[House Report 108-25]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-25
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PROVIDING FOR CONSIDERATION OF H.R. 878, ARMED FORCES TAX FAIRNESS ACT
OF 2003
_______
March 5, 2003.--Referred to the House Calendar and ordered to be
printed
_______
Mrs. Myrick, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 126]
The Committee on Rules, having had under consideration
House Resolution 126, by a record vote of 6 to 4, report the
same to the House with the recommendation that the resolution
be adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for the consideration of H.R. 878,
the Armed Forces Tax Fairness Act of 2003, under a closed rule.
The rule provides one hour of debate in the House equally
divided and controlled by the chairman and ranking minority
member of the Committee on Ways and Means. The rule waives all
points of order against consideration of the bill.
The rule provides that the amendment recommended by the
Committee on Ways and Means now printed in the bill, modified
by the amendment printed in this report, shall be considered as
adopted. Finally, the rule provides one motion to recommit with
or without instructions.
The waiver of all points of order against consideration of
the bill includes a waiver of clause 4(a)(1) of rule XIII
(requiring a three-day layover of the committee report). The
waiver is needed because the Committee on Ways and Means report
(H. Rept. 108-23) was not filed until Wednesday, March 5, 2003
and the bill may be considered in the House as early as
Thursday, March 6, 2003.
COMMITTEE VOTES
Pursuant to clause 3(b) of House rule XIII the results of
each record vote on an amendment or motion to report, together
with the names of those voting for and against, are printed
below:
Rules Committee record vote No. 7
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. Frost.
Summary of motion: To make in order the amendment offered
by Representative Rangel which provides $851 million in tax
relief for the National Guard and Reserves over the next 10
years. Includes an exclusion of gain from the sale of a
principal residence by a member of the uniformed services or
the foreign service. Exempts from gross income certain death
gratuity payments. Includes tax-free treatment for amounts
received under the DOD homeowners assistance program. Expands
combat zone filing rules to contingency operations. Modifies
the membership requirement for exemption from tax for certain
veterans' organizations. Clarifies the treatment of certain
dependent care assistance programs. Suspends tax-exempt status
of terrorist organizations. Provides capital gains relief for
sales of principal residences for members of the military.
Extend IRS user fees. Provides for partial payment of tax
liability installment agreements. Denies certain tax benefits
to individuals when they renounce their US citizenship for tax
purposes.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 8
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. Frost.
Summary of motion: To make in order the amendment offered
by Representatives Frost and Hefley which extends to civilian
employees of the DOD serving in combat zones the tax treatment
given to members of the Armed Forces serving in the same combat
zones. Ensures that additional estate tax will not apply to
civilian employees in case of death. Provides that no tax on
telephone calls originating in a combat zone will apply to
civilian employee phone calls.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 9
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. Frost.
Summary of motion: To make in order the amendment offered
by Representative Frost which allows the INS to conduct
citizenship interviews and other ceremonies for military
personnel stationed abroad. Reduces from three years to two
years the amount of military service required for citizenship
and exempt non-citizen personnel from paying fees related to
naturalization.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 10
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. Frost.
Summary of motion: To make in order the amendment offered
by Representative Frost which removes the $500 cap on the
amount of overnight travel expenses that can be deducted by the
National Guard and Reserves.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 11
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mrs. Slaughter.
Summary of motion: To make in order the amendment offered
by Delegate Bordallo which reconciles the discrepancy in the
Internal Revenue Code between coordination of withholding taxes
for members of the Armed Forces on temporary duty for more than
30 days in a U.S. Territory with those duty stationed therein.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 12
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. McGovern.
Summary of motion: To make in order the amendment offered
by Representative McGovern which denies tax benefits to former
American companies that reincorporate offshore to avoid U.S.
income taxes. Applies to any corporate expatriation transaction
completed after September 11, 2001. Applies to any corporate
expatriation transaction prior to September 11, 2001, but only
with respect to taxable years beginning after December 31,
2003.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 13
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. McGovern.
Summary of motion: To make in order the amendment offered
by Representative McGovern which requires the President to
report to Congress specific information relating to certain
possible costs and consequences of the use of United States
Armed Forces against Iraq.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 14
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. Hastings of Florida.
Summary of motion: To make in order the amendment offered
by Representative Jefferson which allows that in addition to
the exclusion from gross income allowed under Tax Code section
112 (combat zone compensation), for reservists and or their
spouse to exclude up to $30,000 of income, provided the section
112 compensation does not exceed $40,000. Extends the benefits
of section 112 to civilian employees of the DOD.
Results: Defeated 4 to 6.
Vote by Members: Goss--Nay; Linder--Nay; Myrick--Nay;
Sessions--Nay; Reynolds--Nay; Frost--Yea; Slaughter--Yea;
McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 15
Date: March 5, 2003.
Measure: H.R. 878, Armed Forces Tax Fairness Act of 2003.
Motion by: Mr. Goss.
Summary of motion: To report the resolution.
Results: Agreed to 6 to 4.
Vote by Members: Goss--Yea; Linder--Yea; Myrick--Yea;
Sessions--Yea; Reynolds--Yea; Frost--Nay; Slaughter--Nay;
McGovern--Nay; Hastings (FL)--Nay; Dreier--Yea.
