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MISCELLANEOUS TAX BILLS

WEDNESDAY, OCTOBER 3, 1984

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,

SUBCOMMITTEE ON SELECT REVENUE MEASURES,

Washington, DC.

The subcommittee met at 10:08 a.m., pursuant to notice, in room 1100, Longworth House Office Building, Hon. Fortney H. (Pete) Stark (chairman of the subcommittee) presiding.

Chairman STARK. The Subcommittee on Select Revenue Measures will begin.

The subcommittee meets today to consider a number of miscellaneous bills that cover a wide range of areas. Several of the provisions raise revenues; some of them lose revenues; others are essentially technical and have little in the way of revenue impact.

The subcommittee is not under any official pay-as-you-go rule. It has long been our concern that the subcommittee balance its legislation between revenue losers and gainers. Lest we in some manner add to the deficit.

These hearings are essentially informational in nature since we don't intend to mark these bills up in this session. The bills do, however, represent matters of concern to various members of the committee, and indeed to the Treasury, and, in many cases, they warrant further study.

I ask unanimous consent that the press releases announcing today's hearing be made part of the record. [The press releases follow:]

[Press release No. 16, Friday, Sept. 21, 1984]

HON. FORTNEY H. (PETE) Stark (D., Calif.), CHAIRMAN, SUBCOMMITTEE ON SELECT REVENUE MEASURES, COMMITTEE ON WAYS AND MEANS, ANNOUNCES A PUBLIC HEARING ON MISCELLANEOUS TAX BILLS TO BE HELD ON OCTOBER 3, 1984

The Honorable Fortney H. (Pete) Stark (D., Calif.), Chairman, Subcommittee on Select Revenue Measures, Committee on Ways and Means, U.S. House of Representatives, announces a public hearing on miscellaneous tax bills to be held on Wednesday, October 3, 1984, in the Committee's main hearing room, 1100 Longworth House Office Building, at 10:00 a.m. Testimony will be taken from the Treasury Department and interested members of the public.

Testimony is invited on the following bills:

H.R. 700-(Messrs. Stark, Hance, Dorgan, Frenzel, et al), To define the circumstances under which construction workers may deduct travel and transportation expenses in computing their taxable incomes for purposes of the Federal income tax. H.R. 907-(Messrs. Vander Jagt, Conable, Duncan, Heftel of Hawaii, Jenkins, and Jones of Oklahoma), To amend section 119 of the Internal Revenue Code of 1954 to provide that meals furnished by an employer to an employee may be considered furnished for the convenience of the employer if the meals are furnished on the busi

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ness premises of the employer generally, except under certain conditions whereby meals may be furnished off the business premise of the employer.

H.R. 1343-(Mr. Lowry of Washington), To amend section 593 of the Internal Revenue Code of 1954 to provide greater equity in the treatment of stock savings banks in relation to the bad debt reserve deduction that is available to mutual savings banks.

H.R. 1773-(Messrs. Duncan of Tennessee, Guarini, Vander Jagt, Gephardt, Matsui, Flippo, Jacobs, et al), To amend the Internal Revenue Code of 1954 with respect to the unrelated business taxable income of certain nonprofit charitable organizations.

H.R. 2129-(Messrs. Matsui, Stark, and Thomas of California), To amend the Internal Revenue Code of 1954 to provide an alternative method of allocation of property taxes for cooperative housing corporations.

H.R. 2256-(Messrs. Matsui, Mineta, and Zschau), To amend the Internal Revenue Code of 1954 to provide that income otherwise eligible to be taken into account in computing the section 936 credit shall not be ineligible merely by reason of being received in the United States.

H.R. 2686-(Messrs. Guarini, Stark and Frenzel), To amend the Internal Revenue Code of 1954 with respect to the treatment of business development companies.

H.R. 3388-(Messrs. Matsui, Thomas of California, and Mr. Fazio), To provide that the provisions of section 252 of the Economic Recovery Tax Act of 1981 (relating to transfers of property to employees subject to certain restrictions) shall apply to certain transfers occurring during 1973.

H.R. 3528-(Mrs. Kennelly), To allow a deduction for certain freight forwarder operating authorities.

