congressional_record: CREC-2000-12-15-pt1-PgH12097-5
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| granule_id | date | congress | session | volume | issue | title | chamber | granule_class | sub_granule_class | page_start | page_end | speakers | bills | citation | full_text |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CREC-2000-12-15-pt1-PgH12097-5 | 2000-12-15 | 106 | 2 | INSTALLMENT TAX CORRECTION ACT OF 2000 | HOUSE | HOUSE | ALLOTHER | H12097 | H12100 | [{"name": "Bill Archer", "role": "speaking"}, {"name": "Gerald D. Kleczka", "role": "speaking"}, {"name": "Wally Herger", "role": "speaking"}, {"name": "Benjamin L. Cardin", "role": "speaking"}, {"name": "John S. Tanner", "role": "speaking"}, {"name": "John A. Boehner", "role": "speaking"}, {"name": "Doug Bereuter", "role": "speaking"}, {"name": "Mark Udall", "role": "speaking"}] | [{"congress": "106", "type": "HR", "number": "3594"}, {"congress": "106", "type": "HR", "number": "3594"}, {"congress": "106", "type": "HR", "number": "3594"}] | 146 Cong. Rec. H12097 | Congressional Record, Volume 146 Issue 155 (Friday, December 15, 2000) [Congressional Record Volume 146, Number 155 (Friday, December 15, 2000)] [House] [Pages H12097-H12100] From the Congressional Record Online through the Government Publishing Office [www.gpo.gov] INSTALLMENT TAX CORRECTION ACT OF 2000 Mr. ARCHER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3594) to repeal the modification of the installment method. The Clerk read as follows: H.R. 3594 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Installment Tax Correction Act of 2000''. SEC. 2. REPEAL OF MODIFICATION OF INSTALLMENT METHOD. (a) In General.--Subsection (a) of section 536 of the Ticket to Work and Work Incentives Improvement Act of 1999 (relating to modification of installment method and repeal of installment method for accrual method taxpayers) is repealed effective with respect to sales and other dispositions occurring on or after the date of the enactment of such Act. (b) Applicability.--The Internal Revenue Code of 1986 shall be applied and administered as if that subsection (and the amendments made by that subsection) had not been enacted. The SPEAKER pro tempore (Mr. Pease). Pursuant to the rule, the gentleman from Texas (Mr. Archer) and the gentleman from Wisconsin (Mr. Kleczka) each will control 20 minutes. The Chair recognizes the gentleman from Texas (Mr. Archer). General Leave Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and to include extraneous material on H.R. 3594. The SPEAKER pro tempore. Is there objection to the request of the gentleman from Texas? There was no objection. Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, while the nature of this bill is complex, the purpose is quite simple; and that purpose is to protect as many as 260,000 small businesses from a harmful tax provision. More important, it should serve as a lesson to all politicians who talk about closing loopholes. This was presented originally in President Clinton's fiscal year 2000 budget and included in the 1990 Tax Extenders package at the insistence of the White House and it outlawed the use of the installment sales method byN O T I C E Effective January 1, 2001, the subscription price of the Congressional Record will be $393 per year or $197 for six months. Individual issues may be purchased for $4.00 per copy. The cost for the microfiche edition will remain $141 per year with single copies remaining $1.50 per issue. This price increase is necessary based upon the cost of printing and distribution. Michael F. DiMario, Public Printer [[Page H12098]] taxpayers using the accrual method of accounting. The accrual method of accounting generally requires that taxpayers recognize income in the year in which the right to receive the income occurs regardless of whether the taxpayer actually receives the cash in that year. The installment method of accounting allows a taxpayer to defer recognition of income until the taxpayer actually receives the payment, and that is appropriate. During the negotiations in the 1999 tax package, we were told this provision was a ``loophole closer,'' that it was noncontroversial, and that no one would be heard. Months after the bill became law, however, we learned from the small business community that this harmless loophole closure would, in fact, hurt and hurt significantly. So now there is strong bipartisan support to undo this mistake and to go back to the way things were before this tax change was made. But this should serve as a lesson to all of us, not just today but in future Congresses. ``Closing loopholes'' always is a good sound bite for politicians. Whereas the real-life result is usually a bigger tax bite on American workers or businesses. Today we will right the wrong and provide a little more peace of mind to thousands of small business owners across the country. I urge my colleagues to support this important and time sensitive legislation. Mr. Speaker, I reserve the balance of my time. Mr. KLECZKA. