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1974/10/29 HR12281 Extension of Copper Duty Suspension
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1974/10/29 HR12281 Extension of Copper Duty Suspension
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The original documents are located in Box 13, folder "1974/10/29 HR12281 Extension of
Copper Duty Suspension" of the White House Records Office: Legislation Case Files at the
Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
Digitized from Box 13 of the White House Records Office Legislation Case Files at the Gerald R. Ford Presidential Library
APPROVED OCT 29 1974
THE WHITE HOUSE
ACTION
WASHINGTON
Last day - Tuesday, October 29
October 26, 1974
Posted 10/29
TORRELLIVES
MEMORANDUM FOR
THE PRESIDENT
FROM:
KEN COLE
SUBJECT:
Enrolled Bill: Extension of Copper Duty
Suspension, H.R. 12281
BACKGROUND
The suspension of duties on certain forms of copper expired on June 30
of this year. This bill would reimpose the suspension until June 30,
1975, and make it retroactive to when the suspension expired. All your
advisers support the suspension due to a domestic shortage of copper.
Congress attached to this otherwise desirable bill a rider which would
provide tax relief of nearly $1.4 million for a private corporation,
State Lines, Incorporated, by permitting it to treat as a deduction a
damage payment made in 1959. The payment was made pursuant to a court
decision based on cargo which was lost by a liquidated corporation
acquired by State Lines.
ARGUMENTS FOR SIGNING
Because of the copper shortage, there is a legitimate need for the duty
suspension.
There are equitable considerations which could justify the tax relief.
ARGUMENTS FOR VETO
The tax rider involves an undesirable precedent by providing special
relief from the tax laws for a corporation which made a calculated
business decision that turned out to be the wrong choice. Further,
this involves a potential revenue loss of $1.4 million for the govern-
ment.
Congress can easily reenact the copper duty suspension as a clean bill
when it returns from its recess. (You can encourage Congress to take
this action and indicate your support for the duty suspension by signing,
the attached veto statement.)
FORD i LIBRARY GERALD
2
STAFF AND AGENCY POSITIONS
The following recommend signature:
Department of the Interior
Department of Treasury (objects to the tax rider
but avoids a veto recommendation because of
the merits of the copper duty suspension)
The following recommend veto and a statement which urges Congress to
pass a clean copper duty suspension bill:
Roy Ash (see attached enrolled bill memo)
Ken Cole
Bill Timmons
Phil Areeda
DECISION H.R. 12281
Sign (Tab A)
Veto SR7.
(sign veto message reviewed
by Paul Theis at Tab B)
APPROVED
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
OCT 24 1974
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 12281 - Extension of copper duty
suspension
Sponsor - Rep. Griffiths (D) Michigan
Last Day for Action
October 29, 1974 - Tuesday
Purpose
Continues through June 30, 1975, the suspension of duties on
certain forms of copper; and contains a tax rider relating to
the basis of property received in liquidations.
Agency Recommendations
Office of Management and Budget
Disapproval (veto
message attached)
Department of the Treasury
Does not recommend
disapproval
Department of State
No objection
Department of Labor
No objection
Department of Commerce
No objection (sections 1
and 2)
Office of the Special Representative
for Trade Negotiations
No objection (sections 1
and 2)
Council on International Economic Policy
No objection (sections 1
and 2)
Department of the Interior
Approval
Discussion
The enrolled bill contains the following provisions:
Extension of copper duty suspension (sections 1 and 2)
Except for a period of one year, the duty on copper ore and
articles was suspended from 1966 until June 30, 1974. This
2
suspension reflected the shortage of domestic copper pro-
duction as compared to demand except during the year July 1,
1972 to July 1, 1973 when shortages and prices were reduced
to the point at which a duty suspension was not considered
necessary. The generally prevailing situation of excess
domestic demand over supply currently exists, and, accordingly,
H.R. 12281 would continue, until June 30, 1975, the past duty-
free treatment of copper ore and articles. Such treatment
would be made effective as of July 1, 1974 and be extended
to imports from countries enjoying most-favored-nation status.
In its report on H.R. 12281, the Senate Finance Committee
notes:
"Major primary copper producers, many importers,
exporters, dealers and merchants, and consumers
of copper support the proposed copper duty sus-
pension. Some U.S. firms have experienced dif-
ficulty in buying domestic copper, particularly
during periods of tight supply, and must rely
heavily on higher-price imports to meet demand.
"The committee has been informed that the temporary
suspension of duties on certain forms of copper as
provided by H.R. 12281 would not adversely affect
the domestic copper mining industry. Indeed, the
committee is informed that the duty suspension
would be likely to benefit employment in con-
struction, transportation and electronics in-
dustries, which are major consumers of copper."
Basis adjustment for property received in the liquidation of a
subsidiary (section 3)
This section contains a provision that would allow a private
corporation, State Lines, Inc., (New State) which succeeded
to the business of a liquidated corporation, States Steamship
Company, (Old State) to deduct, as a loss for tax purposes, a
payment by New State of a judgment for cargo lost by Old State.
The cost to the Federal Government of such a provision would
be approximately $1.4 million.
Tax law provides that when a corporation acquires another
corporation and liquidates the acquired corporation within
two years, it must capitalize the liabilities of the acquired
corporation. That is, it must treat the liabilities of the
acquired corporation as part of the acquiring corporation's
3
basis in the acquired property even though those liabilities
might have been deductible for tax purposes by the acquired
corporation had it continued in existence.
The facts of the instant case are as follows:
In 1952 Old State lost a ship at sea. In 1955 the U.S. District
Court held that Old State's liability was limited to an amount
less than the insurance of the cargo with the result that it
owed nothing. On appeal, the U.S. Court of Appeals affirmed
the District Court's judgment on May 31, 1957. About a year
before that, on July 11, 1956, New State acquired Old State.
On June 30, 1957, one month after the Circuit Court affirma-
tion, New State liquidated Old State. On November 15, 1957,
the same Circuit Court of Appeals, on a petition for rehearing,
reversed itself and New State became liable for a liability
of Old State. Certiorari was denied by the Supreme Court in
early 1959.
Because New State had liquidated Old State less than two years
after its acquisition, it lost its option under law to treat
the liability as a tax loss. This resulted in financial dis-
advantage to the corporation in that it had to pay a liability
of $1.4 million without claiming it as a tax loss. The New
State could have retained the option of treating the Old State
liability as a tax loss by waiting until two years after
acquisition to liquidate. Presumably, there were financial
advantages to liquidation at the time they chose. New State
could also have preserved its option by waiting until the period
for filing a petition for rehearing or review had passed (thereby
making the judgment final) before assuming that no liability
existed. Apparently it either chose to take a calculated risk
or it acted in error.
