Extensions of Remarks

212 EXTENSIONS OF REMARKS January 19, 1976 Redington Beach, Fla., relative to the dis coal deposits subject to such lease are lo "(8) •.New natural gas' means natural gas continuation of photocopy services at post cated. No such lease may be issued under produced by independent producers and solei offices; to the Committee on Post Office and this Act before the expiration of the 60-day or delivered tn Interstate commerce- Civil Service. period beginning on the date of such sub (A) which is dedicated to interstate com 370. Also, petition of the city council, mission. If any Governor to whom a pro merce for -:;he first time on or after Janu Inkster, Mich., relative to the observance of posed lease wa,s submitted under this sub ary 1, 1976, or Martin Luther King's birthday as a national paragraph objects to the issuance of such (B) which is continued in interstate com holiday; to the Committee on Post Office and lease, such lea,se shall not be issued before merce after the expiration of a contract by Civil Service. the expiration of the one-year period begin its own terzns (and not through the exer 371. Also, petition of B'nai B'rith Women, ning on the date the Secretary is notified by cise of any power to terminate or renegoti Washintgon, D.C., relative to tax credits for the Governor of such objection. During such ate contained therein) for the sale or deliv child care; to the Committee on Ways and one-year period, the Governor may submit ery of such natural gas existing as of such Means. to the Secretary a statement of reasons why date, or 372. Also, petition of the United-Italian such lease should not be issued and the Sec (C) which is produced from wells com American Labor Council, Inc., New York, retary shall, on the basis of such statement, menced on or after January 1, 1976. N.Y., relative to Federal aid to New York reconsider the issuance of such lease." "(9) 'Old natural gas' means natural gas City, and multinational corporations and H.R. 9464 other than new natural gas. labor standards; jointly, to the Committees B~- Mr. ECKHARDT: "(10) 'Affiliate' means any person directly on Banking, ClllTency and Housing. and Edu or indirectly controlling, controlled by, or cation and Labor. (Amendment to Mr. Krueger's amendment published in the CONGRESSIONAL RECORD of under common control or ownership with December 8, 1975; on pages 39152-39156.) any other person, as determined by the Section 204 is amended to read as follows: Commission pursuant to its rulemaking "SEc. 204. (a) section 2 of the Natural authority. AMENDMENTS Gas Act (15 U.S.C. 717(a)) is amended by "(11) 'Offshore Federal lands' means any Under clause 6 of rule :xxm, pro redesignating paragraphs (7) through (9) land or subs1.trface area Within the Outer posed amendments were submitted as as paragraphs (13) through (15) and in Continental Shelf, as defined in section 2 follows: serting the following new paragraphs: (a) of the Outer Continental Shelf Lands H.R. 6721 "(7) 'Boiler fuel use of natural ga,s' means Act (43 U.S.C. 1331(a)). the use of natural gas a,s the source of fuel .. (12) 'Independent producer' means a per By Mr. SIMON: in a generating unit of more than 25 mega son, as determined by the Commission, (A) Page 20, line 8, after" (2)" insert "(A) ". watts rated net generating capacity or in Page 20, after line 20, insert: who is not affiliated with a person engaged any unit which is part of an electric utili in the transportation of natural gas in in "(B) Any lease which permits surface coal ties system with a total net generating ca terstate commerce, and (B) who is not a mining which the secretary proposes to is pacity of more than 150 megawatts for the producing division of such a person en sue under this Act -shall be submitted to the purpose of generating electricity for distri gaged in the transportation of natural gas Governor of each State within which the bution. in interstate commerce. EXTENSIONS OF REMARKS EFF.ECTIVE FEDERAL INCOME TAX outlived their usefulness, in other cases The banking industry provides a service; RATES OF MAJOR U.S. BANKS they may be completely justified. In any it does not manufacture goods. Nonethe JANUARY 19, 1976 event, their clever use by many American less, the industry has moved into two companies has allowed companies to other areas of tax preference which have HON. CHARLES A. YANIK drastically lower their Federal income long been the province of nonfinancial tax load, or avoid it completely. corporations-the foreign tax credit and OF OHIO I hope that the following summary and liberalized capital recovery provisions. IN THE HOUSE OF REPRESENTATIVES statistics on U.S. commercial banks will According to the Federal Reserve Monday, January 19, 1976 be of interest to my colleagues. study, foreign tax credits claimed by Mr. VANIK. Mr. Speaker, in