H.R. 4167-(Messrs. Jenkins, Fowler, Gephardt, Mrs. Kennelly, Messrs. Matsui, Flippo, Anthony, Philip M. Crane, Archer, Moore, Duncan, Pickle, Hance, Vander Jagt, Dorgan, Campbell, Heftel of Hawaii, et al), To amend the Internal Revenue Code of 1954 to permit individual retirement accounts, qualified retirement trusts and certain educational organizations to invest in working interests in oil and gas properties without incurring unrelated business taxable income. Similar bills: H.R. 821 and H.R. 3820.

H.R. 4507-(Messrs. Foley, Rangel, Stark, Mrs. Kennelly, Messrs. Boland, and Schulze), To amend the Internal Revenue Code of 1954 to allow the investment credit with respect to taxable business conducted by certain religious communities without incurring unrelated business taxable income.

H.R. 4779-(Messrs. Thomas of California, Lagomarsino, Pashayan, and McCandless), To amend the Internal Revenue Code of 1954 to provide that the windfall profit tax shall not apply to an amount of crude oil equal to the amount of residual fuel oil used in tertiary recovery processes. Similar bill: H.R. 3099

H.R. 5022-(Mr. Stark), To amend the Internal Revenue Code of 1954 to provide that percentage depletion shall not be allowable for lease bonuses, advance royalties, or similar payments with respect to oil and gas properties.

H.R. 5199-(Mr. Stark), To amend the Internal Revenue Code of 1954 to clarify that the farm syndicate rules of section 278(b) apply in the case of inedible fruits and nuts.

Details for submission of requests to be heard:

Individuals and organizations interested in presenting oral testimony before the Subcommittee must submit their requests to be heard by telephone no later than noon, Thursday, September 27, 1984, to Harriett Lawler [(202) 225-3627] to be followed by a formal written request to John J. Salmon, Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth Building, Washington, D.C. 20515. Notification to those scheduled to appear will be made by telephone as soon as possible after the filing deadline.

It is urged that persons and organizations having a common position make every effort to designate one spokesperson to represent them in order for the Subcommittee to hear as many points of view as possible. Time for oral presentations will be limited with the understanding that a more detailed statement may be included in the printed record of the hearing. This procedure will afford more time for members to question witnesses. In order to expedite the hearing, witnesses may be grouped as panelists with strict time limitations for each panelist.

Requests to be heard, as well as prepared statements to be presented in person and statements for the printed record of the hearing, must contain the following information:

1. The name, full address, and capacity in which the witness will appear (as well as a telephone number where the or a designated representative may be reached);

2. A list of any clients or persons, or any organization for whom the witness appears; and

3. A topical outline or summary of comments and recommendations.

In order to assure the most productive use of the limited amount of time available to question witnesses, witnesses scheduled to appear before the Subcommittee must comply with the following rules:

1. All witnesses must submit 100 copies of their prepared statements to the full Committee office, 1102 Longworth House Office Building, not later than the close of business, Monday, October 1, 1984.

2. Witnesses should not read their written statements to the Subcommittee, but should instead limit their oral presentations to a summary of the points included in their statements.

3. Not more than five minutes will be allowed for the oral summary.

The Subcommittee wishes to emphasize that failure to comply with these requirements may result in the witness being denied the opportunity to testify in person or being deferred until all other testimony is heard.

Written Statements in lieu of personal appearance:

For those who wish to file written statements for the printed record of the hearing, six copies are required and may be submitted to John J. Salmon, Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth Building, Washington, D.C. 20515, by close of business, Wednesday, October 17, 1984. An additional supply of statements for the printed record may be furnished for distribution to the press and public if supplied to the Committee office before the hearing begins.

