"(A) an amount equal to twice the amount computed under the method of depreciation used in respect of such property for the taxable year preceding the first taxable year in which this subsection applies to such property, or "(B) an amount computed under the method of depreciation described in subsection (b) (1) and computed, with respect to the adjusted basis of such property on the first day of the first taxable year in which this subsection applies to such property, as if (i) such property had been acquired on such first day, and (ii) such property had a useful life of 5 years. Nothing in this subsection shall be construed to limit or reduce an allowance otherwise allowable under subsection (a). "(2) SMALL-BUSINESS CONCERNS ADVERSELY AFFECTED BY UNITED STATES FOREIGN TRADE POLICY.-For purposes of paragraph (1), a small-business concern shall be considered to be adversely affected by the foreign trade policies of the United States only if the Small Business Administration has issued a certificate of eligibility to such concern under section 207 (c) (4) of the Small Business Act of 1953 as a small-business concern which meets the requirements of section 207 (c) (2) of such Act. "(3) TAXABLE YEARS TO WHICH APPLICABLE.-Subject to the provisions of paragraph (5), paragraph (1) shall apply with respect to any property used in a trade or business by a small-business concern only for the taxable year in which the Small Business Administration issues the certificate referred to in paragraph (2) to such concern, and for the four taxable years succeeding such taxable year. "(4) PROPERTY TO WHICH APPLICABLE.—Paragraph (1) shall apply only to property which is "(A) used in its trade or business by a small-business concern on the date on which the Small Business Administration issues the certificate referred to in paragraph (2) to such concern; and "(B) used in the industry described in section 207 (c) (2) (A) of the Small Business Act of 1953 in respect of which such certificate is issued. "(5) ELECTION.— "(A) WHEN AND HOW MADE.-An election to compute the allowance allowed as a deduction by subsection (a) with reference to this subsection shall be made, with respect to any property used in a trade or business by a small-business concern, at the time of filing the return for the taxable year in which the Small Business Administration issues the certificate referred to in paragraph (2) to such concern. Such election shall be made in such manner as the Secretary or his delegate shall prescribe. At the time of making such election, the taxpayer shall select the method provided in subparagraph (A) or (B) of paragraph (1) to be used in computing such allowance with respect to such property. "(B) EFFECT.-An election under subparagraph (A) shall be effective for the taxable year for which the return in connection with which the election is made is filed and, unless sooner terminated as provided in subparagraph (C), for the four taxable years succeeding such taxable year. "(C) REVOCATION.-An election under subparagraph (A) may be revoked by the taxpayer at the time of filing his return for any of the four taxable years succeeding the taxable year for which the election was made. Such revocation shall be effective for the taxable year for which such return is filed and for succeeding taxable years. Such revocation shall be made in such manner as the Secretary or his delegate shall prescribe." (b) Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1954 (relating to itemized deductions for individuals and corporations) is amended by adding at the end thereof the following new section: "SEC. 178. AMORTIZATION OF CERTAIN FACILITIES OF SMALL BUSINESSES ADVERSELY AFFECTED BY FOREIGN TRADE POLICIES. "(a) GENERAL RULE.— "(1) ALLOWANCE OF DEDUCTION.-In the case of "(A) a corporation which is a small-business concern which has been adversely affected by the foreign trade policies of the United States, or "(B) an individual who owns a proprietary interest in an unincor porated small-business concern which has been adversely affected by the foreign trade policies of the United States, there shall be allowed, at the election of the taxpayer, a deduction with respect to the amortization of the adjusted basis (for determining gain) of any conversion facility (as defined in subsection (d)) based on a period of 60 months. The 60-month period shall begin as to any facility, at the election of the taxpayer, with the month following the month in which the facility was completed, or with the succeeding taxable year. "(2) AMOUNT OF DEDUCTION.-The amortization deduction provided in paragraph (1) shall be an amount, with respect to each month of the amortization period within the taxable year, equal to the adjusted basis of the facility at the end of such month, divided by the number of months (including the month for which the deduction is computed) remaining in the period. Such adjusted basis at the end of the month shall be computed without regard to the amortization deduction for such month. The amortization deduction above provided with respect to any month shall be in lieu of the depreciation deduction with respect to such facility for such month provided by section 167. "(b) ELECTION OF AMORTIZATION.-The election of the taxpayer under subsection (a) to take the amortization deduction and to begin the 60-month period with the month following the month in which the facility was completed shall be made only by a statement to that effect in the return for the taxable year in which the facility was completed. The election of the taxpayer under subsection (a) to take the amortization deduction and to begin such period with the taxable year succeeding such year shall be made only by a statement to that effect in the return for such succeeding taxable year. Notwithstanding the preceding two sentences, the election of the taxpayer under subsection (a) may be made, under such regulations as the Secretary or his delegate may prescribe, before the time prescribed in the applicable sentence. "(c) TERMINATION OF AMORTIZATION DEDUCTION.-A taxpayer which has elected under subsection (b) to take the amortization deduction provided in subsection (a) may, at any time after making such election, discontinue the amortization deduction with respect to the remainder of the amortization period, such discontinuance to begin as of the beginning of any month specified by the taxpayer in a notice in writing filed with the Secretary or his delegate before the beginning of such month. The depreciation deduction provided under section 167 shall be allowed, beginning with the first month as to which the amortization deduction does not apply, and the taxpayer shall not be entitled to any further amortization deduction with respect to such facility. "(d) DEFINITIONS.