October COMMERCIAL BANKS banks jumped from $63 million in 1967 to of last year I released my fourth annual Only recently have the full implica $218 million in 1971. This increased use corporate tax study. The study is a tions of the trend of tax avoidance by of the foreign tax credit simply docu report on close to 150 major American commercial banks begun to unfold. A ments the remarkable growth in intet·na companies, from industrials to utilities, little over a year ago an economist at the tional activities by the banking industry. and transportation to commercial banks. Philadelphia Federal Reserve Bank com In 1971, 91 U.S. banks had a total of 583 Using publicly available figures, the piled data on the tax burden of banks foreign branches. The combined assets of study is able to approximate the effec over the past decade. The results were these foreign branches totaled over $60 tive Federal income tax rates of the com startling. In 1961, commercial banks billion, or about 10 percent of the total panies. This latest study, for tax year were paying an effective rate of Federal assets of all domestic banks and 1974, showed that 142 companies paid income tax of about 3a.3 percent of net branches. In just 2 years there was a re an approximate effective U.S. Federal in income. By 1972 the rate had dropped markable expansion of foreign opera come tax at a 1·ate of 22.6 percent. to 16.8 percent. tions. By 1973, 136 U.S. banks-an in Because of the length of the statistical There are several reasons underlying crease over 1971 of 45 banks-haq foreign portion of that study, I did not include the reduction of Federal tax liability by branches. The number of foreign a summary of the situation with respect banks. First, the banking industry gen branches grew to 694. By the end of July to the commercial ba.nking portion of the erally earns a good portion of its income 1974, the assets held by these branches economy. Because of the recent interest from investments in tax-exempt State totaled $145 billion-over twice the total that has focused on commercial banks, I and local securities. Under our tax laws of 1971 and a twelvefold increase over would like to insert that summary for the interest on State and local govern 1966. At the same time, foreign t-ax the information of my colleagues. ment obligations is exempt from income credits claimed by banks increased by The figures show that the nine com tax. Generally speaking, about 11 per more than tru·eefold in 4 years. mercial banks in the study paid an aver cent of the assets of commercial banks The growing investment of U.S. banks age approximate effective Federal tax of consists of these securities. in foreign operations raises significant 11.7 percent-a far cry from the 48 per A second tax advantage exploited bY questions concerning the risks and con cent corporate tax rate. banks is the lower capital gains tax on flicts these activities hold for the stabil I must emphasize that these banks the income from securities transactions. ity of the domestic banking industry. were able to reduce their tax load Additionally, banks are allowed tax For example, what impact do these ac through entirely legitimate means. They deductions for reserves set up to offset tivities have on the control of domestic have taken full advantage of the tax loan losses. credit fiows and the allocation of credit "stimulants" and "incentives" that the These three tax advantages are en among sectors of the U.S. economy? Congress has put into the tax code. In joyed by banks primarily because of their As disturbing as the worldwide expan some cases these provisions may have unique status as financial institutions. sion of banking has become, the move- January 19, 1976 EXTENSIONS OF REMARKS 213 ment of banks into the use of tax deduc try is a direct result of our liberalized means increasing banking concentration tions typically exploited by manufac tax treatment of capital investment. of control and ownership of industry." turing corporations is equally serious. Leasing involves capturing tax benefits This development, in turn, has the Through equipment leasing, banks have which otherwise might have been lost. most significant implications for the fu opened the door to an entirely new and As a Boston Federal Reserve Bank study ture strength of our economy. Competi profitable area of tax avoidance. Leas on leasing stated: tion and risk impose important discipline ing actually involves the bartering of "Tax considerations are a major ele on the marketplace; they make sure that tax breaks, principally the investment ment in most large leasing deals, when a business decisions are prudent and that tax credit and accelerated depreciation lessee is unable to take advantage of the business activity is efficient.

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