[Press release No. 16-revised, Monday, Oct. 1, 1984]

HON. FORTNEY H. (PETE) STARK (D., CALIF.), CHAIRMAN, SUBCOMMITTEE ON SELECT REVENUE MEASURES, COMMITTEE ON WAYS AND MEANS, ANNOUNCES CHANGES IN THE PUBLIC HEARING ON MISCELLANEOUS TAX BILLS TO BE HELD ON OCTOBER 3, 1984

The Honorable Fortney H. (Pete) Stark (D., Calif.), Chairman, Subcommittee on Select Revenue Measures, Committee on Ways and Means, U.S. House of Representatives, announces two changes to the hearing scheduled for Wednesday, October 3, 1984. The following bill was deleted from the list:

H.R. 2256—(Messrs. Matsui, Mineta, and Zschau), To amend the Internal Revenue Code of 1954 to provide that income otherwise eligible to be taken into account in computing the section 936 credit shall not be ineligible merely by reason of being received in the United States.

The following bill was added to the list:

H.R. 3284-(Messrs. Jenkins, Hance, Flippo, Heftel of Hawaii, Schulze, Guarini, and Mrs. Kennelly), To amend the Internal Revenue Code of 1954 to allow an amortization deduction for bus operating rights based on a 60-month period. All other details of the hearing remain the same.

Chairman STARK. I want to emphasize to my colleagues and the members that because of the large number of witnesses, and because of another committee hearing later this afternoon-I think we are scheduled for some 34 witnesses here, so I want to remind everyone that in the announcement we insisted that, with the exception of the Treasury Department, who has to review all of the bills, we will put the full text of prepared remarks in the record but each witness will be held strictly to a 5-minute rule. They may read a 5-minute statement or summarize as they wish. And the Chair-and I am sure other witnesses-would appreciate it if the panels-some panels are somewhat larger than others—would attempt to follow the spirit of that. I don't intend to allow people to yield their 5 minutes to another member of the panel.

Questioning, similarly, by members of the committee, will be held to 5 minutes.

Having said that, our first witness is our distinguished colleague, my neighbor in California, Congressman Robert Matsui.

I have your statements-you, too, Bob-and you may proceed. STATEMENT OF HON. ROBERT T. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. MATSUI. Thank you, Mr. Chairman.

I appreciate the opportunity to appear before you and the subcommittee.

With respect to H.R. 3388, there has been ample testimony on that particular issue over the last 4 years. And I will merely resubmit what I had submitted in prior testimony on that particular issue.

With respect to H.R. 2129, Mr. Chairman, I have submitted a written document dated October 3, and if the chairman or any other subcommittee members have any questions, I would be happy to answer them.

[The prepared statement follows:]

STATEMENT OF HON. ROBERT T. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman, I appreciate the opportunity to appear before the Subcommittee on Select Revenue Measures today in support of the bill H.R. 2129. I introduced this measure to alleviate specific and unintended effects of federal tax law that have adverse consequences for numerous taxpayers.

With respect to H.R. 2129, it should be noted that federal tax law provides that the property tax deduction allocable to a resident of a co-op must be in proportion to each resident's stockholding interest in the corporation that owns the building.

Proposition 13 has created unique tax problems in California as this measure freezes tax assessments until a unit is sold and then requires the new owner to pay the full amount of any increased assessments. Federal law requires however, that any increased assessments be allocated among and subject to deduction by all shareholders, even those shareholder-residents whose assessments on their units did not increase. Therefore, the allowable deduction does not reflect the actual tax liability incurred by each resident.

H.R. 2129 provides a special rule that if a state law requires that the property taxes be allocated other than on the basis of shareholding interest of each resident, the co-op residents are entitled to deduct only the amount of taxes actually paid. A similar provision was contained in the Senate version of the Tax Reform act of 1984 but was not adopted by the Conference Committee because there were objections to other co-op sections with no relation to this provision.

Given the press of our legislative schedule, I hope that my colleagues on the Subcommittee might give this measure their favorable consideration.

Thank you.

Chairman STARK. Thank you very much, Mr. Matsui.

Mr. MATSUI. Thank you.

Chairman STARK. I am familiar with your legislation, and I appreciate your testimony.

Next we have the Honorable William Thomas of California, another member of our committee.

Bill, welcome to the committee. And you may proceed in your own fashion.

STATEMENT OF HON. WILLIAM M. THOMAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. THOMAS. Thank you, Mr. Chairman.

I do want to thank you for this opportunity to testify on H.R. 4779, which is really the latest version of legislation I have been working on since 1981. Since I have been working on it for so long and have not had a hearing, I will not be nearly as short as Mr.

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