3 1 2 3 4 5 6 7 8 9 10 11 12 E23 13 14 15 16 17 18 (c) STATUTE OF LIMITATIONS. (1) OVERPAYMENTS.-If refund or credit of any overpayment of tax resulting from the application of subsection (a) is prevented on the date of the enact ment of this Act (or at any time within 6 months after such date of enactment) by the operation of any law or rule of law, refund or credit of such overpayment (to the extent attributable to the application of subsection (a)) may, nevertheless, be made or allowed if claim therefor is filed before the close of such 6-month period. (2) DEFICIENCIES.-If the assessment of any deficiency of tax resulting from the application of subsection (a) is prevented on the date of the enactment of this Act (or at any time within 6 months after such date of enactment) by the operation of any law or rule of law, assessment of such deficiency (to the extent attributable to the application of subsection (a)) may, 19 nevertheless, be made within such 6-month period. 2. Property transferred to employees subject to certain restrictions (sec. 810 of the bill and sec. 83 of the Code) Present Law Under present law, the taxation of property transferred by an employer to an employee as compensation is governed by section 83. Generally, if property (including stock) received is not transferable or is subject to a substantial risk of forfeiture (such as the obligation to perform future services), taxation is postponed until the stock or the property is transferable or is no longer subject to a substantial risk of forfeiture. The Tax Court has ruled that section 16(b) of the Securities Exchange Act of 1934, under which an "insider's" profit may be recovered by a corporation if the stock is sold within six months. of receipt, does not make the stock nontransferable, and therefore does not affect the taxation of the stock. Thus, the value of the stock (less any amount paid) is treated as compensation when received. An employer generally is allowed a business expense deduction equal to the amount includible in the employee's income in its corresponding taxable year (sec. 83 (h)). Reasons for Change The committee believes that the imposition of Federal restrictions, which limit the ability of an “insider" to dispose of stock for a short period of time after receipt, should be taken into account in determining the manner in which the value of the stock should be included in income. Because of mandated restriction on transferability, the com mittee believes it may be inequitable to tax the employee before the restriction lapses. Explanation of Provision Under the provision. a taxpayer who receives stock subject to the application of section 16(b) of the Securities and Exchange Act of 1934 will be treated as being subject to a substantial risk of forfeiture for the 6-month period during which that section applies. Thus, the employee will include in income, and the employer may deduct, at the time the restriction lapses, the difference between the value of the stock at that time and the amount paid for the stock (if any). A similar rule is applicable if the stock is subject to restriction by reason of the need to comply with the "Pooling-of-Interests Accounting" rules set forth in Accounting Series Release Numbered 130 ((10/5/72) 37 FR 20937; 17 CFR 211.130) and Accounting Series Release Numbered 135 ((1/18/73) 38 FR 1734; CFR 211.135). Effective Date The provision will apply to taxable years ending after June 30, 1969. However, for taxable years beginning before January 1, 1982, the provision will apply only if the person receiving the property elects, in accordance with Treasury regulations, to have the provision apply. Revenue Effect This provision is estimated to affect revenues by less than $15 million. Horwith v. Comm'r., 71 T.C. 932 (1979). Chairman STARK. Mr. Duncan. Mr. DUNCAN. Thank you, Mr. Morris. Mr. MORRIS. Thank you very much. Chairman STARK. Mr. Robert J. Frulla, President of Freight Forwarders Institute, testifying on H.R. 3528 STATEMENT OF ROBERT J. FRULLA, PRESIDENT, FREIGHT FORWARDERS INSTITUTE, ACCOMPANIED BY DON EVANS, COUNSEL Mr. FRULLA. Thank you, Mr. Chairman and members of the subcommittee, for the opportunity to appear before you concerning H.R. 3528. My name is Robert J. Frulla. I am president of the Freight Forwarders Institute, a national association of the regulated domestic common carrier freight forwarding industry. With me is Mr. Don Evans, counsel of the association. I would like to make a short summarized statement to you today. I have submitted a longer written statement for the record. Mr. Chairman, the once valuable ICC permits of freight forwarders, like those of motor carriers, have been rendered worthless by deregulation. The Economic Recovery Tax Act of 1981 clarified existing law by providing a deduction for the devalued operating rights of motor carriers. The Freight Fowarders Institute requests the committee's support for H.R. 3528, legislation introduced by Representative Kennelly to provide a similar deduction for freight forwarder operating rights. The legislation is supported by principles of fairness and equity, and by the same sound tax policies underlying the motor carrier legislation. In some important respects, indeed, the case is more