59-006

2006
109TH CONGRESS 2D SESSION
HOUSE OF REPRESENTATIVES
Report

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DECEMBER 22, 2006- Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

LETTER OF TRANSMITTAL

-

Hon. KAREN HAAS,
Office of the Clerk,
House of Representatives, Washington, DC.

DEAR MS. HAAS: I am herewith transmitting, pursuant to House Rule XI, clause 1(d), the report of the Committee on Ways and Means on its legislative and oversight activities during the 109th Congress.

Sincerely,

Bill Thomas,

Chairman.

FOREWORD

Clause 1(d) of Rule XI of the Rules of the House, regarding the rules of procedure for committees, contains a requirement that each committee prepare a report at the conclusion of each Congress summarizing its activities. The 104th Congress added subsections on legislative and oversight activities, including a summary comparison of oversight plans and eventual recommendations and actions. The full text of the Rule, as recodified in the 109th Congress, follows:

(d)(1) Each committee shall submit to the House not later than January 2 of each odd-numbered year a report on the activities of that committee under this rule and rule X during the Congress ending at noon on January 3 of such year.

(2) Such report shall include separate sections summarizing the legislative and oversight activities of that committee during that Congress.

(3) The oversight section of such report shall include a summary of the oversight plans submitted by the committee under clause 2(d) of rule X, a summary of the actions taken and recommendations made with respect to each such plan, a summary of any additional oversight activities undertaken by that committee, and any recommendations made or actions taken thereon.

(4) After an adjournment sine die of the last regular session of a Congress, the chairman of a committee may file an activities report under subparagraph (1) with the Clerk at any time and without approval of the committee, provided that

(A) a copy of the report has been available to each member of the committee for at least seven calendar days; and

(B) the report includes any supplemental, minority, or additional view submitted by a member of the committee.

The jurisdiction of the Committee on Ways and Means during the 109th Congress is provided in Rule X, clause 1(s), as follows:

(s) Committee on Ways and Means.

(1) Customs, collection districts, and ports of entry and delivery.

(2) Reciprocal trade agreements.

(3) Revenue measures generally.

(4) Revenue measures relating to the insular possessions.

(5) Bonded debt of the United States, subject to the last sentence of clause 4(f).

(6) Deposit of public monies.

(7) Transportation of dutiable goods.

(8) Tax exempt foundations and charitable trusts.

(9) National social security (except health care and facilities programs that are supported from general revenues as opposed to payroll deductions and except work incentive programs).

The general oversight responsibilities of committees are set forth in clause 2 of Rule X. The 104th Congress also added the requirement in clause 2 of Rule X that each standing committee submit its oversight plans for each Congress. The text of the Rule, as recodified in the 109th Congress, in pertinent part, follows:

2. (a) The various standing committees shall have general oversight responsibilities as provided in paragraph (b) in order to assist the House in

(1) its analysis, appraisal, and evaluation of

(A) the application, administration, execution, and effectiveness of Federal laws; and

(B) conditions and circumstances that may indicate the necessity or desirability of enacting new or additional legislation; and

(2) its formulation, consideration, and enactment of changes in Federal laws, and of such additional legislation as may be necessary or appropriate.

(b)(1) In order to determine whether laws and programs addressing subjects within the jurisdiction of a committee are being implemented and carried out in accordance with the intent of Congress and whether they should be continued, curtailed, or eliminated, each standing committee (other than the Committee on Appropriations) shall review and study on a continuing basis

(A) the application, administration, execution, and effectiveness of laws and programs addressing subjects within its jurisdiction;

(B) the organization and operation of the Federal agencies and entities having responsibilities for the administration and execution of laws and programs addressing subjects within its jurisdiction;

(C) any conditions or circumstances that may indicate the necessity or desirability of enacting new or additional legislation addressing subjects within its jurisdiction (whether or not a bill or resolution has been introduced with respect thereto); and

(D) future research and forecasting on subjects within its jurisdiction.

(2) Each committee to which subparagraph (1) applies having more than 20 members shall establish an oversight subcommittee, or require its subcommittees to conduct oversight in their respective jurisdictions, to assist in carrying out its responsibilities under this clause. The establishment of an oversight subcommittee does not limit the responsibility of a subcommittee with legislative jurisdiction in carrying out its oversight responsibilities.

(c) Each standing committee shall review and study on a continuing basis the impact or probable impact of tax policies affecting subjects within its jurisdiction as described in clauses 1 and 3.

(d)(1) Not later than February 15 of the first session of a Congress, each standing committee shall, in a meeting that is open to the public and with a quorum present, adopt its oversight plans for that Congress. Such plan shall be submitted simultaneously to the Committee on Government Reform and to the Committee on House Administration. In developing its plan each committee shall, to the maximum extent feasible--

(A) consult with other committees that have jurisdiction over the same or related laws, programs, or agencies within its jurisdiction with the objective of ensuring maximum coordination and cooperation among committees when conducting reviews of such laws, programs, or agencies and include in its plan an explanation of steps that have been or will be taken to ensure such coordination and cooperation;

(B) review specific problems with Federal rules, regulations, statutes, and court decisions that are ambiguous, arbitrary, or nonsensical, or that impose severe financial burdens on individuals;

(C) give priority consideration to including in its plan the review of those laws, programs, or agencies operating under permanent budget authority or permanent statutory authority; and

(D) have a view toward ensuring that all significant laws, programs, or agencies within its jurisdiction are subject to review every 10 years.

To carry out its work during the 109th Congress, the Committee on Ways and Means had six standing Subcommittees, as follows:

Subcommittee on Trade;

Subcommittee on Oversight;

Subcommittee on Health;

Subcommittee on Social Security;

Subcommittee on Human Resources; and

Subcommittee on Select Revenue Measures.

The membership of the six Subcommittees of the Committee on Ways and Means in the 109th Congress is as follows:

SUBCOMMITTEE ON TRADE

• WALLY HERGER, California
• PHIL ENGLISH, Pennsylvania
• JIM NUSSLE, Iowa
• ROB PORTMAN, Ohio 2
• JERRY WELLER, Illinois
• RON LEWIS, Kentucky
• MARK FOLEY, Florida 3
• KEVIN BRADY, Texas
• THOMAS M. REYNOLDS, New York 4

• BENJAMIN L. CARDIN, Maryland
• SANDER M. LEVIN, Michigan
• WILLIAM J. JEFFERSON, Louisiana 1
• JOHN S. TANNER, Tennessee
• JOHN B. LARSON, Connecticut
• JIM McDERMOTT, Washington

SUBCOMMITTEE ON OVERSIGHT

• ERIC CANTOR, Virginia
• BOB BEAUPREZ, Colorado
• THOMAS M. REYNOLDS, New York 5
• JOHN LINDER, Georgia
• E. CLAY SHAW, Jr., Florida
• SAM JOHNSON, Texas
• ROB PORTMAN, Ohio 6
• DEVIN NUNES, California 7
• J.D. HAYWORTH, Arizona 8

• JOHN LEWIS, Georgia
• EARL POMEROY, North Dakota
• MICHAEL R. McNULTY, New York
• JOHN S. TANNER, Tennessee
• CHARLES B. RANGEL, New York

SUBCOMMITTEE ON HEALTH

• JIM McCRERY, Louisiana
• SAM JOHNSON, Texas
• DAVE CAMP, Michigan
• JIM RAMSTAD, Minnesota
• PHIL ENGLISH, Pennsylvania
• J.D. HAYWORTH, Arizona
• KENNY C. HULSHOF, Missouri

• FORTNEY PETE STARK, California
• JOHN LEWIS, Georgia
• LLOYD DOGGETT, Texas
• MIKE THOMPSON, California
• RAHM EMANUEL, Illinois

SUBCOMMITTEE ON SOCIAL SECURITY

• E. CLAY SHAW, Jr., Florida
• SAM JOHNSON, Texas
• J.D. HAYWORTH, Arizona
• KENNY C. HULSHOF, Missouri
• RON LEWIS, Georgia
• KEVIN BRADY, Texas
• PAUL RYAN, Wisconsin

• SANDER M. LEVIN, Michigan
• EARL POMEROY, North Dakota
• XAVIER BECERRA, California
• STEPHANIE TUBBS JONES, Ohio
• RICHARD E. NEAL, Massachusetts

SUBCOMMITTEE ON HUMAN RESOURCES

• NANCY L. JOHNSON, Connecticut
• BOB BEAUPREZ, Colorado
• MELISSA A. HART, Pennsylvania
• CHRIS CHOCOLA, Indiana 9
• JIM McCRERY, Louisiana
• DAVE CAMP, Michigan
• PHIL ENGLISH, Pennsylvania
• DEVIN NUNES, California 10

• JIM MCDERMOTT, Washington
• BENJAMIN L. CARDIN, Maryland
• FORTNEY PETE STARK, California
• XAVIER BECERRA, California
• RAHM EMANUEL, Illinois

SUBCOMMITTEE ON SELECT REVENUE MEASURES

• JERRY WELLER, Illinois
• MARK FOLEY, Florida 11
• THOMAS M. REYNOLDS, New York
• ERIC CANTOR, Virginia
• JOHN LINDER, Georgia
• MELISSA A. HART, Pennsylvania
• CHRIS CHOCOLA, Indiana

• MICHAEL R. McNULTY, New York
• LLOYD DOGGETT, Texas
• STEPHANIE TUBBS JONES, Ohio
• MIKE THOMPSON, California
• JOHN B. LARSON, Connecticut

1 Pursuant to H. Res. 872, removed June 16, 2006.

2 Resigned April 29, 2005.

3 Resigned September 29, 2006.

4 Assigned to Subcommittee May 12, 2005.

5 Reassigned May 12, 2005.

6 Resigned April 29, 2005.

7 Assigned to Subcommittee May 12, 2005.

8 Assigned to Subcommittee May 12, 2005.

9 Reassigned May 12, 2005.

10 Assigned to Subcommittee May 12, 2005.

11 Resigned September 29, 2006.

The Committee on Ways and Means submits its report on its legislative and oversight activities for the 109th Congress pursuant to the above stated provisions of the Rules of the House. Section I of the report describes the Committee's legislative activities, divided into six sections as follows: Legislative Review of Tax, Trust Fund, and Pension Issues; Legislative Review of Trade Issues; Legislative Review of Health Issues; Legislative Review of Social Security Issues; Legislative Review of Human Resources Issues; and Legislative Review of Debt Issues.

Section II of the report describes the Committee's oversight activities. It includes a copy of the Committee's Oversight Agenda, adopted in open session on February 2, 2005, along with a description of actions taken and recommendations made with respect to the oversight plan. The report then discusses additional Committee oversight activities, and any recommendations or actions taken as a result. Finally, the report includes four appendices with Committee information. Appendix I is an expanded discussion of the Jurisdiction of the Committee on Ways and Means along with a revised listing and explanation of blue slip resolutions and points of order under House Rule XXI 5(a). Appendix II is a brief Historical Note on the origins of the Committee; Appendix III is a Statistical Review of the Activities of the Committee on Ways and Means; and Appendix IV is a listing of the Chairmen and Membership of the Committee from the 1st-109th Congresses.

59-006

--REPORT ON THE LEGISLATIVE AND OVERSIGHT ACTIVITIES OF THE COMMITTEE ON WAYS AND MEANS DURING THE ONE HUNDRED NINTH CONGRESS

I. LEGISLATIVE ACTIVITY REVIEW

A. LEGISLATIVE REVIEW OF TAX, TRUST FUND, AND PENSION ISSUES

1. BILLS ENACTED INTO LAW DURING THE 109TH CONGRESS

a. Tsunami Relief (P.L. 109-1)

On January 6, 2005, Chairman Thomas and Ranking Member Charles Rangel cosponsored H.R. 241 to accelerate the income tax benefits for charitable cash contributions for the relief of victims of the December 26, 2004 Indian Ocean tsunami. H.R. 241 passed both the House and the Senate by unanimous consent on January 6, 2005. The President signed the bill into law on January 7, 2005 (P.L. 109-1).

H.R. 241 allowed taxpayers to deduct on their 2004 tax return donations made in January 2005 for the relief of victims affected by the December 26, 2004 Indian Ocean tsunami.

b. Leaking Underground Storage Tank Trust Fund (P.L. 109-6)

On March 14, 2005, Chairman Thomas introduced H.R. 1270 which proposed to extend the leaking underground storage tank trust fund financing rate. The trust fund is financed with an excise tax of 0.1 cent per gallon that is imposed on the sale of gasoline, diesel, and other motor fuels. This tax was set to expire on March 31, 2005. The bill proposed to extend the trust fund's financing through September 30, 2005. The bill passed the House on March 16, 2005 under suspension of the rules by a vote of 431-1. The bill passed the Senate without amendment, by Unanimous Consent, on March 17, 2005, and was signed by the President on March 31, 2005 (P.L. 109-6).

c. FEMA Disaster Mitigation (P.L. 109-7)

On March 7, 2005, Representative Mark Foley and Representative Bobby Jindal introduced H.R. 1134, which would prevent the Internal Revenue Service from taxing Americans who receive Federal Emergency Management Agency (FEMA) grants to take preventative measures against natural disasters. H.R. 1134 passed the House of Representatives by a voice vote on March 14, 2005. The Senate passed the bill, amended, by U.C. on April 13, 2005, and the House agreed to the Senate amendment by U.C. on April 14, 2005. The President signed the bill into law on April 15, 2005 (P.L. 109-7).

