Letter Opposing H.R. 2419, the Farm Bill
February 13, 2008
TO THE MEMBERS OF THE UNITED STATES CONGRESS:
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, continues to oppose the enactment of HR 2419, the Farm Bill, as sent to conference by the House and Senate because it perpetuates an inequitable and outdated agricultural policy that benefits only a handful of Americans. Specifically, the bill fails to reduce agricultural subsidies to farmers, encourage market-based reforms to the nation's agricultural policy, or promote international trade liberalization.
While we have many concerns with the House and Senate versions of the Farm Bill, the Chamber would like to highlight its opposition to the following particularly egregious provisions that are being considered as the bill moves to conference:
TAX PROVISIONS
The Chamber opposes the retroactive provision to further tighten rules for sale-in, lease-out (SILO) arrangements with foreign entities. The provision would result in substantial new tax liabilities on U.S. taxpayers and significant adverse financial statement consequences caused by recalculations for those affected U.S. companies that are publicly listed.
The Chamber also opposes disallowing businesses from deducting certain fines, penalties, and other amounts as ordinary expenses. Under current law, a business cannot deduct from income "any fine or similar penalty paid to a government for the violation of any law." This change significantly extends this provision to the non-penalty portion of settlement payments, eliminating deductions for otherwise allowable ordinary and necessary business expenses. This would deny deductions for the routine efforts of many businesses to comply with laws applicable to their industries, regardless of whether there was a violation of law resulting in an admission of guilt or liability.
The Chamber has long-opposed the codification of the judicially-developed economic substance doctrine. Codifying the economic substance doctrine would transform a long-standing doctrine in such a way that previously legitimate business transactions could be deemed abusive. Moreover, because of the vague and subjective nature of the economic substance doctrine, the provision of this bill, would, as a practical matter, be unworkable. The Chamber believes effective administration and enforcement of the tax code is a much better alternative than a legislative change.
SUGAR
Despite continuing Chamber opposition to sugar subsidies, the U.S. sugar industry was able to achieve additional protections in the House and Senate versions of HR 2419. Now, certain companies in the U.S. sugar industry have surreptitiously concluded a private agreement with a portion of the Mexican sugar industry in an effort to stifle trade by imposing new limits on sweetener shipments between our two countries. These companies are asking Congress to insert this agreement into the conference report on H.R. 2419 and roll back the open market commitments that the United States and Mexican Governments made 14 years ago as a part of the North American Free Trade Agreement. This agreement was not part of either the House or the Senate version of H.R. 2419 and the Chamber urges you not to consider it during conference.
STATE OUTSOURCING
The Chamber opposes Section 4015 of the House-passed Farm bill, which limits the flexibility of states to administer their Food Stamp Programs by prohibiting states from utilizing private sector companies to improve service and efficiency. The section mandates that state employees administer virtually every function related to Food Stamp Programs and also prohibits a waiver of such requirements under any circumstances. Section 4015 would also have the effect of forcing the termination of existing state contracts, prohibiting future contracts, and therefore increasing costs to states significantly. As the nation's traditional laboratories for innovation, states should continue to have the flexibility to improve the administration of their Food Stamp Programs to determine the best approach to deliver the highest customer service. The Chamber opposes any language in the Farm Bill, which would limit the flexibility of states to operate their Food Stamp Programs.
ARBITRATION
The Chamber strongly opposes the inclusion of any anti-arbitration provisions in the Farm Bill that would effectively nullify pre-dispute binding arbitration clauses in livestock contracts agreed to by livestock and poultry growers. The long-term effects of such provisions, if enacted, would cause serious damage to the general use and availability of alternative dispute resolution (ADR) as well as weaken the Federal Arbitration Act (FAA). Many businesses rely on the FAA for enforcement of agreements to engage in ADR. Businesses and consumers use ADR mechanisms, such as arbitration, to fairly, quickly, and relatively inexpensively settle disputes. The inclusion of anti-arbitration provisions would weaken long-standing, clear congressional intent to encourage ADR and could also call into question the U.S. Supreme Court's continual reaffirmation of contractual arbitration clauses.
As conference debate begins over the provisions of the Farm Bill, Congress should consider that the agricultural sector of the U.S. economy has never been stronger. The farm debt-to-asset ratio is the lowest it has been in more than 45 years; farm equity has risen approximately $200 billion annually for the last five years; crop prices are at record high levels; and farm incomes are sky-rocketing. Yet, inexplicably, farmers will continue to receive unprecedented levels of assistance under the Farm Bill, perpetuating a fiscally unsound policy of increased price supports and trade-distorting agricultural subsidies.
Consequently, the Chamber strongly urges Congress not to include any of the above provisions in the Farm Bill, and hopes that any future farm bills will be based on substantive, market-based reforms.
Sincerely,
R. Bruce Josten