The specific legal implications of the enrolled bill are that
it would exempt this particular liquidation from the rules
respecting capitalization of liabilities of recently acquired
corporations and permit New State to deduct the payment as a
loss when paid in 1959.
The Treasury Department, in its views letter on H.R. 12281,
states:
"In general, the Treasury Department opposes amend-
ing tariff legislation to add tax or other provisions
which, like section 3, clearly involve special relief
4
for particular taxpayers. From the standpoint of
tax policy, section 3 is also objectionable on the
grounds of retroactivity
"
Treasury does not recommend disapproval of the enrolled bill,
however, because:
-- section 3 is drafted in a manner which would
not affect other taxpayers, and thus would not
involve a general modification of the Internal
Revenue Code; and
-- the tariff amendments in sections 1 and 2 are
considered to have a significant anti-inflationary
effect.
Recommendation
We believe that H.R. 12281 should be vetoed on the grounds that:
-- section 3 involves an undesirable precedent (at
a revenue loss of $1.4 million) which could
invite others to petition the Congress for relief
when they either make errors in corporate tax
planning or lose on calculated risks; and
----- extension of the duty suspension on copper could
easily be reenacted by the Congress before the
end of this session or early next session.
A proposed veto message is attached for your consideration.
Director
Enclosures
U.S. DEPARTMENT OF LABOR
OFFICE OF THE SECRETARY
WASHINGTON
OCT 25 1974
Honorable Roy Ash
Director, Office of Management
:
and Budget
:
Executive Office of the President
:
Washington, D. C. 20503
Dear Mr. Ash:
This is in response to the request of your office for
our views on the enrolled enactment of H.R. 12281,
"To continue until the close of June 30, 1975, the
suspension of duties on certain forms of copper,
and for other purposes." This Department would have
no objection to the President's approval of this
measure insofar as it relates to the duty-free entry
of the imports referred to above.
The Department defers to the views of the Department
of the Treasury on section 3 of the enrolled enactment
concerning the Federal tax consequences incidental to
the distribution of property in complete liquidation
of certain corporations.
Sincerely,
Secretary of Labor
BECEINED
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
713
Date:
October 25, 1974
Time:
9:30 a.m.
rike Duval
FOR ACTION:
Gooff Signature
CC (for information): Warren Haedriks
Phil Buchen
Jerry Jones
Bill Timmons
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: October 25, 1974, Today
Time:
3:00 p.m.
SUBJECT: Enrolled Bill H.R. 12281 - Extension of copper duty
suspension
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K. R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
OF
THE TREASURY THE DEPARTMENT
THE DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
1789
ASSISTANT SECRETARY
OCT 23 1974
Dear Sir:
This is in response to your request for the views of
the Treasury Department on the enrolled bill H.R. 12281.
The first section of the enrolled bill would amend the
Appendix to the Tariff Schedules of the United States to
extend for one year, that is until June 30, 1975, the sus-
pension of duties on copper and copper products provided
for in items 911.10, 911.11, 911.13, 911.14, 911.15 and
911.16 of the Tariff Schedules. The second section provides
that such amendments shall apply to articles entered, or
withdrawn from warehouse, for consumption on or after July 1,
1974. There are strong economic arguments for continuing this
tariff suspension, which has generally been in effect since
the mid-1960's. Domestic prices are high, copper is a major
raw material import, and a lot of trade is involved ($1 billion
in 1973). The Treasury Department accordingly would recommend
approval of this provision because of its significant though
moderate (the tariff rate is one percent), anti-inflationary
effect.
The third section of the enrolled bill contains an ex-
ception to the general tax rule that the basis of property
received in a liquidation of a subsidiary within two years
after purchase of its stock must be adjusted for the amount
of liabilities to which the property was subject or which
the parent assumed. The exception would provide that such
basis adjustment is not required for property distributed
prior to July 1, 1957, if the distributor and distributee
did not consider the liability relevant to the value of the
stock redeemed, they reasonably relied on a United States
district court decision adjudicating the amount of the
liability and its affirmance by the United States Court of
Appeals, and the amount of such liability was not greater
than would be compensated for by insurance. Section 3 would
apply without regard to the fact that the Court of Appeals
subsequently modified its decision after such distribution
occurred. Section 3 also provides that to the extent the
liability is not compensated for by insurance or otherwise,
it shall be allowed as a deduction for the taxable year when
paid and shall be effective in determining income tax
liabilities for prior years.
- 2 -
In general, the Treasury Department opposes amending
tariff legislation to add tax or other provisions which,
like section 3, clearly involve special relief for particular
taxpayers. From the standpoint of tax policy, section 3 is also
objectionable on the grounds of retroactivity and because it
would reverse a pending case in which the decision on the issue
in question is against the taxpayer.
We appreciate the fact that the circumstances as pre-
sented to Congress -- involving a payment to satisfy a cargo
damage claim -- indicate that there are equitable considera-
tions which could warrant the relief sought. Furthermore,
in view of the way in which section 3 is drafted it would
not affect other taxpayers, and it does not involve a general
modification of the Internal Revenue Code.
On balance, the Treasury Department would prefer to see
the tariff amendments approved even though they are coupled
with the tax provision described above. Accordingly, the
Treasury would not recommend a veto of H.R. 12281. However,
the Department does not view the tax amendment as providing
a precedent for any other situation or a modification of any
general tax principle, and the amendment should not be so
construed.
Sincerely yours
Jederin Frederic W. Certickman Hickman
Assistant Secretary
Director, Office of Management and Budget
Attention: Assistant Director for
Legislative Reference, Legislative
Reference Division
Washington, D.C. 20505
DEPARTMENT OF STATE
Washington, D.C. 20520
Honorable Roy L. Ash
Director, Office of
OCT 22 1974
Management and Budget
Washington, D. C. 20503
Dear Mr. Ash:
The Secretary has asked me to reply to your communi-
cation (Office of Management and Budget Memorandum,
dated October 21, signed by Mr. Rommel) requesting
our views on H.R. 12281, an enrolled bill extending
the suspension of import duties on certain forms of
copper.
The Department of State has no objection from the
standpoint of United States foreign economic rela-
tions to the enactment of the proposed legislation.
We note, however, that the text of the bill also
includes provisions amending the Internal Revenue
Code and assume other executive agencies will comment
on the effects of the proposed amendment on our tax
policy. The Department of State would wish to
review any negative positions to determine their
impact on U.S. trade.
