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News from NAM's Tax Policy Department

August 24, 2000

In This Issue – links to the specific topics in this newsletter:

Issues Update

Tax Legislation 2000 — A Fall Bill: A potential driver for a fall tax bill is a replacement for foreign sales corporations (FSCs). The World Trade Organization has given the United States until October 1 to repeal the current FSC rules, and the House Ways and Means Committee in late July approved substitute legislation, with Senate Finance Committee action expected in September (see detailed report below). A 2000 tax bill — probably in the neighborhood of $175 billion over five years — could advance either as a reconciliation bill, protected by budget procedural safeguards, or as part of an omnibus spending bill at the end of the 106^th Congress — sometime in late September or early October. In addition to a FSC remedy, other likely components of a 2000 tax bill include the repeal of the phone excise tax, a Community Renewal/New Markets proposal and a provision to ensure the confidentiality of competent authority agreements. The bill also is expected to include some of the components from the small business/minimum wage bill that passed the House this spring, including reinstatement of the installment sales rule and pension reforms and simplification. For more information, contact Dorothy Coleman at (202) 637-3077, dcoleman@nam.org, Monica McGuire at (202) 637-3076, mmcguire@nam.org, or Kimberly Pinter at (202) 637-3071, kpinter@nam.org.

Foreign Sales Corporations: On July 25, NAM President Jerry Jasinowski hosted a press conference to release the results of an NAM survey on the significance of foreign sales corporations (FSCs) to small and mid-sized manufacturers. Ways and Means Trade Subcommittee Chairman Phil Crane (R-8^th IL) was featured along with three NAM small manufacturers: Doug Parsons, president of Excel Foundry and Machine in Pekin, IL; Dyke Messinger, president of Power Curbers in Salisbury, NC; and John McCann, CFO of Oberg Industries in Freeport, PA. Small and mid-sized manufacturers save an average of $124,000 annually by using FSCs. Copies of the survey were sent to all members of the House Ways and Means Committee. Click here to view the text of the survey.

The day before the August recess, the Ways and Means Committee overwhelmingly passed H.R. 4986, the "FSC Repeal and Extraterritorial Income Exclusion Act of 2000," by a vote of 34 to 1. The lone dissenter was Rep. Pete Stark (D-13^th CA). Several NAM-opposed amendments to reduce or eliminate benefits for pharmaceuticals, tobacco and defense products were offered by Reps. Stark and Lloyd Doggett (D-10^th TX) and promptly defeated on voice votes. House floor and Senate Finance Committee action are expected in early September. For further information, contact Kimberly Pinter at (202) 637-3071, kpinter@nam.org.

Pension Reform Senate Style: The Senate Finance Committee is expected to mark up pension reform legislation on September 7 as part of a second budget reconciliation bill. Committee Chairman Bill Roth (R-DE) has long been a strong supporter of retirement security and the Finance bill is expected to be similar to the legislation (H.R. 1102) overwhelmingly approved by the House in July. There is speculation on Capitol Hill that significant pension legislation could be enacted this year. Pension reform has broad bipartisan support in both houses. Unlike the estate tax repeal and marriage penalty relief bills, the pending pension legislation has not drawn a veto threat from the President. For more information, contact Dorothy Coleman at (202) 637-3077, dcoleman@nam.org.

Long Overdue Treasury Depreciation Study: As expected, the Treasury study, which was released four months late, is short on recommendations. In the report, Treasury takes the position that only Congress can make changes to asset class definitions or class lives. The recommendations are general, for example, suggesting comprehensive reform of the depreciation system versus modifying the system. The lack of specific recommendations in the report, coupled with the already heavy tax legislative agenda for the rest of the 106^th Congress, virtually ensures that there will not be any congressional action this year to change the current depreciation system. For further information, contact Monica McGuire at (202) 637-3076, mmcguire@nam.org.

A Newcomer’s Support for Death Tax Repeal: Recent comments from the newest member of the Senate, Sen. Zell Miller (D-GA), reflect the attitude of many on Capitol Hill. Not long after he had been sworn in to fill the seat of the late Sen. Paul Coverdell (R-GA), Miller expressed support for the effort to abolish the estate tax. He said, "I've looked at that closely. That's not just for some superrich billionaires. That's for these people who have established businesses, built businesses, built mom-and-pop operations and now want to leave it to their children. It's a kitchen-table issue."

