[Congressional Record (Bound Edition), Volume 150 (2004), Part 12]
[House]
[Pages 16855-16863]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              {time}  1445
       TAX SIMPLIFICATION FOR AMERICA'S JOB CREATORS ACT OF 2004

  Mr. PORTMAN. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4840) to amend the Internal Revenue Code of 1986 to simplify 
the taxation of businesses.
  The Clerk read as follows:

                               H.R. 4840

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Tax Simplification for 
     America's Job Creators Act of 2004''.

     SEC. 2. 2-YEAR EXTENSION OF INCREASED EXPENSING FOR SMALL 
                   BUSINESS.

       Subsections (b), (c), and (d) of section 179 of the 
     Internal Revenue Code of 1986 are each amended by striking 
     ``2006'' each place it appears and inserting ``2008''.

     SEC. 3. INDEXING OF GROSS RECEIPTS TEST FOR CASH METHOD OF 
                   ACCOUNTING.

       (a) In General.--Section 448(c) of the Internal Revenue 
     Code of 1986 is amended by adding at the end the following 
     new paragraph:
       ``(4) Inflation adjustment of gross receipts test.--In the 
     case of any taxable year beginning in a calendar year after 
     2003, the $5,000,000 dollar amount in paragraph (1) shall be 
     increased by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 2002' for `calendar year 1992' in subparagraph 
     (B) thereof.

     If any amount as adjusted under the preceding sentence is not 
     a multiple of $100,000, such amount shall be rounded to the 
     nearest multiple of $100,000.''.
       (b) Conforming Amendments.--
       (1) Section 448(b)(3) of such Code is amended by striking 
     ``$5,000,000'' both places it appears in the heading and 
     text.
       (2) Section 448(c) of such Code is amended by striking 
     ``$5,000,000'' in the heading and the first place it appears 
     in paragraph (1) thereof.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 4. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE 
                   PROVISIONS.

       (a) In General.--
       (1) General business credits.--Subsection (d) of section 38 
     of the Internal Revenue Code of 1986 is amended by striking 
     paragraph (3).
       (2) Carryback and carryforward of unused credits.--
     Subsection (d) of section 39 of such Code is amended by 
     striking paragraphs (1) through (8) and by redesignating 
     paragraphs (9) and (10) as paragraphs (1) and (2), 
     respectively.
       (3) Adjustments based on adjusted current earnings.--Clause 
     (ii) of section 56(g)(4)(F) of such Code is amended by 
     striking ``In the case of any taxable year beginning after 
     December 31, 1992, clause'' and inserting ``Clause''.
       (4) Items of tax preference; depletion.--Paragraph (1) of 
     section 57(a) of such Code is amended by striking ``Effective 
     with respect to taxable years beginning after December 31, 
     1992, this'' and inserting ``This''.
       (5) Intangible drilling costs.--
       (A) Clause (i) of section 57(a)(2)(E) of such Code is 
     amended by striking ``In the case of any taxable year 
     beginning after December 31, 1992, this'' and inserting 
     ``This''.
       (B) Clause (ii) of section 57(a)(2)(E) of such Code is 
     amended by striking ``(30 percent in the case of taxable 
     years beginning in 1993)''.
       (6) Great plains conservation program.--Section 126(a) of 
     such Code is amended by striking paragraph (6) and by 
     redesignating paragraphs (7), (8), (9), and (10) as 
     paragraphs (6), (7), (8), and (9), respectively.
       (7) Treble damage payments under the antitrust law.--
     Section 162(g) of such Code is amended by striking the last 
     sentence.
       (8) Charitable, etc., contributions and gifts.--Section 170 
     of such Code is amended by striking subsection (k).
       (9) Net operating loss carrybacks and carryovers.--
       (A) Section 172 of such Code is amended--
       (i) by striking subparagraph (D) of subsection (b)(1) and 
     by redesignating subparagraphs (E), (F), (G), and (H) as 
     subparagraphs (D), (E), (F), and (G), respectively,
       (ii) by striking ``ending after August 2, 1989'' in 
     subsection (b)(1)(D)(i)(II) (as redesignated by clause (i)),
       (iii) by striking ``subparagraph (F)'' in subsection 
     (b)(1)(G) (as redesignated by clause (i)) and inserting 
     ``subparagraph (E)'',
       (iv) by striking subsection (g), and
       (v) by striking subparagraph (F) of subsection (h)(2).
       (B) Section 172(h)(4) of such Code is amended by striking 
     ``subsection (b)(1)(E)'' each place it appears and inserting 
     ``subsection (b)(1)(D)''.
       (C) Section 172(i)(3) of such Code is amended by striking 
     ``subsection (b)(1)(G)'' each place it appears and inserting 
     ``subsection (b)(1)(F)''.
       (D) Section 172(j) of such Code is amended by striking 
     ``subsection (b)(1)(H)'' each place it appears and inserting 
     ``subsection (b)(1)(G)''.
       (E) Section 172 of such Code, as amended by subparagraphs 
     (A) through (D) of this paragraph, is amended--
       (i) by redesignating subsections (h), (i), and (j) as 
     subsections (g), (h), and (i), respectively,
       (ii) by striking ``subsection (h)'' each place it appears 
     and inserting ``subsection (g)'', and
       (iii) by striking ``subsection (i)'' each place it appears 
     and inserting ``subsection (h)''.
       (10) Research and experimental expenditures.--Subparagraph 
     (A) of section 174(a)(2) of such Code is amended to read as 
     follows:
       ``(A) Without consent.--A taxpayer may, without the consent 
     of the Secretary, adopt the method provided in this 
     subsection for his first taxable year for which expenditures 
     described in paragraph (1) are paid or incurred.''.
       (11) Amortization of certain research and experimental 
     expenditures.--Paragraph (2) of section 174(b) of such Code 
     is amended by striking ``beginning after December 31, 1953''.
       (12) Soil and water conservation expenditures.--Paragraph 
     (1) of section 175(d) of such Code is amended to read as 
     follows:
       ``(1) Without consent.--A taxpayer may, without the consent 
     of the Secretary, adopt the method provided in this section 
     for the taxpayer's first taxable year for which expenditures 
     described in subsection (a) are paid or incurred.''.
       (13) Activities not engaged in for profit.--Section 
     183(e)(1) of such Code is amended by striking the last 
     sentence.
       (14) Dividends received on certain preferred stock; and 
     dividends paid on certain preferred stock of public 
     utilities.--
       (A) Sections 244 and 247 of such Code are hereby repealed, 
     and the table of sections for part VIII of subchapter B of 
     chapter 1 of such Code is amended by striking the items 
     relating to sections 244 and 247.
       (B) Paragraph (5) of section 172(d) of such Code is amended 
     to read as follows:
       ``(5) Computation of deduction for dividends received.--The 
     deductions allowed by

[[Page 16856]]

     section 243 (relating to dividends received by corporations) 
     and 245 (relating to dividends received from certain foreign 
     corporations) shall be computed without regard to section 
     246(b) (relating to limitation on aggregate amount of 
     deductions).''.
       (C) Paragraph (1) of section 243(c) of such Code is amended 
     to read as follows:
       ``(1) In general.--In the case of any dividend received 
     from a 20-percent owned corporation, subsection (a)(1) shall 
     be applied by substituting `80 percent' for `70 percent'.''.
       (D) Section 243(d) of such Code is amended by striking 
     paragraph (4).
       (E) Section 246 of such Code is amended--
       (i) by striking ``, 244,'' in subsection (a)(1),
       (ii) in subsection (b)(1)--

       (I) by striking ``sections 243(a)(1), and 244(a),'' the 
     first place it appears and inserting ``section 243(a)(1)'',
       (II) by striking ``244(a),'' the second place it appears, 
     and
       (III) by striking ``subsection (a) or (b) of section 245, 
     and 247,'' and inserting ``and subsection (a) or (b) of 
     section 245,'', and