Cordially,
Linwood Holton
Assistant Secretary for
Congressional Relations
DEPARTMENT OF COMMERCE
GENERAL COUNSEL OF THE
DEPARTMENT OF COMMERCE
UNITED STATES OF AMERICA
Washington, D.C. 20230
OCT 22 1974
Honorable Roy L. Ash
Director, Office of Management
and Budget
Washington, D. C. 20503
Attention: Assistant Director for Legislative Reference
Dear Mr. Ash:
This is in reply to your request for the views of this Department
concerning H.R. 12281, an enrolled enactment
"To continue until the close of June 30, 1975, the
suspension of duties on certain forms of copper,
and for other purposes. 11
The Department of Commerce would have no objection to approval
by the President of the provisions in Sections 1 and 2 of H.R. 12281
relating to the temporary suspension of import duties on certain
forms of copper.
We have no recommendation to make concerning Section 3 which
amends the Internal Revenue Code of 1954.
Enactment of this legislation would involve no increase in expenditures
by this Department.
Sincerely,
Karl E. Bakke
General Counsel
OFFICE OF THE SPECIAL REPRESENTATIVE
FOR TRADE NEGOTIATIONS
EXECUTIVE OFFICE OF THE PRESIDENT
WASHINGTON
20506
October 21, 1974
W. L. Rommel, Esquire
Assistant Director for
Legislative Reference
Office of Management and Budget
Washington, D. C. 20503
Attention: Mrs. Garziglia
Dear Mr. Rommel:
Reference is made to your request of October 17,
concerning enrolled bills, H.R. 11452, H.R. 11251,
H.R. 13631, H.R. 12035, H.R. 7780, H.R. 6191, H.R. 6642,
H.R. 11830, and your request of October 21 concerning
H.R. 12281.
This Office considers that the import duty
suspensions provided by these bills provide no reason
for withholding Presidential signature. We would,
however, yield to the Treasury Department as to the
advisability of the Administration's concurrence
with the tax riders to each of these duty suspension
bills.
John Attorney Sincerely, John
MEMORANDUM
COUNCIL ON INTERNATIONAL ECONOMIC POLICY
October 21, 1974
FOR
: MR. W. H. ROMMEL, Assistant Director for Legislative
Reference, OMB, Room 7201 - New EOB
FROM : SKIP HARTQUIST H
SUBJECT: Enrolled Bill Request - H.R. 12281
We have no objections to Sections 1 or 2 of H.R. 12281.
However, Section 3 relates to changes in the Internal Revenue Code
and we defer to the Treasury Department for their views on that
section.
STATEMENT OF THE INTERIOR
United States Department of the Interior
OFFICE OF THE SECRETARY
March
3,
1849
WASHINGTON, D.C. 20240
OCT 22 1974
Dear Mr. Ash:
This responds to your request for our views on the enrolled bill
H.R. 12281, "To continue until the close of June 30, 1975, the
suspension of duties on certain forms of copper, and for other
"
purposes.
We recommend that the President approve the enrolled bill.
H.R. 12281 would amend the Tariff Schedules of the United States
by extending from June 30, 1974 to June 30, 1975, the suspension
of duties on certain forms of copper such as copper-bearing ores,
scrap, blister, and refined copper. Section 3 of the enrolled bill
would permit a corporation in a limited type of situation to deduct
as a loss its payment of a judgment against it as the successor to
the business of a liquidated corporation, when the liquidation
occurred before July 1, 1957.
The effective rate of duty on unwrought copper products, in accord
with the 1967 agreement in Geneva, has been reduced in stages from
1.7 cents per pound of contain copper in 1967 to 0.8 cent per pound
effective January 1, 1972. Legislation suspending copper duties
was enacted in 1966, and as a result of periodic extensions intro-
duced in April 1972 to extend the suspension was not passed and,
therefore, duties were reimposed, effective July 1, 1972. Public
Law 93-77 reinstated the copper duty suspension, effective July
1, 1973 through June 30, 1974.
An examination of salient copper market trends is important for
determination of a position on this trade bill. From 1964 to mid-
1970, world copper producers had difficulty in keeping pace with
the growing demand. However, after mid-1970, the increased pro-
duction capacity of copper producers, coupled with a slowdown
in the demand for copper, resulted in a rapid buildup of copper
stocks and a decline in world copper prices. Beginning in mid-
November 1972, world copper prices rose significantly in response
to increased demand for copper and disruptions in the supply of
copper from several countries. The ensuing shortage of copper
relative to demand has continued to the present. The planned sale
of 251,600 tons of surplus copper from the national stockpile
during 1974 is equivalent to one-tenth of current annual consump-
tion and the consensus is that this quantity will be absorbed into
the market without undue disruption. A first offering of 49,873
tons in February was sold at an average bid price of 85.3 cents
per pound compared with a domestic producer price of 68 cents.
Since there are no discernible factors at this time indicating
significant shifts in the copper market detrimental to the copper
producer, we favor extension of the copper duty suspension until
June 30, 1975. It should be recognized that in the future the
domestic producer may be faced with costly labor settlements, pro-
spective large investments required to meet pollution control
regulations, and periods of reduced demand which could cause an
adverse, competitive position compared to the foreign producer.
However, it is unlikely that these contingencies would become a
serious problem during the period of time covered by the bill
under consideration.
Sincerely yours,
Assistant Secretary of the Interior
Honorable Roy L. Ash
Director
Office of Management and Budget
Washington, D.C. 20503
2
THE WHITE HOUSE
WASHINGTON
October 25, 1974
MEMORANDUM FOR: MR. WARREN HENDRIKS
FROM:
WILLIAM E. TIMMONS tol
SUBJECT:
Action Memorandum - - Log No. 713
Enrolled Bill H.R. 12281 - Extension
of Copper Duty Suspension
The Office of Legislative Affairs concurs in the attached
proposal and has no additional recommendations.
Attachment
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
713
Date:
October 25, 1974
Time:
9:30 a.m.
FOR ACTION:
Geoff Shepard
CC (for information): Warren Hendriks
Phil Buchen
Jerry Jones
Bill Timmons
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: October 25, 1974, Today
Time:
3:00 p.m.
SUBJECT: Enrolled Bill H.R. 12281 - Extension of copper duty
suspension
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate C1
Worren X. Hendriks
Decretary immediately
For the President
We assume that the form of
this message including the
title and the first paragraph,
will be revised to conform with
the approach taken in the veto
message on H.R. 11541--the
TO THE HOUSE OF REPRESENTATIVES
National Wildlife Refuge System,
dated October 22, 1974.
I am returning without my approval H.R. 12281, "To continue
until the close of June 30, 1975, the suspension of duties on
certain forms of copper, and for other purposes."
This bill would amend the Tariff Schedules of the United
States by extending from June 30, 1974 to June 30, 1975, the
suspension of duties on certain forms of copper such as copper-
bearing ores, scrap, blister, and refined copper.