H.R. 1134 implemented the President's budget proposal for mitigation grants. In general, the bill removed the tax on any payments made to or for the benefit of the owner of any property for hazard mitigation, giving taxpayers the assurance that they could accept assistance without higher taxes.

Taxpayers that receive disaster mitigation grants to improve their property are not permitted to increase the basis of their property due to the improvements made through the grants.

d. Surface Transportation Extension Act of 2005 (P.L. 109-14)

Representative Don Young introduced H.R. 2566, the `Surface Transportation Extension Act of 2005,' on May 24, 2005 to extend transportation-related programs funded by the Highway Trust Fund. The next day, the House passed the bill under suspension of the rules by voice vote. On May 26, 2005, the Senate passed the bill without amendment by unanimous consent. The President signed the bill into law on May 31, 2004 (P.L. 109-14).

The bill provided an extension of highway, highway safety, motor carrier safety, transit, and other programs funded by the Highway Trust Fund pending enactment of a law reauthorizing the Transportation Equity Act for the 21st Century (TEA-21). The tax-related provisions in the bill extended authorization of the use of the Highway Trust Fund, the Mass Transit Account, and the Aquatic Resources Trust Fund for obligations under TEA-21 before July 1, 2005 and extended the imposition of tax on the use of certain heavy vehicles through September 30, 2006.

e. Surface Transportation Extension Act of 2005, Part II (P.L. 109-20)

Representative Don Young introduced H.R. 3104, the `Surface Transportation Extension Act of 2005, Part II' on June 29, 2005 to extend certain transportation-related programs funded out of the Highway Trust Fund. The next day, the House passed the bill by U.C. and the Senate passed the bill without amendment by unanimous consent. The President signed the bill into law on July 1, 2005 (P.L. 109-20).

The bill extended highway, highway safety, motor carrier safety, transit, and other programs funded out of the Highway Trust Fund pending enactment of a law reauthorizing the Transportation Equity Act for the 21st Century (TEA-21). The tax-related provisions in the bill extended authorization of the use of the Highway Trust Fund, the Mass Transit Account, and the Aquatic Resources Trust Fund for obligations under TEA-21 before July 20, 2005.

f. Surface Transportation Extension Act of 2005, Part III (P.L. 109-35)

Representative Don Young introduced H.R. 3332, the `Surface Transportation Extension Act of 2005, Part III,' on July 19, 2005 to extend certain transportation-related programs funded out of the Highway Trust Fund. The House passed the bill on July 19, 2005 by unanimous consent, as did the Senate later that day. The President signed the bill into law on July 20, 2005 (P.L. 109-35). The tax-related provisions extended authorization of the use of certain trust funds, as in Part II until July 21, 2005.

g. Surface Transportation Extension Act of 2005, Part IV (P.L. 109-37)

Representative Don Young introduced H.R. 3377, the `Surface Transportation Extension Act of 2005, Part IV,' on July 21, 2005 to extend certain transportation-related programs funded by the Highway Trust Fund. The House passed the bill that day by unanimous consent, as did the Senate later that day. The President signed the bill into law on July 22, 2005 (P.L. 109-37). The tax-related provisions extended authorization of the use of certain trust funds, as in Parts II and III until July 27, 2005.

h. Surface Transportation Extension Act of 2005, Part V (P.L. 109-40)

Representative Don Young introduced H.R. 3453, the `Surface Transportation Extension Act of 2005, Part V' on July 27, 2005 to extend certain transportation-related programs funded by the Highway Trust Fund. That day, the House and Senate both passed the bill by unanimous consent. The President signed the bill into law on July 28, 2005 (P.L. 109-40). The tax-related provisions extended authorization of the use of certain trust funds, as in Parts II, III and IV until July 30, 2005.

i. Surface Transportation Extension Act of 2005, Part VI (P.L. 109-42)

Representative Don Young introduced H.R. 3512, the `Surface Transportation Extension Act of 2005, Part VI,' on July 28, 2005 to extend certain transportation-related programs funded by the Highway Trust Fund. The next day, the House and Senate passed the bill by unanimous consent. The President signed the bill into law on July 30, 2005 (P.L. 109-42). The tax-related provisions extended authorization of the use of certain trust funds, as in Parts II, III and IV until August 15, 2005.

j. Energy Policy Act of 2005 (P.L. 109-58)

On April 12, 2005, Chairman Thomas introduced H.R. 1541, the `Enhanced Energy Infrastructure and Technology Tax Act of 2005.' The full Committee held a markup of the bill on April 13, 2005, ordered the bill favorably reported, as amended, by a vote of 26-11 (H. Rept. 109-45). The reported bill, H.R. 1541, was subsequently merged into H.R. 6, the `Energy Policy Act of 2005.' H.R. 6 passed the House on April 21, 2005 by a vote of 249-183. The Senate passed the bill, as amended, on June 28, 2005, by a vote of 85-12. The two chambers agreed to go to conference, and a Conference Agreement was reached on July 27, 2005 (H. Rept. 109-190). The House passed the Conference Agreement of the bill on July 28, 2005 by a vote of 275-156. The Senate approved the Conference Agreement the following day by a vote of 74-26 and it was signed by the President on August 8, 2005.

The House-passed bill contained tax incentives to advance energy policy in a number of areas. These included energy infrastructure initiatives, miscellaneous energy tax incentives and alternative minimum tax relief provisions.

With respect to energy infrastructure initiatives, the House bill contained a number of tax incentives to encourage greater investment in needed energy infrastructure. For example, the bill provided for a reduced recovery period (15 years) for assets used in the distribution of natural gas. Similarly, the bill also reduced the recovery period for assets used in the transmission of electricity from 20 to 15 years. Other infrastructure incentives included a reform of nuclear decommissioning rules and revised amortization of pollution control devices.

With respect to miscellaneous energy tax incentive, the House bill included energy efficiency incentives such as a credit for installation of residential solar equipment, a credit for energy improvements to existing homes and advance lean burn vehicle tax credits.

With respect to alternative minimum tax relief, the bill included several provisions to reduce the effect of the alternative minimum tax, including relief for taxpayers claiming energy-related tax credits.

The Senate-passed bill, S. 10, contained fewer provisions related to energy infrastructure but did include numerous incentives for energy efficiency and for renewable energy. Most notably, the Senate passed bill included a provision expanding and extending for three years the Section 45 production tax credit for producing electricity from renewable energy sources (including wind, biomass, geothermal and others).

The Conference Agreement as agreed to by the House and Senate and as signed into law by the President adopted many House provisions. Title XIII contains the agreed to tax provisions which are summarized as follows:

Subtitle A of Title XIII of the Conference Agreement provides a number of incentives for investment in energy infrastructure and largely follows the House bill with certain exceptions. The Conference Agreement includes a new production tax credit for producing electricity from advanced nuclear power facilities. The Agreement also provides for a 2-year extension of the Section 45 renewable energy production tax credit (through December 31, 2007). This provision also modifies Section 45 to equalize the duration of the credit to 10 years for all qualifying sources of renewable energy.

Subtitle B of Title XIII of the Conference Agreement contains various provisions related to domestic fossil fuel security. These tax incentives include 50% expensing for qualifying expansions made to refinery facilities, a clarification to the recovery period for gas gathering pipelines, and a new business tax credit for producing fuel from coke or coke gas.

Subtitle C of Title XIII of the Conference Agreement provides several energy efficiency and energy conservation tax incentives. These incentives include a 30% tax credit for installation of solar energy equipment businesses and in residences. The subtitle also includes a tax incentive for owners of energy efficient commercial buildings and for energy efficient new homes. The Conference Agreement also adopts, with modifications, the House provision which provides a tax credit for energy efficient improvements to existing homes.

Subtitle D of Title XIII of the Conference Agreement contains several motor vehicle and fuels incentives. These incentives include an alternative motor vehicle credit which offers a tax credit to the purchaser of a hybrid or lean burn diesel vehicle. Other incentives are offered for installation of alternative refueling property and for producing biodiesel. A new credit was also created for renewable diesel. The renewable diesel credit is available for producing a fuel from biomass via a process involving thermal depolymizeration.

Subtitle E of Title XIII of the Conference Agreement included other additional tax incentives including an enhanced research and development credit for energy research, a National Academy of Sciences study and report and a recycling study.

The Conference Agreement, Subtitle F of Title XIII, contains several revenue raising provisions. These include a reinstatement of the Oil Spill Liability Trust Fund tax. The tax applies on April 1, 2007, or later, if the Secretary of the Treasury estimates that, as of the close of that quarter, the unobligated balance in the Oil Spill Liability Trust fund will be less that $2 billion. Also, the Leaking Underground Storage Tank Trust (LUST) Fund tax was extended through September 30, 2011. The provision also clarifies that dyed fuel is subject to the LUST tax and without refund. Finally, there are provisions that modify the recapture rules for amortizable Section 197 intangibles and that clarify the tire excise tax.

k. Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2005 (P.L. 109-59)

On March 1, 2005, Chairman Thomas introduced H.R. 996, the `Highway Reauthorization Tax Act of 2005.' The bill was ordered favorably reported, as amended, out of the Committee on March 3, 2005 by voice vote (H. Rept. 109-13). The bill's provisions were incorporated into H.R. 3, the `Transportation Equity Act: A Legacy for Users.' H.R. 3 passed the House on March 10, 2005 by a vote of 417-9. The Senate passed H.R. 3, as amended, by a vote of 89-11. The Conference Report for the renamed bill, the `Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2005,' was filed on July 28, 2005 (H. Rept. 109-203), and passed the House and the Senate the next day by votes of 412-8 and 91-4, respectively.

In general, the revenue provisions of the `Transportation Equity Act: A Legacy for Users' as passed by the House would have extended the Highway Trust Fund expenditure authority and related expiring excise taxes.

The excise taxes are imposed to finance the Federal Highway Trust Fund program. These taxes are highway motor fuels taxes (on gasoline, diesel fuel, kerosene, and special motor fuels), a retail sales tax on heavy highway vehicles, a manufacturers' excise tax on heavy vehicle tires, and an annual use tax on heavy vehicles.

The excise tax rates on highway motor fuels are 18.3 cents per gallon for gasoline, 24.3 cents per gallon for diesel fuel and kerosene, and 18.3 cents per gallon for special motor fuels. With the exception of 4.3 cents per gallon of these Highway Trust Fund fuels tax rates, all of these taxes were scheduled to expire after September 30, 2005. The bill proposed to extend these taxes through September 30, 2011.

The Highway Trust Fund also receives revenues from a 12-percent excise tax imposed on the first retail sale of heavy highway vehicles, tractors, and trailers (generally, trucks having a gross vehicle weight in excess of 33,000 pounds and trailers having such a weight in excess of 26,000 pounds); an excise tax imposed at graduated rates on highway tires weighing more than 40 pounds; and an annual use tax imposed on highway vehicles having a taxable gross weight of 55,000 pounds or more. The maximum rate for this tax is $550 per year, imposed on vehicles having a taxable gross weight over 75,000 pounds. These taxes were scheduled to expire on September 30, 2005. The bill proposed to extend these taxes through September 30, 2011.

Under present law, most of the highway motor fuels excise tax revenues and the non-fuel excise tax revenues discussed above are dedicated to the Highway Trust Fund. Expenditures from this Fund were authorized (subject to appropriations) through May 30, 2005. The bill proposed to extend the Highway Trust Fund expenditure authority through September 30, 2009.

A separate Mass Transit Account exists within the Highway Trust Fund. Expenditures from the Account were authorized (subject to appropriations) through May 30, 2005. The bill proposed to extend the Account expenditure authority through September 30, 2009.

The bill proposed to extend a special enforcement provision, the `Basso rule,' which prevents expenditure of Highway Trust Fund monies for purposes not authorized by the Internal Revenue Code. If such unapproved expenditures occur, no further excise tax receipts would be transferred to the Highway Trust Fund. Rather, the tax receipts will be retained in the General Fund.

