[Congressional Record (Bound Edition), Volume 150 (2004), Part 17]
[Extensions of Remarks]
[Page 23466]
[From the U.S. Government Publishing Office, www.gpo.gov]




   CONFERENCE REPORT ON H.R. 4520, AMERICAN JOBS CREATION ACT OF 2004

                                 ______
                                 

                               speech of

                           HON. PHIL ENGLISH

                            of pennsylvania

                    in the house of representatives

                       Thursday, October 7, 2004

  Mr. ENGLISH. Mr. Speaker, I submit the following exchange of letters 
between myself and Chairman Thomas for submission into the Record 
related to debate on H.R. 4520, The American Jobs Creation Act of 2004, 
which took place October 7, 2004.

                                     House of Representatives,

                                  Washington, DC, October 7, 2004.
     Hon. William M. Thomas,
     Chairman, Committee on Ways and Means, Longworth House Office 
         Building, Washington, DC.
       Dear Mr. Chairman: I am writing to raise a concern 
     regarding regulations issued several years ago by the 
     Internal Revenue Service (IRS) in which they apply an 
     expansive new interpretation of the law retroactively.
       Congress enacted section 263(g) of the Internal Revenue 
     Code as part of the Economic Recovery Tax Act of 1981 
     (``ERTA'') to discourage the use of certain ``straddle'' type 
     tax shelters known as ``cash and carry'' transactions. In the 
     Report accompanying ERTA, the Senate Finance Committee noted 
     that ``[t]he committee intends to discourage these 
     transactions, sometime called `cash and carry' shelters, in 
     its legislation.'' The Committee also described the nature of 
     the ``cash and carry'' transactions Congress was trying to 
     discourage, in detail.
       Twenty years later, on January 17, 2001 the Treasury 
     Department issued a set of proposed regulations under section 
     263(g), that would expand the scope of 263(g) beyond so-
     called cash and carry transactions, and states in its 
     effective date section that the new rules apply to ``. . . 
     interest and carrying charges properly allocable to personal 
     property that are paid, incurred, or accrued after the date 
     these regulations are adopted as final . . . for a straddle 
     established on or after January 17, 2001.''
       Despite the clear legislative intent, the IRS has attempted 
     to apply the proposed regulations expanding the coverage of 
     263(g) to transactions undertaken prior to January 17, 2001, 
     and a number of field agents have indicated to taxpayers that 
     absent clear guidance to the contrary, they will continue to 
     apply this expansive interpretation of section 263(g) on a 
     retroactive basis.
       When the tax writing committees decide to change the law in 
     a way that might affect ongoing transactions our normal 
     practice is to put the public on notice through an 
     announcement. Once we have so acted, it is considered fair to 
     make the change effective on the date of the announcement 
     because taxpayers have been given fair warning.
       I would like to know if you agree with my conclusion that 
     the IRS should follow rules that are equally fair. If a 
     change in the law which was not made as a result of a 
     legislative mandate is announced in regulations, do you agree 
     that the change should be prospective?
       Thank you for considering this matter and I look forward to 
     your response.
           Sincerely,
                                                     Phil English.
                                  ____
                                  
                                         House of Representatives,


                                  Committee on Ways and Means,

                                  Washington, DC, October 8, 2004.
     Hon. Phil English,
     House of Representatives, Longworth House Office Building, 
         Washington, DC.
       Dear Mr. English: I am writing in response to your letter 
     regarding Sec. 263(g) of the Internal Revenue Code and the 
     Internal Revenue Service's (IRS) application of related 
     regulations.
       Without in any way questioning whether IRS interpretation 
     in this case was appropriate, I agree with your conclusion 
     that the expansion of the scope of 263(g) should have been 
     prospective. I believe the Secretary of Treasury should do 
     whatever is necessary to make sure that the regulations that 
     have been brought to my attention by your letter are 
     implemented in that manner.
           Sincerely,
                                                William M. Thomas,
     Chairman.

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