compelling for freight forwarders than it is for motor carriers. In every respect, it is at least as compelling. First, meaningful ICC entry restriction of freight forwarders has ended. The grant rate has been effectively 100 percent for several years. De facto, administrative deregulation began earlier and ran deeper for freight forwarders than it did for motor carriers. Second, the statutory entry provisions for freight forwarders are significantly less restrictive, more procompetitive than the governing motor carrier statute. Third, the Motor Carrier Act of 1980, as interpreted and applied by the Interstate Commerce Commission, has had a profound effect on the regulation of freight forwarders. Like much of the motor carrier industry and the American trucking associations, many forwarders and the institute have not always agreed with the full extent of the Commission's interpretation of the statute, but it is, nonetheless, a fact of our economic and regulatory life. In recognition of this fact, the institute has announced its support for legislation, S. 2874, which would formally remove all vestiges of economic regulation of the freight forwarder industry. From the point of view of tax policy, the critical point is that both motor carriers and freight forwarders, whatever the differences in their regulatory situations, have had their certificates rendered worthless by a fundamental change in governmental entry policy. They should be afforded the same tax treatment. The revenue impact of a tax deduction for freight forwarders is approximately $3 million; small in comparison to the impact of the motor carrier provisions. The Freight Forwarders Institute requests the committee's support for legislation to give forwarders the same ordinary deduction for their permits as that already provided for the certificates of motor carriers. Thank you, Mr. Chairman. I would be happy to answer any questions. [The prepared statement follows:] STATEMENT OF ROBERT J. FRULLA, PRESIDENT, FREIGHT FORWARDERS INSTITUTE The once-valuable ICC permits of freight forwarders, like those of motor carriers, have been rendered worthless by deregulation. The Economic Recovery Tax Act of 1981 clarified existing law by providing a deduction for the devalued operating rights of motor carriers. The Freight Forwarders Institute requests the Committee's support for H.R. 3528, legislation introduced by Rep. Kennelly to provide a similar deduction for freight forwarder operating rights. The legislation is supported by principles of fairness and equity-and by the same sound tax policies underlying the motor carrier legislation. In some important respects, indeed, the case is more compelling for freight forwarders that it is for motor carriers. In every respect, it is at least as compelling. 1. Meaningful ICC entry restriction of freight forwarders has ended. The grant rate has been effectively 100 percent for several years. De facto, administrative deregulation began earlier and run deeper for freight forwarders than it did for motor carriers. 2. The statutory entry provisions for freight forwarders are significantly less restrictive, more pro-competitive, than the governing motor carrier statute. 3. The Motor Carrier Act of 1980, as interpreted and applied by the Interstate Commerce Commission, has had a profound effect on the regulation of freight forwarders. Like much of the motor carrier industry and the American Trucking Associations, many forwarders and the Institute have not always agreed with the full extent of the Commission's interpretation of the statute, but it is nonetheless a fact of our economic and regulatory life. In recognition of this fact, the Institute has announced its support for legislation (S. 2874) which would formally remove all vestiges of economic regulation of the freight forwarder industry. From the point of view of tax policy, the critical point is that both motor carriers and freight forwarders, whatever the differences in their regulatory situations, have had their certificates rendered worthless by a fundamental change in governmental entry policy. They shoud be afforded the same tax treatment. The revenue impact of a tax deduction for freight forwarders is approximately 3 million dollars-small in comparison to the impact of the motor carrier provisions. The Freight Forwarders Institute requests the Committee's support for legislation to give forwarders the same ordinary deduction for their permits as that already provided for the certificates of motor carriers. STATEMENT Thank you Mr. Chairman and members of the Subcommittee for the opportunity to appear before you concerning H.R. 3528. I appear to request on behalf of the Freight Forwarders Institute that the sound principles underlying the deduction for motor carrier operating rights also be applied to freight forwarders. My name is Robert J. Frulla. I am President of the Freight Forwarders Institute, a national association of the regulated, domestic, common-carrier freight forwarding industry. Though perhaps less well recognized than other common carriers, freight forwarders are an integral part of our surface freight transportation system. A forwarder takes freight from shippers, usually in small shipments, combines it with freight of |