Congress is expected to send the death tax repeal legislation (H.R. 8) to the President on August 24. A threatened Clinton veto casts a dark cloud over the short-term prospects; however, the House is tentatively scheduled to vote September 7 to override a potential veto. Even if the President acts on his promise, the broad support on the Hill for death tax repeal guarantees that Congress will not walk away from this issue. This vote has been designated a Key Manufacturing Vote in the NAM voting record for the 106^th Congress. For more information, contact Dorothy Coleman, (202) 637-3077, dcoleman@nam.org.

Competent Authority: In an apparent reprise of last year’s fight over the confidentiality of advance pricing agreements (APAs), the confidentiality of competent authority agreements is being challenged by a freedom of information (FOIA) request from Tax Analysts to obtain these agreements. On July 27, Rep. Amo Houghton (R-31^st NY) introduced H.R. 5044, which clarifies that competent authority agreements — as well as closing agreements and pre-filing agreements —are confidential taxpayer information not subject to FOIA disclosure. The NAM, along with the National Foreign Trade Council (NFTC) and the Organization for International Investment (OFII), sent letters to House Ways and Means Chairman Bill Archer (R-7^th TX) and Ranking Member Charlie Rangel (D-15^th NY) on August 8 in support of the bill. Click here to view the letter. For further information, contact Kimberly Pinter at (202) 637-3071, kpinter@nam.org.

Tax-writers’ Jurisdiction over E-Commerce Tax Issues: Congressional staff have researched the issue and concluded that the Senate Finance Committee does have jurisdiction over e-commerce taxation, from both a trade and tax perspective. In fact, the Finance Committee at one time had a separate subcommittee on interstate taxation. If time doesn’t get in the way, Finance Committee members would like to hold a hearing this year to revisit the scope of the current moratorium and to hear from some of the "principal players" on the Advisory Commission on Electronic Commerce.

A Call for AMT Relief: The NAM-led AMT Coalition sent a letter to congressional leaders advocating reform of the AMT, an arcane and punitive anti-manufacturing element of the tax code. The current climate of growing budget surplus dollars is a perfect time to rectify this anti-investment tax for corporate AMT payers who contribute to the budget surplus. Click here to view the letter. For further information, contact Monica McGuire at (202) 637-3076, mmguire@nam.org.

Business Tax Credits: NAM member companies can take advantage of existing government tax credit programs through an NAM member service, offered in conjunction with Net Profit, Inc. With its state-of-the-art database, Net Profit can determine the federal, state and local credits that apply to a particular company. Net Profit’s services include monitoring all new and changing tax laws and procedures; calculating potential and retroactive savings, where appropriate; and completing necessary forms. Available credits and incentives cover a wide range of areas including R&D, relocation and expansion, empowerment and enterprise zones, training and education, employment, capital equipment, dependent and child care, property and sales tax and pollution control. For further information, call toll-free (1-877) NAM-6741 or visit http://www.netprofitincrease.com/.

Staff Changes in the Tax World: Richard Grafmeyer, deputy chief of staff at the Joint Committee on Taxation since December 1998, plans to leave the Joint Committee on Taxation at the end of the month to become national director for federal tax services at Arthur Andersen LLP in Washington, D.C. Melissa Bonicelli, tax aide for House Ways and Means Committee Chairman Bill Archer has been promoted to Archer’s legislative director. Tim Wineland, tax aide for House Ways and Means member David Camp (R-4^th MI) has left Camp’s office for the private sector; Dena Plummer, a legislative assistant for Camp has been promoted to handle tax issues. At IRS, Val Oveson, National Taxpayer Advocate since September 1998 is leaving this fall to return to the private sector in Utah.

For updated lists of tax writing committee members and their tax aides, click here.

NAM Tax Policy Scheduled Events

Tax and Budget Policy Committee Winter Meeting: Tuesday, Dec. 5, 2000, The International Trade Center, Ronald Reagan Building, Washington, D.C. (day-long event).

Tax and Budget Policy Committee Spring Meeting: Wednesday, May 9, 2001, Washington, D.C. (day-long event).

Washington Advisory (tax) Council Biannual Reception: Wednesday, May 9, 2001, 5:00-7:00 p.m., Washington, D.C. (Reception for members and tax aides of the congressional tax-writing committees in the 107^th Congress).

To obtain information or register for any of these events, please contact Maureen Green by email at mgreen@nam.org or by phone: (202) 637-3073.

Tax Talk is a monthly e-mail newsletter from NAM’s Tax Policy Department. Please feel free to distribute this within your organization. For additions or deletions to this list, please contact Maureen Green at mgreen@nam.org.

Copyright © 2000 National Association of Manufacturers