       (iii) by striking ``, 244,'' in subsection (c)(1).
       (F) Section 246A of such Code is amended by striking ``, 
     244,'' both places it appears in subsections (a) and (e).
       (G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 
     469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and (D) of 
     section 805(a)(4), 805(b)(5), 812(e)(2)(A), 
     815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), and 1059(b)(2)(B) 
     of such Code are each amended by striking ``, 244,'' each 
     place it appears.
       (H) Section 1244(c)(2)(C) of such Code is amended by 
     striking ``244,''.
       (I) Section 805(a)(4)(B) of such Code is amended by 
     striking ``, 244(a),'' each place it appears.
       (J) Section 810(c)(2)(B) of such Code is amended by 
     striking ``244 (relating to dividends on certain preferred 
     stock of public utilities),''.
       (15) Organization expenses.--Section 248(c) of such Code is 
     amended by striking ``beginning after December 31, 1953,'' 
     and by striking the last sentence.
       (16) Amount of gain where loss previously disallowed.--
     Section 267(d) of such Code is amended by striking ``(or by 
     reason of section 24(b) of the Internal Revenue Code of 
     1939)'' in paragraph (1), by striking ``after December 31, 
     1953,'' in paragraph (2), by striking the second sentence, 
     and by striking ``or by reason of section 118 of the Internal 
     Revenue Code of 1939'' in the last sentence.
       (17) Acquisitions made to evade or avoid income tax.--
     Paragraphs (1) and (2) of section 269(a) of such Code are 
     each amended by striking ``or acquired on or after October 8, 
     1940,''.
       (18) Interest on indebtedness incurred by corporations to 
     acquire stock or assets of another corporation.--Section 279 
     of such Code is amended--
       (A) by striking ``after December 31, 1967,'' in subsection 
     (a)(2),
       (B) by striking ``after October 9, 1969,'' in subsection 
     (b), and
       (C) by striking ``after October 9, 1969, and'' in 
     subsection (d)(5).
       (19) Special rules relating to corporate preference 
     items.--Paragraph (4) of section 291(a) of such Code is 
     amended by striking ``In the case of taxable years beginning 
     after December 31, 1984, section'' and inserting ``Section''.
       (20) Tax credit employee stock ownership plans.--Section 
     409 of such Code is amended by striking subsection (q).
       (21) Funding standards.--Section 412(m)(4) of such Code is 
     amended--
       (A) by striking ``the applicable percentage'' in 
     subparagraph (A) and inserting ``25 percent'', and
       (B) by striking subparagraph (C) and by redesignating 
     subparagraph (D) as subparagraph (C).
       (22) Retiree health accounts.--Section 420 of such Code is 
     amended--
       (A) by striking paragraph (4) of subsection (b) and by 
     redesignating paragraph (5) as paragraph (4), and
       (B) by amending paragraph (2) of subsection (c) to read as 
     follows:
       ``(2) Requirements relating to pension benefits accruing 
     before transfer.--The requirements of this paragraph are met 
     if the plan provides that the accrued pension benefits of any 
     participant or beneficiary under the plan become 
     nonforfeitable in the same manner which would be required if 
     the plan had terminated immediately before the qualified 
     transfer (or in the case of a participant who separated 
     during the 1-year period ending on the date of the transfer, 
     immediately before such separation).''.
       (23) Employee stock purchase plans.--Section 423(a) of such 
     Code is amended by striking ``after December 31, 1963,''.
       (24) Limitation on deductions for certain farming.--
       (A) Section 464 of such Code is amended by striking ``any 
     farming syndicate (as defined in subsection (c))'' both 
     places it appears in subsections (a) and (b) and inserting 
     ``any taxpayer to whom subsection (d) applies''.
       (B)(i) Subsection (c) of section 464 of such Code is hereby 
     moved to the end of section 461 and redesignated as 
     subsection (j).
       (ii) Such subsection (j) of such Code is amended--
       (I) by striking ``For purposes of this section'' in 
     paragraph (1) and inserting ``For purposes of subsection 
     (i)(4)'', and
       (II) by adding at the end the following new paragraphs:
       ``(3) Farming.--For purposes of this subsection, the term 
     `farming' has the meaning given to such term by section 
     464(e).
       ``(4) Limited entrepreneur.--For purposes of this 
     subsection, the term `limited entrepreneur' means a person 
     who--
       ``(A) has an interest in an enterprise other than as a 
     limited partner, and
       ``(B) does not actively participate in the management of 
     such enterprise.''
       (iii) Paragraph (4) of section 461(i) of such Code is 
     amended by striking ``section 464(c)'' and inserting 
     ``subsection (j)''.
       (C) Section 464 of such Code is amended--
       (i) by striking subsections (e) and (g) and redesignating 
     subsections (d) and (f) as subsections (c) and (d), 
     respectively, and
       (ii) by adding at the end the following new subsection:
       ``(e) Farming.--For purposes of this section, the term 
     `farming' means the cultivation of land or the raising or 
     harvesting of any agricultural or horticultural commodity 
     including the raising, shearing, feeding, caring for, 
     training, and management of animals. For purposes of the 
     preceding sentence, trees (other than trees bearing fruit or 
     nuts) shall not be treated as an agricultural or 
     horticultural commodity.''
       (D) Subsection (d) of section 464 of such Code, as 
     redesignated by subparagraph (C), is amended--
       (i) by striking paragraph (1) and redesignating paragraphs 
     (2), (3), and (4) as paragraphs (1), (2), and (3), 
     respectively, and
       (ii) by striking ``Subsections (a) and (b) to Apply to'' in 
     the subsection heading.
       (E) Subparagraph (A) of section 58(a)(2) of such Code is 
     amended by striking ``section 464(c)'' and inserting 
     ``section 461(j)''.
       (25) Deductions limited to amount at risk.--Paragraph (3) 
     of section 465(c) of such Code is amended by striking ``In 
     the case of taxable years beginning after December 31, 1978, 
     this'' and inserting ``This''.
       (26) Nuclear decommissioning costs.--Section 468A(e)(2) of 
     such Code is amended--
       (A) by striking ``at the rate set forth in subparagraph 
     (B)'' in subparagraph (A) and inserting ``at the rate of 20 
     percent'', and
       (B) by striking subparagraph (B) and by redesignating 
     subparagraphs (C) and (D) as subparagraphs (B) and (C), 
     respectively.
       (27) Passive activity losses and credits limited.--
       (A) Section 469 of such Code is amended by striking 
     subsection (m).
       (B) Subsection (b) of section 58 of such Code is amended by 
     adding ``and'' at the end of paragraph (1), by striking 
     paragraph (2), and by redesignating paragraph (3) as 
     paragraph (2).
       (28) Adjustments required by changes in method of 
     accounting.--Section 481(b)(3) of such Code is amended by 
     striking subparagraph (C).
       (29) Exemption from tax on corporations, certain trusts, 
     etc.--Section 501 of such Code is amended by striking 
     subsection (q).
       (30) Requirements for exemption.--
       (A) Section 503(a)(1) of such Code is amended to read as 
     follows:
       ``(1) General rule.--An organization described in paragraph 
     (17) or (18) of section 501(c) or described in section 401(a) 
     and referred to in section 4975(g)(2) or (3) shall not be 
     exempt from taxation under section 501(a) if it has engaged 
     in a prohibited transaction.''.
       (B) Paragraph (2) of section 503(a) of such Code is amended 
     by striking ``described in section 501(c)(17) or (18) or 
     paragraph (a)(1)(B)'' and inserting ``described in paragraph 
     (1)''.
       (C) Subsection (c) of section 503 of such Code is amended 
     by striking ``described in section 501(c)(17) or (18) or 
     subsection (a)(1)(B)'' and inserting ``described in 
     subsection (a)(1)''.
       (31) Insurance company taxable income.--
       (A) Section 832(e) of such Code is amended by striking ``of 
     taxable years beginning after December 31, 1966,''.
       (B) Section 832(e)(6) of such Code is amended by striking 
     ``In the case of any taxable year beginning after December 
     31, 1970, the'' and inserting ``The''.
       (32) Property on which lessee has made improvements.--
     Section 1019 of such Code is amended by striking the last 
     sentence.
       (33) Involuntary conversion.--Section 1033 of such Code is 
     amended by striking subsection (j) and by redesignating 
     subsection (k) as subsection (j).
       (34) Property acquired during affiliation.--Section 1051 of 
     such Code is hereby repealed, and the table of sections for 
     part IV of subchapter O of chapter 1 is amended by striking 
     the item relating to section 1051.
       (35) Holding period of property.--
       (A) Paragraph (5) of section 1223 of such Code is amended 
     by striking ``(or under so much of section 1052(c) as refers 
     to section 113(a)(23) of the Internal Revenue Code of 
     1939)''.
       (B) Paragraph (7) of section 1223 of such Code is amended 
     by striking the last sentence.
       (C) Paragraph (9) of section 1223 of such Code is repealed.
       (36) Property used in the trade or business and involuntary 
     conversions.--Subparagraph (A) of section 1231(c)(2) of such 
     Code is amended by striking ``beginning after December 31, 
     1981''.