Unfortunately, the Congress attached to this desirable
provision an unacceptable tax rider which would provide tax
relief of nearly $1.4 million for a specific corporation by
permitting it to treat as a deduction a damage payment that it
made in 1959 on behalf of a corporation it had acquired three
years earlier and liquidated less than two years after such
acquisition.
Tax law provides that a corporation acquiring and liquidating
another corporation in less than two years must add the acquired
corporation's liabilities to the basis of the acquired corpora-
tion, thereby losing the option of treating those liabilities
as tax losses. In this case, the corporation whose taxes would
be relieved by H.R. 12281 liquidated the assets of the acquired
corporation within two years of the acquisition before the
liability in question had been finally determined. When, as
a result of litigation, the acquiring corporation was required
to pay the liability of the acquired corporation, it could not
treat that payment as a loss. The corporation could have
avoided this situation by waiting two years to liquidate or
by waiting until the litigation respecting the liability had
finally been determined.
- 2 -
The tax code should not be changed so as to undo the con-
sequences of an individual's assumption of risk or error. To
do so would invite others who, in retrospect, find that they
have made an error in corporate tax planning to similarly
petition the Congress for relief, thereby diverting attention
from pressing public business.
THE WHITE HOUSE
October , 1974
CTION MEMORANDUM
WASHINGTON
LOG NO.: 713
Date:
October 25, 1974
Time:
9:30 a.m.
FOR ACTION:
Geoff Shepard
CC (for information): Warren Hendriks
Phil Buchen
Jerry Jones
Bill Timmons
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: October 25, 1974, Today
Time:
3:00 p.m.
SUBJECT: Enrolled Bill H.R. 12281 - Extension of copper duty
suspension
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
1974 OCT 25 AM II 09
MUB- Research
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
in submitting the required moterial.
Warren K. Hendriks
telephone inv Start Secretary immediately
For the President
We assume that the form of
this message including the
title and the first paragraph,
will be revised to conform with
the approach taken in the veto
message on H.R. 11541--the
TO THE HOUSE OF REPRESENTATIVES
National Wildlife Refuge System,
dated October 22, 1974.
Tab
witholding
a
I am returning without my approval h H.R. 12281, " continue
OR
until the close of June 30, 1975, the suspension of duties on
New
certain forms of copper, and for other purposes.' "
SINSERT "An statement
This bill would amend the Tariff Schedules of the United
1
or
one
States by extending from June 30, 1974 to June 30, 1975, the
suspension of duties on certain forms of copper such as copper-
bearing ores, scrap, blister, and refined copper.
Unfortunately, the Congress attached to this desirable
provision an unacceptable tax rider which would provide tax
OR
relief of nearly $1.4 million for a specific corporation by
permitting it to treat as a deduction a damage payment that it
or
made in 1959 on behalf of a corporation it had acquired three
years earlier and liquidated less than two years after such
acquisition.
are
Tax law provides that a corporation acquiring and liquidating
another corporation in less than two years must add the acquired
corporation's liabilities to the basis of the acquired corpora-
tion, thereby losing the option of treating those liabilities
as tax losses. In this case, the corporation whose taxes would
be relieved by H.R. 12281 liquidated the assets of the acquired
corporation within two years of the acquisition before the
liability in question had been finally determined. When, as
a result of litigation, the acquiring corporation was required
to pay the liability of the acquired corporation, it could not
treat that payment as a loss. The corporation could have
avoided this situation by waiting two years to liquidate or
by waiting until the litigation respecting the liability had
finally been determined.
a.
- 2 -
The tax code should not be changed so as to undo the con-
sequences of an individual's assumption of risk or error. To
do so would invite others who, in retrospect, find that they
have made an error in corporate tax planning to similarly
petition the Congress for relief, thereby diverting attention
from pressing public business.
THE WHITE HOUSE
October , 1974
FOR IMMEDIATE RELEASE
OCTOBER 22, 1974
Office of the White House Fress Secretary
(Cleveland, Ohio)
THE WHITE HOUSE
TO THE HOUSE OF REPRESENTATIVES:
I am withholding my approval from H.R. 11541, a
bill which would amend the National Wildlife Refuge System
Administration Act of 1966. I am advised by the Attorney
Insert
General and I have determined that the absence of my signa--
in 1st
ture from this bill prevents it from becoming law. Without
in any way qualifying this determination, I am also returning
it without my approval to those designated by Congress to
Ft
receive messages at this time.
This bill would amend section 4(d) of the Act of
Dick Gilberts
according to
October 15, 1966 by adding a new standard in determining
office
the authority of the Secretary of the Interior to allow
certain rights-of--way across lands of the National Wildlife COMB, ext 4710)
Refuge System. This new standard would require the Secretary
to review all reasonable alternatives to the use of such
(alsb
area, and then make a determination that the proposed right-
of-way use is the most feasible and prudent alternative for
such purpose.
If we are to have adequate energy-transmission and
communication facilities, we must have rights-of-way on
which to locate them. Of course, when such lands have a
special status as wildlife refuges or national parks, we
must fully protect this status when portions of these areas
are sought for use as rights-of-way
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
713
Date:
October 25 1974
Time:
9:30 a.m.
Michael Duval
FOR ACTION:
Croff Shepard
CC (for information): Warren Hendriks
Phil Buchen
Jerry Jones
Bill Timmons
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: October 25, 1974, Today
Time:
3:00 p.m.
SUBJECT: Enrolled Bill H.R. 12281 - Extension of copper duty
suspension
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
concern in dation
records TO
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
Worren K. Hendriks
the STAR Secretary immediately
For the President
HR12281
Veto ?
TO THE HOUSE OF REPRESENTATIVES:
I am witholding my approval of H.R. 12281, a bill
which would "continue until the close of June 30, 1975, the
suspension of duties on certain forms of copper, and for
other purposes." I am advised by the Attorney General and
-I have determined that the absence of my signature from this
bill prevents it from becoming law. Without in any way
qualifying this determination, I am also returning it without
my approval to those designated by Congress to receive messages
at this time.
This bill would amend the Tariff Schedules of the United
States by extending from June 30, 1974 to June 30, 1975, the
suspension of duties on certain forms of copper such as
copper-bearing ores, scrap, blister, and refined copper.
Unfortunately, the Congress attached to this desirable
provision an unacceptable tax rider which would provide tax
relief of nearly $1.4 million for a specific corporation by
permitting it to treat as a deduction a damage payment that
it made in 1959 on behalf of a corporation it had acquired
three years earlier and liquidated less than two years after
such acquisition.
