Grassley Comments to the Tax Executives Institute
This is my first opportunity as chairman of the Finance Committee to directly address the taxconcerns of the corporate business community.
As I’m sure you have observed, the primary focus of the President’s tax proposal is tax relieffor individual taxpayers. As individual taxpayers, most of you should be pleased with the individualtax initiatives the Administration has put forth.
As business taxpayers, my guess is that most of you are wondering, what if anything, willtake place this year. Much of that will be determined by the Budget Resolution, which will bebrought to the floor this week by Senator Domenici.
As you may have heard, the Democrats are fomenting procedural roadblocks to tax relief.At the behest of Senate Democrats, the Senate Parliamentarian may not allow the tax bill to moveunder reconciliation protection. Obviously, this complicates our floor strategy, and will require usto first call up the House-passed resolution and then amend it to substitute the Senate version.
Senator Domenici has stated that he may offer an amendment that allows one or two tax cutbills. He may also include instructions to provide another $60 billion in immediate economicstimulus out of the Fiscal Year 2001 surplus.
We are committed to the President’s call for tax relief for all taxpayers, and we hope to finda way to do that. And we don’t plan to leave town this week until the budget resolution is done.Today, I would like to walk through some of the major corporate tax issues that we areconsidering, and give you an assessment of their current state of play.
Last fall, the Finance Committee unanimously reported out a retirement securityimprovement package.
This package contained a combination of business and individual tax incentives forretirement security.
Clearly, most of your companies will benefit because you will be able to offer moretax-favored retirement benefits to your employees.
This package will also pump more money into the stock market and help with ourdangerously low national savings rate.
Shortly, Senator Baucus and I will introduce a bill similar to last year’s Finance Committeepackage. It is a priority for both of us.
One corporate tax issue that is awaiting congressional action is depreciation. In recent years,Congress has deferred action on several depreciation proposals because the Department of Treasurywas working on a comprehensive depreciation study.
Well, for better or for worse, the Treasury study was finally released last summer.I know that many of you are disappointed that the study did not include concrete suggestionsfor modernizing the depreciation provisions in our tax code, most of which were enacted in the last15 to 20 years, and are in need of updating.
The study did acknowledge that there are inequities and unnecessary complexities in thecurrent system, and that many of today’s industries and manufacturing techniques did not exist atthe time the rules were written.
I look forward to working on this important area during the upcoming year.I also think that as we review the depreciation methods, we should look at your INDOPCOconcerns as well.
You are all well aware that the climate at the moment is focused on individual tax issues, notbusiness tax issues. The Administration has clearly set this tone for its current tax legislativeinitiative.
It is, therefore, no small feat that a permanent Research & Experimentation tax credit madeit into the President’s tax proposal. This provision is the only corporate tax provision in thePresident's tax plan.
The fact that the R&E credit has gotten this far is a testament to how hard many of you haveworked to make this provision a priority.
It is very likely that the Finance Committee will address electronic commerce issues this year.The present federal moratorium on the states’ ability to tax Internet transactions expires thisfall.
The challenging issues involved in the interstate and international aspects of Internettransactions will certainly be part of the Finance Committee’s upcoming slate of projects.There are also some expiring provisions, such as the work opportunity tax credit, that willhave to be addressed in a timely fashion.
As supportive as I am of your tax concerns, however, I must also be quite frank with youconcerning a corporate activity of which I do not approve -- and that is tax shelters.The tax shelter business is a menace to our tax system. It tears at the fabric and integrity ofvoluntary tax compliance. And we need to address it.
The Finance Committee is continuing to work on this issue, in cooperation with Treasury andthe taxpayer community. We are studying ways to effectively address tax shelter abuses, but withoutinterfering with legitimate business transactions.
The international tax area is also ripe for attention. A very important issue will be the ActiveFinancing Exception, which expires this year. This has been an important provision for manycompanies, and will need to be extended or made permanent by Congress this year.
While the Active Financing provision can be dealt with in an extender package, many otherinternational tax provisions require a longer-range review. I believe that it is important for theFinance Committee to continue its work in the international tax area in order for the United Statesto remain competitive in the global economy.
In December 2000, the Treasury Department released its long-awaited study on Subpart F.As you know, there are many problems with the current Subpart F rules. Now that the Treasury hascompleted its study, the Finance Committee should initiate a review of possible Subpart F reforms.
Congress should also continue in its international simplification efforts. We passed severalsimplification provisions in the 1999 Taxpayer Refund and Relief Act. We understand that interestallocation and foreign tax credit simplification are high priorities for the business community.Senator Hatch and Senator Baucus are presently working on their international simplificationbill, and we look forward to receiving that bill for further consideration.
Many of you have been closely following last year’s legislation repealing the foreign salescorporation provisions.
It appears the WTO will not issue a decision until this summer. Be assured that the FinanceCommittee is following the WTO case closely and is prepared to respond if necessary.And last but not least, be assured that I intend to address your concerns regardingsimplification issues. It is time to improve the clarity of our tax code.
With that, I would like to close by assuring you that I am committed to making our tax codefair for both individuals and companies alike. I look forward to working with you to achieve thisgoal.
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