[[Page 16857]]

       (37) Sale or exchange of patents.--Section 1235 of such 
     Code is amended--
       (A) by striking subsection (c) and by redesignating 
     subsections (d) and (e) as subsections (c) and (d), 
     respectively, and
       (B) by striking ``subsection (d)'' in subsection (b) and 
     inserting ``subsection (c)''.
       (38) Dealers in securities.--Subsection (b) of section 1236 
     of such Code is amended by striking ``after November 19, 
     1951,''.
       (39) Sale of patents.--Subsection (a) of section 1249 of 
     such Code is amended by striking ``after December 31, 
     1962,''.
       (40) Gain from disposition of farm land.--Paragraph (1) of 
     section 1252(a) of such Code is amended by striking ``after 
     December 31, 1969,'' both places it appears.
       (41) Treatment of amounts received on retirement or sale or 
     exchange of debt instruments.--Subsection (c) of section 1271 
     of such Code is amended to read as follows:
       ``(c) Special Rule for Certain Obligations With Respect to 
     Which Original Issue Discount Not Currently Includible.--
       ``(1) In general.--On the sale or exchange of debt 
     instruments issued by a government or political subdivision 
     thereof after December 31, 1954, and before July 2, 1982, or 
     by a corporation after December 31, 1954, and on or before 
     May 27, 1969, any gain realized which does not exceed--
       ``(A) an amount equal to the original issue discount, or
       ``(B) if at the time of original issue there was no 
     intention to call the debt instrument before maturity, an 
     amount which bears the same ratio to the original issue 
     discount as the number of complete months that the debt 
     instrument was held by the taxpayer bears to the number of 
     complete months from the date of original issue to the date 
     of maturity,

     shall be considered as ordinary income.
       ``(2) Subsection (a)(2)(A) not to apply.--Subsection 
     (a)(2)(A) shall not apply to any debt instrument referred to 
     in subparagraph (A) of this paragraph.
       ``(3) Cross reference.--

  ``For current inclusion of original issue discount, see section 
1272.''.
       (42) Amount and method of adjustment.--Section 1314 of such 
     Code is amended by striking subsection (d) and by 
     redesignating subsection (e) as subsection (d).
       (43) Election; revocation; termination.--Clause (iii) of 
     section 1362(d)(3) of such Code is amended by striking 
     ``unless'' and all that follows and inserting ``unless the 
     corporation was an S corporation for such taxable year.''.
       (44) Affiliated group defined.--Subparagraph (A) of section 
     1504(a)(3) of such Code is amended by striking ``for a 
     taxable year which includes any period after December 31, 
     1984'' in clause (i) and by striking ``in a taxable year 
     beginning after December 31, 1984'' in clause (ii).
       (45) Disallowance of the benefits of the graduated 
     corporate rates and accumulated earnings credit.--
       (A) Subsection (a) of section 1551 of such Code is 
     amended--
       (i) by striking paragraph (1) and by redesignating 
     paragraphs (2) and (3) as paragraphs (1) and (2), 
     respectively, and
       (ii) by striking ``after June 12, 1963,'' each place it 
     appears.
       (B) Section 1551(b) of such Code is amended--
       (i) by striking ``or (2)'' in paragraph (1), and
       (ii) by striking ``(a)(3)'' in paragraph (2) and inserting 
     ``(a)(2)''.
       (46) Definition of wages.--
       (A) Section 3121(b) of such Code is amended by striking 
     paragraph (17).
       (B) Section 210(a) of the Social Security Act is amended by 
     striking paragraph (17).
       (47) Credits against tax.--
       (A) Paragraph (4) of section 3302(f) of such Code is 
     amended--
       (i) by striking ``subsection--'' and all that follows 
     through ``(A) In general.--The'' and inserting ``subsection, 
     the,
       (ii) by striking subparagraph (B),
       (iii) by redesignating clauses (i) and (ii) as 
     subparagraphs (A) and (B), respectively, and
       (iv) by moving the text of such subparagraphs (as so 
     redesignated) 2 ems to the left.
       (B) Paragraph (5) of section 3302(f) of such Code is 
     amended by striking subparagraph (D) and by redesignating 
     subparagraph (E) as subparagraph (D).
       (48) Domestic service employment taxes.--Section 3510(b) of 
     such Code is amended by striking paragraph (4).
       (49) Tax on fuel used in commercial transportation on 
     inland waterways.--Section 4042(b)(2)(A) of such Code is 
     amended to read as follows:
       ``(A) The Inland Waterways Trust Fund financing rate is 20 
     cents per gallon.''.
       (50) Transportation by air.--Section 4261(e) of such Code 
     is amended--
       (A) in paragraph (1) by striking subparagraph (C), and
       (B) by striking paragraph (5).
       (51) Taxes on failure to distribute income.--
       (A) Paragraph (2) of section 4942(f) of such Code is 
     amended by striking the semicolon at the end of subparagraph 
     (B) and inserting ``, and'', by striking ``; and'' at the end 
     of subparagraph (C) and inserting a period, and by striking 
     subparagraph (D).
       (B) Subsection (g) of section 4942 of such Code is 
     amended--
       (i) by striking ``For all taxable years beginning on or 
     after January 1, 1975, subject'' in paragraph (2)(A) and 
     inserting ``Subject'', and
       (ii) by striking paragraph (4).
       (C) Section 4942(i)(2) of such Code is amended by striking 
     ``beginning after December 31, 1969, and''.
       (52) Taxes on taxable expenditures.--Section 4945(f) of 
     such Code is amended by striking ``(excluding therefrom any 
     preceding taxable year which begins before January 1, 
     1970)''.
       (53) Returns.--Subsection (a) of section 6039D of such Code 
     is amended by striking ``beginning after December 31, 
     1984,''.
       (54) Information returns.--Subsection (c) of section 6060 
     of such Code is amended by striking ``year'' and all that 
     follows and inserting ``year.''.
       (55) Canal zone.--Subparagraph (A) of section 6103(b)(5) of 
     such Code is amended by striking ``the Canal Zone,''.
       (56) Abatements.--Section 6404(f) of such Code is amended 
     by striking paragraph (3).
       (57) Failure by corporation to pay estimated income tax.--
     Clause (i) of section 6655(g)(4)(A) of such Code is amended 
     by striking ``(or the corresponding provisions of prior 
     law)''.
       (58) Merchant marine capital construction funds.--Paragraph 
     (4) of section 7518(g) of such Code is amended by striking 
     ``any nonqualified withdrawal'' and all that follows through 
     ``shall be determined'' and inserting ``any nonqualified 
     withdrawal shall be determined''.
       (59) Valuation tables.--
       (A) Subsection (c) of section 7520 of such Code is amended 
     by striking paragraph (2) and by redesignating paragraph (3) 
     as paragraph (2).
       (B) Paragraph (2) of section 7520(c) of such Code, as so 
     redesignated, is amended--
       (i) by striking ``Not later than December 31, 1989, the'' 
     and inserting ``The'', and
       (ii) by striking ``thereafter'' in the last sentence 
     thereof.
       (60) Administration and collection of taxes in 
     possessions.--Section 7651 of such Code is amended by 
     striking paragraph (4) and by redesignating paragraph (5) as 
     paragraph (4).
       (61) Definition of employee.--Section 7701(a)(20) of such 
     Code is amended by striking ``chapter 21'' and all that 
     follows and inserting ``chapter 21.''.
       (b) Effective Date.--
       (1) General rule.--Except as otherwise provided in 
     paragraph (2), the amendments made by subsection (a) shall 
     take effect on the date of enactment of this Act.
       (2) Savings provision.--If--
       (A) any provision amended or repealed by subsection (a) 
     applied to--
       (i) any transaction occurring before the date of the 
     enactment of this Act,
       (ii) any property acquired before such date of enactment, 
     or
       (iii) any item of income, loss, deduction, or credit taken 
     into account before such date of enactment, and
       (B) the treatment of such transaction, property, or item 
     under such provision would (without regard to the amendments 
     made by subsection (a)) affect the liability for tax for 
     periods ending after such date of enactment,

     nothing in the amendments made by subsection (a) shall be 
     construed to affect the treatment of such transaction, 
     property, or item for purposes of determining liability for 
     tax for periods ending after such date of enactment.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Ohio (Mr. Portman) and the gentleman from Texas (Mr. Sandlin) each will 
control 20 minutes.
  The Chair recognizes the gentleman from Ohio (Mr. Portman).
  Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, Americans are frustrated. They are frustrated with their 
current Tax Code, and they should be. The mountains of documents that 
they face are complicated, confusing, and sometimes contradictory. The 
effects of this complex code, by the way, are more than just 
frustration for those of us who are taxpayers. They include decreased 
levels of voluntary compliance, people cannot figure out the code and 
they are less likely to comply with it; increased costs, of course, for 
the entire taxpayer system; reduced perception of fairness in the 
Federal tax system; and, of course, increased difficulties at the 
Internal Revenue Service as they try to administer this unwieldy code. 
Clearly, we need to make our Tax Code more user friendly, and we should 
take every opportunity to do so.
  Over the last few years, we have done that in some cases, for 
instance, the expansion of the 10 percent tax bracket, and taking 
literally millions of taxpayers off the Internal Revenue Code 
altogether.
  But today, Mr. Speaker, I would like to commend my colleague, the 
gentleman from Illinois (Mr. Crane), for