Tax law provides that a corporation acquiring and liquida-
ting another corporation in less than two years must add the
acquired corporation's liabilities to the basis of the acquired
corporation, thereby losing the option of treating those
liabilities as tax losses. In this case, the corporation
whose taxes would be relieved by H.R. 12281 liquidated the
assets of the acquired corporation within two years of the
acquisition before the liability in question had been finally
determined. When, as a result of litigation, the acquiring
corporation was required to pay the liability of the acquired
2
corporation, it could not treat that payment as a loss.
The corporation could have avoided this situation by waiting
two years to liquidate or by waiting until the litigation
respecting the liability had finally been determined.
The tax code should not be changed so as to undo the
consequences of an individual's assumption of risk or error.
To do so would invite others who, in retrospect, find that
they have made an error in corporate tax planning to similarly
petition the Congress for relief, thereby diverting attention
from pressing public business.
Geould R.
THE WHITE HOUSE,
Harren Handrike
EXECUTIVE OFFICE OF THE PRESIDENT
10 7:30pm. m.
OFFICE OF management AND BUDGET
WASHINGTON, D.C. 20503
OCT 24 1974
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 12281 - Extension of copper duty
suspension
Sponsor - Rep. Griffiths (D) Michigan
Last Day for Action
October 29, 1974 - Tuesday
Purpose
Continues through June 30, 1975, the suspension of duties on
certain forms of copper; and contains a tax rider relating to
the basis of property received in liquidations.
Agency Recommendations
Office of Management and Budget
Disapproval (veto
message attached)
Department of the Treasury
Does not recommend
disapproval
Department of State
No objection
Department of Labor
No objection
Department of Commerce
No objection (sections 1
and 2)
Office of the Special Representative
for Trade Negotiations
No objection (sections 1
and 2)
Council on International Economic Policy
No objection (sections 1
and 2)
Department of the Interior
Approval
Discussion
The enrolled bill contains the following provisions:
Extension of copper duty suspension (sections 1 and 2)
Except for a period of one year, the duty on copper ore and
articles was suspended from 1966 until June 30, 1974. This
Calendar No. 1021
93D CONGRES.
SENATE
REPORT
2d Session
No. 93-1064
SUSPENSION OF DUTIES ON CERTAIN FORMS OF
COPPER
AUGUST 1, 1974.-Ordered to be printed
Mr. LONG, from the Committee on Finance,
submitted the following
REPORT
[To accompany H.R. 12281]
The Committee on Finance, to which was referred the bill
(H.R. 12281) to continue until the close of June 30, 1975, the suspen-
sion of duties on certain forms of copper, having considered the same,
reports favorably thereon with amendments and recommends that
the bill as amended do pass.
I. SUMMARY
House bill.-The House bill would continue until July 1975 the
suspension of duties on certain forms of copper, with a "peril point"
level of $0.51 per pound. The committee bill does not modify the House
bill, but includes an amendment unrelated to the subject matter of the
House bill.
Committee amendment.-The committee amendment permits a
corporation in a limited type of situation to deduct as a loss, its pay-
ment of a judgment against it as the successor to the business of a
liquidated corporation, when the liquidation occurred before July 1,
1957. The amendment is intended to correct an inequity arising from
the requirement of present law that the assumption of the liabilities of
a corporation liquidated within two years after the purchase of its
stock be capitalized, and as a result no deduction would be available
when the accrual takes place. At the time of liquidation, in the case
presented to the committee, the liability had been determined by the
decision of a Federal Court of Appeals and then, after the liquidation
had been completed, that same court reversed itself. In this case there-
fore the loss, which would have been deductible by the predecessor
corporation, was no longer deductible but resulted instead in a basis
adjustment. That disallowance has produced an inequitable result, in
the opinion of the committee, because the liquidation of the former
38-010
2
3
corporation was carried out in reliance on the earlier decision of the
Major primary copper producers, many importers, exporters, deal-
Court of Appeals, and the court's reversal of its own helding was not
ers and merchants, and consumers of copper support the proposed
foreseeable.
copper duty suspension. Some U.S. firms have experienced difficulty
II. GENERAL STATEMENT
in buying domestic copper, particularly during periods of tight
supply, and must rely heavily.or higher-price imports to meet demand.)
A. DUTY SUSPENSION ON CERTAIN FORMS OF COPPER
The committee has been informed that the temporary suspension
Legislation suspending the duty of imports of unwrought copper
of duties on certain forms of copper as provided by H.R. 12281 would
(except nickel copper), copper waste and scrap, copper articles im-
not adversely affect the domestic copper mining industry. Indeed, the
ported to be used in remanufacture by smelting, and on the copper
committee is informed that the duty suspension would be likely to
content of certain copper-bearing ores and materials was enacted in
benefit employment in construction, transportation and electronics
1966, and, as a result of periodic extensions, was continued through
industries, which are major consumers of copper.
June 30, 1972. Legislation introduced in April 1972, to continue the
It is to be noted that the "peril point," under which the suspension
copper duty suspension was not passed and, therefore, duties were
of duty would no longer be applicable when the price of copper is
reimposed, effective July 1, 1972. Enactment of H.R. 2323 (Public
below 51 cents per pound, would be continued.
Law 93-77) reinstated the copper duty suspension, effective for a
period from July 1, 1973, until June 30, 1974.
B. BASIS ADJUSTMENT FOR PROPERTY RECEIVED IN THE LIQUIDATION OF A
The rate of duty which is presently suspended under Public Law
SUBSIDIARY PRIOR TO JULY 1, 1957
93-77, and which would remain suspended to June 30, 1975, under
H.R. 12281, is 0.8 cents per pound on the copper content of the
Under existing law, when the stock of a corporation is acquired by
articles imported from countries accorded most-favored-nation treat-
purchase and the acquired corporation is liquidated within two years,
ment. Imports of copper from most Communist countries would con-
no gain or loss is recognized on the liquidation (sec. 332) and the basis
tinue to be dutiable at existing rates of duty.
of the acquired corporation's assets is taken to be the same as the acquir-
The previous suspension of duties on copper, beginning in 1966,
ing corporation's basis in the purchased stock of the liquidated corpora-
was enacted to relieve the domestic supply shortage and for national
tion (sec. 334 (b) (2)) In the liquidation, liabilities of the liquidated
defense purposes. Market trends indicate that following the period
corporation assumed by the acquiring corporation are capitalized and
from 1964 until mid-1970, increased copper production capacity, to-
added to the acquiring corporation's basis for the assets, even though
gether with a decline in demand, resulted in a rapid worldwide buildup
the liabilities might have been deductible by the liquidated corpora-
of copper stocks and lower world copper prices. However, world
tion had it still been in existence. Capitalization of the liabilities is
copper prices rose significantly during the fourth quarter of 1972 due
required even though the assumed liabilities may have been contin-
to increased demand and disruptions in the supply of copper from
gent at the time of liquidation.
several countries. The resulting shortage of copper relative to demand
Application of the rule has resulted in inequitable hardship in the
has continued to the present, with consumption plus exports exceeding
case of the acquisition of the stock, and subsequent liquidation, of the
production plus imports in each successive calendar quarter since mid-
States Steamship Company ("Old States"). To understand the in-
1972. As indicated in a recent report by the Bureau of Domestic Com-
equity which the committee's provision is intended to correct, a brief
merce, domestic copper production is not expected to increase measur-
summary of the facts in this case is necessary.
ably during 1974.
