Congressional tax agenda: busy and fluid.

• Author: Prysock, Mark
• Position: Washington Insights

Congressional staffers on the House Ways and Means Committee and the Senate Finance Committee must feel a little like Sisyphus: No matter how hard they push the rock, their work is never done. While you might expect the tax-writing committees to take a breather in the wake of the recently enacted $350 billion tax cut bill, that is simply not in the cards. The agenda remains fluid, but there are numerous tax legislative items we expect these two committees to consider in the coming months.

First, they will take up Medicare reform, and how to provide seniors with a new prescription drug benefit. Both the House and the Senate have announced an ambitious timetable to complete this legislation by the July 4 recess. The major debate will center on providing all seniors with the option of a subsidized prescription drug benefit. Another, related issue will be the offsets that Congress may include to keep the total cost below $400 billion.

Then the House Ways and Means Committee is expected to take up HR 1776, legislation that builds on the retirement savings reforms included in the 2001 tax cut package. The bill accelerates some provisions of the 2001 law, including scheduled increases in contribution limits for IRAs and qualified plans. It also proposes several new reforms, including provisions dealing with minimum required distributions, retiree health and incentives for retirees to take annuities.

Finally, the bill includes a provision to permanently replace the 30-year Treasury rate for purposes of pension plan funding and lump-sum payment calculations. The 30-year Treasury issue requires near-term consideration, and both houses are expected to act on a replacement before the year ends.

International Taxation

Of great interest to FEI is the ongoing debate over international tax reform. Congress faces growing pressure to respond to the adverse World Trade Organization (WTO) ruling on the U.S. foreign sales corporation (FSC)/Extraterritorial Income (ETI) tax regimes. The European Union has obtained WTO approval to impose slightly over $4 billion in trade sanctions on U.S. exports if the U.S. does not repeal FSC/ETI.

House Ways and Means Committee Chairman Bill Thomas is likely soon to reintroduce his comprehensive international tax reform legislation, which repeals the FSC/ETI. The new bill will probably include provisions designed to garner support among wavering Republicans, including: a 2 1/2-year extension of the research and development tax...