SUMMARY OF AMENDMENT CONSIDERED AS ADOPTED
(Summary derived from information provided by amendment
sponsors.)
McInnis/Johnson (CT)/Houghton--Provides a two-year
moratorium on corporate inversions where the corporation has
done little more than change its corporate residence for tax
purposes. Provides that modifications made in the underlying
bill to the orphan drug tax credit will expire after December
31, 2010. Provides that it is the sense of Congress that the
tax laws of the United States are overly complex and burdensome
and that tax reform is needed to address the issue of corporate
expatriation.
TEXT OF AMENDMENT CONSIDERED AS ADOPTED
Redesignate section 302 as section 304 and insert after
section 301 the following new sections (and conform the table
of contents accordingly):
SEC. 302. TAX TREATMENT OF CORPORATE EXPATRIATION.
(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7874. TAX TREATMENT OF CORPORATE EXPATRIATION.
``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity
is treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall
be treated for purposes of this title as a domestic
corporation.
``(2) Inverted domestic corporation.--For purposes of
this section, a foreign incorporated entity shall be
treated as an inverted domestic corporation if,
pursuant to a plan (or a series of related
transactions)--
``(A) the entity completes after March 4,
2003, the direct or indirect acquisition of
substantially all of the properties held
directly or indirectly by a domestic
corporation or substantially all of the
properties constituting a trade or business of
a domestic partnership,
``(B) after the acquisition at least 80
percent of the stock (by vote or value) of the
entity is held--
``(i) in the case of an acquisition
with respect to a domestic corporation,
by former shareholders of the domestic
corporation by reason of holding stock
in the domestic corporation, or
``(ii) in the case of an acquisition
with respect to a domestic partnership,
by former partners of the domestic
partnership by reason of holding a
capital or profits interest in the
domestic partnership, and
``(C) the expanded affiliated group which
after the acquisition includes the entity does
not have substantial business activities in the
foreign country in which or under the law of
which the entity is created or organized when
compared to the total business activities of
such expanded affiliated group.
``(3) Termination.--This subsection shall not apply
to any acquisition completed after December 31, 2004.
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but
for subsection (a) would be, treated as a foreign
corporation for purposes of this title.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined
in section 1504(a) but without regard to paragraphs
(2), (3), and (4) of section 1504(b), except that
section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Certain stock disregarded.--There shall not be
taken into account in determining ownership under
subsection (a)(3)(B)--
``(i) stock held by members of the
expanded affiliated group which
includes the foreign incorporated
entity, or
``(ii) stock of such foreign
incorporated entity which is sold in a
public offering related to the
acquisition described in subsection
(a)(3)(A).
``(4) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic
corporation or partnership during the 4-year period
beginning on the date which is 2 years before the
ownership requirements of subsection (a)(3)(B) are met,
such actions shall be treated as pursuant to a plan.
``(5) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers
are part of a plan a principal purpose of which is to
avoid the purposes of this section.
``(6) Special rule for related partnerships.--For
purposes of applying subsection (a)(3)(B) to the
acquisition of a domestic partnership, except as
provided in regulations, all partnerships which are
under common control (within the meaning of section
482) shall be treated as 1 partnership.
``(7) Regulations.--The Secretary shall prescribe
such regulations as may be appropriate to determine
whether a corporation is an inverted domestic
corporation, including regulations--
``(A) to treat warrants, options, contracts
to acquire stock, convertible debt interests,
and other similar interests as stock, and
``(B) to treat stock as not stock.
``(c) Special Rule for Treaties.--Nothing in section 894 or
7852(d) or in any other provision of law shall be construed as
permitting an exemption, by reason of any treaty obligation of
the United States heretofore or hereafter entered into, from
the provisions of this section.
``(d) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or
other noncorporate entities, or other intermediaries,
or
``(2) transactions designed to have persons cease to
be (or not become) members of expanded affiliated
groups or related persons.''.
(b) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end the
following new item:
``Sec. 7874. Tax treatment of corporate expatriation.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after March 4, 2003.
SEC. 303. EXPRESSING THE SENSE OF THE CONGRESS THAT TAX REFORM IS
NEEDED TO ADDRESS THE ISSUE OF CORPORATE
EXPATRIATION.
(a) Findings.--The Congress finds that--
(1) the tax laws of the United States are overly
complex;
(2) the tax laws of the United States are among the
most burdensome and uncompetitive in the world;
(3) the tax laws of the United States make it
difficult for domestically-owned United States
companies to compete abroad and in the United States;
(4) a domestically-owned corporation is disadvantaged
compared to a United States subsidiary of a foreign-
owned corporation; and
(5) international competitiveness is forcing many
United States corporations to make a choice they do not
want to make--go out of business, sell the business to
a foreign competitor, or become a subsidiary of a
foreign corporation (i.e., engage in an inversion
transaction).
(b) Sense of Congress.--It is the sense of Congress that
passage of legislation to fix the underlying problems with our
tax laws is essential and should occur as soon as possible, so
United States corporations will not face the current pressures
to engage in inversion transactions.
Subparagraph (C) of section 45C(b)(2) of the Internal Revenue
Code of 1986 (as proposed to be added by section 208 of the
bill) is amended by adding at the end the following new
sentence: ``The preceding sentence shall not apply with respect
to any expense incurred after December 31, 2010.''.