On January 9, 1952, a steamship owned by Old States was lost at
Because of this recurrent shortage in domestic copper supply, the
sea with a cargo of wheat insured by the U.S. Government. When the
Congress enacted and the President signed Public Law 93-214 on
United States sued to recover the value of the cargo from Old States,
December 28, 1973, authorizing the sale of 251,600 tons of surplus
Old States took the position that its liability was limited to an amount
copper from the national stockpile. It is anticipated that the sale of
less than the insurance on the cargo, with the result that they owed
this surplus copper, which is equivalent to one-tenth of current annual
nothing. On November 17, 1955, the U.S. District Court (D. Ore.)
consumption, will be absorbed without disruption to the market. As
held that Old States' liability was SO limited.
reported by the Department of the Interior, a first offering on 49,873
In early 1956, a series of transactions took place, which resulted in
tons from the copper stockpile in February 1974, was sold at an aver-
the acquisition of all of the stock of Old States on July 11 by a newly
age bid price of 85.3 cents per pound compared with a domestic pro-
formed corporation, State Lines, Inc. ("New States"). While Old
ducer price of 68 cents per pound.
States was still a wholly owned subsidiary of New States, the opinion
Copper imports for 1973 totalled 402,000 tons valued at $493 million,
of the District Court was affirmed by the Court of Appeals on May 31,
with the principal supplying countries being Canada, Peru, Chile,
1957 (259 F. 2d 458 (9th Cir.). In reliance on that decision, New
Mexico, and the Republic of South Africa. Net imports during the
States liquidated Old States on June 30, 1957, thereby acquiring all
period 1967-1973 accounted for approximately 7 to 8 percent of do-
of its assets and assuming all of its liabilities.¹ The liquidation took
mestic copper supply.
place under the assumption that the Court of Appeals' decision on the
liability question would be the final outcome of the case, since that
1 Assumption of liabilities was required by State law.
S.R. 1064
S.R. 1064
4
5
decision affirmed the lower court's ultimate findings of fact as to Old
It is estimated that enactment of this provision will decrease cor-
States' liability.
poration income tax liability by about $1.4 million.
However, on November 15, 1957, the Court of Appeals, on a petition
for rehearing of the liability case, reversed itself and held that Old
III. COSTS OF CARRYING OUT THE BILL AND EFFECT ON THE REVENUES
States was liable for the full amount of the Government's claim (259
OF THE BILL
F. 2d 463). After certiorari was denied by the Supreme Court in early
1959, New States paid the Government $1,455,394 in full settlement of
In compliance with section (a) of the Legislative Reorganiza-
the liability case. The payment was deducted as a loss on the consoli-
tion Act of 1970, the following statement is made relative to the costs
dated returns of New States and its affiliated corporations in 1959, and
to be incurred in carrying out this bill and the effect on the revenues of
the deduction resulted in loss carrybacks to 1957 and 1958.
the bill. The committee estimates that the extension of the existing
The Internal Revenue Service disallowed the deduction on the
suspension of duties on certain forms of copper provided by the bill
ground that it was a liability of Old States which, under the provisions
will not result in any additional revenue loss or administrative costs.
of section 334(b) (2), had to be capitalized and added to the basis of
It is estimated by the committee that the amendment permitting
the assets acquired by New States and therefore was not deductible.
a deduction for a liability assumed in connection with the liquidation
In subsequent litigation, the Tax Court (29 T.C.M. 133 (1970)) held
of a subsidiary prior to July 1, 1957, will decrease corporation income
the settlement deductible by New States on the ground that, in causing
tax liability by about $1.4 million.
Old States to be liquidated, it had relied on the first decision of the
Court of Appeals in the liability case. On appeal, the Court of Appeals
IV. VOTE OF COMMITTEE ON REPORTING THE BILL
reversed the Tax Court holding and held that the settlement had to be
capitalized because of section 334(b) (2) Pacific Transportation Co. &
In compliance with section 133 of the Legislative Reorganization
Subsidiaries V. Commissioner, 483 F. 2d 209 (9th Cir. 1973).
Act, as amended, the following statement is made relative to the vote
The Court of Appeals in the latter case made clear its belief that
of the committee on reporting the bill. This bill was ordered favorably
its holding produced an inequitable result because of New States'
reported by the committee without a roll call vote and without
reliance upon the court's decision in proceeding with the liquidation.2
objection.
Had it been aware of the unforeseen possibility that the Court of Ap-
V. CHANGES IN EXISTING LAW
peals would reverse itself, New States probably would have waited
until final determination before completing the liquidation, thereby
In the opinion of the committee, it is necessary, in order to expedite
keeping Old States in existence and possibly permitting it to deduct
the business of the Senate, to dispense with the requirements of sub-
the amount of the liability. In that case, because a consolidated return
section 4 of rule XXIX of the Standing Rules of the Senate (relating
would have been filed for the entire group, whether or not the liquida-
to the showing of changes in existing law made by the bill, as
tion occurred, the tax result would have been the same as allowing New
reported).
States to take the deduction in 1959, when the liability was finally
determined.
Moreover, the reversal by the Court of Appeals of its own decision
was unusual, particularly in this case where the issue involved the
review of inferences drawn by the trial judge from his findings of
fact. In such cases, a court rarely reconsiders its factual conclusions.
The element of unforeseeability especially makes denial of the deduc-
tion hard to justify since New States clearly acted in reliance on the
earlier decision.
The committee's provision permits New States to deduct the amount
paid in settlement of the liability, instead of using it as a basis adjust-
ment on the liquidation of Old States. The deduction is to be taken
into account in determining the loss carrybacks of members of the
affiliated group to earlier years.
2 One judge, concurring in the result, observed "It is with great hesitation and con-
siderable reluctance that I join in the foregoing opinion. If logical support could be found
in the adjudicated authorities, I would introduce into tax law, under circumstances such
as these, a principle of equity which would not permit the revenue gathering branch of
our government to take advantage of a taxpayer's well intentioned reliance on the action of
another branch." 483 F. 2d 209, 215.
3 Even that result may not have been possible because liquidation must take place within
two years for section 884(b) (2) to apply and the liability case was not finally resolved
until mid-1959, about three years after New States had purchased the stock.