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise today in support of the Installment Tax Correction bill. As the author of the first bill introduced in the House of Representatives to reinstate the installment method of accounting for accrual basis taxpayers, I commend the gentleman from Texas (Mr. Archer) for his efforts on this issue. Mr. Speaker, this legislation is needed to correct a flaw in the Ticket to Work and Work Incentives Improvement Act, which was passed by Congress last year. Although the Ticket to Work bill contained many important provisions, it repealed the installment method of accounting for most accrual basis taxpayers. The bill before us is necessary to fix this repeal. The installment sales method is frequently used in the sale and purchase of a small business where bank financing is unavailable. Under the Ticket to Work Act, small business owners selling a business using the installment sales are required to pay all capital gains taxes on the sale of a business all at once even if the proceeds are to be received in installments over the years. As a result, some small businesses now face lump sum income tax payments that are more than the immediate proceeds of the actual sale. In other words, taxpayers have had to pay taxes on money they will not receive for many years in the future or, in some cases, money that they will never receive due to the buyer defaulting on future payments. The intention behind repealing the installment method of accounting was to crack down on large corporations deferring taxes for extended periods of time. Instead of simply addressing a tax avoidance scheme, the Ticket to Work bill also eliminated a perfectly legitimate method of financing sales transactions for small business owners. Clearly, Congress did not consider the full ramifications of this change in the law. It is estimated that more than 250,000 small businesses may have already been adversely affected by this repeal. Many small business sales that were not finalized when the Ticket to Work bill was enacted on December 17, 1999, have fallen apart and countless others have never occurred before because of the repeal contained in the Ticket to Work bill. Furthermore, those business owners who are looking to purchase additional assets in order to expand their operations will now find it more difficult to find a potential seller. As a result, the value of some small businesses may have been reduced by as much as 20 percent. Mr. Speaker, I believe the broad partisan interest that this bill has attracted underscores the importance of passing this legislation to reinstall and to reinstate the installment method of sales. Mr. Speaker, I guess we can deal in a blame game this morning, but I should point out to the Members that in both Republican tax bills, the massive tax bills that were introduced in the House, both of those bills contained this repeal also. So while some may take to the floor to blame the administration, know full well that the blame should be equally spread on all of us. However, the important thing is that the Congress will correct this inequity today. I urge my colleagues to vote yes on H.R. 3594. Mr. Speaker, I reserve the balance of my time. Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the gentleman from California (Mr. Herger) a highly respected member of the Committee on Ways and Means who has spent such terrific effort in bringing this issue to fruition on the floor today. Mr. HERGER. Mr. Speaker, I say to the chairman, as this is the last bill that will be considered by the House under his chairmanship, I want to thank him for helping to bring this important legislation to the floor and for all he has done to improve the Tax Code and make it fairer for all Americans. Our Nation owes him a great debt of gratitude. Mr. Speaker, earlier this year I was pleased to join with my colleagues from both sides of the aisle to introduce the legislation before us today, the Installment Tax Correction Act. This bill corrects a change in tax law which has had serious, unanticipated consequences for small business owners. Last year, Congress passed and the President signed a change in law to disallow the installment method by accrual basis taxpayers. An unexpected result of this new law has been to erect a serious barrier to small business ownership. Many small business sales across the country have been canceled, while others have simply been put on hold while waiting for Congress to act. Additionally, the value of some businesses has been reduced by as much as 10 or 20 percent. And perhaps most urgently, business owners who have sold their business under the new tax law now face a large unexpected tax burden. The time has come to correct this situation. This legislation, which is retroactive to the time of the tax change last December, will ensure that small business owners who find