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More Than 80 Amendments Filed for Possible Action as House Tax Panel Begins Work on Tax Bill

Thursday, June 12, 1997

Deloitte & Touche OnLine

More than 80 proposed amendments to the tax portion of the fiscal 1998 budget reconciliation bill have been filed for possible consideration as the House Ways and Means Committee late June 11 began action on the proposed measure.

Action on the bill was postponed repeatedly throughout the day as Rep. Bill Archer, R-Texas, struggled to amend his initial proposal to address Republican leadership concerns about his proposed estate tax relief and repeal of the corporate alternative minimum tax.

The committee quit work during the early morning hours Thursday and is set to resume action on the bill later in the morning. Following more than four hours of technical discussion of Archer’s proposed bill, the panel began to plow through the list of proposed amendments.

In short order, the panel rejected several Democratic proposals to alter how the proposed bill would implement its recommended $500 child credit.

Proposed Amendments Riddled With Rifle Shots: Republican members proposed about 40 amendments to the Archer bill, chiefly the sort usually characterized as "rifle shots," meaning they are targeted to benefit a particular industry.

The Democratic list, which also contains about 40 amendments, contains a mix of rifle shots and broader, more partisan proposals that would alter key elements of Archer’s plan.

Narrowly targeted amendments generally have a greater chance of being approved than do broadly targeted ones, such as those seeking to rewrite the capital gains tax or the child credit, because the narrow proposals tend to have small revenue implications and do not affect broad political players, such as middle-income taxpayers.

Items on the two lists include proposals to provide foreign sales corporation treatment for defense exporters, extend the Section 127 exclusion for education expenses permanently, clarify that frequent flier miles are not taxable, strike the proposed expansion of the safe harbor for independent contractor designations, and amend the corporate organization proposal "to eliminate the effect of distribution with an affiliated group, unless distribution is part of a Morris Trust (Section 355) transaction."

Under the Ways and Means Committee’s rules, proposed changes to the Archer bill must not increase the deficit, so any proposals that would lose money must include a way to offset the revenue loss.

Amendments Defeated: The committee began debate on amendments after midnight following a technical briefing by Joint Tax Committee Staff Director Ken Kies. These discussions focused chiefly on the technical aspects of the bill, but the talks at times disintegrated into partisan bickering.

While briefing members, Kies relied on a new revenue table that reflects the changes Archer proposed to his bill prior to the start of the markup.

Archer June 11 narrowed the scope of his corporate alternative minimum tax proposal to pay for an earlier phase-in of his estates tax relief proposals. Other minor changes also were made to Archer’s original bill.

Rubin Articulates White House Opposition: "The President is eager to sign legislation implementing the (budget) agreement into law, but in its present form, the proposal you have put forth does not meet the test of fairness to working families and has other serious problems," Treasury Secretary Robert Rubin told Archer in a June 11 letter detailing the Clinton Administration’s opposition to the proposed tax bill.

Rubin objected to the economic distributional effects of Archer’s proposed child credit and sent him tables to illustrate the administration’s position.

The administration also "is concerned about the proposal to reduce the corporate capital gains tax rate," Rubin said. "We would propose expanding the existing exclusion for long-term equity investments in smaller businesses," Rubin wrote, which would help more start-up businesses "get off the ground."

Rubin also had harsh words for Archer’s AMT proposals. "At a time when business conditions are strong and profits are at their highest share of GDP in two decades, you have proposed to spend $34 billion over 10 years to eliminate the corporate alternative minimum tax. This provision would return us to the days when some large and profitable corporations could pay little or no tax," Rubin said.

The administration also has "serious concerns" with several other proposals in the bill, Archer said, including the proposed safe harbor for independent contractor status and subjecting Indian tribes to the unrelated business income tax.

The Ways and Means Committee will resume work on the tax bill Thursday morning and is expected to continue in session as long as is necessary to complete action on the bill. The committee must complete action on the legislation and report its recommendations to the House Budget Committee by June 13.