S.R. 1064
S.R. 1064
93D CONGRESS
HOUSE OF REPRESENTATIVES
REPO
2d Session
No. 93-1031
EXTENDING UNTIL JULY 1, 1975, OF THE SUSPENSION OF
DUTIES ON CERTAIN FORMS OF COPPER
MAY 8, 1974.-Committed to the Committee of the Whole House on the State of
the Union and ordered to be printed
Mrs. GRIFFITHS, from the Committee on Ways and Means,
submitted the following
REPORT
[To accompany H.R. 12281]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 12281) to continue until the close of June 30, 1975, the
suspension of duties on certain forms of copper, having considered
the same, report favorably thereon without amendment and recom-
mend that the bill do pass.
PURPOSE
The purpose of H.R. 12281, as reported, is to continue until the
close of June 30, 1975, the suspension of duties on certain forms of
copper.
GENERAL STATEMENT
Legislation suspending the duty of imports of unwrought copper
(except nickel copper), copper waste and scrap, copper articles im-
ported to be used in remanufacture by smelting, and on the copper
content of certain copper-bearing ores and materials was enacted in
1966, and, as a result of periodic extensions, was continued through
June 30, 1972. Legislation introduced in April, 1972, to continue the
copper duty suspension was not passed and, therefore, duties were
reimposed, effective July 1, 1972. Enactment of H.R. 2323 (Public
Law 93-77) reinstated the copper duty suspension, effective for a
period from July 1, 1973, until June 30, 1974.
The rate of duty which is presently suspended under Public Law
93-77, and which would remain suspended to June 30, 1975, under
H.R. 12281, is 0.8 cents per pound on the copper content of the
articles imported from countries accorded most-favored-nation treat-
99-006
2
3
ment. Imports of copper from most Communist countries would con-
In compliance with clause 27 (b) of rule XI of the Rules of the House
tinue to be dutiable at existing rates of duty.
of Representatives, the following statement is made relative to the
The previous suspension of duties on copper, beginning in 1966,
vote by the committee in reporting the bill. The bill was unanimously
was enacted to relieve the domestic supply shortage and for national
ordered favorably reported by the committee.
defense purposes. Market trends indicate that following the period
from 1964 until mid-1970, increased copper production capacity, to-
CHANGES IN EXISTING LAW MADE BY THE BILL, As REPORTED
gether with a decline in demand, resulted in a rapid worldwide buildup
of copper stocks and lower world copper prices. However, world copper
In compliance with clause 3 of rule XIII of the Rules of the House
prices rose significantly during the fourth quarter of 1972 due to in-
of Representatives, changes in existing law made by the bill, as
creased demand and disruptions in the supply of copper from several
reported, are shown as follows (existing law proposed to be omitted is
countries. The resulting shortage of copper relative to demand has
enclosed in black brackets, new matter is printed in italic, existing
continued to the present, with consumption plus exports exceeding
law in which no change is proposed is shown in roman):
production plus imports in each successive calendar quarter since mid-
1972. As indicated in a recent report by the Bureau of Domestic Com-
TARIFF SCHEDULES OF THE UNITED STATES
merce, domestic copper production is not expected to increase measur-
ably during 1974.
APPENDIX TO THE TARIFF SCHEDULES
Because of this recurrent shortage in domestic copper supply, the
Congress enacted and the President signed Public Law 93-214 on
Rates of duty
December 28, 1973, authorizing the sale of 251,600 tons of surplus
Item
Articles
Effective period
copper from the national stockpile. It is anticipated that the sale of
1
2
this surplus copper, which is equivalent to one-tenth of current annual
consumption, will be absorbed without disruption to the market. As
PART 1.-TEMPORARY
LEGISLATION
reported by the Department of the Interior, a first offering on 49,873
tons from the copper stockpile in February, 1974, was sold at an aver-
Subpart B.-Temporary Provisions
age bid price of 85.3 cents per pound compared with a domestic pro-
Amending the Tariff Schedules
ducer price of 68 cents per pound.
Copper imports for 1973 totalled 402,000 tons valued at $493
million, with the principal supplying countries being Canada, Peru,
Rates of duty
Chile, Mexico, and the Republic of South Africa. Net imports during
Effective period
the period 1967-1973 accounted for approximately 7 to 8 percent of
1-a
1-b
2
domestic copper supply.
Major primary copper producers, many importers, exporters,
Metal waste and scrap (provided for in
part 2, schedule 6), except lead, zinc,
dealers and merchants, and consumers of copper support the proposed
and tungsten waste and scrap; un-
wrought metal (except copper, lead,
copper duty suspension. Some U.S. firms have experienced difficulty
zinc, and tungsten) in the form of
in buying domestic copper, particularly during periods of tight
pigs, ingots, or billets (a) which are
defective or damaged, or have been
supply, and must rely heavily on higher-price imports to meet demand.
produced from melted down metal
waste and scrap for convenience in
Your committee has been informed that the temporary suspension
handling and transportation with-
of duties on certain forms of copper as provided by H.R. 12281 would
out sweetening, alloying, fluxing, or
deliberate purifying, and (b) which
not adversely affect the domestic copper mining industry. Indeed, the
cannot be commercially used with-
out remanufacture; relaying or reroll-
Committee is informed that the duty suspension would be likely to
ing rails; and articles of metal (ex-
benefit employment in construction, transportation and electronics
cept articles of lead, of zinc, or of
tungsten, and not including metal-
industries, which are major consumers of copper.
bearing materials provided for in
schedule 4 or in part 1 of schedule 6
It is to be noted that the "peril point;" under which the suspension
and not including unwrought metal
of duty would no longer be applicable when the price of copper is
provided for in part 2 of schedule 6)
to be used in remanufacture by
below 51 cents per pound, would be continued.
melting:
911.10
Copper waste and scrap.
Free
No
No
On or before [6/30/
change.
change.
74] 6/30/75.
EFFECT ON THE REVENUES OF THE BILL AND VOTE OF THE
911.11
Articles of copper
Free
No
No
On or before [6/30/
change.
change.
74] 6/30/75.
COMMITTEE IN REPORTING THE BILL
911.12
Other
Free
Free
Free
On or before 6/30/75:
In compliance with clause 7 of rule XIII of the Rules of the House of
Representatives, the following statement is made relative to the effect
on the revenues of this bill. Your committee estimates that the pro-
visions of this bill will result in no additional revenue loss and will
result in no administrative costs.
H.R. 1031
H.R. 1031
4
Rates of duty
Item
Articles
Effective period
1
2
911. 13
Copper bearing ores and materials
Free of duty
No change
On or before [6/30/74]
(provided for in items 602.30 or
imposed on
6/30/75
603.50, part 1, schedule 6).
copper con-
tent under
items
602.30 or
603.50.
