[Congressional Record (Bound Edition), Volume 151 (2005), Part 20]
[House]
[Pages 27674-27677]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        TAX REVISION ACT OF 2005

  Mr. McCRERY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4388) to amend the Internal Revenue Code of 1986 to extend 
certain expiring provisions, and for other purposes, as amended.
  The Clerk read as follows:

                               H.R. 4388

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

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Tax 
     Revision Act of 2005''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title, etc.

[[Page 27675]]

Sec. 2. Election to include combat pay as earned income for purposes of 
              earned income credit.
Sec. 3. Cover over of tax on distilled spirits.
Sec. 4. Authority for undercover operations.
Sec. 5. Disclosures of certain tax return information.
Sec. 6. Deduction allowable with respect to income attributable to 
              domestic production activities in Puerto Rico.
Sec. 7. Technical corrections to regional value-content methods for 
              rules of origin under Public Law 109-53.

     SEC. 2. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR 
                   PURPOSES OF EARNED INCOME CREDIT.

       (a) In General.--Subclause (II) of section 32(c)(2)(B)(vi) 
     is amended by striking ``January 1, 2006'' and inserting 
     ``January 1, 2007''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 3. COVER OVER OF TAX ON DISTILLED SPIRITS.

       (a) In General.--Paragraph (1) of section 7652(f) (relating 
     to limitation on cover over of tax on distilled spirits) is 
     amended by striking ``January 1, 2006'' and inserting 
     ``January 1, 2007''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to articles brought into the United States after 
     December 31, 2005.

     SEC. 4. AUTHORITY FOR UNDERCOVER OPERATIONS.

       Paragraph (6) of section 7608(c) (relating to application 
     of section) is amended by striking ``January 1, 2006'' both 
     places is appears and inserting ``January 1, 2007''.

     SEC. 5. DISCLOSURES OF CERTAIN TAX RETURN INFORMATION.

       (a) Disclosures to Facilitate Combined Employment Tax 
     Reporting.--
       (1) In general.--Subparagraph (B) of section 6103(d)(5) 
     (relating to termination) is amended by striking ``December 
     31, 2005'' and inserting ``December 31, 2006''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to disclosures after December 31, 2005.
       (b) Disclosures Relating to Terrorist Activities.--
       (1) In general.--Clause (iv) of section 6103(i)(3)(C) and 
     subparagraph (E) of section 6103(i)(7) are each amended by 
     striking ``December 31, 2005'' and inserting ``December 31, 
     2006''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to disclosures after December 31, 2005.
       (c) Disclosures Relating to Student Loans.--
       (1) In general.--Subparagraph (D) of section 6103(l)(13) 
     (relating to termination) is amended by striking ``December 
     31, 2005'' and inserting ``December 31, 2006''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to requests made after December 31, 2005.

     SEC. 6. DEDUCTION ALLOWABLE WITH RESPECT TO INCOME 
                   ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES 
                   IN PUERTO RICO.

       (a) In General.--Subsection (d) of section 199 (relating to 
     definitions and special rules) is amended by redesignating 
     paragraph (7) as paragraph (8) and by inserting after 
     paragraph (6) the following new paragraph:
       ``(7) Treatment of activities in puerto rico.--
       ``(A) In general.--In the case of any taxpayer with gross 
     receipts for any taxable year from sources within the 
     Commonwealth of Puerto Rico, if all of such receipts are 
     taxable under section 1 or 11 for such taxable year, then for 
     purposes of determining the domestic production gross 
     receipts of such taxpayer for such taxable year under 
     subsection (c)(4), the term `United States' shall include the 
     Commonwealth of Puerto Rico.
       ``(B) Termination.--Subparagraph (A) shall not apply to any 
     taxable year beginning after December 31, 2006.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 7. TECHNICAL CORRECTIONS TO REGIONAL VALUE-CONTENT 
                   METHODS FOR RULES OF ORIGIN UNDER PUBLIC LAW 
                   109-53.