The Aquatic Resources Trust Fund (consisting of the Sport Fish Restoration Account and the Boat Safety Account) is funded by a portion of the receipts from the excise tax imposed on motorboat fuel taxes and small-engine fuel taxes. Most of these funds are first deposited into the Highway Trust Fund before being transferred to the Aquatic Resource Trust Fund. However, a portion of these funds are retained by the General Fund. Transfers from the Highway Trust Fund to the Aquatic Resources Trust Fund were authorized through September 30, 2005. Expenditures from the Boat Safety Account were authorized (subject to appropriations) through May 30, 2005. The bill proposed to authorize Highway Trust Fund transfers to the Aquatic Resources Trust Fund through September 30, 2009, extend the Boat Safety Account expenditure authority through September 30, 2009, and eliminate the General Fund retention of motorboat fuel taxes and small-engine fuel taxes for taxes imposed after September 30, 2005.

Two highway-related technical corrections were also included in the House-passed bill. Two provisions enacted in the American Jobs Creation Act of 2004 (P.L. 108-357) related to highway funding required technical correction. One correction was a conforming amendment to the Volumetric Ethanol Excise Tax Credit provision. The other correction clarified that the rate for jet fuel used in noncommercial aviation is 4.3 cents per gallon and that users of aviation fuel in commercial aviation must register with the IRS in order for the 4.3-cents-per-gallon rate to apply.

The Conference Agreement included many of the provisions included in the House-passed bill and added several others, most of which were incorporated from the Senate-passed transportation bill. The revenue provisions of the Conference Agreement extended expenditure authority from the Highway Trust Fund and Aquatic Resources Trust Fund through September 30, 2009. The related expiring excise taxes that finance the trust fund were extended through September 30, 2011. The Conference Agreement also required that unfunded highway authorizations exceed projected net Highway Trust Fund tax receipts for the 48-month period beginning at the close of each fiscal year.

The Conference Agreement also modified the gas guzzler tax (IRC Section 4064). This provision exempts limousines over 6,000 pounds unloaded gross vehicle weight from the gas guzzler tax. It specifies that tractors weighing 19,500 pounds gross vehicle weight or less with a gross combined weight of 33,000 pounds or less are exempt from the 12-percent excise tax on heavy highway vehicles. The Conference Agreement expanded the ethanol excise tax credit to include other alternative fuels that displace conventional petroleum products. Alternative fuels now include natural gas, liquid petroleum gas, P Series fuels, diesel from coal, and liquid hydrocarbons derived from biomass. The Conference Agreement also increased the tax on alternative fuels to the same level of taxes applied to gasoline and diesel. Alternative fuels are entitled to a tax credit equal to 50 cents per gallon.

The Conference Agreement eliminated the Boat Safety Account and transforms the Sport Fish Restoration Account into the Sport Fish Restoration and Boating Trust Fund. It repealed the harbor maintenance tax on exports and caps the 10-percent excise tax on fishing rods at $10.

The Agreement repealed the requirement that crop-dusters receive consent from farmers to apply for refunds and clarifies that travel to and from a farm is exempt use. This provision also extends the exemption of helicopters used in timber operations from the ticket and flight segment taxes to fixed-wing aircraft. The Conference Agreement expanded the definition of a rural airport to include airports not connected by paved roads to another airport and having fewer than 100,000 passengers on flights of at least 100 miles per year. The Conference Agreement also exempts from ticket taxes, transportation by a seaplane, with respect to any segment consisting of a takeoff from, and a landing on, water, but only if the places at which such takeoff and landing occur do not receive financial assistance from the Airport and Airways Trust Fund. For purposes of the fuel taxes, transportation by seaplane is treated as noncommercial aviation. Sightseeing flights were also exempted from the airline ticket tax.

The Conference Agreement repealed the special occupational taxes relating to alcoholic beverages. It provided an income tax credit for distilled spirits wholesalers and for distilled spirits in control of State bailment warehouses for costs of carrying federal excise tax on bottled distilled spirits in inventory. The Conference Agreement allowed small distillers, brewers and winemakers to file excise taxes quarterly instead of every other week. Also, the excise tax on firearms was repealed for persons who manufacture, produce, and import less than 50 firearms, pistols, and revolvers during a calendar year.

Several studies were commissioned by the Conference Agreement to examine ways to improve and reform collections of excise taxes. Also included is the establishment of a bipartisan Motor Fuel Tax Enforcement Advisory Commission to review fuel tax collections and to submit recommendations for improving enforcement of fuel tax collections and the establishment of a National Surface Transportation Infrastructure Financing Commission to report on the sufficiency of Highway Trust Fund revenues and alternative approaches for generating trust fund revenues. The Conference Agreement also directed the IRS to report on new technologies that can be used to reduce diesel fuel tax evasion, including the use of chemical markers and to conduct a study regarding the amount of fuel used by trucks to operate equipment that is not related to the transportation function of the vehicle. The latter study will propose options for exempting this fuel from tax, if administratively feasible.

The Conference Agreement provided $15 billion of tax-exempt bond financing authority to finance highway projects and rail-truck transfer facilities. The Conference Agreement also allowed the North Carolina Railroad Company to convert from a real estate investment trust to a state-owned tax exempt entity without incurring tax on built-in gains.

The Conference Agreement extended the provision that prevents expenditure of Highway Trust Fund monies for purposes not authorized by the Internal Revenue Code. It also added a similar provision to address the LUST Trust Fund. If unauthorized expenditures from the LUST Trust Fund occur, no further excise tax receipts would be transferred to the LUST Trust Fund.

The Conference Agreement included seven provisions to combat fuel fraud and increase Highway Trust Fund receipts. It taxed all removals of kerosene (other than directly into an aircraft) at 24.4 cents per gallon. If kerosene that is taxed at 24.4 cents is used for aviation, then a refund is available to reduce the tax to the applicable aviation fuel rate. The Secretary of Treasury will transfer from the Highway Trust Fund to the Airport and Airway Trust Fund amounts based on the aviation use of kerosene. Under the Conference Agreement, farmers must buy clear fuel and apply for refunds of tax paid on fuel used for farming. Farmers may continue to buy dyed exempt fuel. The Conference Agreement required credit card companies to register with the IRS and be the party responsible for claiming refunds if a qualified exempt entity used a credit card to purchase the fuel. Reregistration is required in the event of a change of ownership of a registered blender, pipeline operator, position holder, refiner, terminal operator and vessel operator. If the ownership changes, the new owners will require a new registration (except in case of publicly traded corporation). A $10,000 penalty will be imposed on those who fail to apply for a new registration. The Department of Homeland Security and the Department of Treasury are to transmit information pertaining to taxable fuels destined for importation into the United States to the IRS. The Conference Agreement required ships and barges to register for tax-exempt bulk transfers of fuel. It also imposed a $10,000 penalty for anyone who knowingly sells diesel which does not comply with Environmental Protection Agency low-sulfur diesel regulations.

The two highway-related technical corrections from the House-passed bill are included in the Conference Agreement. A third technical correction was added to provide a conforming cross-reference with the `Transportation and Equity Act for the 21st Century' (P.L. 105-178).

l. Katrina Emergency Tax Relief Act of 2005 (P.L. 109-73)

On September 14, 2005, Representative Jim McCrery introduced H.R. 3768, the `Katrina Emergency Tax Relief Act of 2005,' to aid in the relief and recovery efforts pursuant to Hurricane Katrina. The next day, the House passed the bill under suspension of the rules by a voice vote. The Senate agreed to the bill with amendment later in the day. On September 21, 2005, the bill passed the House, as amended by the Senate, pursuant to House Resolution 454, by a vote of 422-0. The Senate subsequently agreed to the House amendment to the Senate amendment by unanimous consent. The President signed the legislation on September 23, 2005 (P.L. 109-73).

The Act included special rules for using retirement funds for relief relating to Hurricane Katrina, employment relief, charitable giving incentives, and other provisions to assist taxpayers affected by Hurricane Katrina. In general, those affected by the hurricane were defined by those located in the portion of the Hurricane Katrina disaster area determined by the President before September 14, 2005, under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L. 93-288) by reason of Hurricane Katrina. Some provisions applied only to the `core disaster area' which is defined as that portion of the Hurricane disaster area determined by the President to warrant individual or individual and public assistance. The Hurricane Katrina disaster area includes areas within southern Louisiana, southern Mississippi, and the southwestern portion of Alabama.

Title I of the `Katrina Emergency Tax Relief Act of 2005' provided for special rules for the use of retirement funds for relief related to Hurricane Katrina. In general, distributions from Individual Retirement Accounts and pensions are subject to a 10-percent penalty if they are made before a certain age. The penalty is intended to discourage individuals from withdrawing funds that are needed for retirement. To ease the financial burden faced by many families in the disaster area, the proposal allowed eligible individuals to withdraw a maximum of $100,000 from their IRAs and pensions without paying the 10-percent penalty. Individuals eligible for the waiver may pay income tax on the distribution over three years. Income tax is not due if the distribution is repaid to the account within three years. The proposal also increased the limit on loans from pension plans from $50,000 to $100,000. To qualify for these provisions, an individual's principal place of abode on August 28, 2005 must have been located in the Hurricane Katrina disaster area and the individual must have sustained an economic loss by reason of such hurricane. Title I also allowed for the recontributions of withdrawals for home purchases cancelled due to Hurricane Katrina.

Title II provided for employment related relief. Employers are allowed to claim the Work Opportunity Tax Credit (WOTC) if they hire individuals from certain target groups who are considered to face barriers to employment. The credit generally equals 40 percent of the first $6,000 of wages paid to the employee in the first year (i.e., the maximum credit is $2,400). The bill temporarily creates a new target group under the WOTC, called Hurricane Katrina employees. The credit was available to small employers (i.e., an average of 200 or fewer employees in the taxable year) whose business was inoperable as a result of damage sustained by Hurricane Katrina.

In general, Title III changed certain rules regarding donations for charitable purposes. Individuals could deduct charitable donations up to 50 percent of their adjusted gross income. Deductions for charitable donations are further limited by the phase-out of itemized deductions. Under the bill, cash donations to charities were exempt from the 50-percent income limitation and the phase-out of itemized deductions if made before January 2006. Donations to supporting organizations and donor-advised funds did not qualify for this exclusion. Corporations may deduct charitable donations to charities up to 10 percent of their taxable income. The bill waives the 10-percent income limitation for cash donations related to Hurricane Katrina relief efforts if the donations are made before January 2006. The bill sets the mileage reimbursement rate for charitable work at 70 percent of the standard business mileage rate (48.5 cents per mile) through December 31, 2006. If the individual is a volunteer and is reimbursed for the use of the personal vehicle, the proposal ensures that the individual does not have to pay income tax on the reimbursement. This provision is effective through December 31, 2006. C-corporations could deduct the cost of food inventory donations. The value of the deduction is equal to the lesser of two times the basis or basis plus one-half of the added-value. The proposal extends the current-law deduction for food donations to S-corporations, partnerships and sole proprietors through December 31, 2005. The bill also allows a special charitable deduction through the end of the 2005 calendar year for donations of educational books to public schools. Title III created a special tax deduction for individuals who provide rent-free housing to dislocated persons for at least 60 days. The deduction is $500 for each dislocated person housed in the individual's principal residence (up to a maximum of $2,000). The deduction can be claimed in either 2005 or 2006, but cannot be claimed in both years with respect to the same person.

Title IV included additional tax relief provisions. The bill ensured that individuals affected by the hurricane are not taxed on personal debt forgiven related to the hurricane, if the debt was discharged before January 1, 2007. Also, the bill waived the 10-percent and $100 floors on the deduction for personal casualty losses attributable to Hurricane Katrina. The bill extended the January 3, 2006 deadline the IRS set as a result of Hurricane Katrina for filing tax returns and making tax payments until February 28, 2006. The bill waived the first-time homebuyer requirement for mortgage revenue bonds so that individuals whose homes were rendered uninhabitable by Hurricane Katrina can qualify for these low-interest rate mortgages through 2007. In addition, the proposal provides that up to $150,000 of the loan proceeds may be used to repair damaged homes. Insurance proceeds are not taxable if they are invested in replacement property within two years (with respect to damaged business property) or four years (with respect to damaged principal residences in Presidentially-declared disaster areas). The bill increased the reinvestment period to 5 years as long as property in the disaster area was involuntarily converted as a result of Hurricane Katrina and the replacement property is located within the disaster area. The bill allows individuals the option of using their 2004 income to calculate the child credit and the Earned Income Tax Credit on their 2005 tax returns. This special rule applies to individuals who were displaced from their principal residence by reason of Hurricane Katrina. Finally, the bill grants the Secretary of the Treasury authority to ensure that taxpayers do not lose tax benefits or experience a change in filing status in 2005 and 2006 due to temporary relocations by reason of Hurricane Katrina.

m. Sportfishing and Recreational Boating Safety Act of 2005 (P.L. 109-74)

On September 6, 2005, Representative Don Young introduced H.R. 3649, the `Sportfishing and Recreational Boating Safety Act of 2005.' The bill extended authorization for recreational boating and boat safety expenditures, as well as enlarging authorized funding for the Coast Guard. The bill passed the House under suspension of the rules on September 13, 2005 by a vote of 401-1. On September 15, 2005, it passed the Senate by unanimous consent, with an amendment providing for technical corrections to other legislation. The House passed the bill as amended by the Senate on September 20, 2005. H.R. 3649 became Public Law 109-74 when it was signed by the President on September 29, 2005.

n. Gulf Opportunity Zone Act of 2005 (P.L. 109-135)

The Gulf Opportunity Zone Act of 2005. (H.R. 4440) was introduced by Representative Jim McCrery (R-LA) on December 6, 2005, passed the House by a vote of 414-4 on December 7, 2005, passed the Senate in amended form on December 15, 2005, and was subsequently passed by the House as amended by the Senate by unanimous consent on December 16, 2005, and signed by the President on December 22, 2005 (P.L. 109-135).

