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Small Business Tax Bill Could Be Considered After July 4 Recess, Lott Says

Tuesday, June 18, 1996

Deloitte & Touche OnLine

Senate Majority Leader Trent Lott, R-Miss., wants to bring the bill raising the minimum wage and providing tax relief to small businesses (HR 3448) to the Senate floor during the week of July 8.

Senate Democrats signaled they would block passage of the minimum wage increase unless the proposal is to their liking. Recently, Lott discussed a compromise wage hike that eliminates from the bill the controversial TEAM Act, which imposes special labor-management work rules. Organized labor and many Democrats oppose the TEAM act.

Under the tax component of the bill, certain expiring tax provisions would be extended (including employer-paid tuition assistance and the R&D credit), the expensing limitation for small businesses would be increased (from $17,500 to $25,000), and the possessions tax credit (for American companies who have manufacturing facilities in U.S.-owned possessions, like Puerto Rico) would be phased out.

The Senate Finance Committee has not yet completed work on the legislative language of the small business tax incentive bill and its accompanying report. Both should be available by the end of the week.

IRS Funding Cuts Expected: Fiscal 1997 funding for the Internal Revenue Service would be cut substantially under a bill being drafted by the House Treasury Postal Service and General Government subcommittee Tuesday.

The brunt of the funding reductions would fall upon IRS’ tax systems modernization program (TSM), which has come under fire because of the perceived lack of progress updating the agency’s computer and information systems even though millions of dollars have been spent.

Under the subcommittee bill, IRS funding for fiscal 1997 would be about $6.6 billion, about $800 million less than the fiscal 1996 level and about $1.4 billion less than what President Clinton asked Congress to provide.

The bill also directs the IRS to hire private contractors to develop the new computer system and directs the Department of Defense to assist IRS in developing the bid proposals.

Subcommittee Chairman Jim Lightfoot, R-Iowa, explained that the approach to TSM represents a "broad new strategy" and reflects the fact that "Congress is very near the end of the rope" on TSM funding.

The subcommittee is not expected to complete work on the appropriations bill until late Tuesday.

Only 6 Million Benefit From MSAs, JCT Says: The Medical Savings Account compromise proposed by Republicans would allow about 6 million people to participate under the three-year start-up period, Joint Committee on Taxation Chief of Staff Kenneth Kies said in a letter obtained by CongressDaily news service.

Kies wrote the chairmen of the tax-writing committees that the 6 million figure "represents 7.66% of all workers who currently have some form of insurance coverage."

The MSA proposal in the health insurance reform bill (HR 3103) is the stumbling block preventing congressional leaders and the White House from passing the bill.

President Bill Clinton and Sen. Ted Kennedy, D-Mass., oppose a broad MSA provision on the grounds that it could undermine the health insurance system, especially if too many rich people decide to opt out of traditional health insurance plans and use MSAs instead.