IRS Restructuring Bill on Track

Wednesday, March 25, 1998

OnLine

The Senate Finance Committee is considering speeding up the implementation of an increase in the cigarette excise tax as a possible tax hike to pay for the Internal Revenue Service restructuring bill, congressional sources said March 25.

The increase in the tobacco tax was enacted as part of the Taxpayer Relief Act of 1997, which imposed a 10-cent increase in 2000 and an additional 5-cent hike in 2002.

The discussion draft of the IRS restructuring plan would cost about $9 billion over five years and about $20 billion over ten years, Finance Committee sources said.

The Senate Finance Committee’s plans to release legislative language on the IRS restructuring bill late March 26 and to mark up the bill next week remain on track, congressional sources said March 25.

It is unclear whether the bill to be unveiled tomorrow will include details on the tax hikes needed to offset the approximately $9 billion revenue loss from restructuring the IRS.

The tax hikes most likely will be unveiled when the panel begins its markup March 31 or April 1, if they are not included in the materials to be released March 26, congressional sources said.

Rep Rob Portman, R-Ohio, suggested Senate Finance Committee Chairman Bill Roth, R-Del., soon-to-be-unveiled bill could be improved by including the House-passed provisions requiring that tax bills undergo a tax complexity analysis, streamlining congressional oversight of the IRS, and soliciting IRS comment on proposed tax law changes.

Internet Tax Bill Introduced: Rep. Steve Chabot, R-Ohio, March 23 introduced the Internet tax moratorium bill (H.R. 3529) at the request of Rep. Christopher Cox, R-Calif., who worked out a deal last week with the National Governors’ Association to gain its support for the bill.

The governors opposed an earlier version of the legislation that would have imposed a five-year moratorium on Internet taxes. The introduced bill would impose only a three-year moratorium, thus opening the possibility that states will collect sales tax and other taxes from Internet commerce.

The House Judiciary Committee was scheduled to mark up the bill March 24, but did not act because of opposition from direct marketers, who are concerned the proposed commission to study long-term Internet policy could reverse the decision in the Quill case. The Supreme Court declined to review a lower court decision holding that mail order companies only have to collect state sales taxes if the firm has a physical presence in a state. Mailing a catalogue does not constitute a physical presence.

Chabot's bill also has been referred to the House Rules and House Ways and Means Committees. The tax-writing panel’s jurisdiction extends only to the portion of the bill that would require the commission to look at its international tax implications.

Estate Tax Places Burden on Family-Owned Business: The estate and gift tax places an onerous burden on taxpayers and should be abolished, or at least reduced, Reps. Linda Smith, R-Wash., and Roscoe Bartlett, R-Md., testified March 25 to the House Small Business Committee’s Tax, Finance and Exports Subcommittee.

Timber farms and newspaper publishers are a good example of family-owned businesses that are harmed by the estate tax, Smith said. Parents should be able to pass these small businesses on to their heirs, but many currently must sell the businesses to pay the estate tax, she testified.

The House Small Business Committee used this forum to express its views on estate taxes, but it does not have jurisdiction to amend the tax code. Estate tax reforms need the approval of the House Ways and Means Committee.

Gas Tax Extended under House Bill: The House Ways and Means Committee will hold a drafting session March 26 on the extension of gasoline and other highway excise taxes contained in the pending surface transportation bill (H.R. 2400).

The panel also will consider repealing the tire excise tax, simplifying the fuels tax refund procedures, and repealing the 4.3 cents-per-gallon excise tax on diesel fuel, according to a Joint Committee on Taxation staff document (JCX-15-98). The Senate bill repeals only 1.3 cents of the tax on railroads.

The Senate bill, passed March 12, also provides for tax-exempt bonds for private sector highway infrastructure construction, clarifies the tax treatment of environmental grants, and increases employer-provided mass transit pass income exclusion.

The staff description of the House bill does not include language on the extension of the ethanol tax credit, which the Senate Finance Committee version of the bill would extend and modify. House Ways and Means Committee Chairman Bill Archer, R-Texas, opposes the credit, and a fight over the Senate’s language is possible when the House-Senate conference on the transportation bill convenes.

|  Home   |  Personal Finance Advisor  |  Tax News & Views  |  Growth Company Services  |
|  Contact us!  |  Guest Registry   |   Site Search  |

Tax News & Views is produced by the Financial Counseling Specialists and
the Legislative & Regulatory Services Group at .

Copyright © 1998 . All rights reserved. Copyright and Legal Information.
For feedback or suggestions contact the webmaster@dtonline.com.