-For purposes of this section— "(1) CONVERSION FACILITY.-The term 'conversion facility' means any facility, land, building, machinery, or equipment, or any part thereof, the construction, reconstruction, erection, installation, or acquisition of which was completed after the date of the enactment of this section, and with respect to which a certificate under subsection (e) has been made. In no event shall an amortization deduction be allowed in respect of any conversion facility for any taxable year unless a certificate in respect thereof under this paragraph shall have been made before the filing of the taxpayer's return for such taxable year. "(2) SMALL-BUSINESS CONCERN. The term 'small-business concern' means a corporation, partnership, or proprietorship engaged in carrying on a trade or business which meets the criteria of a small-business concern set forth in section 203 of the Small Business Act of 1953 and the criteria established by the Small Business Administration under such section. "(3) SMALL-BUSINESS CONCERNS ADVERSELY AFFECTED BY THE FOREIGN TRADE POLICIES OF THE UNITED STATES.-A small-business concern shall be considered to be adversely affected by the foreign trade policies of the United States only if the Small Business Administration has issued a certificate of eligibility to such concern under section 207 (c) (4) of the Small Business Act of 1953 as a small-business concern which meets the requirements of section 207 (c) (2) of such Act. (e) DETERMINATION OF ADJUSTED BASIS OF CONVERSION FACILITY. "(1) GENERAL RULE.-For purposes of subsection (a), in determining the adjusted basis of a conversion facility there shall be included only so much of the amount of the adjusted basis or such facility (computed without regard to this section) as is properly attributable to such con struction, reconstruction, erection, installation, or acquisition after the date of the enactment of this section as the Small Business Administration has certified as necessary to enable the small-business concern either (A) to develop new or different lines of production, or (B) to renovate its productive facilities, and only such portion of such amount as such Administration has certified as attributable to the need of the small-business concern to develop new or different lines of production, or to renovate its productive facilities, because of the foreign trade policies of the United States. Such certification shall be under such regulations as may be prescribed from time to time by the Small Business Administration. An application for a certificate must be filed at such time and in such manner as may be prescribed by such Administration under such regulations but in no event shall such certificate have any effect unless an application therefor is filed before the expiration of six months after the beginning of such construction, reconstruction, erection, or installation, or the date of such acquisition. "(2) SEPARATE FACILITIES; SPECIAL RULE.-After the completion or acquisition of any conversion facility with respect to which a certificate under paragraph (1) has been made, any expenditure (attributable to such facility and to the period after such completion or acquisition) which does not represent construction, reconstruction, erection, installation, or acquisition included in such certificate, but with respect to which a separate certificate is made, shall not be applied in adjustment of the basis of such facility, but a separate basis shall be computed therefor pursuant to paragraph (1), as if it were a new and separate conversion facility. "(f) DEPRECIATION DEDUCTION.-If the adjusted basis of the conversion facility (computed without regard to subsection (e)) exceeds the adjusted basis computed under subsection (e), the depreciation deduction provided by section 167 shall, despite the provisions of subsection (a) (2) of this section, be allowed with respect to such conversion facility as if the adjusted basis for the purpose of such deduction were an amount equal to the amount of such excess. "(g) LIFE TENANT AND REMAINDERMAN.-In the case of property held by one person for life with remainder to another person, the amortization deduction provided in subsection (a) shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. "(h) CROSS REFERENCE.— "For special rule with respect to gain derived from the sale or exchange of property, the adjusted basis of which is determined with regard to this section, see section 1238." (c) The table of sections for such part is amended by adding at the end thereof "Sec. 178. Amortization of certain facilities of small businesses adversely affected by foreign trade policies." (d) Section 1238 of the Internal Revenue Code of 1954 (relating to amortization in excess of depreciation) is amended by inserting after "section 168 (relating to amortization deduction of emergency facilities)" the following: "or section 178 (relating to amortization deduction of certain facilities of small businesses adversely affected by foreign trade policies)". (e) The amendments made by this section shall apply only to taxable years ending after the date of the enactment of this Act. [S. 3791, 85th Cong., 2d sess.] A BILL To authorize assistance under the Small Business Act of 1953 to certain smallbusiness concerns displaced as a result of urban renewal activities under the Housing Act of 1949. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 207 (b) (1) of the Small Business Act of 1953 is amended by inserting "(A)" immediately after "to be necessary or appropriate", and by inserting before the first colon a comma and the following: "and (B) to any small-business concern if the Administration determines that the small-business concern has suffered a substantial economic injury (for which reimbursement or compensation is not otherwise made, exclusive of relocation payments, if any, under section 106 (f) of the Housing Act of 1949), as a result of its displacement by an urban renewal project included in an urban renewal area respecting which a contract for capital grant has been executed under such Act". [S. Res. 138, 85th Cong., 1st sess.] Whereas the Congress of the United States on numerous occasions has expressed its interest that small-business concerns be given a fair share of the procurement dollars spent by the Department of Defense; and Whereas Congress, in the First War Powers Act of 1941, as amended in 1951; the Defense Production Act of 