themselves facing a large tax burden as a result of an installment sale will receive tax relief before having to file their tax returns next year. This much needed measure will make certain that elderly small business owners waiting to finance their retirement through the sale of their business would not have to wait any longer. Mr. Speaker, most small business owners have chosen to use the installment sales method when selling their business because bank financing is often unavailable. Under an installment sale, the buyer makes a down payment up front and pays for the rest of the business over a period of years. Such sales grant greater flexibility to both the buyer and seller and have enabled thousands of Americans who would otherwise be unable to buy a business the opportunity to make their dream of small business ownership a reality. This chart clearly demonstrates the impact the new tax treatment is having on small business sales. Imagine a small business being sold for $100,000 with the buyer paying $10,000 each year over 10 years. Under the old rule, the seller would pay tax on the gain from the sale as he received the payments. In other words, he would be taxed on $10,000 each year. However, under the new rule, the seller is taxed on the entire $100,000 up front even though he has only received the initial $10,000 payment. We believe it is simply unfair to ask small business owners to pay tax on money they have not yet received. Our legislation will fix this problem by once again allowing business owners to pay the tax as they receive the payments. And because our legislation is retroactive to the time of the tax change last December, small business owners who have completed installment sale this year would no longer face an unexpected tax burden. [[Page H12099]] Mr. Speaker, this is a serious problem. The National Federation of Independent Business estimates that as much as 200,000 small business sales each year could be adversely affected if we do not act. I believe we owe it to small businessmen and businesswomen to have a Tax Code which treats them fairly, and I look forward to our approval today of this very worthy legislation, thus ensuring that small business remains a path to prosperity for millions of Americans. {time} 1015 Mr. KLECZKA. Mr. Speaker, I yield 3 minutes to the gentleman from Maryland (Mr. Cardin), a member of the Committee on Ways and Means. Mr. CARDIN. Mr. Speaker, let me thank the gentleman from Wisconsin (Mr. Kleczka) for his leadership on this issue, for yielding me this time and in helping us make sure that we get this change indeed enacted before the Congress adjourns for this session. Mr. Speaker, this is an example of unintended consequence of legislation that was previously passed by this body and was enacted into law. Sometimes we look to try to get revenue raisers attached to bills in order to pay for them and we do not really realize the consequences of that action. This is an example of that. The changes that we made to the Installment Sales Act of 1999 will have and has had adverse consequence on small businesses in our country. Let me try to explain why. The reason why we put the installment sales provisions in the Tax Code was very logical. If you sell a business and you get part of the proceeds and you get the proceeds over a number of years, it is almost impossible for the person who sells the business to be able to pay all the taxes up front. If you do that, you do not have enough cash to pay all the taxes up front. That is the reason why we developed the installment sales provisions within our tax code. What we did in 1999 for many of the installment sales is require the business owner who sold the business to pay 100 percent of the taxes up front. That did not make any sense. I do not think we really intended that to be the consequence because we were dealing with the differences between accrual accounting and cash accounting, not realizing the fact that we have mandated that most small businesses must use accrual accounting procedures. Therefore, on one section of the code, we require them to use an accounting method that would require them to pay 100 percent of the taxes up front. This legislation corrects it. I applaud my colleagues on both sides of the aisle for bringing it forward. It makes sense. It will help small businesses in our country. It is the right tax policy. Mr. Speaker, I am disappointed that we are not going to have a more comprehensive tax bill this year, because I think there are many provisions that Republicans and Democrats have worked out and we had hoped to have had a broader bill. But I applaud the gentleman from Texas (Mr. Archer) for at least making it possible to correct this mistake this year to get it enacted. It is the right thing to do. I fully support it. I hope that we will pass it with broad support on both sides of the aisle. Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume to thank my friend from Maryland for all of his contributions in the years that I have been chairman of the Committee on Ways and Means and also to thank the gentleman from Wisconsin (Mr. Kleczka) for his independent thinking and the contributions that he has made to the committee. I would say to my friend from Maryland that I am also saddened that we did not get the pension reform bill passed. We had over 400 votes here on the floor of the House in support of it. He, along with the gentleman from Ohio (Mr. Portman), did tremendous work in putting that package together. It would benefit all working Americans with greater retirement security opportunities. But it will come another day. It will come, I am sure, in the next Congress; and all of the work that our committee has put into it and the gentleman from Maryland along with the gentleman from Ohio (Mr. Portman) has put into it will not be lost. I think we finish this year on a very positive note. This bill is a bill that can be supported by all of us. The tax provisions that will go in the ultimate package that we will vote on later today are provisions that I believe all of us should be able to support. I am pleased that we finish this Congress on this high level of harmony. I hope that it can extend into the next Congress. Mr. Speaker, I urge full support of this bill. Mr. Speaker, I reserve the balance of my time. Mr. KLECZKA. Mr. Speaker, I yield 3 minutes to the gentleman from Tennessee (Mr. Tanner). Mr. TANNER. Mr. Speaker, I am afraid we are getting into the area of everything having been said about this bill but not everybody having said it. Nonetheless I think it is important to reflect and realize that this action that was taken last year by the House was done at the end of the session, with a lot of unfinished work poured into one huge package, and I am afraid we are going to do that again today. It was thought to end abusive practices within the code as it relates to businesses with accrual accounting and installment sales and to actually pay for the ticket to work which was a smaller part of a broader welfare reform bill, that this was a desirable change in the code. After it was discovered by almost everyone connected with it, it was quickly realized that this covered far more than those abusive practices that were being closed to pay for the ticket to work, and so the gentleman from California (Mr. Herger) and others, myself and others, put a bill in, H.R. 3594, some time ago. I am glad we are getting this done. This is truly, I think by anyone's definition, the law of unintended consequences at work. It demands that one who has an accrual basis of accounting in one's business when one sells it to report all of the income at the time of the sale when one has, as Members know under accrual accounting, a right to the income. This makes no sense, as the gentleman from Maryland (Mr. Cardin) said; and so we changed it back to the way it was and the way that is sensible, sane, and reasonable. And so what we will do is by this change assure every small business owner, every small business prospective buyer that on the installment sales contract method of transaction, one may count on not having a tax liability until the money is actually realized. I want to thank the gentleman from Texas (Mr. Archer) for working with us on this this year and also the gentleman from New York (Mr. Rangel) and the gentleman from Wisconsin (Mr. Kleczka), who is the ranking member of the subcommittee. I think this is a good thing we do to straighten out an obvious error that was made last year in the haste of closing up shop for the year. I hope we do not have to do this again next year. Mr. KLECZKA. Mr. Speaker, I yield myself such time as I may consume. What I would like to indicate at this point is that this is the last tax bill that will be managed by the able chairman of the Committee on Ways and Means, the gentleman from Texas (Mr. Archer). I know this is not the tax bill he really wanted to bring to the floor to manage for his last bill but nevertheless that was not to be this session. But I would want to tell the gentleman and the Members who are listening that the gentleman will be missed. He was a real gentleman on the committee. I really appreciated the opportunity to work with him. What was especially heartening was his knowledge of the Tax Code and the fairness with which he treated all members of the committee, both Democrat and Republican. He is moving on to a much deserved retirement. However, with the new administration taking over, there are some of us who would like to put together a letter to recommend to President- elect Bush that he look very seriously upon him as the new Secretary of the Treasury. So if he gives me a wink and a nod, I am sure we can put something together on that score. However, if that is not to be, I personally wish him the very, very best. He is going to be missed sorely in the House. Mr. BOEHNER. Mr. Speaker, will