Skip banner
HomeHow Do I?Site MapHelp
Return To Search FormFOCUS
Search Terms: estate w/10 tax w/10 repeal, House or Senate or Joint

Document ListExpanded ListKWICFULL format currently displayed

Previous Document Document 13 of 54. Next Document

More Like This
Copyright 2000 Federal News Service, Inc.  
Federal News Service

April 12, 2000, Wednesday

SECTION: PREPARED TESTIMONY

LENGTH: 986 words

HEADLINE: PREPARED TESTIMONY OF NICK RUNNEBOHM OWNER OF RUNNEBOHM CONSTRUCTION CO. INC.
 
BEFORE THE HOUSE GOVERNMENT REFORM COMMITTEE SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH, NATURAL RESOURCES, AND REGULATORY AFFAIRS
 
SUBJECT - "REINVENTING PAPERWORK?: THE CLINTON-GORE ADMINISTRATION'S RECORD ON PAPERWORK REDUCTION"

BODY:
 Mr. Chairman and members of the House Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs, thank you for asking me to testify before you today. I commend you for your efforts to reduce the paperwork burden on small businesses and for holding a hearing on this important issue. I am here to ask you to do all you can to reduce the paperwork burden, and especially the IRS tax form burden, on small businesses like mine.

I founded Runnebohm Construction in Shelbyville, Indiana in 1968, which operated out of my home until 1970. Runnebohm Construction has won more than a dozen national design-build awards for excellence in construction. Our management philosophy evolves from the golden rule "Do unto others as you would have them do onto you." We practice this philosophy with our employees and customers, and think this is why we have so much repeat business. Our 60 employees are treated fairly and with respect, and benefit from our profit-sharing plan. Many of our key personnel have been with us over 20 years. The tax code is so complicated that it is almost impossible for a small businessperson to prepare his own taxes. It cost me $9,575 to prepare my company's 1999 taxes. And this does not include substantial ongoing costs throughout the year for outside tax advice, bookkeeping, and my own and other executive's work on taxes. For example, our bookkeeper spends at least 200 hours every year on tax issues and reporting Federal taxes. I also spend about 70 or 80 hours every year on tax and reporting issues. Simplifying IRS forms would allow more time for my company to concentrate on the construction business.

I have undergone two Federal tax audits and one 401 (k) audit in the last 8 years. The last tax audit cost $9,483 in accounting fees, as well as 85 hours of our bookkeeper's time and 30 hours of my time. The 401 (k) audit cost 20 hours of our bookkeeper's time.There are four particular tax burdens on small business that I wish to talk about. The first three involve substantial paperwork and recordkeeping. First, the "look-back" calculation for "percentage of completion" method of reporting income is very burdensome. These calculations cost between $600 to $1,000 for the accountant, plus several hours of the bookkeeper's time to prepare. Moreover, forcing us to use this method means that we must project profits on projects that may be only 10 to 20 percent complete and which entail a high degree of risk. In other words, we have to pay taxes on income that we may never receive.

Second, the "alternative minimum tax" (AMT) requires taxpayers to calculate their tax using two methods. Certain preference items must be calculated and subsequently added back to determine AMT income. Examples include the difference between regular and accelerated depreciation and the differences between "completed contracts" versus "percent complete" accounting for long-term contracts. Once these AMT preference items are calculated, AMT and related taxes are determined and the taxpayer is required to pay the higher of the regular and the AMT tax. The cost of both of these calculations can be about $1,000 to $3,000 per year for a small contractor like me. The AMT should be eliminated or simplified to reduce this cost and the burden of figuring the tax due.

Third, section 125 of the tax code is unfair to minority owners of subchapter S corporations and partnerships, which includes a large number of small businesses. Anyone who is more than a 2-percent owner of a small business loses the right to pay for group health insurance with "pre-tax" dollars. Every other employee enjoys that right. In addition, a 2 or more percent owner is not eligible for other tax-free benefits, such as uniforms, etc. to which other employees are entitled. These provisions are very harmful to small businesses, especially now when small companies are trying to prevent good employees from being "raided" by large firms. Big business employee stock ownership is not as effected because most of them are "C"

corporations and not subject to this rule. These provisions should be changed so that they do not adversely effect the value of minority ownership of stock in the small business.

Fourth, I want to thank Chairman Mcintosh and the other Representatives that voted to repeal the death or estate tax. I am a third-generation general contractor and hope to pass management of the business to my son, Mike. Mike is a part owner of the company now, and I hope that the death tax will not force him to sell or otherwise cut back on the business. I also pay a hidden tax and am distracted from my business because I have to pay an accountant to help with estate tax planning.

I also want to say something about other Federal paperwork we face besides IRS paperwork. The OSHA recordkeeping requirements are especially onerous. We spend approximately 260 hours every year maintaining our required "Material Safety Data Sheet" (MSDS) book. OSHA considers such things as sawdust, drywall, sand, gravel, and concrete as hazardous. OSHA regulations force us to keep exposure records and data on these common substances for as long as an employee works with us plus an additional 30 years. We are a small company with only 2,500 square feet of office space. If we tried to keep records on exposure for all the things which OSHA considers hazardous, according to their MSDS regulation, we would fill our entire office in six months.

In addition to OSHA, our people spend a significant amount of time each month on FMLA, COBRA and other Federal recordkeeping and reporting requirements.

My message is to ask Chairman Mcintosh and other Representatives to keep up your efforts to reduce paperwork and foster small business growth. Mr. Chairman and members of the Subcommittee, thank you for allowing me to be a witness before you today.

END

LOAD-DATE: April 14, 2000




Previous Document Document 13 of 54. Next Document


FOCUS

Search Terms: estate w/10 tax w/10 repeal, House or Senate or Joint
To narrow your search, please enter a word or phrase:
   
About LEXIS-NEXIS® Congressional Universe Terms and Conditions Top of Page
Copyright © 2001, LEXIS-NEXIS®, a division of Reed Elsevier Inc. All Rights Reserved.