[[Page 16858]]

legislation that he has brought to the floor showing his commitment to 
tax simplification, and particularly focusing on the needs of our small 
businesses.
  H.R. 4840, which is before the House today, the Tax Simplification 
For America's Job Creators Act, provides provisions that will provide 
tax relief and simplification for small businesses and small business 
owners as they plan for the economy, which is now growing.
  First, the bill will extend the $100,000 expensing amount provided 
under what is called section 179 of the Internal Revenue Code. This is 
an extremely important incentive which was included in the President's 
2003 tax relief bill, the Jobs Growth and Tax Relief Reconciliation 
Act.
  It allows small businesses to deduct up to $100,000 immediately, to 
write that off, not depreciate it over time, as compared to $25,000, 
which was in law before the 2003 tax relief act. This is for new 
equipment up to 2006. Therefore, we want to expand that, we want to 
extend the legislation into 2006 and 2007, and the legislation offered 
by the gentleman from Illinois (Mr. Crane) does that.
  It also expands the definition of who qualifies. Before 2003, those 
companies who qualified were those that had $200,000 or less of capital 
purchases per year. We doubled that to $400,000 of capital purchases 
per year, making this provision something that is more usable for more 
small businesses.
  Expensing, of course, allows small businesses to recover the cost of 
their investment immediately rather than writing it off over time and 
rather than requiring them to keep extensive records and track those 
deductions over several years. This helps reduce the cost of capital, 
which helps to expand plant and equipment. It also makes it simpler and 
less costly, less complicated for our small businesses to be able to 
comply with our Tax Code.
  Again, today's bill will provide yet another vehicle that we can use 
to try to enact this important small business priority that has already 
passed the House in some other forms, and I commend the gentleman from 
Illinois (Chairman Crane) for it.
  Second, his bill also begins adjusting an important standard which 
affects small businesses' ability to use the cash accounting system. 
The cash accounting method is simpler, and it provides under this 
legislation to convert from the current $5 million threshold to $10 
million. So we are expanding the amount that can be indexed for 
inflation, so that more and more small businesses are not forced into 
using the accrual method each year.
  It is important to understand that forcing businesses into the 
accrual accounting method has real consequences for smaller companies. 
Not only must they begin calculating taxes using a different accounting 
method; they must actually pay tax on the difference in income as 
measured by the accrual and the cash methods. The bill before us 
rectifies this situation by indexing the limit so inflation will not 
force more and more small businesses into the accrual method.
  This does not change the $5 million threshold. Mr. Speaker, I correct 
myself. Rather, it indexes that going forward to inflation to be able 
to increase that amount. This change will provide $120 million in tax 
relief to smaller businesses during the coming decade.
  Finally, the bill eliminates a number of outdated references in the 
code. These are so-called ``deadwood provisions.'' This is also very 
important both because these deadwood provisions that have been 
identified by the Joint Tax Committee, by the Treasury Department, by 
others in their reports are important to get out of the code because 
they do not need to be in it, do not make any sense; but it also 
creates confusion at the IRS and confusion among taxpayers and has 
created downstream problems that are difficult to address.
  H.R. 4840, in the end, Mr. Speaker, will cut taxes by approximately 
$1.2 billion for our small businesses, and that figure is over the next 
decade.
  The bill is well within our House-passed budget, and I believe it is 
very worthy of our support as an important simplification method. I 
urge my colleagues to support this legislation to help our small 
businesses, our job creators, our risk takers, who are out there 
ensuring that this economic recovery continues, and continues strongly.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SANDLIN. Mr. Speaker, I yield myself as much time as I may 
consume.
  I thank my friend from Ohio for his work on this bill. Mr. Speaker, I 
rise today in support of tax simplification. There can be little doubt 
that taxpaying individuals and American businesses, particularly small 
businesses, spend far too much time, not just preparing their tax 
returns and paying their taxes, but in even figuring out just how to 
file or which forms to fill out, what tax preferences they qualify for, 
what they can deduct, and what elections they should make to best serve 
the interests of the business, its employees, and themselves.
  On top of that is the anxiety that many small business owners 
experience when confronting the daunting complexity of the Tax Code and 
trying to make sound business and tax planning decisions with the 
prospect of taking a wrong turn in a numbing maze that makes tax 
lawyers and accountants shudder. Such complexity is both unnecessary 
and unhealthy, Mr. Speaker, for small business and our Nation's 
economy.
  So, Mr. Speaker, I wholeheartedly support meaningful efforts to 
reform our tax system and to reduce an extreme burden on our small 
businesses and individuals and to ensure efficiency.
  Moreover, I am pleased to rise in support of the legislation 
introduced by the gentleman from Illinois (Mr. Crane). I am pleased to 
be a cosponsor of the legislation that somewhat eases the burden borne 
by America's small businesses, truly the engine that drives our 
economy.
  Mr. Speaker, at a very modest cost, H.R. 4840 provides two valuable 
benefits to our Nation's small businesses.
  First, the bill extends enhanced section 179 expensing for small 
businesses for 2 years. Last year Congress passed and President Bush 
signed into law legislation that increased the amount of equipment that 
small businesses may expense from $25,000 annually to $100,000 
annually. The 2003 law also increased the phase-out range from $200,000 
of capital expenditures to $400,000, significantly expanding the number 
of small businesses that qualify for section 179 expensing. Both 
amounts are indexed for inflation.
  The bill the House considers today extends these improvements to 
section 179 for 2 additional years through 2007, thereby providing 
much-needed relief as our economy continues to recover and to grow.
  Second, H.R. 4840 eases the accounting burden on small businesses by 
preserving the cash accounting method for more small businesses. 
Generally, under current law, businesses with $5 million or more in 
gross receipts must switch from the cash method of accounting to the 
accrual method. The bill offered by the gentleman from Illinois (Mr. 
Crane) preserves the value of the $5 million limit by indexing it for 
inflation so that more small businesses will not be forced to use the 
more complicated accrual method.
  Finally, but less directly beneficial, H.R. 4840 cleans up the Tax 
Code by eliminating outdated, rarely used and unnecessary provisions of 
the code. Repealing these deadwood provisions certainly has the effect 
of reducing clutter in our code, but its practical effects and benefits 
to small business are somewhat limited.
  Mr. Speaker, H.R. 4840 is a fine bill. It is a good first step, and I 
am proud to support it. However, this Congress needs to do more to 
relieve the burden borne by America's small businessmen and -women and 
individuals.
  Mr. Speaker, I reserve the balance of my time.
  Mr. PORTMAN. Mr. Speaker, I appreciate the comments of my colleague 
from Texas. I agree with them.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Illinois (Mr. Crane), the author of this legislation on tax 
simplification.

