Tax reform: battle lines being drawn.

• Author: Davila, Serena
• Position: Washington insights - United States. Congress. House. Committee on Ways and Means

The Chairman of the House Ways and Means Committee, Rep. Charles Rangel, recently introduced H.R. 3970, The Tax Reduction and Reform Act of 2007. The legislation is considered one of the biggest tax reform proposals in decades.

The first major provision of the bill includes a cut in the corporate income tax rate from 35 percent to between 30 and 31 percent. A second major provision would repeal the individual alternative minimum tax (AMT). These two provisions could be good for lots of businesses. However, it is the revenue offsets needed to pay for the legislation that gives companies heartburn.

FEI's Committee on Private Companies' (CPC) Policy Subcommittee and FEI's Committee on Taxation (COT) are monitoring the legislation. A coalition of business associations, including FEI's CPC Policy Subcommittee, sent a letter to Chairman Rangel making it clear that several of the offsets would hurt smaller public companies and private companies.

Debate Likely for Months

Rangel is realistic in acknowledging that the bill isn't likely to make great strides or become law this year, but constituencies that will be impacted by the legislation would be wise to be prepared to speak out against some or all of its provisions, as the issues will likely continue to surface on Capitol Hill for months to come. Since the full AMT repeal isn't likely to come up for a vote this year, a one-year "patch" to the individual AMT is considered far more likely to succeed.

The need for individual AMT provisions to be addressed quickly is being underscored by the Internal Revenue Service and the Treasury Department. Treasury Secretary Henry M. Paulson has expressed concern that Congress address the AMT patch as quickly as possible so tax forms are ready for the 2008 tax season. There has also been recent correspondence to Chairmen Rangel and Sen. Max Baucus, and Ranking Members Rep. Jim McCrery and Sen. Charles Grassley, from acting IRS Commissioner Linda Stiff concerning the need to act on the individual AMT as quickly as possible.

In her letter, Stiff emphasized that the IRS must rely on enacted law to make the appropriate changes to its forms and computer systems. The IRS estimates that from the date of enactment of a new law, it takes approximately 10 weeks to begin processing forms.

Rangel has also introduced H.R. 3996, The Temporary Tax Relief Act of 2007, which offers a one-year extension on the individual AMT. Rangel has acknowledged that Congress would need to...