As introduced and passed by the House, the bill expanded tax relief for regions affected by Hurricane Katrina and provided additional relief and incentives to rebuild for regions affected by Hurricanes Rita and Wilma as well as Hurricane Katrina. For areas within the Gulf Opportunity (GO) Zone affected by Hurricane Katrina, the bill provided additional tax exempt bond financing allocations of $2,500 per capita, allowed additional advance refunding of certain exempt bonds, authorized federal tax credit bonds and federally-guaranteed bonds to aid local governments facing financing difficulty because of tax base losses, provided special low income housing credit allocations, and made available bonus depreciation and expanded small business expensing limits for capital investment. The bill also allowed expensing of brownfields remediation (including petroleum contamination), site demolition and clean up costs. The bill expanded the rehabilitation tax credit, doubled the limit on reforestation cost expensing, allowed a special net operating loss (NOL) carry back for small timber growers and provided special NOL treatment for public utility casualty losses and carry back rules for deductions related to GO Zone property. The bill clarified the treatment of traveling expenses incurred away from home and would have designated certain public debt as `Gulf Coast Recovery Bonds.'

For taxpayers in areas affected by Hurricanes Rita and Wilma, the bill provided relief similar to what had earlier been extended for the relief of Katrina victims. Included were pension and retirement savings modifications providing greater access to withdrawals, employee retention tax incentives, suspension of income limits on charitable giving with regard to contributions for hurricane relief and suspension of casualty loss thresholds. Also included were administration relief provisions for filing and special procedures for claiming the Earned Income and refundable Child Credits.

The Senate amendment to H.R. 4440 modified a number of the House bill's provisions, including eligibility standards related to low income housing credits and employee retention incentives. It also included an expanded New Markets Tax Credit, education tax incentives, a temporary exclusion for employer-provided housing in the GO Zone and a 30-percent employer credit for such housing. It extended a series of expiring tax provisions related to disclosure of return information and undercover operations. The amendment extending the law allowing combat pay to be included in income for the purposes of calculating the Earned Income Credit and modified the rules regarding suspension of interest and penalties when the IRS fails to contact the taxpayer. Many of the Senate modifications were preceded by related hurricane relief proposals included in S. 2020 as considered by the Senate earlier in the year.

The final version of H.R. 4440 allowed a tax credit for investment in `Gulf tax credit bonds.' For this purpose, a `Gulf tax credit bond' is defined as any bond: (1) that is issued by Alabama, Louisiana, or Mississippi after December 31, 2005, and before January 1, 2007; (2) 95 percent of the proceeds of which are used to refinance existing bonds or make loans to localities for such refinancing; and (3) the maturity of which does not exceed 2 years. The bill requires States issuing `Gulf tax credit bonds' to pledge matching amounts equal to the face amount of such bonds. The bill limits the amount of eligible `Gulf tax credit bonds' to $200 billion for Louisiana, $100 billion for Mississippi, and $50 billion for Alabama.

H.R. 4440 as enacted also included technical corrections on tax legislation originally included in H.R. 3376.

o. Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222)

Chairman Thomas introduced H.R. 4297 on November 10, 2005 to provide for reconciliation pursuant to the concurrent resolution on the budget for fiscal year 2006. The bill was ordered favorably reported by the Committee as amended as the `Tax Relief Extension Reconciliation Act of 2005' by a 24-15 vote on November 15, 2005 (H. Rept. 109-304). On December 8, 2005, the bill passed the House on a 234-197 vote.

Related legislation was introduced by Senator Grassley on November 16, 2005 as S. 2020. S. 2020 passed the Senate on November 18, 2005 by a vote of 64-33. The Conference Report on H.R. 4297 (H. Rept. 109-455) was filed on May 9, 2006, was agreed to by the House on May 10, 2006 by a recorded vote of 244-185, and was agreed to by the Senate on May 11, 2006 by a recorded vote of 54-44. It was signed by the President on May 17, 2006 (P.L. No. 109-222).

Title I of the bill as passed by the Committee and the House of Representatives would have extended certain expiring provisions through 2006 without modification. These provisions were the deduction for State and local sales taxes; the deduction for qualified tuition and related expenses; parity in the application of certain limits to mental health benefits; availability of Archer medical savings accounts; the welfare-to-work credit; authority to issue qualified zone academy bonds; the enhanced deduction for qualified computer donations; the exclusion of certain expenses of elementary and secondary school teachers from gross income; tax incentives for investment in the District of Columbia; the allowance for nonrefundable personal credits to be applied against the alternative minimum tax; fifteen-year depreciation for leasehold and restaurant improvements; the suspension of the 100-percent net-income limitation on percentage depletion in the case of oil and gas from marginal wells; the Indian employment credit; and, accelerated depreciation for business property on Indian reservations. The bill would have also extended the possessions tax credit for American Samoa. The bill would have also extended the Work Opportunity Tax Credit through 2006 and expand eligible hires by increasing the age limit for food stamp recipients from 25 to 35. The credit for increasing research activities would have also been extended through 2006 as well. In addition to this extension, the provision would have enhanced the credit by increasing the value of the alternative incremental credit and by adding a new alternative simplified credit.

Title II of the bill would have extended certain provisions for 2 years. The saver's tax credit for eligible low-income individuals who make contributions to an IRA or qualified pension plan would have been extended through 2008. Through 2009, small businesses would be allowed to expense up to $100,000 of investments in depreciable assets. The deduction phases out dollar-for-dollar to the extent the business's annual investments exceed $400,000. Under the bill, taxpayers would be allowed to expense the costs incurred in cleaning up certain contaminated sites (brownfields) through 2009 including sites contaminated by petroleum products. The active financing exception from the immediate taxation on foreign subsidiaries of U.S. companies under Subpart F would be extended for 2 years. In addition to extending the active financing exception, the provision also provided a 3-year exception from Subpart F for certain cross-border payments of dividends, interest, rents, and royalties that are funded with active income that has not been repatriated. The bill would have extended for 2 years the preferential tax rates for long-term capital gains and dividends which will other expire after 2008.

Title III of included temporary simplifications of present law. It would have simplified the application of the active trade or business test to certain corporate distributions. Also, it would have treated environment cleanup settlement funds as governmentally owned (i.e., not subject to tax) if certain standards and requirements are met to encourage more companies to establish settlement funds devoted to environmental cleanup. It would have provided capital gains treatment for self-created musical works when these works are sold by the artist. It would have codified and extended the present IRS exemption of the Permanent University Fund from the tax-exempt bond arbitrage rules. The bill would have reduced the eligible weight threshold to elect tonnage taxation from 10,000 to 6,000 deadweight tons. Finally, the bill would have expanded eligibility for the qualified veterans' mortgage bond programs that certain States use to finance affordable mortgages for veterans by repealing the requirement that veterans must have served before 1977.

As enacted, Title I of the Conference Agreement on H.R. 4297 includes: (1) a 2-year extension of enhanced Section 179 expensing for small business (through 2009), (ii) a 2-year extension of reduced rates on capital gains and dividends (through 2010); (3) a 2-year extension of the Subpart F active financing exception (through 2008); and (4) enactment of the Subpart F controlled foreign corporation `look-through' rule for 5 years (through 2008).

Title II contains additional provisions that apply through December 31, 2010. The provisions are: (1) clarification of taxation of certain settlement funds; (2) modification of the active business definition under Section 355; (3) modification of certain States' authority to issue veterans' mortgage bonds; (4) capital gains treatment of certain self-created musical works; (5) modification of special arbitrage rule for certain funds; (6) amortization of expenses incurred in creating or acquiring music or music copyrights; (7) modification of effective date of disregard of certain capital expenditures for purposes of qualified small issue bonds; and (8) modification of treatment of loans to qualified continuing care facilities.

Title III contains alternative minimum tax relief provisions, including: (1) an increase in the alternative minimum tax exemption levels for 2006 to $62,550 for joint filers and $42,500 for single filers; and (2) the allowance of nonrefundable personal credits against regular and alternative minimum tax liability.

Title IV changes the timing of certain corporate estimated tax installment payments.

Title V contains revenue offset provisions, including: (1) application of earnings stripping rules to partners which are corporations; (2) reporting of interest on tax-exempt bonds; (3) 5-year amortization of geological and geophysical expenditures for certain major integrated oil companies; (4) application of Foreign Investment Real Property Tax Act (FIRPTA) to regulated investment companies; (5) treatment of distributions attributable to FIRPTA gains; (6) prevention of avoidance of tax on investments of foreign persons in U.S. real property through wash sale transactions; (7) denying application of Section 355 to distributions involving disqualified investment companies; (8) limits on loan and redemption requirements on pooled financing requirements; (9) requiring partial payments with submission of offers-in-compromise; (10) an increase in the age of minor children whose unearned income is taxed as if parent's income; (11) imposition of withholding on certain payments made by government entities; (12) relaxation of 2006 limits on conversion to Roth IRAs; (13) repeal of Foreign Sales Corporation/Extra-Territorial Income (FSC/ETI) binding contract relief; (14) limiting wages attributable to domestic production taken into account in determining deduction for domestic production; (15) modification of exclusion for citizens living abroad; and (16) an excise tax on involvement of accommodation parties in tax shelter transactions.

p. Heroes Earned Retirement Opportunities Act (P.L. 109-227)

On April 6, 2005, Representative Virginia Foxx introduced H.R. 1499. Under the bill, combat pay which is otherwise excluded from gross income could be used to determine the eligibility of contributions to retirement savings plans. H.R. 1499 passed the House on May 23, 2005 by voice vote under suspension of the rules. On November 15, 2005, the bill was discharged by the Senate Finance Committee by unanimous consent and it passed the Senate with amendment to the effective date of the bill later that day. The House passed the bill as amended by the Senate with a further amendment (regarding certain contributions) on May 9, 2006. The Senate passed the bill as amended by the House on May 18, 2006, and the President signed the bill into law on May 29, 2006 (P.L. 109-227).

q. Pension Protection Act of 2006 (P.L. 109-280)

Majority Leader John Boehner (for himself, Chairman Bill Thomas, Chairman Howard P. `Buck' McKeon, Representative John Kline, and Representative Dave Camp) introduced H.R. 4 on July 28, 2006. The House passed the bill the same day by a vote of 279-131. H.R. 4 went on to pass the Senate on August 3, 2006 by a vote of 93-5. The President signed H.R. 4 into law on August 17, 2006 (P.L. 109-280). H.R. 4 reforms the single-employer and multiemployer pension funding rules, makes permanent certain retirement and saving incentives, and includes a number of new incentives for retirement savings.

H.R. 4 was preceded in the House by action on H.R. 2830, the `Pension Security and Transparency Act of 2005'. H.R 2830 was introduced by Chairman Boehner of the House Committee on Education and the Workforce, Chairman Thomas and others on June 9, 2005 and referred to the Committee on Education and the Workforce and the Committee on Ways and Means. Education and the Workforce ordered the bill reported with amendments on June 30, 2005. Subsequently, Ways and Means marked up H.R. 2830 and ordered the bill reported as amended on November 9, 2005 by a recorded vote of 23-17. The Committees' bills were combined in a single text considered by the House under a rule and the revised bill was passed by the House on December 15, 2005 by a vote of 294-132. The House appointed conferees on H.R. 2830 and the Senate amendment to the bill on March 8, 2006. The conferees did not come to an agreement, but many aspects of the House and Senate bills were modified and included in H.R. 4.

Like H.R. 4, H.R. 2830 included changes in funding requirements for single and multi-employer plans. In general, the bill would have required single employer defined benefit plans to fund up to 100 percent of their pension liabilities under revised measurement standards and established new funding shortfall amortization rules. Multiemployer plans would also have been required to amortize shortfalls over a fifteen year period and would be subject to funding new improvement requirements based on the pensions' being endangered (between 65 and 80 percent funded) or critical (less than 65 percent funded). The bill also would have increased the maximum tax-deductible fund limit for multiemployer plans from 100 percent to 140 percent of current liability to encourage additional employer contributions during profitable years.

