FOR IMMEDIATE RELEASE Press Release #105-314
May 6, 1998

The IRS reform bill was reported out of the Senate Finance Committee on March 31 with the first five years fully offset in compliance with the Budget Act, but without full funding for the second five years. Under the Senate's pay-as-you-go budget rules, legislation must be fully paid for over ten years, or else a budget point of order can be brought against the bill on the Senate floor.

The most significant offset of Senator Roth's amendment is a change in IRA rules that would allow more seniors to rollover their traditional IRA's into Roth IRA's. The offsets proposed by Senator Roth are:

€ A provision to tighten the definition of operating losses that are eligible for a special ten year carry back;
€ A provision that would modify the rollover rules for Roth IRAs; € A four year extension of the current law user fees charged by the IRS for private letter rulings;
€ A dedication of the balance on the pay go scorecard;
€ A change in the effective date of the foreign tax credit revenue raiser, already part of the legislation, to tax years beginning after 1998.

The text of Roth's statement from the Senate floor Wednesday morning follows:

"Mr. President, I send an amendment to the desk and ask for its immediate consideration. Mr. President, under the Senate's budget rules, the first year, first five years, and second five years of revenue losses in a tax bill must be offset with either mandatory savings or revenue increases.

"When the Finance Committee marked up the underlying bill, the first five years of revenue loss were offset. The second five years of revenue loss were not fully offset. The IRS Restructuring bill was short in excess of $9 billion in the last five years. During the markup, I indicated that I would work with the Budget Committee to attempt to find offsets so that the bill would be fully paid for over the last five years.

"Finding offsets was not an easy task. Every major revenue raiser I considered brought forth opposition from different members. After several weeks of reviewing options, I have developed a package, in consultation with the Leadership.

"Mr. President, this pay-for package contains three new revenue raisers and a change to a revenue raiser in the underlying bill.

"The first revenue raiser comes from the Administration's budget. This proposal would tighten the definition of operating losses that are eligible for a special ten year carry back. Congress intended this treatment to be limited to a narrow category of activities. This proposal simply clarifies the types of losses eligible for this special treatment. This proposal is noncontroversial.

"The second new revenue raiser relates to the rollover rules for Roth IRAs. Under current law, individuals or married couples with adjusted gross income over $100,000 cannot rollover a traditional IRA into a Roth IRA. For purposes of the $100,000 test, minimum distributions which are required when an IRA beneficiary reaches 70 1/2 are counted as income.

"This second new raiser would modify current law by excluding minimum distributions from the $100,000 test. The effect of this proposal is to allow more taxpayers, at age 70 1/2 and above, to rollover from a traditional IRA to a Roth IRA. This proposal will enlarge the group of taxpayers who can enjoy the benefits of the Roth IRA.

"The third new raiser would extend the current law user fees charged by the IRS for private letter rulings. This extension would be effective for four years.

"Let me note that the IRS Restructuring bill uses the balance on the pay-go scorecard of $406 million in the last five years as an offset. We have been informed by the Budget Committee staff that the use of the pay-go balance is appropriate in this instance.

"Finally, this amendment modifies an effective date of a revenue raiser in the Finance Committee bill. The proposal modified is the proposal to limit the carry back period of the foreign tax credit. Under this amendment, the effective date of the foreign tax credit raiser has been moved out one year to tax years beginning after 1998.

"Now, Mr. President, some on the other side may criticize the most significant new revenue raiser in this package. The target of their criticism is the proposal to allow more older taxpayers to convert to Roth IRAs.

"As I see it, those criticizing the rollover provision have the objective of limiting retirement savings choices for taxpayers who reach the end of their working years. For taxpayers who reach 70 1/2, the opponents of the rollover provision are saying those taxpayers should fall under a more restrictive rule than those taxpayers under 70 1/2.

"If you are over 70 1/2 and you are a middle income person who has a healthy IRA or pension plan, the opponents of the rollover provision are arguing you should not have the choice of a Roth IRA.

