to opt 
     out of subchapter K, so there is precedent for this approach.
       Amending IRC Sec. 761(a) to allow a husband and wife co-
     owned business to elect out of subchapter K would not require 
     an additional amendment to Internal Revenue Code section 6031 
     regarding filing partnership returns. Treasury Regulations 
     currently state that a taxpayer who has made an election to 
     be exempt from subchapter K is not required to file a 
     partnership return except in the year of the election. In the 
     election year, the taxpayers would only need to file a 
     partnership return with the election statement. All income 
     and deductions would then be reported on a Schedule C in the 
     election year and for all subsequent years.
       If this proposal is enacted into law, we recommend that the 
     IRS design a form to supplement Schedule C for married co-
     owners who make the election to opt out of subchapter K. It 
     could be called Schedule C-MC (for ``Married Couple''). The 
     business entity's income and expenses would be reported on 
     Schedule C. The net profit (or loss) would then be allocated 
     between the husband and wife on Schedule C-MC.
       The supplemental form would serve three important purposes. 
     First, the amount of income allocated to each spouse--and 
     thus carried to separate Schedules SE--would be shown on the 
     form.
       Second, the form could be used to record each spouse's 
     respective interest in the business. This could become 
     important if, for example, one spouse dies and the value of 
     his or her interest must be determined for purposes of 
     computing the estate tax.
       Third, the form could be designed to allow the business to 
     make certain tax elections that are only available at the 
     entity level. This issue arises because even if a business 
     co-owned by a husband and wife is excluded from the 
     definition of a partnership for purposes of subchapter K, the 
     business generally remains a partnership for all other 
     purposes of the Code.\62\ The principal significance of 
     partnership classification outside the context of subchapter 
     K is that a partnership may make certain tax elections 
     available only to an entity and not to individuals. For 
     example, a partnership may make an election under IRC 
     Sec. 179 to expense depreciable business assets. We see no 
     reason to prohibit husband-and-wife-owned partnerships that 
     elect out of subchapter K from making tax elections of this 
     nature.
       In sum, our legislative proposal would reduce the tax 
     compliance burden on many husband-and-wife-owned businesses, 
     would facilitate the coverage of both spouses under the 
     Social Security and Medicare systems and, depending on state 
     law, could facilitate more equitable divisions of property in 
     the event of divorce. The revenue impact of the proposal 
     should be negligible. Regardless of how the net earnings from 
     the business are reported--either as a flow-through item from 
     the partnership return or as net earnings from Schedule C--
     the income tax liability of the husband and wife generally 
     will be the

[[Page 8571]]

     same. Social Security and Medicare receipts generally will 
     also be the same.

                          TRIBUTE TO JOE COORS

                                 ______
                                 

                           HON. SCOTT McINNIS

                              of colorado

                    in the house of representatives

                        Thursday, April 3, 2003

  Mr. McINNIS. Mr. Speaker, it is with a heavy heart that I rise today 
to honor the memory of Joe Coors--a man of unmatched dedication to his 
family, his community, and his beliefs. Joe died recently at the age of 
85, and as his family mourns this loss, I would like to take this 
opportunity to acknowledge his life before this body of Congress and 
this nation.
  Joe is a legend in my home state of Colorado and indeed across 
America. His grandfather, Adolph Coors, founded the Coors brewery in 
1873. Joe began his career as a chemical engineer when his 
grandfather's company in Golden, Colorado was a small operation 
producing 300,000 barrels a year. He returned to Golden to begin 
working at the brewery in 1946, helping to develop the signature Coors 
cold-filtration process and eventually pioneering use of the aluminum 
can and the nation's first large-scale recycling program. When Joe 
retired from his job as chief operating officer in 1988 after 41 years 
of service, Coors had grown into the nation's third-largest brewer.
  In addition to his role as a business leader, Joe was an active 
American citizen. In the 1970s he helped to found the Heritage 
Foundation, an influential think-tank and actively worked for other 
conservative groups and causes. Among the organizations he supported 
were the Independence Institute in Golden, Colorado and the Mountain 
States Legal Foundation, a public interest law firm. In the late 1960s, 
Joe served for 6 years on the Board of Regents for the University of 
Colorado. Throughout his life, Joe boldly fought for what he believed 
in; never for recognition but simply because he thought it was right.
  Mr. Speaker, we are all terribly saddened by the loss of Joe Coors 
though we take comfort in the knowledge that our grief is overshadowed 
by his legacy of success and accomplishment. His life is the very 
embodiment of the American dream, and I am deeply honored to be able to 
stand before this body of Congress and this nation to recognize Joe's 
life and many accomplishments.

                          ____________________