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Online Home | Site Search | Tax News & Views |Tax Chairmen Pledge Action on Second Tax Bill; Archer Opposes Foreign Tax Credit ChangesWednesday, April 1, 1998 OnLine Curtailing the foreign tax credit to raise revenue to help pay for restructuring the Internal Revenue Service is unacceptable, according to House Ways and Means Committee Chairman Bill Archer, R-Texas. "We’ll just have to find something else," Archer told reporters after a speech at a Tax Foundation conference April 1. Modifications to the foreign tax credit carryback and carryforward provisions were approved March 31 by the Senate Finance Committee as a key component in their version of the IRS bill. The House version of the bill, passed last year, does not include as many major revenue-raising measures because it costs about one-third of the total for the Senate bill. While acknowledging the rocky road ahead for the restructuring legislation, Archer and Senate Finance Committee Chairman Bill Roth, R-Del., both pledged action later this year on a second tax bill. |
Support for extenders Both are committed to enacting legislation to extend tax law provisions set to expire in June pertaining to the research and development tax credit, the work opportunity credit, and deductions for contributions of stock to private foundations. Although all these so-called "extenders" should be passed permanently, Sen. Orrin Hatch, R-Utah, told the conference, "the size of the overall tax package is likely to constrain us to a temporary extension," because permanent extensions would be too costly. Roth "committed to getting R&D extended without a gap" between its expiration and extension, according to Hatch, who serves on the Senate Finance Committee. Hatch in part took credit for Roth’s commitment: "I did get a commitment last night from the chairman that if I did not bring up my capital gains rate reduction amendment that we’re going to take care of that in the tax bill next summer." Archer said he plans action on "a modest tax relief bill" this summer but gave few specifics about what it might contain. The chairman expressed his well-known interest in providing marriage penalty relief, which he acknowledged would be expensive, and in further capital gains rate reductions. Democrats Offer Capital Gains Reform: House Ways and Means Committee Democrats led by Rep. William Coyne, D-Pa., introduced a bill April 1 that would simplify the way the capital gains tax is calculated. The bill would allow taxpayers to exclude 40% of their capital gains from taxation and tax the remaining 60% at the individual’s regular income tax rate. "We can eliminate five different tax rates, 18-month holding periods, and complex computations and replace them with one simple step," Coyne said in a press release. Of the 14 million taxpayers with capital gains, 11.3 million would receive a tax cut, the 700 wealthiest would receive tax increases, and the remaining taxpayers would be unaffected by the bill, the press release said. The proposal is an alternative to Archer’s proposal to shorten the holding period for preferred capital gains tax rates from 18 to 12 months, which the chairman suggests would be revenue neutral. Archer plans to include his proposal in the tax-cut bill he offers later this year. Rossotti, Johnson Dub 1998 Filing Season a Success: The Internal Revenue Service and House Ways and Means Oversight Subcommittee Chair Nancy Johnson, R-Conn., March 31 agreed that the 1998 filing season has been successful so far. At a March 31 hearing on the 1998 filing season and the IRS’ 1999 budget, Johnson congratulated the IRS on a trouble-free tax season. She noted that significant progress has been made toward achieving the IRS’ customer service objectives. Testifying before the subcommittee, IRS Commissioner Charles Rossotti attributed much of the filing season’s success to the customer service initiatives implemented by the IRS. Because IRS outreach efforts in the business community to encourage the use of the Electronic Federal Tax Payment System (EFTPS) to make tax deposits have yielded positive results in the form of increased enrollment in the system, it won’t be necessary to impose a penalty on July 1, 1998, as previously planned, he announced The penalty would have been imposed on businesses with $50,000 in annual federal tax deposits that failed to use the EFTPS system. Rossotti observed that refunds were up 6% over last year, the amount of the average refund has increased to $1,397, and the number of returns filed electronically has increased by more than 20%. On the IRS budget, Rossotti explained that the $8.2 billion budget requested for fiscal 1999 would be the first budget increase ($529 million more than in fiscal 1998) for the IRS in several years. He said that the highest priority will be given to completing the century date conversion (Year 2000) program by the beginning of the 1999 filing season Other high-priority programs in the budget are implementation of the customer service initiatives recommended by the Customer Service Task Force and IRS modernization. Also appearing before the subcommittee was Lynda Willis, director of tax policy and administration issues for the General Accounting Office. She stated that $247 million of the $323 million included in the IRS budget for information technology, which includes the century date conversion program, should not be granted because "the request has not been justified on the basis of analytical data or derived using a verifiable estimating method." Finally, commenting on the $103 million requested by the IRS for enhanced customer service, Willis said the estimates do not provide sufficient information to determine how much of the funds are going to be used for taxpayer assistance as opposed to enforcement. Final Revenue Estimate on IRS Reform: The staff of
the Joint Committee on Taxation issued a final revenue estimate (JCX-22-98, JCX-25-98) on the IRS
restructuring bill and descriptions (JCX-23-98, JCX-24-98) of the provisions to the bill that were added late March
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