       Section 203(c) of the Dominican Republic-Central America-
     United States Free Trade Agreement Implementation Act (Public 
     Law 109-53; 19 U.S.C. 4033(c)) is amended as follows:
       (1) In paragraph (2)(A), by striking all that follows ``the 
     following build-down method:'' and inserting the following:

                                    av-vnm

                           ``rvc = -------- 100''.

                                      av

       (2) In paragraph (3)(A), by striking all that follows ``the 
     following build-up method:'' and inserting the following:

                                     vom

                            ``rvc = -------- 100''.

                                      av

       (3) In paragraph (4)(A), by striking all that follows ``the 
     following net cost method:'' and inserting the following:

                                    nc-vnm

                           ``rvc = -------- 100''.

                                      nc

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Louisiana (Mr. McCrery) and the gentleman from New York (Mr. Rangel) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Louisiana.
  Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
  The bill before us at this time is a bill that takes several expiring 
provisions of the Tax Code that were not eligible for inclusion in the 
tax reconciliation bill because of the rules of reconciliation and 
packages them in this legislation that we hope to pass out of the House 
today.
  Briefly, Mr. Speaker, those provisions include treating combat pay as 
earned income under the Earned Income Credit. Currently, combat pay can 
be used to figure the earned income credit of our soldiers in combat. 
The special rule that allows that would expire this year. This 
provision in the bill would extend that special rule by 1 year.
  Also, an extension of the transfer of the rum excise taxes to the 
Virgin Islands and Puerto Rico is included in this bill.
  Also, Mr. Speaker, there is a provision in current law that expires 
at the end of this year which gives the IRS the authority to use income 
generated by an undercover operation to pay ongoing expenses on that 
operation.

                              {time}  1430

  Again, that authority would be extended by 1 year in this bill. Also 
there is authority in the bill for the IRS to disclose certain tax 
information to other Federal and State authorities.
  Finally, Mr. Speaker, a provision in this bill would allow Puerto 
Rico and businesses in Puerto Rico to claim the manufacturing deduction 
that was part of legislation previously passed by this House. That 
summarizes the provisions of this bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I fully support this bill. I hope that the gentleman 
from Louisiana would understand how those of us on the committee would 
have a lot of concern about so many of these tax issues coming up under 
the suspension calendar. This is so since the ones that we agree on and 
are concerned about are subject to unanimous consent in the Senate. 
Therefore, it does not have the same type of protections it would if it 
was included in the reconciliation bill. I say that not from a partisan 
viewpoint, but from a respect and appreciation of the work that is done 
by Republicans and Democrats on the Committee on Ways and Means.
  Mr. Speaker, I yield 3 minutes to the gentleman from South Carolina 
(Mr. Spratt), the ranking member of the Budget Committee.
  Mr. SPRATT. Mr. Speaker, we have three tax cut bills before us today, 
a large one coming up tomorrow, and here is the problem with doing 
business that way, especially under suspension.
  When you break these tax cuts into so many small places, virtually 
fragments, we quickly lose the audit trail and do not appreciate in the 
aggregate how much they add up to. So let me try to reconstruct that 
audit trail on the back of this envelope right here and show you 
exactly what the summation of today and tomorrow will mean for the 
bottom line, i.e. the deficit.
  If we take the transportation bill which we passed this year, is $1.1 
billion over 10 years, about a billion dollars over 5 years.
  The Energy Policy Act is about $6.9 billion in revenues lost over 5 
years.
  The Katrina Tax Relief of 2005 has a $6.1 billion price tag. That is 
its revenue impact.
  The big bill tomorrow will be the Tax Extension Reconciliation Act, 
$56 billion in the House, $80 billion over 10 years.
  We have just done the Stealth Tax Relief Act extending for 1 year the 
AMT at its existing level of application. The cost of that for 1 year 
over 5 years is $31 billion.
  Then we have the Tax Revision Act of 2005 with small cuts in it which 
have not been scored, but it has a cost.
  Finally, we have the Gulf Opportunity Zone Act of 2005. The revenue 
effect of it over 5 years is $7 billion.