H.R. 2830 also would have clarified current law on hybrid pension plans by creating a uniform age discrimination standard for all defined benefit plans, improved notice and disclosure requirements for single and multiemployer plans, given employers the option of providing employees with access to professional investment advice and clarified the standards under which annuities can be offered. The bill would have allowed health plans to recover benefits paid out once the participant is reimbursed by a third party for the same expenses and allowed sponsors of certain 401(k) plans to modify investment options when a pension plan changes administrators or replaces existing investment options.

As reported by the Committee on Ways and Means, H.R. 2830 also included provisions to make pension and retirement savings provisions from the `Economic Growth and Tax Relief Reconciliation Act of 2001' (P.L. 107-16) permanent. Among other changes, it also would have made the Saver's Credit permanent and included proposals to enhance pension participation through automatic enrollment procedures. The bill as reported would have allowed combat pay to be counted when determining amounts which could be contributed to IRAs, permitted members of the National Guard and Reserves called to active duty to take distributions from retirement plans and accounts without paying the 10 percent early withdrawal penalty and eliminated the 10 percent penalty for participants in Deferred Retirement Option Plans (DROP plans). The bill would have allowed direct deposit of tax refunds into IRAs.

As reported by the Committee on Ways and Means, H.R. 2830 also included health care affordability provisions. It would have allowed creation of insurance products combining annuities and long-term care coverage and tax free distributions from government retirement plans for public safety officers for the purchase of health and long-term care coverage. Also included in H.R. 2830 was a provision permitting Flexible Spending Account (FSA) participants to roll over up to $500 per year in their FSA or to transfer that amount to a Health Savings Account (HSA).

As enacted, H.R. 4 included pension reform provisions based on H.R. 2830 and Senate pension reform bill provisions.

Title I reforms the funding rules for single-employer defined benefit pension plans. The bill provides a permanent interest rate based on a `modified yield curve' to measure current pension liabilities. Interest rates for measuring liabilities and asset values may be smoothed over 24 months. Employers are required to make contributions to meet a 100 percent funding target (phased-in for certain plans that are well funded). Any funding shortfall must be amortized over seven years. The bill reforms the use of credit balances.

Sponsors of certain plans that are `at-risk' must make accelerated contributions. A plan is deemed to be `at-risk' if, for the preceding plan year, (1) the plan's assets are less than 70 percent of its liabilities calculated using `at-risk' assumptions, and (2) the plan's assets are less than 80 percent of its liabilities calculated using non-at-risk assumptions. Plans that are `at-risk' must assume that during the next 10 years participants will retire at the earliest date available under the plan and will elect the most expensive benefit available under the plan. Plans with fewer than 500 participants are exempt from the `at-risk' rules.

Title II of H.R. 4 reforms the funding rules for multiemployer defined benefit pension plans. The bill modifies the amortization periods applicable to multiemployer plans so the amortization period for most charges is 15 years. The bill requires the adoption of a funding improvement plan for multiemployer pension plans that are in `endangered status' and a rehabilitation plan for multiemployer plans that are in `critical status.' The maximum deductible amount is increased to 140 percent of current liability. Benefit increases are prohibited if the increase causes the plan to fall below 65 percent funded status.

Title III extends for 2 years (2006 and 2007) the long-term corporate bond rate established under the Pension Funding Equity Act of 2004 (P.L. 108-218) as a temporary replacement for the 30-year Treasury rate in calculating pension funding and premium payments to the Pension Benefit Guaranty Corporation (PBGC). The bill changes the interest rate assumptions used in calculating and applying benefit limitations to lump sum distributions.

Title IV modifies the calculation liability for purposes of the PBGC variable rate premium to reflect the changes to the general funding rules under the bill. The bill eliminates the full funding exception to the variable rate premium and makes permanent the termination premium enacted in the Deficit Reduction Act of 2005 (P.L. 109-171). In addition, Title IV establishes special funding rules for certain plans maintained by commercial airlines, limits the PBGC guarantee of certain shutdown benefits, authorizes the PBGC to pay interest on premium overpayment refunds, and makes the position of PBGC Director a Presidential appointment subject to Senate confirmation by both the Finance Committee and the Health, Education, Labor, and Pensions Committee.

Title V requires both single and multiemployer defined benefit pension plans to include more detailed and specific information on their form 5500 filings. The bill also requires disclosure of termination information to plan participants, notice of freedom to divest employer securities, periodic pension benefit statements and notice to participants or beneficiaries of blackout periods.

Title VI provides a prohibited transaction exemptions under Employee Retirement Income Security Act (ERISA) (P.L. 93-406) and the Code for the provision of certain investment advice. The bill provides prohibited transaction exemptions under ERISA and the Code for certain block trades. The bill provides a prohibited transaction exemption under ERISA and the Code for certain transactions that are corrected within 14 days of the date the disqualified person discovers, or reasonably should have discovered, the transaction was a prohibited transaction.

Title VII clarifies the legal uncertainty associated with hybrid pension plans and provides that defined benefit plans are not age discriminatory if, as of any date, a participant's accrued benefit under the terms of the plan is equal to the accrued benefit of any similarly situated younger participant.

Title VIII includes a number of tax incentives to enhance retirement savings, including: making permanent the pension and retirement saving provisions (including the saver's credit) in `The Economic Growth and Tax Relief Extension Act of 2001'; requiring the IRS to establish procedures for depositing tax refunds directly into an IRA; creating a safe harbor to encourage employers to offer automatic enrollment in employer-sponsored defined contribution pension plans; and eliminating the aggregate limit on the use of excess funds from black lung trusts to be used to fund retiree health for coal miners. The bill included the modified long-term care annuity and public safety officers' distribution rules, but not the FSA rollover rule.

H.R. 4 also includes several provisions related to Judges of the U.S. Tax Court. The bill includes provisions that provide cost-of-living adjustments to annuities paid to survivors of Tax Court judges and authorizes the Tax Court to pay the increased cost of life insurance for Tax Court judges. The bill also allows Tax Court judges to participate in the U.S. Government Thrift Savings Plan. The bill consolidates judicial review of collection due process activity in the Tax Court and clarifies that the Tax Court may authorize its special trial judges to enter decisions in employment tax cases that are subject to certain small case proceedings. The bill confirms that the Tax Court may apply equitable recoupment principles to the same extent as District Courts and the Court of Federal Claims. The bill also clarifies, in keeping with current Tax Court procedure, that the Tax Court is authorized to impose a $60 filing fee for all cases commenced by petition and expands the use of fees to provide services to pro se taxpayers.

Title XII includes provisions related to exempt organizations by providing incentives for charitable giving and reforms for certain exempt organizations. These incentives and reforms had been previously passed by the Senate. In general, the charitable giving incentives are effective for 2 years through 2007, and the reforms are enacted on a permanent basis.

The charitable giving incentives include a provision that provides an exclusion from gross income for certain distributions of up to $100,000 from a traditional individual retirement account (IRA) or a Roth IRA, which would otherwise be included in income. To qualify, the charitable distribution must be made to a tax-exempt organization to which deductible contributions can be made. Donations to supporting organizations and donor-advised funds do not qualify for this exclusion. For donations of food inventory, the bill extends to all trades and businesses an enhanced deduction equal to the lesser of (i) the taxpayer's basis plus one-half of the difference between fair market value and basis, and (ii) twice the taxpayer's basis in the contributed inventory. The bill would allow the reduction of a shareholder's basis in the stock of an S corporation as a result of the donation of such stock to charity to equal the shareholder's pro rata share of the basis of the contributed property. The provision extends the current-law provision that adds public schools to the list of eligible donees for the enhanced deduction for contributions of qualified book inventory by C corporations. H.R. 4 provides that payments received or accrued by certain exempt parent organizations from taxable controlled subsidiaries will not be treated as unrelated business taxable income. Exempt organizations are required to report these amounts received from controlled organizations. The bill raises the charitable deduction limit from 30 percent of adjusted gross income to 50 percent of adjusted gross income for qualified conservation contributions. This charitable deduction limit is raised to 100 percent of adjusted gross income for eligible farmers and ranchers. The bill would also exempt qualified blood collection organizations from paying certain excise taxes.

The reforms related to tax-exempt organizations in H.R. 4 require charitable organizations to report to the Secretary of the Treasury certain acquisitions of interests in certain insurance contracts for 2 years beginning on the date of enactment. The bill doubles the amount of excise taxes applicable to certain activities by charities, social welfare organizations, private foundations and exempt organization managers. The bill allows a charitable deduction with respect to easements concerning buildings located in a registered historic district. However, the easement must provide that no portion of the exterior of the building may be changed or altered in a manner inconsistent with the historical character of the exterior. This provision also clarifies that the charitable deduction is reduced if a rehabilitation tax credit has been claimed with respect to the donated property. The bill limits the basis for donated taxidermy property to the cost of preparing, stuffing and mounting an animal. The value of the deduction would be equal to the lesser of basis or fair market value. The bill requires the recovery of the tax benefit derived from the contribution of property with respect to which a fair market value deduction was claimed if the property is not used for an exempt purpose of the donee organization. The bill specifies that no deduction is allowed for charitable contributions of clothing and household items if such items are not in good used condition or better. In addition, the Secretary may deny a deduction for any item with minimal monetary value.

The bill further requires that in the case of a charitable contribution of money, regardless of the amount, the donor must maintain a cancelled check, bank record or receipt from the donee organization showing the name of the donee organization, the date of the contribution, and the amount of the contribution. The bill also requires that charities receiving a fractional interest in an item of tangible personal property must take complete ownership of the item within 10 years or the death of the donor, whichever is first. In addition, the donee must have (i) taken possession of the item at least once during the 10-year period as long as the donor remains alive, and (ii) used the item for the organization's exempt purpose. The bill lowers the thresholds for imposing accuracy-related penalties on a taxpayer who claims a deduction for donated property for which a qualified appraisal is required. The provision also applies for purposes of estate tax appraisals and provides definitions of a qualified appraiser and qualified appraisals. The bill imposes certain requirements on tax-exempt organizations that offer credit counseling services, subject to a four-year transition rule to limit the allowable amount of debt management plan (DMP) income to 50 percent of revenues. This provision also imposes restrictions on organizations offering credit counseling services with respect to loans, fees, and solicitation of contributions from consumers receiving counseling. The bill amends the definition of gross investment income to include capital gains, notional principal contracts, annuities, and other substantially similar investment income.

The bill clarifies the definition of a convention or association of churches and requires certain exempt organizations to file an annual notice with the IRS containing basic contact and financial information. The bill provides that upon written request by an appropriate state official, the Secretary may disclose information regarding organizations for which the IRS has denied or revoked tax-exempt status, certain other actions the IRS may have taken, and returns filed by tax-exempt organizations. It also extends the present-law public disclosure requirements applicable to Form 990 to the unrelated business income tax returns of Section 501(c)(3) organizations.

Under the bill, the Secretary will undertake a study on the organization and operation of donor-advised funds and of supporting organizations under the bill. The study will include an examination of requirements for determining if such organizations are operating in a manner consistent with the purposes or functions constituting the basis for their tax-exempt status.

Finally, H.R. 4 applies an excess benefits transaction tax on any grant, loan, compensation or other similar payments from a donor-advised fund to a person that with respect to such fund is a donor, donor adviser, or a related person, and from a supporting organization to a substantial contributor or a related person. This provision imposes excess business holdings rules on donor advised funds and Type III supporting organizations. Transition rules apply to the present holdings of donor-advised funds and supporting organizations. Supporting organizations that are functionally integrated with their charity would not be subject to any excess business holdings.

r. Tax Relief and Health Care Act of 2006 (H.R. 6111) 1

[Footnote]

[Footnote 1: At the time of printing, the Public Law number for H.R. 6111 was not available.]

H.R. 6111, originally introduced by Congresswoman Ellen Tauscher (D-CA), was passed with an amendment by the House under suspension of the rules on December 5, 2006. The original bill gave the Tax Court jurisdiction over cases involving innocent spouse relief. The Senate passed the bill by unanimous consent with an amendment to the effective date and returned the bill to the House on December 7, 2006. On December 8, 2006, the House passed H.R. 6111 with an amendment by a vote of 367 to 45 after defeating an amendment sponsored by Representative Ed Markey to the Senate amendment by a vote of 205-207. The Senate followed suit, passing the bill by a vote of 67-21 on December 9, 2006.

As amended by the House on December 8, 2006 and passed by the Senate, H.R. 6111 included the House-passed legislation on Tax Court jurisdiction and a number of provisions previously passed by the House in H.R. 5970. Generally, the bill extended provisions of law such as the research and experimentation credit, the tuition deduction, deduction for sales taxes and the above the line deduction for teachers' out of pocket expenses for a period of two years beginning after 2005 as was done in H.R. 5970. The amended bill also included provisions making a number of Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) provisions permanent as well as deductions for private mortgage insurance premiums, adjustments to the tonnage tax for Great Lakes shipping and other provisions which had been included in H.R. 5970. It included abandoned mine fund reforms from H.R. 5970 intended to address retiree health care needs.