[[Page 16859]]


  Mr. CRANE. Mr. Speaker, I thank my distinguished colleague from the 
Committee on Ways and Means, the gentleman from Ohio (Mr. Portman), for 
yielding this time to me and for helping me in getting this bill 
explained and passed.
  Mr. Speaker, I rise in strong support of H.R. 4840, the legislation I 
have introduced that will simplify the Tax Code for small businesses.
  Nearly seven in 10 new jobs are created by small businesses, which 
are the backbone of our economy. The Tax Simplification For America's 
Job Creators Act helps small businesses in three ways:
  First, it extends section 179, small business expensing, for 2 years, 
through 2007. This provision allows small businesses to immediately 
deduct the cost of up to $100,000 in expenditures for new equipment. 
Failure to extend this provision will result in an effective tax 
increase of about $1 billion on small businesses seeking to make 
critical investments that expand their businesses and create jobs.
  Second, my legislation will allow small businesses to take advantage 
of the cash method of accounting. Under current law, subchapter C 
corporations cannot use cash accounting, which allows them to deduct 
expenses in the year paid and report income in the year received, if 
their gross receipts exceed $5 million. H.R. 4840 indexes the $5 
million threshold for inflation, which ensures that more small 
businesses are not forced to use the more complex, costly, and time-
consuming accrual method of accounting. This provision saves business 
taxpayers roughly $120 million.
  Third, H.R. 4840 eliminates from the Tax Code a number of dead-letter 
provisions, which serve no purpose other than to clutter an already 
overly complex set of laws.
  My constituents tell me that passage of this legislation will mean 
more jobs and increased economic growth in the Chicagoland area. I am 
also pleased that some of the Nation's leading small business 
associations, including the National Federation of Independent 
Businesses, the NFIB, the U.S. Chamber of Commerce, and the Associated 
Builders and Contractors, strongly support the bill.
  Mr. Speaker, my legislation is not a panacea for small business. The 
government can only do so much. As always, it is the hard work and 
ingenuity of the American people that lead to expanded growth, job 
creation, and prosperity. However, taxpayers with business income pay 
about 55 percent of all income taxes. This bipartisan legislation will 
not only simplify the Tax Code; but by returning over $1 billion to 
business taxpayers, it will also let our job creators know that 
Congress means business when it comes to lowering their tax burden. It 
is the least we can do.
  While I am extraordinarily pleased that we are acting today on much-
needed simplification for small business, I want to take a moment to 
mention the need for greater simplification in the tax laws. I, for 
one, intend to be dogged in my pursuit of this goal.
  To give one example, I have long championed an effort for many years 
to address a complex and unfair provision in the consolidated return 
rules. These rules were enacted so that corporate groups could pay tax 
on the net income of all their affiliated companies. Generally, the 
rules accomplish this goal, unless one of the affiliated corporations 
in the group is a life insurance company.
  Twenty Members of the Committee on Ways and Means have cosponsored 
legislation I have introduced, H.R. 2228, that reforms the consolidated 
returns to address this inequity. Similar legislation passed both the 
House and Senate in 1999 as part of a larger tax bill that, 
unfortunately, was vetoed by President Clinton. I would expect that 
with the appropriate amount of effort, this legislation, as well as 
other meritorious simplification, can and will be enacted in the near 
future.
  Finally, Mr. Speaker, to continue on the theme of tax simplification, 
in 2002, the IRS issued Revenue Procedure 2002-28 to allow subchapter S 
corporations to use cash accounting if their gross receipts do not 
exceed $10 million. That ruling provided useful clarification for 
taxpayers. I believe the service should go one step further and make 
this guidance a formal regulation so that in the future America's small 
business owners can rely on a simple method of accounting.
  Mr. Speaker, I include for the Record a copy of the NFIB's petition 
to the IRS asking for a final rule to address this issue.

                                        NFIB Legal Foundation,

                                    Washington, DC, July 20, 2004.

      Petition for Rulemaking Before the Internal Revenue Service

     Hon. Mark W. Everson,
     Commissioner, Internal Revenue Service,
     Washington, DC.
       Dear Mr. Commissioner: The National Federation of 
     Independent Business Legal Foundation (``NFIB Legal 
     Foundation'') submits this petition to the Internal Revenue 
     Service (IRS) pursuant to 5 U.S.C. Sec. 553(e) of the 
     Administrative Procedure Act, 5 U.S.C. Sec. Sec. 551 et seq. 
     Petitioners request a rulemaking to incorporate Revenue 
     Procedure 2002-28, with three requested modifications, into a 
     formal regulation. Pursuant to 5 U.S.C. Sec. 555(e), 
     petitioners request prompt consideration and response to this 
     petition.
       The NFIB Legal Foundation, a 501(c)(3) public interest law 
     firm, is the legal arm of the National Federation of 
     Independent Business (NFIB), which is the nation's oldest and 
     largest organization dedicated to representing the interests 
     of small-business owners throughout all 50 states. The 
     approximately 600,000 members of NFIB own a wide variety of 
     America's independent businesses from restaurants to hardware 
     stores to bowling alleys.

                       REVENUE PROCEDURE 2002-28

       Revenue Procedure 2002-28 allows qualifying small business 
     taxpayers with gross receipts of less than $10 million to use 
     the cash receipts and disbursements method of accounting. 
     This relieves qualifying small businesses from the more 
     complex inventory and accrual method of accounting. Revenue 
     Procedure 2002-28 also provides for qualifying businesses to 
     obtain automatic consent to change from accrual accounting to 
     cash accounting.


  the proposed regulation--incorporation of revenue procedure 2002-28 
                           into a final rule.

       Petitioner requests that the IRS convert Revenue Procedure 
     2002-28 into a formal regulation. A formal rule would provide 
     stability and prevent long-term confusion and wide-ranging 
     interpretations of the current revenue procedure. While there 
     are numerous revenue procedures that have been in effect for 
     many years, nothing prevents a subsequent administration from 
     modifying or withdrawing a revenue procedure. Incorporation 
     into a formal regulation would make the components and intent 
     of Revenue Procedure 2002-28 a more permanent fixture of the 
     tax law thereby maintaining a predictable environment in 
     which small businesses may operate.


               further changes are needed in a final rule

       Petitioner applauds the IRS Small Business/Self-Employed 
     Division's outreach to small business owners on this matter. 
     In doing so, Revenue Procedure 2002-28 addressed many small 
     business owners' concerns and provided much needed tax 
     simplification for many taxpayers. Nevertheless, there are 
     some outstanding issues that Petitioner would like to see 
     incorporated into a final rule.
     1. Provide one-year grace period to adjust income ratio or 
         change accounting method
       Section 4(.01) of Revenue Procedure 2002-28 allows a 
     qualifying small business taxpayer to use a cash method of 
     accounting for all of its trade or business if ``the taxpayer 
     reasonably determines that its principal business activity is 
     the provision of services, including the provision of 
     property incident to those services.'' A taxpayer may 
     determine its principal business activity using either (1) 
     the gross receipts for its prior taxable year, or (2) the 
     average annual gross receipts for its three most recent prior 
     taxable years.
       We support the inclusion of the three-year average test in 
     Revenue Procedure 2002-28 for determining if a small business 
     qualifies for use of cash accounting methods. By using a 
     three-year average, qualifying businesses can maintain their 
     customary cash accounting methods if, in one year, their 
     service-to-produce income ratio changes to 55/45 rather than 
     60/40. Revenue Procedure 2002-28 addresses this issue in 
     Example 6 by showing that a business with 57% of its income 
     from services still qualifies for the cash accounting method. 
     This practice is both practical and fair, and petitioner 
     requests that the procedure and examples used in Revenue 
     Procedure 2002-28 are incorporated into a regulation.
       In addition, however, we request that a business should not 
     be forced to immediately switch from cash accounting to 
     accrual accounting when the business' principal business 
     activity income ratio falls below the 60/ 40 threshold 
     percentage provided in the Revenue Procedure examples. 
     Instead, businesses should be provided a one-year grace 
     period to either adjust their income ratios or

[[Page 16860]]

     to change accounting methods. Allowing such a grace period 
     would enhance stability and certainty for small business 
     taxpayers by providing them with an opportunity to avoid 
     having to switch from cash to accrual accounting from one 
     year to the next.
     2. Provide notice of changes to NAICS
       Revenue Procedure 2002-28 applies to qualifying taxpayers 
     who fit within the $1 million to $10 million gross receipts 
     threshold. Businesses qualify if they derived their largest 
     percentage of gross receipts in the prior tax year from an 
     activity other than one in the following North American 
     Industry Classification System (NAICS) codes: mining 
     activities within NAICS codes 211 and 212, including oil and 
     gas extraction; manufacturing within NAICS codes 31-33; 
     wholesale trades within NAICS code 42; retail trade within 
     NAICS codes 44 and 45; and information industries within 
     NAICS codes 5111 and 5122, including newspaper, periodical, 
     book, and database publishers and sound recording. The cash 
     accounting method does not apply to farming businesses or 
     those prohibited from using cash accounting by IRC Sec. 448.
       Changes made to NAICS codes could obviously impact the 
     ability of a business to qualify for the cash accounting 
     method under Revenue Procedure 2002-28. The IRS should 
     provide some form of notification to affected businesses when 
     NAICS codes are changed, to ensure that business taxpayers 
     remain aware of the impact on their accounting procedures.
     3. Provide one-year grace period to businesses affected by 
         changes to NAICS
       Petitioner also requests that the IRS provide businesses 
     affected by changes to the NAICS codes a one-year grace 
     period to switch their accounting systems from cash 
     accounting to accrual accounting. A grace period would 
     provide business taxpayers time to adjust their business 
     practices and change their accounting procedures.


                     authority of the commissioner

       The enhanced sense of permanence associated with a formal 
     regulation as described above would provide certainty and 
     stability for thousands of small businesses nationwide, 
     allowing the business owners to do what they do best--run the 
     businesses that are the backbone of our economy. Federal law 
     provides ample authority to grant this petition and issue the 
     requested final rule.
       Respectfully submitted this 20th day of July 2004,
                                            Karen R. Harned, Esq.,
                                               Executive Director.

