CONTENTS ADMINISTRATION WITNESS Page Aidinoff, M. Bernard, partner, Sullivan & Cromwell American Bar Association, Hugh Calkins, chairman, tax section American Institute of Certified Public Accountants, Frank O'Connell, Jr., Andrews, William D., Eli Goldston professor of law, Harvard University Auerbach, Alan J., professor of economics, University of Pennsylvania Calkins, Hugh, chairman, section of taxation, American Bar Association........ 158 391 391 174 245 Cohen, Edwin S., partner, Covington & Burling on behalf of the Chamber of Collinson, Dale S., chairman, tax section, New York State Bar Association Eustice, James S., professor of law, New York University.... Faber, Peter L., partner, Kaye, Scholer, Fierman, Hays & Handler. Hoffman, Arthur S., chairman, tax executive committee, New York State Jacobs, Robert A., managing director, Milgrim, Thomajan, Jacobs & Lee........... Kaye, Scholer, Fierman, Hays & Handler, Peter L. Faber, partner...... Kiefer, Donald W., special in public finance, Economics Division, Congression- al Research Service, Library of Congress Low, Evelyn, vice chairman, taxation section, State Bar of California........ 245 262 343 232 282 New York State Bar Association, Dale S. Collinson, chairman, tax section. 212 343 O'Connell, Frank, Jr., chairman, American Institute of Certified Public Ac- 329 Roche, James M., partner, McDermott, Will & Emery 282 Schiff, Hardin & Waite, Samuel C. Thompson, Jr., partner.. 305 State Bar of California, Evelyn Low, vice chair, taxation section.. 232 192 Thompson, Samuel C., Jr., partner, Schiff, Hardin & Waite.. Page Prepared statement of New York State Bar Association. 214 234 248 Prepared statement of Peter L. Faber 264 Prepared statement of James M. Roche. 284 Prepared statement of Samuel C. Thompson, Jr. 307 Prepared statement of Frank J. O'Connell, Jr... 331 Prepared statement of New York State Society of CPA's.. 346 Prepared statement of Robert A. Jacobs..... 360 Prepared statement of Nicholas Tomasulo. 381 Prepared statement of Richard L. Bacon 393 The subcommittee met, pursuant to notice, at 9:39 a.m., in room SD-215, Dirksen Senate Office Building, Hon. John Chafee (chairman) presiding. Present: Senators Chafee and Danforth. [The press release announcing the hearing and background material on Tax Reform Proposals: Corporate Taxation and an opening statement of Senator Dole follow:] [Press Release No. 85-056, Wednesday, July 17, 1985] COMMITTEE ON FINANCE HEARING ON SUBCHAPTER C SCHEDULED FOR SEPTEMBER 30 Senator Bob Packwood (R-Oregon), Chairman of the Senate Committee on Finance, announced today that the Subcommittee on Taxation and Debt Management has scheduled a hearing on the staff recommendations to revise Subchapter C of the Internal Revenue Code that were submitted to the Committee this past May. Chairman Packwood said that the Taxation Subcommittee's hearing is scheduled to begin at 9:30 a.m., Monday, September 30, 1985 in Room SD-215 of the Dirksen Senate Office Building. Senator John Chafee (R-Rhode Island), Chairman of the Subcommittee on Taxation and Debt Management, will preside at the September 30 hearing. The subject of the hearing will be a final staff report that recommended a number of significant revisions to Subchapter C. The report represented the culmination of over two and one-half years of study. A preliminary report was filed with the Committee in September, 1983, and hearings on the recommendations contained in the preliminary report were held in October, 1983. "A great deal of time and study has already gone into the Subchapter C project,” Chairman Packwood said. "I am hopeful that this hearing will provide good, constructive testimony that will help to shape any revisions to this important area of the law." "It should also be noted that the staff proposals contain specific recommendations relating to the net operating loss rules," Chairman Packwood added. "At the end of this year, Congress, once again, will be faced with the question of whether to put into effect the 1976 version of Section 382. I hope that this hearing will help to clarify what course of action Congress should take in that difficult area:" Chairman Packwood requested that witnesses include in their testimony cɔmments on the following issues; (1) The proposal to make corporate level tax consequences of a qualified acquisition explicitly elective; (2) The proposed separation of shareholder level tax consequences from the corporate level election, and from the tax consequences to other shareholders; (3) The proposed uniform definitional structure for "qualified acquisitions"; (4) The proposed complete repeal of the so-called General Utilities doctrine, assuming adequate relief is provided in appropriate circumstances; (1) (5) The various forms of relief from the repeal of the General Utilities doctrine that are proposed in the final staff report; (6) Assuming any General Utilities relief should appropriately be limited to small business, should the relief follow along the lines of the final staff report recommendations, or is some alternative form of relief for small business preferable? (7) Regarding net operating losses, the following questions should be addressed: (a) Are the staff proposals preferable to the current law (1954 version) rules limiting net operating loss carryovers? (b) Are the staff proposals preferable to the 1976 version of the rules? (c) Are the staff proposals preferable to the so-called "two-rule" approach (i.e., a separate rule for "mergers" and for "purchases'") or a single "merger" rule approach? (d) Assuming a single "purchase" rule is to be adopted, is the proposed formula based upon the applicable long-term Federal rate the proper limitation rule? (e) Should there be a special "investment company" rule along the lines of the staff proposals? (f) Should built-in gains and losses be treated as proposed? How should built-in depreciation deductions be treated? (g) What should be the proper role of Section 269 if the staff proposals are enacted? What should be the proper role of the special limitations contained in the consolidated return regulations, including the separate return limitations year (SRLY) and consolidated return change of ownership (CRCO) rules? |