H.R. 6111 included several items not included in H.R. 5970. These provisions included adjustments in Medicare payments to physicians, extension of the Section 45 energy tax credits and certain other incentive programs originally enacted in the Energy Policy Act of 2005 (P.L. 109-58), 50 percent bonus depreciation for investment in cellulosic ethanol facilities, modification of tax credits for gasification of sub-bituminous coal, wilderness legislation pertaining to White Pine County, Nevada, authorizing exploration of certain areas of the Outer Continental Shelf by including the text of S. 3711 as passed by the Senate (with one technical amendment) and included the provisions of H.R. 6134, the Health Opportunity Empowerment Act of 2006 as ordered reported by the Committee on Ways and Means by a vote of 24-14 on September 27, 2006. The Health Opportunity Empowerment Act provisions modified contribution limits for HSAs, allow taxpayers to have an HSA though still technically eligible for FSAs benefits, revised the date for calculating cost of living adjustments, allow employers to make larger contributions to HSAs on behalf of lower-income workers and permitted rollovers of funds from Health Reimbursement Accounts, FSAs and IRAs. The bill included several trade-related provisions, including modifications of the exemption from tariffs for cigarettes brought in for personal use, cotton shirt and trust fund tariff provisions and legislation to implement the U.S.-European Union accord on wine labeling.

s. Fallen Firefighters Assistance Tax Clarification Act of 2006 (H.R. 6429)

Rep. Mary Bono introduced H.R. 6429 on December 8, 2006. The bill treats payments by charitable organizations to the families of those firefighters who died as result of the October 2006 Esperanza Incident fire in southern California as exempt payments. It passed the House by Unanimous Consent and passed the Senate without amendment by Unanimous Consent on December 9, 2006. The bill was signed by the President on December 21, 2006. 2

[Footnote]

[Footnote 2: At the time of printing, the Public Law number for H.R. 6429 was not available.]

t. Leaking Underground Storage Tank Trust Fund (H.R. 6131)

On September 21, 2006, Representative Chris Chocola introduced H.R. 6131, to permit certain expenditures from the Leaking Underground Storage Tank Trust. The bill passed the House under suspension of the rules by voice vote on September 26, 2006. The bill passed the Senate without amendment by unanimous consent on December 8, 2006 and was signed by the President on December 20, 2006. 3

[Footnote] The text of H.R. 6131 was also included in H.R. 6111 as enacted.

[Footnote 3: At the time of printing, the Public Law number for H.R. 6131 was not available.]

2. TAX RELIEF AND OTHER PROPOSALS

a. Death Tax Repeal Permanency Act (H.R. 8)

Representative Kenny Hulshof introduced H.R. 8 on February 17, 2005. H.R. 8 would extend permanently the repeal of the estate tax. The bill passed the House on April 13, 2005 by a 272-162 vote. The bill has not been considered by the Senate.

b. Rail Infrastructure Development and Expansion Act for the 21st Century (RIDE 21) (H.R. 1631)

H.R. 1631 was introduced by Chairman Don Young of the Committee on Transportation and Infrastructure on April 14, 2005 and reported by that Committee on November 18, 2005. The bill was also referred to the Committee on Ways and Means, which reported the bill by voice vote as amended and without recommendation on February 3, 2006. The House has not considered the bill.

During consideration of the bill on February 1, 2006, the Committee on Ways and Means struck provisions of the bill as introduced which authorized issuance of $12 billion in tax-exempt bonds and another $12 billion in federal tax credit bonds for the purpose of financing high-speed rail infrastructure. The Committee struck these provisions, which were within its jurisdiction, in order to consider proposals to expand use of tax-preferred state and local financing in a more comprehensive manner. The Subcommittee on Select Revenue Measures subsequently held a hearing to examine tax-preferred bond policies on March 16, 2006.

c. Pension Security and Transparency Act of 2005 (H.R. 2830)

The Committee acted to improve the security of pensions and retirement savings in 2005 by reporting provisions to enhance single and multi-employer defined benefit plan financing and through other measures. The Committee considered these matters during consideration of H.R. 2830, the `Pension Security and Transparency Act of 2005.' H.R. 2830 was introduced by Chairman John Boehner of the House Committee on Education and the Workforce, the Committee on Ways and Means Chairman Thomas and others on June 9, 2005 and referred to the Committee on Education and the Workforce and the Committee on Ways and Means. Education and the Workforce ordered the bill reported with amendments on June 30, 2005. Subsequently, Ways and Means marked up H.R. 2830 and ordered the bill reported as amended on November 9, 2005 by a record vote of 23-17. The Committees' bills were combined in a single text considered by the House under a rule and was passed by the House on December 15, 2005 by a vote of 294-132. The House appointed conferees on H.R. 2830 and the Senate amendment to the bill on March 8, 2006.

Elements of H.R. 2830 as modified under agreement with Senate conferees were included in H.R. 4, the `Pension Protection Act of 2006.' For further information on H.R. 4 (P.L. 109-280), see subsection q. Pension Protection Act of 2006 (P.L. 109-280) in Bills Enacted into Law during the 109th Congress.

d. Tax Technical Corrections Act of 2005 (H.R. 3376)

H.R. 3376, the `Tax Technical Corrections Act of 2005,' was introduced by Chairman Thomas on July 21, 2005. The Committee on Ways and Means issued a request for written comments from the public on August 31, 2005 (WMCP 109-8). Companion legislation was introduced by the Senate on the same day by Senator Grassley and Senator Baucus as S. 1447. Similar legislation was introduced in the 108th Congress as H.R. 5395 and S. 3019.

The bill makes technical and clerical corrections to the Internal Revenue Code, including corrections to provisions enacted by: (1) the American Jobs Creation Act of 2004; (2) the Working Families Tax Relief Act of 2004; (3) the Jobs and Growth Tax Relief Reconciliation Act of 2003; (4) the Victims of Terrorism Tax Relief Act of 2001; (5) the Transportation Equity Act for the 21st Century; and (6) the Taxpayer Relief Act of 1997.

Provisions contained in H.R. 3376 were included in H.R. 4440, the Gulf Opportunity Zone Act of 2005. H.R. 4440 was introduced by Rep. Jim McCrery (R-LA) on December 6, 2005, passed the House by a vote of 414-4 on December 7, 2005, passed the Senate with an amendment by unanimous consent on December 16, 2005 and subsequently by the House as amended by the Senate, and signed by the President on December 22, 2005 as P.L. 109-135.

e. Stealth Tax Relief Act of 2005 (H.R. 4096)

On October 20, 2005, Rep. Reynolds introduced H.R. 4096, the `Stealth Tax Relief Act of 2005.' Under the bill, the 2005 alternative minimum tax exemption amount of $40,250 ($58,000 for joint returns) would be extended through 2006 and adjusted for inflation. The bill passed the House on December 7, 2005 by a vote of 414-4 under suspension of the rules. The Senate did not act on H.R. 4096. The exemption amount was subsequently extended and increased in the Tax Increase Prevention and Reconciliation Act (P.L. 109-222).

f. Gulf Opportunity Zone Public Finance Relief Act of 2005 (H.R. 4337)

H.R. 4337, the Gulf Opportunity Zone Public Finance Relief Act of 2005, was introduced by Representative Jefferson on November 16, 2005. The House passed the bill the same day by unanimous consent. Provisions were included later in H.R. 4440 (P.L. 109-135).

The bill would allow a tax credit for investment in `Gulf tax credit bonds.' For this purpose, a `Gulf tax credit bond' is defined as any bond: (1) that is issued by Alabama, Louisiana, or Mississippi after December 31, 2005, and before January 1, 2007; (2) 95 percent of the proceeds of which are used to refinance existing bonds or make loans to localities for such refinancing; and (3) the maturity of which does not exceed two years. The bill requires states issuing `Gulf tax credit bonds' to pledge matching amounts equal to the face amount of such bonds. The bill limits the amount of eligible `Gulf tax credit bonds' to $200 billion for Louisiana, $100 billion for Mississippi, and $50 billion for Alabama.

The bill also allows for one additional advance refunding of outstanding bond obligations of Alabama, Louisiana, or Mississippi until December 31, 2010. The amount of bonds eligible for an advance refunding are limited to $4.5 billion for Louisiana, $2.25 billion for Mississippi, and $1.125 billion for Alabama. The bill also provides for federal guarantees of up to $3 billion of the bonds issued by Alabama, Louisiana, or Mississippi before January 1, 2008, for the purpose of restoring lost revenue and funding infrastructure in areas affected by Hurricane Katrina. The bill limits such guarantee to 50 percent of bond principal. The `Gulf tax credit bond' and advance refunding provisions of H.R. 4337 were included in H.R. 4440.

g. Tax Revision Act of 2005 (H.R. 4388)

On November 18, 2005, Chairman Thomas introduced H.R. 4388, the `Tax Revision Act of 2005' to extend several tax provisions scheduled to expire at the end of 2005. Under suspension of the rules, the bill passed the House on December 7, 2005 by a vote of 423-0. The Senate did not consider the bill.

H.R. 4388 would extend several provisions for 1 year through 2006. These provisions are a special rule which allows military personnel the option of including their combat pay in the Earned Income Tax Credit calculation, the transfer to Puerto Rico and the Virgin Islands of $13.25 per-proof gallon of rum imported into the United States, and the authority for the IRS to use income recovered by undercover operations to pay additional expenses incurred by such operations. It also extends for one year (through 2006) the authority for the IRS to disclose certain tax information with certain other Federal and State authorities. This disclosure authority is limited to activities to the investigation of terrorist activities, to facilitate the repayment of student loans, and to facilitate combined employment tax reporting. H.R. 4388 also allows U.S. businesses operating in Puerto Rico to claim the domestic manufacturing deduction in 2006. This bill generally included many items which could not be included in budget reconciliation.

h. Permanent Estate Tax Relief Act of 2006 (H.R. 5638)

Chairman Thomas introduced H.R. 5638 on June 19, 2006. The bill was considered by the House on June 22, 2006 and passed by a vote of 269-156.

As introduced and passed by the House, H.R. 5638 provided for permanent relief from the estate and gift tax by reunifying the estate and gift tax for decedents dying or gifts made after December 31, 2009, providing a $5 million per decedent exemption amount, setting the tax rate at the long term capital gains rate for the first $25 million in cumulative taxable transfers and at twice the long term gains rate for amounts valued above $25 million. The exemption amounts would become portable: to the extent one spouse was unable to use the full $5 million exemption, the surviving spouse would be able to use the excess. The provisions also permanently repealed carryover basis, the credit for state death taxes, repealed qualified family owned business trusts and denied a deduction for state death taxes paid.

H.R. 5638 also included a deduction for qualified timber gains. The deduction equaled the lesser of 60% of such gains or net capital gains and could be taken against both the regular tax and the alternative minimum tax.

i. Estate Tax and Extension of Tax Relief Act of 2006 (H.R. 5970)

H.R. 5970, the `Estate Tax and Extension of Tax Relief Act of 2006,' was introduced by Chairman Thomas on July 28, 2006 and passed by the House on July 29, 2006 by a vote of 230-180. The Senate was unable to proceed on the measure as a motion to invoke cloture failed on August 3, 2006 by a vote of 56 to 42.

As introduced and passed by the House, H.R. 5970 provided permanent estate and gift relief similar to that contained in H.R. 5638. The bill reunified the estate and gift tax for decedents dying or gifts made after December 31, 2009, provided a $5 million per decedent exemption amount (increasing the exemption amount from $3.75 million to $5 million between 2010 and 2015), setting the rate at the long term capital gains rate for the first $25 million in cumulative taxable transfers. Transfers in excess of $25 million would be subject to tax at rates of 40 percent in 2010, 38 percent in 2011, 36 percent in 2012, 34% in 2013, 32 percent in 2014 and 30% in and after 2015. The $25 million threshold be indexed against inflation beginning in 2016. The exemption amount for each spouse would become portable: to the extent one spouse was unable to use the full $5 million exemption, the surviving spouse would be able to use the excess. The provisions also permanently repealed carryover basis, the credit for state death taxes, repealed qualified family owned business trusts and denied a deduction for state death taxes paid.

H.R. 5970 also included extensions of a number of tax provisions which had expired at the end of 2005 or which faced expiration in the near future. Among the provisions extended were a modified research and experimentation tax credit, reforms of the Work Opportunity Tax Credit and Welfare to Work Credit, the deduction for state sales taxes, investment and hiring incentives for activities on Indian reservations, the New Markets Tax Credit, the deduction for qualified tuition expenses, extension of Qualified Zone Academy Bonds, expensing of the cost of cleaning up `brownfields', 15-year depreciation for leasehold and restaurant improvements (extended to new restaurants), the cover over of $13.25 per proof gallon of rum excise taxes to Puerto Rico and the Virgin Islands, charitable contributions of computers (enhanced to cover self-constructed property), mental health parity and suspension of the 100 percent of net income limit on percentage depletion on marginal oil and gas wells. Most of these provisions had expired at the end of 2005 and would have been extended for 2 years under the bill.