                              {time}  1500

  Mr. SANDLIN. Mr. Speaker, I yield myself such time as I may consume.
  We appreciate the efforts of the gentleman from Illinois (Mr. Crane) 
and clearly, there is a need for tax simplification. Today, the IRS now 
prints more than 1,000 publications, forms, and instruction booklets, 
and while the Tax Code was a mere 500 pages in 1913, financial 
publisher CCH says its Standard Federal Tax Reporter, which is the 
guidance for tax preparers, has grown to more than 60,000 pages today. 
The cost to individuals and business in America of the complexity of 
our code are staggering.
  More than $100 billion a year in accounting fees and the value of 
taxpayers' time to complete their returns, according to Joel Slemrod of 
the University of Michigan, are used up each year. This is roughly 
equivalent to what our Nation spends to operate the Departments of 
Education, Homeland Security, and the Department of State each year. 
According to the IRS, small business owners are required to devote 60 
hours, almost 8 full work days each year, to prepare their taxes.
  While the bill we debate today is a good piece of legislation, it 
will not do enough to reduce this burden, and we must do more, working 
together.
  Mr. Speaker, I yield 5 minutes to the gentleman from Washington (Mr. 
McDermott.)
  Mr. McDERMOTT. Mr. Speaker, we are getting close to election again. 
The gentleman from Texas (Mr. DeLay) Congress says it is time for 
simplifying the Tax Code. But, Mr. Speaker, my colleagues know that 
``tax simplification'' is just the term the Republicans use to start 
talking about the need for a flat tax or a sales tax. Every year at 
this time it comes up.
  The Committee on Ways and Means had a host of hearings about this 
same issue in the mid-1990s under Chairman Archer. At one point during 
the hearings in 1995, the chairman said he was convinced that the Tax 
Code needed to go to a flat tax. He even said he was going to introduce 
legislation to do it. But, after all the hearings and all of the 
rhetoric, he never even introduced a bill.
  Mr. Speaker, we can do two things with money: We can save it or we 
can spend it. Now, rich people have more to save than do poor people. 
If all that we do is impose taxes when people spend money, then poor 
people are going to spend the larger share of their paycheck on taxes 
than rich people are. I mean, anybody knows that. Poor people spend 
every dime of every paycheck; rich people spend some and then they put 
a whole bunch in the bank or in the stock market or in something else. 
A system based on consumption taxes hardly is fair at all.
  Legislation has been introduced in the past to convert our tax regime 
to one that relies solely on consumption taxes. The gentleman from 
Georgia (Mr. Linder) has introduced legislation to abolish the IRS, 
abolish it, and force the Federal Government to rely on a national 
sales tax, a proposal that the majority leader supports. This proposal 
would be a boon to the wealthy elite. His proposal would tax all 
purchases on goods and services in our economy, including food, health 
care, home rents, and new home purchases.
  The Joint Committee on Taxation did an analysis of the Linder 
proposal. The study indicated that in order for the bill to be revenue 
neutral over 10 years, the estimated national sales tax rate would be 
between 36 and 57 percent. In other words, the price of blood 
transfusions, prescription drugs, and a pair of sneakers would increase 
between 37 and 57 percent. Does that sound fair to my colleagues?
  How do we sell this proposal to simplify tax structure to the baby 
boomers of this country who are about to go onto a fixed income? We 
have this big bulge of people who are just about, in 2008, going to 
start going onto Social Security. You cannot, and that is why they call 
it tax simplification. It sounds like a good idea.
  The Health Insurance Association of America states that one of the 
consequences of a flat tax bill is likely to be a rapid increase in the 
number of people without private health insurance coverage. One 
economist estimated that there would be 8 million more people without 
health benefits if a flat tax proposal were enacted.
  James Poterba, an economist at MIT, estimated that eliminating the 
current tax law benefits for purchasing homes could result in a 17 
percent decline in the value of the U.S. housing market.
  Now, what about the payroll taxes? A flat tax proposal may eliminate 
the deduction that employers pay for their payroll taxes, amounting to 
a massive tax increase on businesses of all sizes.
  The American public is not naive, Mr. Speaker. They know that when it 
is election time and the Republicans start talking about tax 
simplification, it really means they want a flat tax. If you just give 
us one more chance, we did not simplify it over the last 10 years that 
we have been in control. Give us another chance and we will get our 
flat tax in.
  Now, when are they going to be honest about these goals for the 
people? When are they going to be honest and tell the American people 
that the Tax Code has only become more complex since they controlled 
the Congress and its tax-writing committees. They have 105 more days to 
run this charade, but it is coming. There is going to be a change, and 
not in the Tax Code, but in who runs this House.
  Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
  I appreciate my friend from Washington's discussion on general tax 
relief. I suppose at the end he would say he supports this legislation 
before us because it is not a flat tax, it is not a sales tax, it is 
not even a fundamental reform. Rather, it is simplification and good, 
common-sense simplification at that, this one focused on small 
businesses. The next piece of legislation we will take up focuses more 
on individuals.
  But it is hard to defend the current code. Again, my friend from 
Texas talked earlier about the compliance costs and referenced 
Professor Joel Slemrod's reports from the University of Michigan. I 
think the number is somewhere between 50 and 100 billion now. That is 
the consensus number; 85 seems to be the one most people are using. Mr. 
Speaker, $85 billion a year in

[[Page 16861]]