[[Page 27676]]

  Add all of those together, and the cost, the revenue impact, comes to 
nearly $100 billion which, goes straight to the bottom line and adds to 
the deficit.
  And the reconciliation spending bill that you passed only offsets 
half of that amount.
  That is not all. As we demonstrate today, the AMT will have to be 
fixed. It will be fixed this year, patched, patched next year, and 
patched into the future until we finally do something about its 
application to middle income families for whom it was never intended. 
If we do basically in future years what we have done today, the cost is 
going to be at least $30-40 billion a year.
  If you assume in the next 4 years after 2006, we will also have fixes 
to the AMT, the cost of these tax bills we are doing today, and it is 
going to be close to $200 billion. All of it goes to the bottom line 
and adds to the budget deficit, and all of it supports what we have 
been saying that until you deal with this aspect of the budget deficit, 
the revenue side of the equation as well as the spending side, until 
you reinstate the pay-go rule and offset these costly provisions in the 
aggregate, you are going to have a huge deficit.
  We would have offered, given the chance, on offset. And we will offer 
offsets tomorrow, given the chance, in the bill presented. We will 
offer a substitute that will offset the revenue impact on the bottom 
line. If we had that opportunity on the House floor and in committee, 
we would have done it again and we could have avoided the revenue 
impact and at least protected the deficit from being made any worse. It 
is a shame we will not have that opportunity.
  Mr. McCRERY. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Florida (Mr. Shaw), the chairman of the Trade 
Subcommittee of the Committee on Ways and Means.
  Mr. SHAW. Mr. Speaker, I rise in strong support of this particular 
provision. As House Members know, moneys received that are paid during 
combat is not subject to taxation. That means then it is not used in 
the calculation of the earned income tax credit. Clearly our soldiers, 
our men and women in the combat zone, deserve that particular treatment 
so they can claim the earned income tax credit.
  This simply allows it and it extends that provision for an additional 
year. This is another provision we should look at and see when we 
should look at a permanent fix, that the earned income tax credit would 
certainly apply to combat pay.
  The question has been as to whether or not this should have been in 
reconciliation. Well, it is an outlay; and, therefore, it would be 
prohibited as far as the reconciliation bill. The so-called Byrd rule 
when this bill gets over into the Senate, would knock it out of 
reconciliation, so this is the proper way to bring it to the floor. I 
urge all Members to support the bill, as I am sure they will.
  Mr. McCRERY. Mr. Speaker, I yield 3 minutes to the gentleman from 
Arizona (Mr. Hayworth), a respected member of the Committee on Ways and 
Means.
  Mr. HAYWORTH. Mr. Speaker, I rise in strong support of this 
legislation and welcome the bipartisan support we will see for its 
passage. I especially applaud the efforts of the gentlewoman from North 
Carolina (Ms. Foxx) for dealing with the key provision of treating 
combat pay as earned income under the earned income credit. It has been 
stated before on the floor but it deserves amplification again, 
especially in the wake of this House voting 403-3 in strong support of 
our men and women in uniform in the combat zone in Iraq.
  Under current law, combat pay is ignored for the purpose of 
calculating the combat credit. Ignoring combat pay can reduce the EIC 
in some cases, but a special rule gives military personnel the option 
to include combat pay in their earned income calculation. This would 
extend the special rule by 1 year.
  The criticism to the extent we have heard today is not based totally 
on partisan posturing. No, the criticism is inherent at times in 
dealing in an institution that is a deliberative body. Sometimes the 
clock catches up with us. We would note not in terms of criticism but 