H.R. 5970 also included a 2-year economic development credit for American Samoa, revisions in tax incentives for rebuilding the New York Liberty Zone, an extension of bonus depreciation for businesses in the Gulf Opportunity Zone and extensions of certain IRS disclosure and undercover authority. As well, the bill provided a tax credit intended to relieve taxpayers facing AMT liability as a result of receiving incentive stock options, partial expensing for mine safety equipment and a tax credit for mine rescue team training, extended the manufacturing deduction under section 199 to Puerto Rico for 2 years, a 60 percent deduction for timber gains, a 1-year deduction for Private Mortgage Insurance premiums, federal tax credits for holders of Rural Renaissance Bonds, temporary restoration of the deduction for spousal travel and a series of other small provisions. The bill would also have made a number of temporary provisions included in the Tax Increase Prevention and Reconciliation Act of 2005 permanent. Finally, the bill included reform of the Combined Benefit Fund (established by the Coal Industry Retiree Health Benefit Act of 1992), to permit certain operators to prepay their liability and provisions to increase the federal minimum wage.

j. Health Opportunity Patient Empowerment Act of 2006 (H.R. 6134)

H.R. 6134, as introduced by Representative Eric Cantor and Representative Paul Ryan on September 21, 2006, was ordered reported by the Committee on Ways and Means as amended on September 29, 2006 by a vote of 24-14. The text of H.R. 6134 was included in an amendment to the Tax Relief and Health Care Act (H.R. 6111) 4

[Footnote] on December 8, 2006.

[Footnote 4: At the time of printing, the Public Law number for H.R. 6111 was not available.]

As introduced, H.R. 6134 included a number of modifications to HSAs. These modifications included setting the limit for HSA contributions at the statutory amount, allowing mid-year HSA enrollees to make the full annual contribution, accelerating announcement of indexed amounts for various HSA limits effective after in 2008, allowing employers to make higher contributions for non-highly compensated employees and permitting tax free rollover of funds from HRAs, health FSAs and IRAs. As modified by the Committee, the reported bill accelerated announcement of indexed amounts to take effect after 2007 and allowed taxpayers to make contributions to an HSA notwithstanding certain residual coverage under a FSA.

k. Hatian and African Trade (H.R. 6142)

H.R. 6142 was introduced by Chairman Thomas on September 21, 2005. The bill included the African Investment Incentive Act to provide investment incentives for U.S. companies in Africa and to extend modified third-country fabric benefits. Included in H.R. 6142 is a provision to provide a tax credit for new wages paid and capital investments in eligible African countries. The credit is available to U.S. corporations that invest in eligible African countries directly (through `branch' operations) and indirectly (through controlled foreign corporations and partnerships). The credit is equal to 60 percent of additional wages and fringe benefits and an amount (15 percent-65 percent) of depreciation on new investments in tangible property (other than vessels, aircraft and related containers). The credit can be carried forward for 10 years. The credit (as well as any carryforward) expires for taxable years beginning after December 31, 2015.

l. Tax Technical Corrections Act of 2006 (H.R. 6264)

H.R. 6264, the `Tax Technical Corrections Act of 2006,' was introduced by Chairman Thomas on September 29, 2006. On that same day, The Committee on Ways and means issued a public request for comments. Companion legislation was introduced by the Senate on the same day by Senator Grassley and Senator Max Baucus as S. 4026.

The bill makes technical and clerical corrections to the Internal Revenue Code, including corrections to provisions enacted by: (1) the Tax Increase Prevention and Reconciliation Act of 2005; (2) the Energy Policy Act of 2005; (3) the American Jobs Creation Act of 2004; and (4) other tax legislation.

3. OTHER TAX MATTERS

a. Budget Hearings

On February 8, 2005, the full Committee held a hearing to receive testimony from Secretary of the Treasury John Snow concerning programs within the President's FY 2006 budget within the jurisdiction of the Committee.

On February 9, 2005, the full Committee received testimony from Joshua Bolten, Director of the Office of Management and Budget, concerning programs within the President's FY 2006 budget within the jurisdiction of the Committee.

On February 17, 2005, the full Committee held a hearing to receive testimony from Secretary of Health and Human Services Michael O. Leavitt concerning programs within the President's FY 2006 budget within the jurisdiction of the Committee.

On March 16, 2005, the full Committee held a hearing to receive testimony from Secretary of Labor Elaine Chao regarding programs within the President's FY 2006 budget within the jurisdiction of the Committee.

On February 8, 2005, the full Committee held a hearing to receive testimony from Secretary of Health and Human Services Michael O. Leavitt concerning programs within the President's FY 2007 budget within the jurisdiction of the Committee.

On February 8, 2006, the full Committee received testimony from Joshua Bolten, Director of the Office of Management and Budget, concerning programs within the President's FY 2007 budget within the jurisdiction of the Committee.

On February 15, 2006, the full Committee held a hearing to receive testimony from Secretary of the Treasury John Snow concerning programs within the President's FY 2007 budget within the jurisdiction of the Committee.

b. Tax Reform Hearings (Full Committee)

On June 8, 2005, the Committee received testimony on economic policy issues for consideration in reforming federal taxation from (i) Alan J. Auerbach, Professor of Economics and Law, University of California at Berkeley; (ii) William Beach, Director of the Center for Data Analysis, The Heritage Foundation; (iii) Leonard E. Burman, Co-Director of Tax Policy Center and Senior Fellow, Urban Institute; (iv) R. Glenn Hubbard, Dean, Columbia University Graduate School of Business; (v) and Joel B. Slemrod, Professor of Economics, University of Michigan.

c. Hearings Held During the 109th Congress by the Subcommittee on Select Revenue Measures

i. President's Proposal for Single-Employer Pension Funding Reform

On March 8, 2005, the Subcommittee received testimony from representatives of the Departments of Labor and Treasury, the Pension Benefit Guarantee Corporation and representatives of the private sector concerning the need for pension funding reform and possible impacts of the funding reform proposals including in President Bush's FY 2007 budget submission.

ii. Tax Credits for Electricity Production from Renewable Sources.

The Subcommittee received testimony from the Department of Energy and private sector representatives on the economics and effects of incentives for the production of energy from renewable sources, including wind, solar, geothermal, and biomass, on May 24, 2005.

iii. Funding rules for Multiemployer Defined Benefit Plans in H.R. 2830, the Pension Protection Act of 2005

On June 28, 2005, the Subcommittee received testimony on the potential effects and proposed modifications of multiemployer pension funding rules included in H.R. 2830 to improve the solvency of such plans.

iv. Proposals for Comprehensive Tax Reform.

On July 28, 2005, the Subcommittee received testimony from Members of Congress concerning their proposals for restructuring federal taxes.

v. Hearing on Miscellaneous Tax Proposals Offered by Members of the House of Representatives.

The Subcommittee on November 16, 2005 received testimony on reform proposals from Members of the Congress.

vi. Use of Tax-Preferred Bond Financing.

On March 16, 2006, the Subcommittee received testimony from Members of Congress, the Department of Treasury, the Congressional Budget Office, a representative of state and local government and from the private sector concerning the economy value of tax-exempt financing and suggestions for reform.

vii. Corporate Tax Reform.

On May 9, 2006, the Subcommittee examined issues involved in possible corporate tax reforms including rate reduction, base broadening and whether tax accounting should conform to book accounting methods.

viii. Impact of International Tax Reform on U.S. Competitiveness.

The Subcommittee received testimony on June 22, 2006 concerning trends in international taxation affecting U.S. businesses overseas and suggestions for reform.

ix. Issues Relating To The Patenting Of Tax Advice.

On July 13, 2006, the Subcommittee held a hearing to explore the effect on the federal tax system of issuing patents for tax compliance strategies.

x. Hearing on Miscellaneous Tax Proposals Offered by Members of the House of Representatives.

The Subcommittee on September 26, 2006 received testimony on reform proposals from Members of Congress.

B. LEGISLATIVE REVIEW OF TRADE ISSUES

1. BILLS CONSIDERED UNDER TRADE PROMOTION AUTHORITY (TPA)

a. Legislation

i. United States-Dominican Republic-Central America Free Trade Implementation Act

On June 15, 2005, the Committee informally approved with amendment draft legislation to implement the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA), by a roll call vote of 25-16. The Committee conducted this informal markup to provide advice to the Administration on the implementing bill and Statement of Administrative Action. On June 23, 2005, Majority Leader DeLay introduced (by request) H.R. 3045, the `Dominican Republic-Central America-United States Free Trade Agreement Implementation Act,' to be considered under TPA. On June 30, 2005, the Committee held a formal markup session to consider H.R. 3045. The Committee approved the bill and favorably reported H.R. 3045 by a roll call vote of 25-16. Under TPA, amendments are not permitted to the bill once it has been introduced. On July 28, 2005, the House passed the bill by a recorded vote of 217-215. On June 30, 2005, before the House took action on H.R. 3045, the Senate passed S. 1307 by a recorded vote of 54-45. On July 28, 2005, the Senate passed H.R. 3045, without amendment, by a recorded vote of 55-45. The President signed the bill into law on August 2, 2005 (P.L. 109-53).

In 2006, Congress took up technical amendments to DR-CAFTA. On July 28, 2006, the House passed H.R. 4, the Pension Protection Act of 2006, which included a provision to extend narrow proclamation authority to the President to implement changes to certain apparel rules of origin with respect to countries that have entered into letters of understanding concerning pocketing material with the United States and, subject to certain Congressional notification and layover limitations, with respect to countries that will do so in the future. H.R. 4 passed the House by a recorded vote of 279-131. On August 3, 2006, the Senate passed H.R. 4, without amendment, by a recorded vote of 93-5. The President signed the bill into law on August 17, 2006 (P.L. 109-280).

ii. United States-Bahrain Free Trade Implementation Act

On November 3, 2005, the Committee informally approved draft legislation to implement the United States-Bahrain Free Trade Agreement, by a roll call vote of 23-0, with 15 Members voting present, without amendment. The Committee conducted this informal markup to provide advice to the Administration on the implementing bill and Statement of Administrative Action. On November 16, 2005, Acting Majority Leader Blunt introduced (by request) H.R. 4340, the `United States-Bahrain Free Trade Agreement Implementation Act,' to be considered under TPA. On November 18, 2005, the Committee held a formal mark-up session to consider H.R. 4340. The Committee approved the bill and favorably reported H.R. 4340 by voice vote. Under TPA, amendments are not permitted to the bill once it has been introduced. On December 7, 2005, the House passed the bill by a recorded vote of 327-95. On December 13, 2005, the Senate passed H.R. 4340 by unanimous consent. The President signed the bill into law on January 11, 2006 (P.L. 109-169).

iii. United States-Oman Free Trade Implementation Act

On May 10, 2006, the Committee informally approved draft legislation to implement the United States-Oman Free Trade Agreement, by a roll call vote of 23-11, with 3 Members voting present, without amendment. The Committee conducted this informal markup to provide advice to the Administration on the implementing bill and Statement of Administrative Action. On June 26, 2006, Majority Leader Boehner introduced (by request) H.R. 5684, the `United States-Oman Free Trade Agreement Implementation Act,' to be considered under TPA. On June 29, 2006, the Committee held a formal markup session to consider H.R. 5684. The Committee approved the bill and favorably reported H.R. 5684 by a roll call vote of 23-15. Under TPA, amendments are not permitted. On June 29, 2006, before the House took action on H.R. 5684, the Senate passed S. 3569 by a recorded vote of 60-34. On July 20, 2006, the House passed the bill by a recorded vote of 221-205. On September 19, 2006, the Senate passed H.R. 5684 by a recorded vote of 62-32. The President signed the bill into law on September 26, 2006 (P.L. 109-283).

iv. United States-Peru Trade Promotion Agreement Implementation Act

On July 20, 2006, the Committee informally approved draft legislation to implement the United States-Peru Trade Promotion Agreement, by a roll call vote of 23-13, without amendment. The Committee conducted this informal markup to provide advice to the Administration on the implementing bill and Statement of Administrative Action. No further action was taken in the 109th Congress.

b. Hearings

i. DR-CAFTA

On April 21, 2005, the Committee held a hearing on implementation of the U.S. bilateral free trade agreement with El Salvador, Guatemala, Honduras, Nicaragua, Costa Rica, and the Dominican Republic (DR-CAFTA). The agreement was signed on May 28, 2004, by U.S. Trade Representative Robert Zoellick and Ministers of El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica. Witnesses at the hearing included Deputy U.S. Trade Representative Peter Allgeier and representatives from the business community, labor unions, and non-governmental organizations. The hearing focused on Congressional consideration of the DR-CAFTA and the benefits that the agreement would bring to American businesses, farmers, workers, and the U.S. economy.

