10 or fewer, the election shall be treated as a valid election, and the 'poration shall be treated as an electing small business corporation the year of the election and all succeeding years (unless, even ough sec. 1371(c) is applicable, the election has been terminated any reason) if the corporation and the shareholders meet the reirements of subsections (b) and (c) of section 23 of the bill. The lier effective date provided in subsection (a) is also available in >se situations where the initial election was valid, but where a ternation in a subsequent taxable year beginning before January 1, 60, is attributable solely to the fact that, by counting a husband d wife owning stock in joint form or as community property as two areholders, the corporation had more than 10 shareholders and thus led to meet the definition of a small business corporation. In such case, if the corporation and shareholders elect and consent as proled in subsections (b) and (c) of section 23 of the bill, such terminaon shall be disregarded, and such corporation shall be treated as an cting small business corporation for the year of the termination d all succeeding years (unless, even though sec. 1371 (c) is applicable, e election has been terminated for any reason). (b) Election and consent by corporations; consent by shareholders.bsection (b) of section 23 of the bill prescribes rules which must be mplied with if the earlier effective date provided in subsection (a) to apply with respect to any electing small business corporation d its shareholders. Subsection (b)(1) provides that the earlier effective date for section 71(c) shall not apply unless the corporation elects, within 1 year ter the date of the enactment of the bill, to have the earlier effective te apply and consents to the application of subsection (c) (relating tolling of statutes of limitations). Both the election to have the ovisions of subsection (a) apply and the consent to the application subsection (c) are to be made in such manner as the Secretary of e Treasury or his delegate prescribes by regulations. Under subsection (b)(2), each shareholder of the corporation must nsent to the corporation's election, and must also consent to the >plication of subsection (c), within 1 year after the date of the actment of the bill. These consents, which must be filed in such anner and at such time as the Secretary of the Treasury or his delete prescribes by regulations, are required of each person who is a areholder of the corporation on the date the corporation makes e election under subsection (b) (1), and of each person who was a areholder of the corporation at any time during any taxable year the corporation beginning after December 31, 1957, and ending efore the date of such election. It is contemplated that the election nd consent by the corporation under subsection (b) (1) and the conents by its shareholders under subsection (b) (2) will be filed together. (c) Tolling of statutes of limitations. Subsection (c) of section 23 the bill provides for a tolling of the statutes of limitations with espect to (1) the assessment of deficiencies, and (2) the credit or fund of overpayments, which are attributable to the application of he earlier effective date provided in subsection (a). Subsection (c)(1) provides that if the assessment of any deficiency gainst the corporation making such election, or against any shareolder of such corporation who consents to such election, for any taxble year is prevented, at any time on or before the expiration of 1 year after the date of such election, by the operation of any law or rak of law, assessment of such deficiency may, nevertheless, be made, t the extent such deficiency is attributable to the application of subsection (a), at any time on or before the expiration of such 1-year period. share Subsection (c) (2) provides that if credit or refund of any overpar ment of tax by the corporation making such election, or by any holder of such corporation who consents to such election, for any tar able year is prevented, at any time on or before the expiration of 1 year after the date of such election, by the operation of any law or rule of law, credit or refund of such overpayment may, nevertheless, be allowed or made, to the extent such overpayment is attributable to the application of subsection (a), if claim therefor is filed on or before the expiration of such 1-year period. SECTION 24. CERTAIN LOSSE SUSTAINED IN CONVERT. ING FROM STREET RAILWAY TO BUS OPERATIONS Section 24 of the bill, which is a new section added to the bill s passed by the House, relates to certain losses sustained in converting from street railway to bus operations. (a) In general. Subsection (a) of section 24 of the bill provides that if a corporation has a net operating loss for the taxable yes ending December 31, 1953, or the taxable year ending December 31, 1954, principally as the result of conversion from street railway to bus operations with respect to part or all of the company's operations then its unused conversion loss (as defined in subsec. (b)) will be subject to the treatment provided in subsection (c). (b) Unused conversion loss defined. Subsection (b) of section 24 the bill defines an "unused conversion loss" as the aggregate of the net operating losses for the taxable years ending December 31, 195 and 1954, reduced to the extent that they have been used as De operating loss carryovers or carrybacks to reduce taxable income for any taxable year beginning before January 1, 1960. (c) Treatment of unused conversion loss. Subsection (c) of section 24 of the bill provides that if a taxpayer has an unused conversion loss, it shall be treated by such taxpayer as a net operating loss for the taxable year ending December 31, 1959, in determining the amoun of the net operating loss carryover from such taxable year to each ot the 5 taxable years following such taxable year. Subsection applies, however, only for years in which the taxpayer is engaged the furnishing or sale of transportation (as defined in sec. 1503 (c)(1)(4 of the 1954 Code). (d) Regulations.