in terms of fact that our friends across the Capitol in the other body 
do not return this week, indeed do not return until Wednesday of next 
week, so the work tends to accumulate. But we do have this venue of 
suspension to move legislation upon which we agree.
  To the criticisms offered by my friend from South Carolina dealing 
with what this costs, I would simply point out that in the broader 
context of tax reductions, what we have seen by reducing the overall 
tax bite, what we see in so many ways with broader tax policy is that 
actually revenues to the Federal Government increase. It is not 
something that is especially partisan. President Kennedy offered it in 
the 1960s; President Reagan in the 1980s; President Bush and this 
majority in Congress now early in the 21st century, so actually to 
invigorate our economy, we reduce tax rates, and although some may 
quibble about some provisions, in general, a reduction in tax rates 
actually fuels the engines of economic prosperity. That is our intent.
  People of goodwill may differ on that, but I expect we will see broad 
bipartisan agreement with this modest package of what is called in the 
trade extenders, and especially dealing with combat pay.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  I would like to say to my friend from Arizona that while we do not 
have any problem with the substance of the bill, it is just unfair to 
talk about the timetable of the other body. We have a responsibility to 
deliberate and to legislate and to do what we think are in the best 
interests of the people of the United States of America. We should not 
be guided by the lack of time the people on the other side have.
  As a matter of fact, by sending this piece of legislation over there, 
albeit that it is not paid for, they only need unanimous consent. Any 
Member of the Senate can stand up and just object to this and then the 
good work is just wiped out. What I am suggesting is that when we do 
try to work in a bipartisan way, this should always be included in a 
House bill that is protected by the House Members and not left to 
arbitrary decisions by people on the other side.
  Mr. Speaker, in closing, the gentleman from Louisiana (Mr. McCrery) 
is a hardworking member of the Committee on Ways and Means, and while 
we may have differences on legislation and policy, that we all have to 
protect the integrity of that committee. That is the only committee 
outlined in the Constitution to provide the ways and means to run this 
great republic, and I just do not like to see the Rules Committee 
making decisions on what has fiscal implications not only for the 
Congress and the Members here, but for the entire country. I do not 
have any objections to this, and I encourage Members on both sides of 
the aisle to support this suspension.
  Mrs. CHRISTENSEN. Mr. Speaker, I rise in support of H.R. 4388, 
legislation which amends the Internal Revenue code of 1986 to extend 
certain expiring provisions.
  I want to express my profound gratitude to the chairman of the Ways 
and Means Committee, Bill Thomas, for including in the bill a provision 
to extend the cover-over of the additional $1.50 of the taxes on 
distilled spirits produced in the Virgin Islands and Puerto Rico for 
another year. While the amount of the revenue generated by this tax is 
minuscule in relation to the overall Federal budget, it is critically 
important to my constituents because the government of the Virgin 
Islands utilizes this funding as security for the bonds that are used 
to provide for improvements to our public infrastructure.
  I am eternally grateful, as well, to my good friend, the ranking 
member of the committee, Charlie Rangel, for his steadfast support.
  Mr. Speaker, my constituents and I look forward to the day, which we 
hope will not be too long in coming, when we will be able to see the 
return of the full tax and that it be made permanent, as was originally 
the case, so that we won't have to annually vie for its extension.
  I urge my colleagues to support the passage of H.R. 4388 and I yield 
back the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, I rise today in support of 
H.R. 4388, the Tax

