[Congressional Record (Bound Edition), Volume 157 (2011), Part 7]
[Extensions of Remarks]
[Page 10065]
[From the U.S. Government Publishing Office, www.gpo.gov]




                               H.R. 2320

                                 ______
                                 

                             HON. DON YOUNG

                               of alaska

                    in the house of representatives

                         Friday, June 24, 2011

  Mr. YOUNG of Alaska. Mr. Speaker, recently, I introduced H.R. 2320, 
which would make permanent the provisions of Section 646 of the 
Internal Revenue Code. Currently, these provisions are slated to expire 
on December 31, 2012.
  In 1971, Congress passed, and President Nixon approved, landmark 
legislation known as the Alaska Native Claims Settlement Act (ANCSA). 
This legislation settled the aboriginal land claims of Native Alaskans 
in exchange for land selection rights and cash. The law was, and is, a 
bold and organic national experiment in Native land claims settlement. 
However, it has needed revision and refinement many times since. 1971. 
I am proud to have worked with my colleagues over the past several 
years to accomplish these improvements.
  In 1988, Congress enacted legislation to authorize Alaska Native 
corporations to establish ``settlement trusts.'' Their purpose was to 
provide benefits to Alaska Natives and permit a legal structure that 
would protect and preserve, for current and future Alaska Native 
generations, much of the value of the land claims settlement. The 
original ANCSA required Native groups to form Alaska state law 
corporations to receive, administer, and distribute the ANSCA 
settlement, and the 1988 legislation was recognition that the corporate 
form had not always been well-suited to this task. In part, this was 
due to the federal tax problems that attend the corporate form, 
although ironically in the years after 1988, it became apparent that 
the federal tax rules relative to trusts present their own complexities 
and problems that discouraged the use of settlement trusts.
  Congress enacted Section 646 of the tax code to address these 
problems. Section 646 provides for an elective regime for Alaska Native 
settlement trusts that (i) provides for a trust level tax at various 
rates ranging up to 10% in lieu of beneficiary level taxes; (ii) allows 
contributions to be made to these trusts on a tax favored basis; and 
(iii) streamlines administrative reporting for these trusts. When 
adopted, this elective treatment initially provided significant 
incentives to the use of settlement trusts to further the ANCSA 
settlement, and Alaska Native corporations utilized this provision to 
provide benefits through Alaska Native stettlement trusts.
  As I mentioned earlier, Section 646 is scheduled to sunset on 
December 31, 2012, despite the positive effects it has had for the 
Alaska Native community. The principal aim of settlement trusts is to 
provide funds to the Alaska Native beneficiaries. These beneficiaries 
are among the most economically disadvantaged persons in our country. 
Section 646 has worked well to provide an incentive for the use of 
settlement trusts, and must be continued.
  However, the looming expiration of Section 646 has had a chilling 
effect in recent years upon the establishment of new Alaska Native 
settlement trusts. Alaska Native corporations have no desire to 
exchange the corporate tax problems they already face for the tax 
problems accompanying the trust form that they will face if Section 646 
is allowed to sunset.
  I introduced H.R. 2320 because a permanent extension of Section 646 
will immediately remove the disincentive presented by the sunset of 
Section 646 for Alaska Native corporations to use settlement trusts to 
provide benefits to their Alaska Native shareholders.
  I would like to note to my colleagues that the fact that Section 646 
is not already a permanent part of the tax code is a result of its 
unique procedural history, rather than a result of any substantive 
determination as to its merits or revenue concerns about its cost. 
Section 646 was originally enacted, along with several other 
provisions, as an unrelated, miscellaneous provision as part of the 
2001 tax legislation which, because of the need to use the budget 
reconciliation process, was subject to a December 31, 2010 sunset 
provision. Rather than subsequently being made permanent similar to 
other unrelated, miscellaneous provisions in the 2001 tax legislation, 
Section 646 was extended for two years along with the 2001 individual 
tax rate reductions as part of the 2010 year-end tax legislation such 
that it is now scheduled to expire on December 31, 2012. Once again, 
the decision to enact a two-year extension (rather than a permanent 
extension) was not attributable to substantive or revenue 
considerations relating to Section 646 itself. Rather, it followed from 
a decision to enact a simple two-year extension of all of the expiring 
2001 provisions without assessing the merits of alternative extension 
periods for each expiring provision being extended. Thus, it is fair to 
say that the current non-permanent status of Section 646 is an accident 
of the legislative process and that no Member has ever suggested that 
the provision should not be made permanent. Further, there was wide 
support for the permanency provision in the last Congress. H.R. 2320 
would simply remedy this accident of the legislative' process and make 
permanent a provision that should have originally been enacted as such.

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