Rates of duty
Effective period
1-a
1-b
2
911. 14
Cement copper and copper precipi-
Free
No
No
On or before
tates (provided for in item 612.02,
change.
change.
[6/30/74] 6/30/75
part 2C, schedule 6).
911. 15
Black copper, blister copper, anode
Free
No
No
On or before
copper (provided for in item 612.03,
change.
change.
[6/30/74] 6/30/75
part 2C, schedule 6).
911. 16
Other unwrought copper (provided for
Free
No
No
On or before
in item 612.06, part 2C, schedule 6).
change.
change.
[6/30/74] 6/30/75
H.R. 1031
93D CONGRESS
HOUSE OF REPRESENTATIVES
REPORT
2d Session
No. 93-1406
EXTENDING UNTIL JULY 1, 1975, THE SUSPENSION OF
DUTIES ON CERTAIN FORMS OF COPPER
OCTOBER 1, 1974.-Ordered to be printed
Mr. MILLS, from the committee of conference,
submitted the following
CONFERENCE REPORT
[To accompany H.R. 12281]
The committee of conference on the disagreeing votes of the two
Houses on the amendments of the Senate to the bill (H.R. 12281) to
continue until the close of June 30, 1975, the suspension of duties on
certain forms of copper, having met, after full and free conference,
have agreed to recommend and do recommend to their respective
Houses as follows:
The committee of conference report in disagreement the amendment
of the Senate to the text of the bill and the amendment of the Senate
to the title of the bill.
W.D. MILLS,
AL ULLMAN,
JAMES A. BURKE,
H. T. SCHNEEBELI,
HAROLD R. COLLIER,
Managers on the Part of the House.
RUSSELL LONG,
HERMAN E. TALMADGE,
WALLACE F. BENNETT,
Managers on the Part of the Senate.
38-006
JOINT EXPLANATORY STATEMENT OF THE
COMMITTEE OF CONFERENCE
The managers on the part of the House and the Senate at the
conference on the disagreeing votes of the two Houses on the amend-
ments of the Senate to the bill (H.R. 12281) to continue until the close
of June 30, 1975, the suspension of duties on certain forms of copper,
submit the following joint statement to the House and the Senate
in explanation of the effect of the action agreed upon by the managers
and recommended in the accompanying conference report:
The Senate amendment adds a new section 3 to the bill to permit
a corporation in a limited type of situation to deduct as a loss its pay-
ment of a judgment against it as the successor to the business of a
liquidated corporation, when the liquidation occurred before July 1,
1957. The amendment permits a taxpayer to deduct a loss occasioned
by a contingent liability created as the result of a reversal of a U.S.
Court of Appeals decision which was not foreseeable. The amendment
is intended to correct an inequity under existing law SO that taxpayers
who have acquired the assets of a liquidated corporation may deduct
the unanticipated loss in the year incurred in the same fashion as the
liquidated corporation would have been permitted to had it remained
in existence.
This amendment is reported in technical disagreement. The mana-
gers on the part of the House will offer a motion that the House recede
from its disagreement to the Senate amendment to the text of the bill,
and agree to the same.
The managers on the part of the House will offer a motion that the
House recede from its disagreement to the amendment of the Senate
to the title of the bill, and agree to the same.
W.D.MILLs,
AL ULLMAN,
JAMES A. BURKE,
H. T. SCHNEEBELL,
HAROLD R. COLLIER,
M anagers on the Part of the House.
RUSSELL LONG,
HERMAN E. TALMADGE,
WALLACE F. BENNETT,
M anagers on the Part of the Senate.
(3)
H.R. 1406
H. R. 12281
Ainety-third Congress of the United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday, the twenty-first day of January,
one thousand nine hundred and seventy-four
An Act
To continue until the close of June 30, 1975, the suspension of duties on certain
forms of copper, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That items 911.10
(relating to copper waste and scrap), 911.11 (relating to articles of
copper), 911.13 (relating to copper bearing ores and materials), 911.14
(relating to cement copper and copper precipitates), 911.15 (relating
to black copper, blister copper, and anode copper), and 911.16 (relat-
ing to other unwrought copper) of the Appendix to the Tariff Sched-
ules of the United States (19 U.S.C. 1202) are each amended by
striking out "6/30/74" and inserting in lieu thereof "6/30/75".
SEC. 2. The amendments made by the first section of this Act shall
apply with respect to articles entered, or withdrawn from warehouse,
for consumption on or after July 1, 1974.
SEC. 3. (a) Notwithstanding the provisions of section 334 of the
Internal Revenue Code of 1954 (relating to basis of property received
in liquidations), no adjustment to the basis of any property distributed
in complete liquidation of a corporation prior to July 1, 1957, shall be
made for any liability if-
(1) the distributor and distributee did not consider the liability
relevant to the value of the stock with respect to which the distri-
bution was made,
(2) the distributor and distributee reasonably relied upon a
decision of a United States district court specifically adjudicating
the amount of the liability and its affirmance by the appropriate
United States court of appeals, and
(3) the amount of the liability SO adjudicated was not greater
than would be compensated for by insurance.
The provisions of this section apply without regard to whether such
decision was subsequently reversed or modified by that United States
court of appeals following distribution of such property in complete
liquidation.
(b) To the extent that the liability described in subsection (a) is
not compensated for by insurance or otherwise, the amount thereof
shall be allowed as a deduction under the appropriate provision of the
Internal Revenue Code of 1954 for the taxable year in which payment
thereof was made and shall be effective in determining income tax
liabilities of all taxable years prior thereto.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
October 17, 1974
Dear Mr. Director:
The following bills were received at the White House on
October 17th:
S.J. Res. 236
S. 2840
H.R. 7768
H.R. 14225
S.J. Res. 250
S. 3007
H.R. 7780
H.R. 14597
S.J. Res. 251
S. 3234
H.R. 11221
H.R. 15148
S. 355
S. 3473
H.R. 11251
H.R. 15427
S. 605
S. 3698
H.R. 11452
H.R. 15540
S. 628
S. 3792
H.R. 11830
H.R. 15643
S. 1411
S. 3838
H.R. 12035
H.R. 16857
S. 1412
S. 3979
H.R. 12281
H.R. 17027
S. 1769
H.R. 6624
H.R. 13561
S. 2348
H.R. 6642
H.R. 13631
Please let the President have reports and recommendations
as to the approval of these bills as soon as possible.
Sincerely,
Robert D. Linder
Chief Executive Clerk
The Honorable Roy L. Ash
Director
Office of Management and Budget
Washington, D. C.