compliance costs, and over 3 billion compliance hours.
  Another interesting statistic is that every year now, tax compliance 
accounts for about 80 percent of the paperwork burden of the Federal 
Government. So we do need to do something.
  Today is not the silver bullet, but it is a start. It is going into 
the current code and changing some unfair aspects of the code; in the 
case of section 179, helping businesses to be able to not just write 
off their purchases more quickly for equipment, but also to be able to 
reduce their compliance costs, because they do not have to keep those 
depreciation schedules over time.
  It also takes out some deadwood provisions which come from the Joint 
Committee on Taxation recommendations, as well as Treasury Department 
recommendations, which say that these provisions of the code that have 
not been removed over time, and it must be done by statute by the way, 
not only cause confusion and complexity, but actually cause some 
taxpayers to make mistakes that then cause tremendous cost to the tax 
system over time.
  This legislation also again helps some smaller businesses to be able 
to take advantage of cash accounting rather than the accrual method, 
which is a complexity. Therefore, this is a simplification as well.
  So I appreciate the gentleman's comments, and what I would say is 
what we are doing today is, we are taking a very responsible step 
towards simplification. We are not providing again for the silver 
bullet. We need to continue to work on that, as we will every year, and 
I know as we are going forward in this Congress, should we be here on 
this congressional floor next year talking about these issues, 
hopefully we will have a more fundamental reform that we can agree on 
on a bipartisan basis, as we will agree today, I believe, on a 
bipartisan basis, on these simplifications.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SANDLIN. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Washington (Mr. McDermott).
  Mr. McDERMOTT. Mr. Speaker, I want to thank the gentleman for 
yielding me a couple more minutes. After listening to the gentleman 
from Ohio (Mr. Portman), I always can think of things to say.
  The gentleman tells us that this bill, that I am probably for it; the 
gentleman is right. This is nothing. This bill does not do anything 
except do what the gentleman told us he was not going to do. The 
gentleman said he was going to make the expensing for a while and then 
stop it. Now my Republican colleagues are making it permanent. It is 
just one more of those things.
  But the real point here is, you say this is a start. It is not much. 
It is a start on the way to what?
  I yield to the gentleman from Ohio (Mr. Portman).
  Mr. PORTMAN. Mr. Speaker, I appreciate the gentleman yielding.
  I certainly never heard anybody say that section 179 expensing was 
temporary. What we said was that the bonus depreciation provision was 
temporary. Section 179, on our side, we have always intended to be 
permanent and we would certainly hope that it will be made permanent.
  What we are doing today is, we are extending it for 2 more years, in 
2006 and 2007, that is as compared to bonus depreciation, which was 
meant as a stimulus, just to correct the gentleman on those two 
depreciation provisions.
  Mr. McDERMOTT. Mr. Speaker, reclaiming my time, does the gentleman 
realize he just put everybody to sleep, who is watching this, with that 
stuff? You guys come out here to pass a bill because you cannot get 
through the military construction bill, and this is nonsense.
  Every time we have had, since 1994 we have Archer talk about 
simplification, we had the majority leader, Mr. Armey, who campaigned 
against the tax system and said he was going to rip it out by the roots 
and have a flat tax. I mean, we have been hearing this stuff, and today 
we have this little bitty thing, and it does not do any harm, really; 
it does not do any good, really.
  I mean, surely everybody would like to have their taxes cut, whoever 
they are, but the real issue is the working people of this country. 
They are paying payroll taxes, and nobody is talking about them. Nobody 
is talking about the fact that we took the tax structure and gave the 
bulk of the benefits to people above $1 million, or above $100,000, for 
that matter. Nobody is talking about that. Why do my Republican 
colleagues not talk about what you are doing for people on the bottom?
  In India they ran a campaign and they said that ``India is shining.'' 
That was the theme of the campaign in India. And the Congress Party ran 
one with a symbol that said, ``The hand of Congress is with the common 
man.'' And, lo and behold, in spite of an 8.2 percent growth rate in 
India, they threw out the ``India is shining'' because it was not 
shining on the people at the bottom.
  And you people have got to understand that. You can keep doing this 
kind of stuff and telling people, we are going to simplify, we are 
going to simplify. They do not believe you. They do not believe you. 
They have watched what you did for 10 years. So you can say it as many 
times as you want, but they have to figure out their taxes, and they 
know that it is not simplification.
  So I know it is election time, and I appreciate that you have control 
of the Committee on Rules and can bring this kind of stuff out, but it 
is not making it any better for the common man in this country.
  Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume 
just to respond to my friend from Washington.
  For him to say, this does not matter and does not help anybody, I 
hope he will talk to the small business people in the State of 
Washington as well as in the State of Ohio that I represent. This does 
help them.
  I was with one of those small business people today talking about 
section 179 expensing and the importance of being able to plan. And he 
was absolutely delighted that this Congress is going to pass, once 
again, legislation to be sure that he can plan for being able to 
immediately write off not $25,000 a year, but $100,000 a year of new 
purchases in equipment. This is extremely important.
  If the gentleman chooses to vote ``no,'' that is his right, but for 
him to say it does not affect anybody, I think is inaccurate. That is 
not to mention the other provisions the gentleman from Illinois (Mr. 
Crane) talked about, which are also important to small businesses.
  To say that this is a bill that does not matter and that it is just 
something that we do around election time, I think, is not consistent 
with the fact that in 2003, this same legislation was passed by this 
Congress. We could not do it for as long a period of time as we wanted 
to, frankly, because of our friends on the other side of the aisle who 
did not believe that this legislation should be made permanent.
  We would like to make it permanent. It is extremely important to our 
small business community. It is extremely important to the risk-takers, 
to the entrepreneurs, who, after all, are creating most of the jobs out 
there right now. And I would hope that on a bipartisan basis we could 
at least agree to these simplifications.
  We can have the debate later as to whether the gentleman would like 
to defend the current code and continue to have, again, 3 billion hours 
a year in compliance costs, $85 billion a year in expenses related to 
compliance; or whether we do want to look at more fundamental reforms. 
That would be more controversial and they will need, again, the same 
kind of bipartisan work that has gone into this legislation here.
  But at a minimum, let us at least go into the current code and make 
some responsible changes to make it simpler for small businesses, which 
is this legislation before us.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SANDLIN. Mr. Speaker, I yield 4 minutes to the gentleman from 
Illinois (Mr. Emanuel).

[[Page 16862]]


  Mr. EMANUEL. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  It is interesting, to my colleague, the gentleman from Ohio, in the 
last 3\1/2\ years, while they have been in control, they have had 326 
changes to the Tax Code, adding 10,000 pages to the Tax Code. So in his 
effort today at simplification, let us have a rendezvous with the 
record: 10,000 new pages to the Tax Code and addendums.

                              {time}  1515

  That has been your record; and if you are in the business of being a 
tax lawyer, a tax accountant, there is a treasure chest out here in 
George Bush and the Republican majority's Tax Code. For middle-class 
families, it has become more complicated, burdensome, and unfair; and 
the complexity of this Tax Code directly relates to the inequities in 
this Tax Code. And that is what has happened to our middle-class 
families as we have shifted more and more of the tax burden onto work 
and people who work for a living rather than people who open up 
dividend checks for a living.
  Let us see what has happened in the last couple of years to typical 
families. It now takes since 1994, since you have been in the majority, 
7\1/2\ hours longer to fill out the tax form. Thanks for the 
contribution to simplification.
  The child tax credits now on the code have five different breaks for 
families and children, each with a different definition. Now, I have 
three kids, and I will tell them there is only one definition for a 
child. We do not need five definitions for what a child is, but their 
Tax Code has done wonders in complicating the code.
  Education tax credits, with a child in college, parents have to 
choose between two nonrefundable tax credits, the Hope or the Lifetime 
Learning, all the while in complicated forms that are long and 
duplicative. But guess what? If you are a corporation and you are 
filling out the Export-Import Bank loan, a page and a half. A kid 
filling out the FAFSA form trying to get a Pell grant, 108 questions. 
Now, what makes a corporation more important to America's future than 
that child? That corporation on average gets $200 million. That child 
gets $2,500. That child is as important to America's future, and it 
should be easier to get a college loan than it is to get an Export-
Import loan agreement.
  Increased tax preparation costs: as middle-class families struggle 
with the wage and benefit recession, costs for gasoline and food are 
going up. The last thing they need to deal with is tax preparation 
costs. Since 1995, 15 more million Americans have needed to hire a 
professional tax preparer to deal with the Tax Code and its increased 
complexity. The average cost is between $100 and $150. It can be a full 
day's pay for millions of Americans. If someone is an attorney or an 
accountant in the tax business, the Bush Tax Code is like Christmas 
every year. The abusive tax shelters used by corporations and the 
wealthy have increased exponentially in the last few years as the 
burden on middle-class families have grown increasingly.
  The tax gap that is underreported by corporations and wealthy 
individuals is nearly $311 billion. Underreporting accounted for $249 
billion. And that is the majority's refusal to work on this and crack 
down on this. Even their Treasury Department has asked for new 
enhancements in the laws.
  Tax shelters have a corrosive effect, stacking the deck against 
ordinary taxpayers. While the special interests win shelters, 
loopholes, middle-class families have to play by the rules and are 
buried under a crushing burden by the IRS. The public's distaste for 
the current Tax Code is a direct result of the inequity.
  And now they want towards election time this holy picture by passing 
this legislation. I will vote for it. It is their first step after 
adding 10,000 pages to the code and 326 changes to trying to do 
something for simplification.
  I have offered my own piece of legislation to simplify family credit 
that condenses the child tax credit, the earned income tax credit and 
the dependent care into a single credit. It takes 200 pages down to 12 
questions. It puts the Tax Code on behalf of work, on behalf of middle-
class families trying to raise their children, and gives the same 
energy to those families that you have given to the wealthy and special 
interest in this country; and that is where we should put the Tax Code 
on behalf of the working families of our country.
  Tax reform is more than a fiscal issue. It is also about our 
priorities. Our tax system should respect the values and the interests 
of the middle-class families.
  Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
  I would remind my colleague from Illinois that some of the very 
issues that he raises are currently under consideration by the 
Congress, including the definition of a child. As he may know, I have 
introduced legislation to consolidate those definitions into one 
definition that is currently in the child tax credit conference between 
the House and the Senate. I fully expect he will have the opportunity 
to vote on that legislation in this Republican-controlled Chamber, if 
not this week, then in September; and that will be a major 
simplification.
  I would also remind the gentleman that this complication of the Tax 
Code, which I agree with him on, is not just the province of one 
administration. I can remember when he was in the Clinton 
administration working on the Hope credit, working on the Lifetime 
Learning credit, working on many other ways to use the Tax Code to 
achieve social purposes which further complicated the code 
dramatically; and I would remind him that one of the pillars of the 
Bush administration tax relief was not just lowering rates for 
everybody, which is a simplification, not just lowering rates on 
capital gains which is a simplification, lowering rates on dividend 
which is a simplification, but also extending this 10 percent tax 
bracket.
  That has focused exactly on the taxpayers that my colleagues are 
talking about. Lower-income taxpayers they say have got no benefit. 
Their benefit is total simplification, because 3 or 4 million Americans 
who are lower-income Americans now are no longer on the tax roles at 
all. They do not have to look over their shoulder at the IRS because 
they are off the Federal tax rolls. They pay no income tax at all, and 
that is simplification that George Bush put through this House and that 
most of us voted for on this side of the aisle.
  With regard to EITC, I would remind my friend that we have actually, 
in the 2001 bill, streamlined the EITC, not as much as I would like, as 
we know, because we have talked about that; but their income tax credit 
has actually in this administration under this Congress been 
simplified.
  So just to put a little bit of clarity around it and some 
perspective, today we are talking about section 179. We are talking 
about the expensing, the need to simplify that. I would remind him that 
the bonus depreciation provision that his colleague from Washington 
talked about as being temporary, that was also a simplification and 
simplification not just for small businesses but for all businesses.
  So we have done our part in terms of making the code more 
complicated, both parties over the years; but if he looks back at the 
record over this Congress and over this administration, there are a 
number of items which have been very positive in terms of 
simplification, the most important of which is to take people off the 
rolls altogether, not having to worry about income taxes and the 
legislation before us today, again, bringing us back to where we are, 
taking us from the abstract to the practical.
  We have an opportunity on a bipartisan basis to make some sensible 
changes to our Tax Code, to make it simpler for small businesses to 
comply with taxes. These are the risks takers. These are the people we 
want to help, and I commend my colleague from Illinois for bringing 
this legislation to the floor today.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SANDLIN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from Illinois (Mr. Emanuel).

