Madam Speaker, pursuant to House Resolution 616, I call up the bill (H.R. 4453) to amend the Internal Revenue Code of 1986 to make permanent the reduced recognition period for built-in gains of S corporations, and ask for its immediate…
Madam Speaker, pursuant to House Resolution 616, I call up the bill (H.R. 4453) to amend the Internal Revenue Code of 1986 to make permanent the reduced recognition period for built-in gains of S corporations, and ask for its immediate consideration.
Madam Speaker, I ask unanimous consent that all Members have 5 legislative days in which to revise and extend their remarks and to include extraneous material on H.R. 4453.
Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I rise today to urge support for H.R. 4453, the S Corporation Permanent Tax Relief Act of 2014.
Since we started the tax reform process in January of 2011, one of the main themes coming up again and again is the need for certainty for individuals to plan and businesses to thrive. Nowhere is this more true than for small businesses.
Pass-through businesses, like S corporations, account for more than half of all jobs in the United States. In my home State of Washington, they are particularly important, providing 1.4 million jobs, with S corporations providing more than one in four private sector jobs.
Permanence in the tax law is especially important for these privately-held businesses because they can't go to the public markets every time they want to invest in new equipment or hire workers. They need certainty to plan how to most effectively deploy their capital.
A perfect example of an area of the Tax Code that is ripe for permanence, so that S corporation businesses can plan to access and redeploy their own capital, is the built-in gains, or BIG, relief provision that is before us today.
The BIG tax, as it is called, is a double tax on S corporations that want to sell their assets after converting from C corporation status. Currently, S corporations have to wait 10 years after converting before selling their assets to avoid the punitive double tax.
Traditional year-to-year tax extender legislation has reduced this holding period to 5 years, holding to the original antiabuse intent of the rule, yet providing significant relief for businesses nationwide. H.R. 4453 would permanently reduce that holding period to 5 years.
As we heard from Jim Redpath, a small business witness who is an accountant--he testified before one of our Ways and Means hearings several weeks ago--the BIG tax causes S corporations to hold on to unproductive or old assets that should be replaced.
He gave the example of a road contractor that is holding onto old equipment and trucks that are sitting in the junkyard that he can't sell. He can't even sell them for parts. Rather than selling them, if he did, they would be subject to the BIG tax, the double tax that I talked about earlier.
The other impact here is, if businesses are allowed to sell these assets and used equipment, it would benefit other small businesses, starting businesses, for example, that may not be able to afford the newest and the latest equipment and technology, but they can start their businesses with used equipment.
Instead of selling assets and using the proceeds to hire new workers or invest in new equipment, businessowners sit on the sidelines. This is a perfect example of Tax Code influencing business decisions, and this needs to stop.
According to the IRS, tens of thousands of corporations convert to C corporations each year. We can't continue to leave this capital locked up. We need to give it back to the small businesses that make this country thrive.
The second part of this bill is also a commonsense provision that will give S corporations certainty in the value of their charitable donations. The S corporation charitable basis adjustment provision simply ensures that S corporations get the same value for their deductions as all other small businesses.
These two commonsense provisions will give S corporations the certainty they need to create jobs and grow our economy in this country.
Madam Speaker, I reserve the balance of my time.
Madam Speaker, I yield as much time as he may consume to the gentleman from Michigan (Mr. Camp), the distinguished chairman of the Ways and Means Committee.
Madam Speaker, I yield as much time as she may consume to the gentlewoman from Kansas (Ms. Jenkins), who is also a member of the Ways and Means Committee.
Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I insert in the Record a letter of support signed by 35 different organizations in support of this legislation. These signees include organizations as diverse as the National Grocers Association, the National Electrical Contractors Association, and the Association for Manufacturing Technology.
June 11, 2014.
Pass the S Corporation Permanent Tax Relief Act of 2014
Dear Member of the U.S. House of Representatives: As
representatives of America's closely-held businesses, we ask
that you support legislation (H.R. 4453) making permanent the
5-year recognition period for built-in gains, as well as the
basis adjustment for charitable giving by S corporations.
Small businesses are the engine of America's economic
growth and S corporations are the cornerstone of the small
business community. There are more than 4.5 million of them
nationwide. They are in every community and every industry
and, according to Ernst & Young, they employ one out of every
four private sector workers.
