November 8, 1997
The Administration supports House passage of H.R. 2513, if the bill includes
appropraite offsets. This bill would restore and modify two provisions of the
Taxpayer Relief Act of 1997 that were canceled by the President pursuant to the
Line Item Veto Act.
One of the provisions establishes a one-year rule that would allow deferral of U.S. tax on certain financial services income from active overseas operations in the insurance, banking, financing or similar business. The provision was canceled by the President because, as originally drafted, it would have permitted abuse and created loopholes. Modifications (along the lines proposed by the Treasury Department before the original legislation was passed) address these problems in the revised provision of H.R. 2513.
The other provision allows a taxpayer to defer recognition of gain on the sale of stock of a qualified refiner or processor to an eligible farmer's cooperative. The provision was canceled by the President because, as originally drafted, it was poorly targeted and susceptible to abuse. The revised provision in H.R. 2513 contains a number of safeguards and limitations that will prevent abuse and help target the benefits to small- and medium-size farmers' and cooperatives.
The Balanced Budget Act of 1997 reduced the PAYGO balances to zero. Consequently, any bill that would increase mandatory spending or result in a net revenue loss would contribute to a sequester of mandatory programs as called for in the Budget Enforcement Act. In the case of H.R. 2513, the Administration understands that the bill now contains offsets that would direct the sale of excess stockpiles of platinum and palladium from the Department of Defense and end the reimbursement of certain health care costs for overseas employees of the State Department. The Administration is concerned that the described are unlikely to be sufficient to offset the costs contained in the bill. If the bill were enacted, any deficit effects could contribute to a sequester of mandatory spending. The Administration supports this bill, but will work with the Congress to ensure that such an unintended sequester does not occur.