[[Page 16863]]


  Mr. EMANUEL. Mr. Speaker, I do want to acknowledge one thing. The 
gentleman is right. We use the Tax Code to let middle-class families 
afford college education and lifetime learning so they can go back to 
community colleges, and the gentleman has used the Tax Code to ensure 
that people who want to buy Hummers get a tax deduction. The gentleman 
has used the Tax Code to ensure that a corporate executive gets only 
$300 for using a plane; and, yet, his corporation writes $30,000 off 
for using a corporate jet. Which is it, $30,000 that the taxpayers have 
to pick up, or $300 that the CEO gets to deduct from their taxes?
  The gentleman is right. We have had our differences in how we have 
used the Tax Code, one for higher education and access to college 
education, and another for corporate executives who want to discount 
their corporate jet use. So when it comes to complexity, I am glad that 
the gentleman is still working on simplification; but since 1995, they 
have been in control, and they have had many opportunities to reduce 
and simplify the code; and they have made it more complicated, more 
difficult for middle-class families, while they have alleviated the 
burden for the wealthy and the special interests in this town.
  Mr. SANDLIN. Mr. Speaker, I yield myself as much time as I consume.
  In 1996, then-Speaker Newt Gingrich stated the Tax Code over the 
years has become increasingly politicized and is seen less as a simple 
tool for raising revenues than as an instrument for social and economic 
engineering, exponentially increasing the complexity of the code.
  The current system is indefensible. Clearly, the small business 
community in America has been subject to more tax law complexity year 
after year. For example, the Small Business Job Protection Act of 1996 
makes 657 Tax Code changes which expanded the Tax Code by more than 50 
pages. The Jobs and Growth Tax Relief Act of 2003 made 51 Tax Code 
changes and expanded the Tax Code by 12 pages. The IRS estimates that 
the average taxpayer with self-employed status has the greatest 
compliance burden in terms of preparation, 59 hours. And this is about 
10 hours longer than in 1994.
  Even the House-passed version of the FSC/ETI bill from this year has 
109 tax changes. This will encompass at least 200 additional Tax Code 
lines and at least 50 new pages of statutory language and footnotes.
  Mr. Speaker, America's small businesses are the engine powering the 
largest, most robust and most innovative economy in the world. They 
deserve a more meaningful effort by this Congress to ensure that 
valuable time and resources are better invested in the success of their 
business and not wasted in preparation of returns and to make sure that 
our business people, entrepreneurs, are not raked over the coals by a 
Tax Code that requires a lawyer, a CPA and a computer programmer to 
understand it. We can and must do better by our small business men and 
women and individuals in this country.
  Mr. Speaker, again, I am proud to support and cosponsor this fabulous 
piece of legislation. I urge my colleagues to join with me in casting a 
vote for small business owners and their employees across this Nation. 
At the same time, however, I am hopeful that this legislation is the 
beginning of meaningful reform and not the end of the line.
  Mr. Speaker, I yield back the balance of my time.
  Mr. PORTMAN. Mr. Speaker, I think this has been a helpful debate to 
talk about the need for simplification. I am glad to see some of my 
colleagues on the other side of the aisle are agreeing with us with 
regard to this underlying legislation with regard to small businesses 
but also with the need to simplify our code. We have taken steps to 
simplify, and we need to continue to do that.
  It is on the heels of major tax relief in 2001, 2002, and 2003 this 
administration inherited a failing economy, moving into recession. Then 
the tragedy of 9/11, the shock of the corporate scandals, the stock 
market boom busting, a lot of challenges to our economy. And our first 
focus was economic recovery; and, therefore, the stimulus and the 
economic recovery tax legislation provided needed tax relief to small 
businesses, to families, and to individuals around this country.
  Now we are focused on that, as well as simplification; and it is very 
important given the fact that we do have an increasingly complex Tax 
Code and that the burden of compliance with that code is greater and 
greater, that we on a bipartisan basis focus on this compliance cost 
and, therefore, on simplifying the code.
  Before us today we have a great piece of legislation. It is not the 
silver bullet, does not do it all; but it helps and it tells small 
businesses that if they want to go out there and buy new equipment to 
be able to expand their plant, to hire new people, to keep this economy 
moving, we are adding jobs, we have economic growth that is the best we 
have had in 20 years in this country, that we will enable them to write 
off $100,000 worth of new purchases rather than $25,000 worth of new 
purchases.
  We are telling them that businesses that are a little bit smaller 
than the very smallest businesses would be able to take advantage of 
this as well by being sure that the definition of what businesses can 
qualify is expanded.
  Now, this is good legislation. We are also telling small businesses 
they can use the cash accounting method, which saves them money, which 
saves them complexity in not having to hire accountants and additional 
professionals, rather than going to the accrual method. So we are 
saying we are going to index that to inflation to help small 
businesses. And, finally, we are saying that our Tax Code has too many 
provisions that are no longer relevant, deadwood provisions that cause 
complexity and confusion. We are going to get rid of those provisions 
in the code, particularly as they affect small businesses.
  So, again, I commend my colleague from Illinois for bringing this 
legislation before us today. This is the first step in a long march 
towards simplifying our Tax Code, and I would hope that we will have 
support across the board on a bipartisan basis for this legislation.
  Mr. BARRETT of South Carolina. Mr. Speaker, I rise in strong support 
of H.R. 4840 which encourages investment and simplifies bookkeeping and 
tax reporting requirements for small business owners. This legislation 
will not only allow small businesses to continue to expense $100,000 
instead of dropping back down to $25,000, but will also allow more 
small businesses to be eligible.
  We should be encouraging small businesses to buy technology, 
machinery, and other equipment so they can expand their businesses and 
in turn create more jobs. H.R. 4840 removes some of the redtape that 
increases the cost of doing business.
  Mr. Speaker, it is the private sector, the small businesses 
throughout the Nation that create jobs, wealth and innovation. In fact, 
small businesses are responsible for creating two out of every three 
net new jobs.
  Low taxes and sensible regulations are essential to helping the 25 
million small businesses in America; that's why I urge my colleagues to 
vote in favor of H.R. 4840.
  Mr. PORTMAN. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Simpson). The question is on the motion 
offered by the gentleman from Ohio (Mr. Portman) that the House suspend 
the rules and pass the bill, H.R. 4840.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. SANDLIN. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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