Unlike public corporations, these closely-held businesses
have little or no access to the capital markets. Instead they
rely on banks, relatives, and their own savings to fill their
investment and working capital needs. An overly long built-in
gains recognition period makes this disadvantage worse by
preventing companies that have chosen to become S
corporations from accessing their own capital and putting it
to better use.
Locking up a company's capital for an entire decade is
simply unreasonable. Past Congresses have recognized that a
decade is too long and voted to reduce the recognition period
on three separate occasions, but those temporary measures
have expired and the 10-year rule is back in effect.
Enacting a permanent shorter recognition period would
sustain the original intent of the rule while providing S
corporations with much needed certainty. It would allow them
to make decisions based on what is best for the company
rather than the dictates of the tax code. At a time when our
economy badly needs increased investment, allowing more
companies to access their own, locked-up capital is an
important step.
Furthermore, making permanent the basis adjustment to stock
of S corporations that make charitable contributions of
property would help bring consistent treatment among flow-
through businesses, and would allow America's S corporations
to be more active and supportive of much-needed charitable
activities.
On behalf of America's Main Street business community, we
respectfully ask that you vote in favor of the S Corporation
Permanent Tax Relief Act of 2014.
Thank you for your consideration.
Aeronautical Repair Station Association, Air Conditioning
Contractors of America, Agricultural Retailers Association,
American Council of Engineering Companies, American Institute
of Architects, American Rental Association, American Supply
Association, American Trucking Associations, Associated
Builders and Contractors, Inc., Associated Equipment
Distributors, Associated General Contractors of America, Auto
Care Association, Financial Executives International, Food
Marketing Institute, Heating, Air-conditioning and
Refrigeration Distributors International, Independent
Community Bankers of America, Independent Electrical
Contractors.
Metals Service Center Institute, National Association of
Wholesaler-Distributors, National Beer Wholesalers
Association, National Electrical Contractors Association,
National Federation of Independent Business, National Funeral
Directors Association, National Grocers Association, National
Lumber and Building Material Dealers Association, National
Roofing Contractors Association, National Small Business
Association, S Corporation Association, Small Business
Council of America, Small Business Legislative Council,
Subchapter S Bank Association, The Association For
Manufacturing Technology, Truck Renting and Leasing
Association, United States Business and Industry Council,
Wine & Spirits Wholesalers of America.
Small businesses across the country recognize just how crucial it is to give access to capital to businesses in our struggling economy today.
I reserve the balance of my time.
Mr. Speaker, I yield myself such time as I may consume.
The gentleman from Maryland spoke very eloquently on this topic. I just want to note that his past action shows something a little bit different. He has voted for this provision three times in the past.
No, I will not.
I will not yield my time.
Point of Order
Mr. Speaker, I would still say that the gentleman from Maryland--to clarify my point--has voted for the extension of these policies three times for a total of 8 years, and that is a fact. That is part of the voting record.
I do not yield.
Mr. Speaker, I would just reiterate that the gentleman has voted for this extension of this policy three separate times for a period lasting 8 years.
I reserve the balance of my time.
Mr. Speaker, I yield such time as he may consume to the gentleman from Michigan (Mr. Camp), the chairman of the committee.
I am. I have no other speakers.
Mr. Speaker, how much time do I have remaining?
Mr. Speaker, just to be honest, I also might want to mention that Mr. Levin has voted five times to extend these policies, for a total of 12 years.
Congress--Democrats and Republicans--have repeatedly reauthorized these tax policies without paying for them. Democrats have agreed with the policy of these bills before us today. Making them permanent gives businesses certainty that they will always be a part of the Tax Code, and it is a more honest way of budgeting. Increasing taxes to pay for these policies makes no sense.
We all agree that small businesses impacted by my bill need more access to their capital, which my bill gives them. Making the policies in this bill permanent, while raising taxes in the area of the economy, defeats the purpose of freeing up capital in a way that encourages job creation and moves the economy ahead.
Again, Mr. Speaker, this legislation will give businesses what they have been asking for since I came to Congress, and that is the certainty in the Tax Code, so that the Tax Code is working for them and they are not working for the Tax Code, so they can plan ahead, so they can grow their business, so they can hire more workers, and so that we can get this economy moving again and get people back to work.
In order to do that, Mr. Speaker, they need the ability to access their capital, so they can invest, again, in their businesses; reenergize their businesses; buy new equipment; sell new equipment; create jobs; and, again, grow the economy.
So I urge my colleagues to vote for the bill before us today, and I yield back the balance of my time.