To amend the Internal Revenue Code of 1986 to permanently extend existing elective tax treatment for Alaska Native Settlement Trusts.

Mr. Speaker, recently, I introduced H.R. 2320, which would make permanent the provisions of Section 646 of the Internal Revenue Code. Currently, these provisions are slated to expire on December 31, 2012.

In 1971, Congress passed, and President Nixon approved, landmark legislation known as the Alaska Native Claims Settlement Act (ANCSA). This legislation settled the aboriginal land claims of Native Alaskans in exchange for land selection rights and cash. The law was, and is, a bold and organic national experiment in Native land claims settlement. However, it has needed revision and refinement many times since. 1971. I am proud to have worked with my colleagues over the past several years to accomplish these improvements.

In 1988, Congress enacted legislation to authorize Alaska Native corporations to establish ``settlement trusts.'' Their purpose was to provide benefits to Alaska Natives and permit a legal structure that would protect and preserve, for current and future Alaska Native generations, much of the value of the land claims settlement. The original ANCSA required Native groups to form Alaska state law corporations to receive, administer, and distribute the ANSCA settlement, and the 1988 legislation was recognition that the corporate form had not always been well-suited to this task. In part, this was due to the federal tax problems that attend the corporate form, although ironically in the years after 1988, it became apparent that the federal tax rules relative to trusts present their own complexities and problems that discouraged the use of settlement trusts.

Congress enacted Section 646 of the tax code to address these problems. Section 646 provides for an elective regime for Alaska Native settlement trusts that (i) provides for a trust level tax at various rates ranging up to 10% in lieu of beneficiary level taxes; (ii) allows contributions to be made to these trusts on a tax favored basis; and (iii) streamlines administrative reporting for these trusts. When adopted, this elective treatment initially provided significant incentives to the use of settlement trusts to further the ANCSA settlement, and Alaska Native corporations utilized this provision to provide benefits through Alaska Native stettlement trusts.

As I mentioned earlier, Section 646 is scheduled to sunset on December 31, 2012, despite the positive effects it has had for the Alaska Native community. The principal aim of settlement trusts is to provide funds to the Alaska Native beneficiaries. These beneficiaries are among the most economically disadvantaged persons in our country. Section 646 has worked well to provide an incentive for the use of settlement trusts, and must be continued.

However, the looming expiration of Section 646 has had a chilling effect in recent years upon the establishment of new Alaska Native settlement trusts. Alaska Native corporations have no desire to exchange the corporate tax

problems they already face for the tax problems accompanying the trust form that they will face if Section 646 is allowed to sunset.

I introduced H.R. 2320 because a permanent extension of Section 646 will immediately remove the disincentive presented by the sunset of Section 646 for Alaska Native corporations to use settlement trusts to provide benefits to their Alaska Native shareholders.

I would like to note to my colleagues that the fact that Section 646 is not already a permanent part of the tax code is a result of its unique procedural history, rather than a result of any substantive determination as to its merits or revenue concerns about its cost. Section 646 was originally enacted, along with several other provisions, as an unrelated, miscellaneous provision as part of the 2001 tax legislation which, because of the need to use the budget reconciliation process, was subject to a December 31, 2010 sunset provision. Rather than subsequently being made permanent similar to other unrelated, miscellaneous provisions in the 2001 tax legislation, Section 646 was extended for two years along with the 2001 individual tax rate reductions as part of the 2010 year-end tax legislation such that it is now scheduled to expire on December 31, 2012. Once again, the decision to enact a two-year extension (rather than a permanent extension) was not attributable to substantive or revenue considerations relating to Section 646 itself. Rather, it followed from a decision to enact a simple two-year extension of all of the expiring 2001 provisions without assessing the merits of alternative extension periods for each expiring provision being extended. Thus, it is fair to say that the current non-permanent status of Section 646 is an accident of the legislative process and that no Member has ever suggested that the provision should not be made permanent. Further, there was wide support for the permanency provision in the last Congress. H.R. 2320 would simply remedy this accident of the legislative' process and make permanent a provision that should have originally been enacted as such.