"Frankly, my preference is a universal savings vehicle. Everyone, regardless of income or age, should have a choice of using tax-preferred savings. The rollover provision in this amendment moves us closer to the step of a universal savings vehicle.

"Alan Greenspan says America's most important economic problem is its low savings rate. It is a problem that we must address. The rollover provision in this amendment is a small step toward resolving our number economic problem.

"Keep in mind providing the rollover to Americans at age 70 1/2 is not a boondoggle for those folks. In order to rollover to a Roth IRA these older Americans must pay tax on the inside buildup in their IRAs. This tax toll charge is the reason the provision raises revenue.

"I ask the opponents of the rollover raiser the following question: How can we go wrong in providing 500,000 Americans a savings incentive choice they do not currently have?

"Mr. President, I ask unanimous consent that a technical description of this amendment, and a revised revenue table for the IRS Restructuring bill, prepared by the Joint Committee on Taxation, be inserted in the record.

"Mr. President, I would now like to turn to the amendment offered by the Senator from Nebraska, Mr. Kerrey.

"Senator Kerrey is offering an alternative pay-for package. I must oppose Senator Kerrey's package.

"The Kerrey Amendment contains revenue raisers similar to the Roth Amendment. There are a few additional items that I had considered in crafting my pay-for amendment.

"There, is, however, one very controversial revenue raiser in the Kerrey Amendment. I think it is important that my colleagues focus their attention on it.

"Rather than modifying the rollover rules for Roth IRAs, which would allow more taxpayers to enjoy the benefits of the Roth IRA, the Kerrey Amendment would reinstate the expired Superfund taxes.

"It is an undisputable fact that the present Superfund program needs immediate, substantial reform. I am a long-standing supporter of the Superfund program. It is critical that Superfund sites be cleaned up. It is a shame that the program has floundered over the past several years. Every Senator should feel the responsibility to get the Superfund program back up and running at full speed.

"The Superfund trust fund received its revenues from excise taxes on domestic crude oil and imported petroleum products, certain chemicals and imported derivative products, and a corporate environmental tax.

"These taxes expired a couple of years ago. If the taxes are extended, they will provide the necessary resources for Superfund cleanup activities.

"It is important to maintain the "connection" between the Superfund taxes and the Superfund program. It is the view of our Senior Republican colleagues on the Environment and Public Works Committee that this connection is important for both the politics and policy of Superfund.

"Our distinguished colleagues from the Committee on Environmental and Public Works, in particular, Senators Smith and Senator Chafee, have worked long and hard on Superfund reform legislation.

"They produced a bill, passed it out of committee, and have asked me to extend the expired Superfund taxes to cover the authorization period. Senators Smith and Chafee should be commended for moving Superfund forward, not undercut here on the Senate floor.

"I intend to support Senators Smith and Chafee's efforts. As they have communicated to me, unless the Superfund taxes are enacted directly in connection with a Superfund reform bill, any hope for the long-needed changes in this environmental program would be dashed.

"In deference to Senators Smith and Chafee, the Finance Committee did not include an extension of the Superfund taxes in either the IRS Reform bill that passed our committee unanimously or in the Roth Amendment. I agree with Senators Smith and Chafee that the appropriate vehicle for extension of the Superfund taxes is their Superfund bill.

"As Chairman, let me be clear -- the Finance Committee will fulfill its Superfund responsibilities. We will extend the Superfund taxes and attend to related issues within Finance Committee jurisdiction.

"It is my hope that after the Finance Committee has extended the Superfund taxes to match the program's authorization, the Senate will move forward with a viable Superfund reform proposal. The recent progress made by the Environment and Public Works Committee is encouraging.

"If you are for Superfund reform, as I am, you need to support Senators Smith and Chafee. For this reason, I urge my colleagues to oppose the Kerrey Amendment."