the gentleman yield? Mr. KLECZKA. I yield to the gentleman from Ohio. Mr. BOEHNER. I thank the gentleman from Wisconsin for yielding and [[Page H12100]] thank all the members of the Committee on Ways and Means, especially the chairman, for moving this piece of legislation. This was, in fact, an oversight that was affecting thousands of businesses if not more across the country. I know a number of people in my district, small- business people, have asked to have this corrected. I am glad that we are, in fact, doing it. Let me add to the chorus of remarks to my good friend the gentleman from Texas (Mr. Archer). The gentleman from Texas and I have worked very closely together during the years that I served in the Republican leadership and as the gentleman from Texas was the chairman of the Committee on Ways and Means. I do not think one could find a more dedicated public servant, someone who believed in reforming the Tax Code and worked hard on behalf of not only his constituents but taxpayers all across the country. After 30 years in the Congress, he deserves a little rest. He has been a pleasure to work with and I think a model Member of this body. I wish him well in his retirement. Mr. BEREUTER. Mr. Speaker, this Member wishes today to express his support for H.R. 3594, the Installment Tax Correction Act of 2000, of which this Member is a cosponsor. This bill, which is being considered under suspension of the rules, will have a positive effect on small businesses nationwide. At the outset, this Member would like to thank both the distinguished gentleman from California [Mr. Herger] for introducing this legislation and the distinguished Chairman of the House Ways and Means Committee from Texas [Mr. Archer] for his efforts in bringing this measure to the House Floor. This legislation, H.R. 3594, eliminates the provision of the tax code which repealed the use of the installment method of accounting for accrual method taxpayers. This bill is necessary because of a provision in the Ticket to Work and Work Incentives Improvement Act (P.L. 106- 170), which was signed into law in 1999. Unfortunately, this Act included a prohibition on the use of the installment method by accrual method taxpayers. As a result of this provision, these type of taxpayers are currently required to pay tax on all capital gains in the first year of an installment sale, regardless of when cash payment is received. This provision is particularly onerous for small businesses. For example, installment sales methods are common for situations where the seller continues to stay involved in the transferred small business or when a family business transfers from one generation to the next. Furthermore, this Member has been told that neither the Administration nor the Ways and Means Committee anticipated nor understood the effect the inclusion of this prohibition in the Ticket to Work and Work Incentives Improvement Act would have on small businesses. Fortunately, H.R. 3594 remedies this by situation by repealing the prohibition on using the installment method of accounting for accrual method taxpayers. Therefore, for these reasons, this Member urges his colleagues to support H.R. 3594, the Installment Tax Correction Act of 2000. Thank you. Mr. UDALL of Colorado. Mr. Speaker, as a cosponsor of H.R. 3594, I rise in strong support of the bill. I am very glad that it is being considered today rather than being left to languish until the new Congress convenes next month. The bill would repeal a change in the tax law that was part of the ``Ticket to Work'' bill enacted last year. It evidently was included as a way to help offset the costs of that bill by increasing tax receipts. However, I do not think that it was necessary or appropriate. The 1999 change prohibited use of the ``installment method'' for calculating taxes on certain asset sales where the seller is paid over time rather than all at once. The effect of this is to make it much harder for small-business owners to sell their businesses or to seriously reduce the amount they can receive if they do sell. I have heard from many people in Colorado who have been and remain concerned about this aspect of the changes made in 1999. H.R. 3594 would repeal that, restoring the ability of sellers to spread their receipts--and taxes--over several years. I think that is a good idea, which is why I joined as a cosponsor. I urge the House to approve the bill. Mr. KLECZKA. Mr. Speaker, I yield back the balance of my time. Mr. ARCHER. Mr. Speaker, I have no further requests for time, and I yield back the balance of my time. The SPEAKER pro tempore (Mr. Pease). The question is on the motion offered by the gentleman from Texas (Mr. Archer) that the House suspend the rules and pass the bill, H.R. 3594. The question was taken; and (two-thirds having voted in favor thereof) the rules were suspended and the bill was passed. A motion to reconsider was laid on the table. ____________________ |