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Finance Sets June 12 Drafting Session on Small Business Tax Incentive Bill

Wednesday, June 5, 1996

Deloitte & Touche OnLine

The Senate Finance Committee met informally Wednesday to plan strategy on the small business tax incentives bill (HR 3448) and decided to hold a drafting session on the measure June 12 when the committee meets to work on the adoption tax credit bill (HR 3286).

The small business bill, approved by the House May 24, increases the expensing limitations on small businesses and offsets the revenue loss by retroactively phasing out the possessions tax credit.

Senators and their staffs had been switching back and forth on the issue of whether to hold a drafting session, and the decision to mark up the bill should settle the issue.

Committee chairman Sen. Bill Roth, R-Del., hopes "to keep it relevant" with respect to the bill’s small business focus and expects it will progress in a bipartisan manner, a spokesperson said.

Roth wants the number of amendments kept to a minimum because the entire package could be defeated if it is loaded down with amendments, the spokesperson told reporters.

Interested parties will have to "wait and see" if Roth will offer an amendment expanding Individual Retirement Accounts or reducing the capital gains tax rate, the spokesperson said.

Extenders Possible: Sen. John Chaffee, R-R.I., told reporters that some so-called extender provisions could be added to the small business bill. No offsets were discussed at the meeting to pay for the revenue loss that would result from the inclusion of the provisions, he said.

Separately, Senate Minority Leader Tom Daschle, D-S.D., told reporters "most Democrats would probably support the package," but added that some amendments could be offered.

Addressing the bill’s proposed repeal of Section 956A, the excessive passive asset rules, Daschle said, "there’s a provision that does encourage businesses to send business overseas ... and we will do as much as possible to try to prevent that from happening."

One popular expired tax provision that seems unlikely to be extended in the bill is the research and development tax credit, according to Sen. Phil Gramm, R-Texas. Gramm said he would not fight to extend the provision on this bill, but did not rule out the possibility that other Senators would fight for its inclusion.

About 200 companies sent a letter to GOP and Democratic Senate leaders expressing support for the provision. "The R & D Credit has provided an invaluable economic incentive to increase investment in U.S. research and development and to continue R & D in the United States," the letter said.

Other possible amendments discussed in the informal meeting include: clarifying the definition of independent contractor and employee, allowing subchapter S corporations to offer employee stock ownership plans, preventing the IRS from taxing the inside buildup in pre-paid college tuition plans, and a phase out of the luxury tax on automobiles.

Democratic Senators still want the minimum wage tax hike to be coupled with the bill and Sen. John Breaux, D-La., warned the small business bill would not pass if GOP senators do not go along with the wage hike.

Finance Has Jurisdiction Over Airline User Fees: An airline industry-backed plan to replace the expired ticket tax with a system of user fees would fall under the jurisdiction of the Senate Finance Committee, congressional aides told CongressDaily news service.

Requiring the users fees to be considered by the Finance Committee, as well as the Commerce Committee, complicates the effort to do away with the ticket tax.

The commerce committee will meet Thursday to discuss the bill to reauthorize the Federal Aviation Administration, which is funded by the airline ticket and other excise taxes.

The FAA reauthorization bill also is moving through the House, and the House Transportation and Infrastructure Committee expects to meet Thursday to mark up the bill. The House Ways and Means Committee will consider the bill after the transportation committee completes its work.

Additional Tax Cut Proposals From Clinton Possible: White House Spokesman Mike McCurry Wednesday did not rule out the possibility that President Bill Clinton would offer additional tax proposals when he addresses a home ownership conference Thursday.

The president’s fiscal 1997 budget proposes middle-class tax relief and "I haven’t heard of any substantial expansion of that," McCurry said at the White House briefing.

Rumors have been floating around Washington suggesting the President may offer tax incentives targeted toward potential home owners.

When asked whether Clinton and likely-GOP presidential nominee Sen. Bob Dole will engage in a battle over who can offer the best tax cuts, McCurry said the president has offered proposals that are paid for and carefully targeted.

Archer Optimistic About Health Reform Bill: House Ways and Means Committee Chairman Bill Archer, R-Texas, said that a compromise over the inclusion of Medical Savings Accounts in the health care reform bill "is within reach," according to CongressDaily news service.

A House-Senate conference has been meeting to work out the differences between the two bills. The MSA provision included in the House-passed version of the bill prevented Democrats and Republicans from reaching a compromise.