ii. Bahrain

On September 29, 2005, the Committee held a hearing on implementation of the U.S. bilateral free trade agreement with Bahrain. The agreement was signed on September 14, 2004, by U.S. Trade Representative Zoellick and Bahrain Minister of Finance and National Economy Abdulla Hassan Saif. Witnesses at the hearing included Assistant U.S. Trade Representative Shaun Donnelly, as well as representatives from the private sector. The hearing focused on Congressional consideration of the United States-Bahrain FTA and the benefits that the agreement would bring to American businesses, farmers, workers, consumers, and the U.S. economy.

iii. Oman

On April 5, 2006, the Committee held a hearing on implementation of the U.S. bilateral free trade agreement with Oman. The agreement was signed on January 19, 2006, by U.S. Trade Representative Rob Portman and Omani Minister of Commerce and Industry Maqbool bin Ali Sultan. Witnesses at the hearing included Deputy U.S. Trade Representative Susan Schwab, as well as representatives from the private sector. The hearing focused on Congressional consideration of the United States-Oman FTA and the benefits that the agreement would bring to American businesses, farmers, workers, consumers, and the U.S. economy, as well as the U.S. strategic relationship in the region.

iv. Peru

On July 12, 2006, the Committee held a hearing on implementation of the United States bilateral free trade agreement with Peru. The agreement was signed on April 12, 2006, by U.S. Trade Representative Portman and Peruvian Minister of Foreign Trade and Tourism Alfredo Ferrero Diez Canseco. Witnesses at the hearing included Assistant United States Trade Representative for the Americas, Everett Eissenstat, as well as representatives from the private sector and non-governmental organizations. The hearing focused on Congressional consideration of the United States-Peru Trade Promotion Agreement and the benefits that the agreement would bring to American businesses, farmers, workers, consumers, and the U.S. economy, as well as to U.S. trade relations with our neighbors in the hemisphere.

c. Reports

In August 2004, the Committee received from the International Trade Commission (ITC) the report entitled `U.S.-Central America-Dominican Republic Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects' (Investigation No. TA 2104-13 (Publication 3717)).

In October 2004, the Committee received from the ITC the report entitled `U.S.-Bahrain Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects' (Investigation No. TA-2104-15 (Publication 3726)).

In April 2005, the Committee received from the ITC the report entitled `U.S.-Morocco Free Trade Agreement: Effect of Modifications to the U.S.-Morocco Free Trade Agreement' (Investigation No. Morocco FTA 103-11 (Publication 3774, April 2005)).

In February 2006, the Committee received from the ITC the report entitled `U.S.-Oman Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects' (Investigation No. TA-2104-19 (Publication 3837)).

In June 2006, the Committee received from the ITC the report entitled `U.S.-Peru Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects' (Investigation No. TA-2104-20 (Publication 3855)).

2. WORLD TRADE ORGANIZATION (WTO)

a. Legislation

On March 2, 2005, Congressman Sanders introduced H.J. Res. 27, a resolution to withdraw Congressional approval of the agreement establishing the WTO. Under the Uruguay Round Agreements Act (P.L. 103-465), the resolution is privileged and subject to specialized procedures. The resolution is not amendable and must be considered on the floor within 45 days of introduction. The resolution was referred to the Committee on Ways and Means, which adversely reported the resolution on May 26, 2005, by voice vote. On June 9, 2005, the House considered the resolution and failed to pass it, by a recorded vote of 86-338 with 1 member voting present. No further action was taken on the resolution in the 109th Congress.

b. Hearings

On May 17, 2005, the Subcommittee on Trade held a hearing to review future prospects for U.S. participation in the WTO. Witnesses at the hearing included Deputy U.S. Trade Representative Peter Allgeier and representatives from the business community, labor unions, and the agriculture sector. The hearing focused on overall results of U.S. membership in the WTO and General Agreement on Tariffs and Trade (GATT); whether future participation of the United States in the WTO and the multilateral trading system can be expected to benefit Americans; and prospects for increased economic opportunities for U.S. farmers, workers, and consumers in the Doha Round.

c. Hong Kong Staff Delegation (December 14-18, 2005)

On December 14-18, 2005, a bipartisan delegation of staff from the Committee on Ways and Means and the Senate Committee on Finance attended the WTO's Ministerial Conference in Hong Kong, consulted with U.S. trade officials during the negotiations, and discussed trade issues with foreign delegates and WTO officials. Staff met with foreign delegations, U.S. business representatives, and WTO Secretariat staff. An important objective of the meetings was to highlight the importance that Members of Congress place on trade and especially on the need for trade liberalization in the agricultural sector.

d. Reports

In May 2005, the Committee received from the Government Accountability Office (GAO), the report entitled `World Trade Organization: Global Trade Talks Back on Track, but Considerable Work Needed to Fulfill Ambitious Objectives' (GAO-05-538). As a follow up to its 2004 report on the problems with the WTO Cancun Ministerial, the GAO reported on the breakthrough made in July 2005 to create a framework for further negotiations. The GAO also noted the uneven progress made in the various trade negotiating groups given the focus on agriculture by many key countries. The report also described the continuing difficulties for future progress such as the complexity of the agenda and competing goals between developed and developing countries. The GAO also highlighted the timing constraints for the negotiations because of the expiration of trade negotiating authority for the President in July 2007. The GAO continues to monitor negotiations for the Committee.

In August 2005, the Committee received from the Congressional Budget Office the paper entitled `Policies That Distort World Agricultural Trade: Prevalence and Magnitude.' The paper reviewed the effects of trade distorting policies including hindrances to market access, various forms of domestic subsidy programs, and export subsidization.

In December 2005, the Committee received from the Congressional Budget Office the paper entitled `The Effects of Liberalizing World Agricultural Trade: A Survey.' The paper reviewed the economic literature on the total cost of policies that distort agricultural trade, the potential impact of the Doha Round on eliminating distortions, and the distribution of benefits among key agriculture producing countries.

In April 2006, the Committee received from the GAO the report entitled `World Trade Organization: Limited Progress at Hong Kong Ministerial Clouds Prospects for Doha Agreement' (GAO-06-596).

3. BILATERAL AND REGIONAL ISSUES

a. Free Trade Agreements

i. Completed Agreements

Dominican Republic-Central America Free Trade Agreement

Negotiations for the U.S.-Dominican Republican-Central America Free Trade Agreement were completed in May 2004. As noted above, the President signed the implementing legislation into law on August 2, 2005 (P.L. 109-53).

Bahrain

Negotiations for the U.S.-Bahrain Free Trade Agreement were completed in May 2004. As noted above, the President signed the implementing legislation into law on January 11, 2006 (P.L. 109-169).

Oman

Negotiations for the U.S.-Oman Free Trade Agreement were completed in October 2005. As noted above, the President signed the bill into law on September 26, 2006 (P.L. 109-283).

Peru

On November 18, 2003, U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with Colombia, Ecuador, and Peru. Negotiations began in May 2004 with Colombia, Ecuador, and Peru. Bolivia was an observer in the negotiations. On December 7, 2005, the United States and Peru concluded FTA negotiations. On January 6, 2006, President Bush officially notified Congress of his intent to sign the U.S.-Peru Trade Promotion Agreement. The agreement was signed on April 12, 2006. See above for discussion of legislative activity related to the U.S.-Peru Trade Promotion Agreement.

Colombia

As noted above, on November 18, 2003, U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with Colombia, Ecuador, and Peru. Negotiations began in May 2004 with Colombia, Ecuador, and Peru. On February 27, 2006, the United States and Colombia concluded FTA negotiations. On August 24, 2006, President Bush officially notified Congress of his intent to sign the U.S.-Colombia Trade Promotion Agreement. The agreement was signed on November 22, 2006.

ii. Ongoing Negotiations

Southern African Customs Union (SACU)

Pursuant to Sense of Congress language in the Africa Growth and Opportunities Act of 2000 (P.L. 106-200), on November 4, 2002, U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement negotiations with the SACU countries (South Africa, Lesotho, Swaziland, Botswana, and Namibia). Negotiations between the United States and the SACU countries were launched on June 2, 2003, in Pretoria, South Africa and were suspended in 2006 due to lack of progress.

Korea

On February 2, 2006, U.S. Trade Representative Portman formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with the Republic of Korea. Negotiations began in June 2006.

Malaysia

On March 8, 2006, U.S. Trade Representative Portman formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with Malaysia. Negotiations were launched in June 2006.

Ecuador

As noted above, on November 18, 2003, the U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with Colombia, Ecuador, and Peru. Negotiations began in May 2004 with Colombia, Ecuador, and Peru. See discussion above concerning the conclusion of negotiations with Peru and Colombia. The United States and Ecuador suspended negotiations in May 2006.

Panama

On November 18, 2003, U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with Panama. Negotiations were launched on April 26, 2004.

Thailand

On February 12, 2004, U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with Thailand. Negotiations began in June 2004, and the sixth round was held in January 2006. However, FTA talks were suspended after a political crisis enveloped Thailand in April 2006. In September 2006, a military coup ousted the sitting government. The United States has stated that the FTA talks will not resume until Thailand has a democratically elected government with authority to resume the negotiations.

United Arab Emirates (UAE)

The United States signed a Trade and Investment Framework Agreement (TIFA) with the UAE on March 15, 2004. On November 15, 2004, U.S. Trade Representative Zoellick formally notified Congress of the Administration's intent to initiate negotiations for a free trade agreement with the UAE. A free trade agreement with the UAE is part of the goal announced by the President to form a Middle East Free Trade Area by 2013. The first round of negotiations was held on March 8, 2005. There have been four full fledged negotiating rounds and three formal rounds on investment, with the last round in August 2006.

iii. Codel to Colombia, Ecuador, and Peru (July 3-9, 2005)

On July 3-9, 2005, Chairman Thomas led a bipartisan delegation of Committee Members to Colombia, Ecuador, and Peru. The purpose of the delegation's trip was to focus on the ongoing negotiations for a free trade agreement with these countries and to discuss investment and security issues in the region. The delegation in particular emphasized that current unilateral trade preferences under the Andean Trade Promotion and Drug Eradication (ATPDEA) are set to expire in December 2006, and the only way that the Andean countries can replicate their access to the U.S. market after these benefits expire is through a comprehensive free trade agreement providing reciprocal market access. In September 2005, the Committee filed its `Report on Trade Mission to Colombia, Ecuador, and Peru.' (WMCP 109-6)

b. China

i. Legislation

On July 14, 2005, Congressman Phil English introduced H.R. 3283, the `Trade Rights Enforcement Act.' The bill would authorize funding for enforcement offices within USTR, require reports on China's currency exchange reforms, authorize the application of U.S. countervailing duty law to exports from nonmarket economies such as China, and establish a system of comprehensive monitoring of Chinese compliance with its trade obligations. The bill was referred to the Committee and placed on the House Suspension Calendar on July 26, 2005. The bill failed to pass with the requisite two-thirds majority with a vote of 240-186. The bill subsequently passed the House under a rule on July 27, 2005, by a recorded vote of 255-168. No further action was taken on this legislation in the 109th Congress.

ii. Hearing

On April 14, 2005, the Committee held a hearing on U.S.-China economic relations and China's role in the world economy. During the hearing, the Committee received testimony from Members of Congress, the Administration, the Congressional Budget Office, and private sector interests. The hearing focused on (1) implementation of China's WTO accession commitments; (2) trade relations between the United States and China; (3) China's currency management; and (4) the relationship between trade with China and the U.S. economy.

iii. GAO and ITC activities

On January 25, 2005, the Ranking Members of the Committee received from the GAO the report entitled `U.S.-China Trade: Summary of 2003 World Trade Organization Transitional Review Mechanism for China' (GAO-05-209R U.S.-China Trade).

On April 14, 2005, the Committee received from the GAO a report entitled `U.S.-China Trade: Opportunities to Improve U.S. Government Efforts to Ensure Open and Fair Markets' (GAO-05-544T).

In June 2005, the Committee received from the GAO a report entitled `U.S.-China Trade: Commerce Faces Practical and Legal Challenges in Applying Countervailing Duties' (GAO-05-474).

On December 9, 2005, the Committee received from the GAO the report entitled `China Trade: U.S. Exports, Investment, Affiliate Sales Rising, but Export Share Falling' (GAO-06-162).

On September 21, 2006, Chairman Bill Thomas requested a three-part study pursuant to section 332 of the Trade Act of 1930 on China trade and investment, which will be due in parts through the middle of 2008.

c. Burma

On July 28, 2003, the President signed into la