-Subsection (d) of section 24 of the bill authorise the Secretary of the Treasury or his delegate to prescribe by regulation such rules as may be necessary to carry out the purposes of th section. SEC IN C S 'ION 25. PENSION PLAN OF LOCAL UNION NO. 435, TERNATIONAL HOD CARRIERS' BUILDING AND MMON LABORERS' UNION OF AMERICA tion 25 of the bill, which is a new section added to the bill as d by the House, provides that the pension plan of Local Union 135 of the International Hod Carriers' Building and Common rers' Union of America, which was negotiated to take effect May 50, pursuant to an agreement between such union and the BuildTrades Employers Association of Rochester, N.Y., shall be held considered to have been a qualified trust under section 401 (a) of Internal Revenue Code of 1954, and to have been exempt from tion under section 501 (a) of such code, for the period beginning - 1, 1960, and ending April 20, 1961, but only if it is shown to the faction of the Secretary of the Treasury or his delegate that the has not in this period been operated in a manner which would ardize the interests of its beneficiaries. TION 26. CONTINUATION OF A PARTNERSHIP YEAR OR SURVIVING PARTNER IN A TWO-MAN PARTNERHIP WHERE ONE DIES a) Close of taxable year of two-man partnership when one partner -Paragraph (1) of subsection (a) of section 26 of the bill is a ical amendment the effect of which is to designate the text of tion 188 of the Internal Revenue Code of 1939 as subsection (a) section 188. ). Paragraph (2) of subsection (a) of section 26 of the bill amends tion 188 of the Internal Revenue Code of 1939 (relating to different cable years of partner and partnership) by adding a new subsection The new subsection (b) provides that for purposes of chapter 1 the 1939 Code, if the surviving partner so elects within 1 year after e date of enactment of this bill, the death of one of the partners of partnership consisting of two members shall not result in the rmination of the partnership or in the closing of the taxable year of e partnership with respect to the surviving partner prior to the ne the partnership year would have closed if neither partner had ed or disposed of his interest. (b) Effective date, etc.-Subsection (b) of section 26 of the bill prodes that the amendments made by section 26 of the bill are to apply ith respect to taxable years of a partnership beginning after Decemer 31, 1946, to which the Internal Revenue Code of 1939 applies. ubsection (b) further provides that if refund or credit of any overayment resulting from the application of the amendment made by ew section 188 (b) (including interest, additions to the tax, and addiional amounts), is prevented on the date of enactment of this bill, r within 1 year from such date, by the operation of any law or rule of law (other than sec. 3760 of the Internal Revenue Code of 1939 or sec. 7121 of the Internal Revenue Code of 1954, relating to closing greements, and other than sec. 3761 of the Internal Revenue Code of 1939 or sec. 7122 of the Internal Revenue Code of 1954, relating to compromises), such refund or credit or such overpayment, mar nevertheless, be made or allowed if claim therefor is filed within! year after the date of enactment of this bill. Furthermore, no terest shall be allowed or paid on any overpayment resulting from the enactment of this section. SECTION 27. TREATIES Section 7852 (d) of the 1954 Code provides that no provision of the 1954 Code shall apply in any case where its application would be contrary to any treaty obligation of the United States in effect o August 16, 1954. The bill as passed by the House provided that see tion 7852(d) would not apply in respect of any amendment made by the bill, thus providing that in the event there was any conflict with any treaty provision (whether or not such provision was in effect of August 16, 1954) the provisions of the bill would govern. Your com mittee has stricken this provision and substituted for it an amend ment providing that no provision of the bill shall apply in any case where its application would be contrary to any treaty obligation of the United States. CHANGES IN EXISTING LAW In the opinion of the committee, it is necessary, in order to expedite the business of the Senate, to dispense with the requirements of subsection 4 of rule XXIX of the Standing Rules of the Senate (relating to the showing of changes in existing law made by the bill, as reported). 1049 DIVIDUAL VIEWS OF SENATORS HARRY F. BYRD, We oppose section 2 of the 1962 revenue bill (H.R. 10650) which Our opposition to this section of the bill is based on firm convictions er full consideration of views expressed by competent witnesses in haustive hearings, and those expressed in voluminous correspondce from the general public. We have given closest possible study to statements in behalf of the ministration's recommendations made before the Senate Finance mmittee which, in some respects, are at variance with provisions w in the section. Before adopting the "investment credit" (sec. 2) provisions as rerted, the Senate must consider the fact that the Internal Revenue rvice on July 11, 1962, substantially revised its regulations to celerate regular depreciation. Our position is in accord with views of a vast number of citizens, cluding those representing industry, business, labor, and agriculture roughout the Nation, who have testified and counseled for rejection the provisions of section 2. Hearings on the pending bill were held over a period of 4 months, d a substantial portion of the testimony taken was directed to ction 2. Generally, our conclusions may be summarized, but the tail must be considered, too. In summary, we oppose "investment credit" as it would be provided section 2 for numerous reasons including the facts that (1) It would be a subsidy in the nature of a windfall to be given to businesses which comply with a Government policy. (2) It would be discriminatory in its application among various businesses, even among those similar in kind. (3) Its value and its need as a stimulant to so-called "economic growth" are both questionable and doubtful. (4) Its continuing cost would be heavy and it would increase the Federal deficit in the current fiscal year. WOULD INCREASE DEFICIT There was a Federal deficit of $6.3 billion in fiscal year 1962 which (1) The Federal deficit in the current fiscal year 1963 will be more than $3.9 billion, excluding the effect of this bill. |