1950; the Small Business Act of 1953; the Armed Services Procurement Act of 1947; the Federal Property and Administrative Services Act of 1949; the Universal Military Training and Services Act of 1948; and the Department of Defense Appropriation Act of 1957, has declared that small-business concerns should receive a fair share of the purchases and prime contracts for supplies and services made by the Government; and Whereas of the $17,750,084,000 spent in fiscal year 1956 by the Department of Defense in the continental United States small-business concerns received only $3,475,315,000, or 19.6 per centum, and such concerns have received only 19.2 per centum of the $144,255,000,000 spent in the continental United States in the past six years; and Whereas the percentage awarded to small-business firms in the current fiscal year, 1957, according to current estimates, will decline to approximately 16.5 per centum: Now, therefore, be it Resolved, That it is the sense of the Senate (1) that, if reasonable progress is to be achieved toward the ultimate goal of obtaining for the small-business segment of our economy a fair share of the purchases and prime contracts made or entered into by the military services, small-business concerns should receive from such purchases and prime contractors not less than 25 per centum of the procurement dollars expended each year by the Department of Defense; (2) that, in the procurement of supplies and services which small-business concerns are readily capable of furnishing, the military services should award a much higher percentage of their prime contracts to such concerns in order to compensate for procurements which by their nature are beyond the capabilities of small-business concerns; (3) that, in order to achieve an increase in the percentage of procurement dollars going to small-business concerns by way of prime contracts, the military services should review the products not now considered to be within the production capabilities of small-business concerns with a view to determining whether some of these products cannot in fact be obtained from such concerns; (4) that the Research and Development Program of the Department of Defense affords one of the greatest areas available for increasing the participation of small business in military procurement; and (5) that more emphasis should be given to the "set-aside" program for small business, provided in the Small Business Act of 1953, in order that small-business concerns will participate to the maximum extent in the award of prime contracts for supplies and services now considered by the Department of Defense to be within their capacity to furnish. SMALL BUSINESS ADMINISTRATION, OFFICE OF THE ADMINISTRATOR, Re S. 2825, to amend the Small Business Act of 1953 to include within the definition of a small business concern certain agricultural enterprises. Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SENATOR FULBRIGHT: Further reference is made to your letter of August 22, 1957, requesting our comments on the captioned bill. S. 2825 is designed to empower this agency to make business loans to four types of enterprises: 1. Corporations engaged in the raising of agricultural products for sale At the present time, all of the Government's loan programs for farmers are administered by the Department of Agriculture. Under its supervision, the Farmers' Home Administration makes loans to individual farmers for operating purposes, for the improvement or purchase of farms, for soil and water conservation, etc. Although corporations engaged in farming are not eligible for assistance under these normal programs, they may obtain loans from the Farmers' Home Administration under emergency conditions, as where their production is disrupted by natural calamity. If a normal loan program is to be established for corporations engaged in farming, it should not, as proposed by S. 2825, be segregated from the closely related lending activities of the Department of Agriculture and delegated to the Small Business Administration. Moreover, this agency lacks the technical knowledge of farming which is indispensable to proper administration of such a program. If the Congress were to delegate the task to us, we should be compelled to call upon the Department for advice in deciding such essential questions as the ability of an applicant to repay, the value and sufficiency of collateral, etc. For the foregoing reasons I believe that, if the Congress finds it desirable to establish a normal loan program for corporations engaged in farming, the duty of administration of such a program should be assigned to the Department of Agriculture. 2. Corporations engaged in the processing or canning of agricultural products for sale This agency has always recognized that the processing or canning of agricultural products for sale are commercial, rather than agricultural, enterprises We have made a large number of business loans, under the provisions of existing law, to firms engaged in such operations. Since this portion of the bill gives the Small Business Administration authority which it already possesses, I do not recommend its enactment. 3. Corporations engaged in the developing, leasing, or sale of farms or lands for the production of agricultural products A corporation which develops, leases, or sells lands to be farmed by others is engaged in a commercial, rather than an agricultural, enterprise. Accordingly it may, if otherwise eligible, obtain a business loan from the Small Business Administration. Since this portion of the bill gives the Administration authority which it already possesses, I do not recommend its enactment. The Loan Policy Board of this Administration, in the exercise of the discretion conferred upon it by section 204 (d) of the Small Business Act of 1953, has established the principle that financial assistance is not to be given which will provide funds for speculation in any kind of property, real or personal, or which will free funds for such speculation. A loan application from a corporation engaged in this third type of enterprise would, of course, be examined in the light of that principle. 4. Individuals, cooperatives, partnerships, associations, or other entities engaged in the sale of agricultural products Taken literally, this portion of the bill would seem to entitle farmers to loans from the Small Business Administration since they are engaged in the sale, as well as the production, of agricultural products. I feel sure, however, that such is not the intent. The purpose, I believe, is to benefit concerns which buy agricultural products for resale. |