[[Page 27677]]

Revision Act. Among other things, H.R. 4388 includes an extension of a 
critical tax provision that our troops and their families rely on to 
make ends meet when deployed in Iraq and Afghanistan.
  The Working Families Tax Relief Act (PL-108-311), which we passed 
last year, included language which ensured that military families are 
not unfairly prevented from receiving the Earned Income Tax Credit 
(EITC) because the combat pay they rely on to make ends meet is tax 
free.
  Ordinarily only those with taxable earned income are eligible for the 
EITC. However the only source of income for many military families is 
the tax free combat pay of a spouse deployed in Iraq or Afghanistan. As 
a result, before we passed last year's legislation, many low-income 
military families were unable to claim the EITC based on the tax free 
status of their family members' combat pay.
  The last thing our troops in Iraq and Afghanistan need to worry about 
is their families' taxes. The extension of the EITC combat pay 
provision will ensure that the families of our brave men and women in 
uniform are not unfairly and inadvertently punished when their loved 
ones are deployed abroad.
  The tax treatment of combat pay for EITC purposes is not 
controversial. However, it was not included in the larger 
reconciliation bill on apparently technical grounds that the refund 
portion of the EITC is a budget outlay and therefore cannot be included 
in the bill. The substitute that Democrats offered in Committee 
contained a provision, rejected by majority, that was designed to 
continue full EITC benefits to our military families and which did not 
run afoul of the budget rules.
  I worry that this bill is for show and merely meant to help make some 
on the other side of the aisle feel better about the tax cut bill they 
will support tomorrow which helps the wealthy and ignores working and 
military families. I hope that my concerns are unfounded and that this 
important legislation is made into law.
  Mr. WELLER. Mr. Speaker, today I rise in strong support of H.R. 
4388--Tax Revision Act of 2005.
  This bill has many important components that assist the America in 
being competitive in a global economy, but I specifically want to talk 
about the provisions in this legislation that concern the Commonwealth 
of Puerto Rico and all the hard work that one of our colleagues, Luis 
Fortuno has done on this bill
  H.R. 4388 extends the benefits of the manufacturing deduction enacted 
with the American Jobs Creation Act of 2004 to manufacturing operations 
conducted in Puerto Rico.
  This is an issue of the utmost importance to the U.S. citizens of 
Puerto Rico, and being such, was a top legislative priority for Mr. 
Fortuno.
  Under current law, U.S. corporations that operate in Puerto Rico are 
subject to full U.S. tax on the income from those operations in the 
same manner as income from operations in the mainland.
  Thus, a U.S. corporation's income from manufacturing activities in 
Puerto Rico is subject to immediate tax in the United States, as well 
as being subject to tax in Puerto Rico. This difference in tax 
treatment under current law means that the tax burden of operating in 
Puerto Rico is significantly higher than in the United States.
  This means, Mr. Speaker, that you pay a higher tax of 35 percent on 
income on a product manufactured in Puerto Rico versus a lower tax of 
32 percent on that same product manufactured in the States.
  The higher tax burden creates a clear disincentive for U.S. companies 
to manufacture in Puerto Rico. It distorts manufacturing location 
choices, putting Puerto Rico at a disadvantage relative to the mainland 
in terms of attracting and retaining investment.
  This bill eliminates the disadvantage for manufacturing in Puerto 
Rico created under current law. It provides U.S. companies with 
comparable tax treatment for their manufacturing activities in Puerto 
Rico and their manufacturing activities conducted in the States.
  Last year, we enacted the American Jobs Creation Act to enhance the 
ability of U.S. companies to compete in the global marketplace.
  At the time, we stated that ``a reduced tax burden on domestic 
manufacturers will improve the cash flow of domestic manufacturers and 
make investments in domestic manufacturing facilities more attractive. 
Such investment will assist in the creation and preservation of U.S. 
manufacturing jobs.''
  I agree with this wholeheartedly. Extending equal treatment to 
manufacturing conducted in Puerto Rico will further enhance the ability 
of U.S. companies to compete in the global marketplace. It will assist 
in the creation and preservation of the local manufacturing jobs that 
are so vitally important to the Puerto Rican economy.
  This bill does not provide special benefit to Puerto Rico or to 
companies operating in Puerto Rico. It simply levels the playing field 
by treating manufacturing in Puerto Rico the same as manufacturing in 
the mainland, leaving companies free to choose where to locate based on 
business considerations.
  Mr. Speaker, once again, let me thank Mr. Fortuno for his hard work 
on this issue. I urge my colleagues to support this bill.
  Mr. RANGEL. Mr. Speaker, I yield back the balance of my time.
  Mr. McCRERY. Mr. Speaker, I have no additional speakers, and 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 Louisiana (Mr. McCrery) that the House 
suspend the rules and pass the bill, H.R. 4388, as amended.
  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. McCRERY. 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 question will 
be postponed.

                          ____________________