Congress yesterday looked at what it had wrought -- and didn't like it.
A parade of angry members of Congress told the House Ways and Means Committee that a law enacted last year to cut down on abuses of business deductions, mostly for vehicles, was a bad idea.
"Let us repent and repeal," chanted Rep. George W. Gekas (R-Pa.).
"This dog ain't gonna hunt," promised Rep. Tom Loeffler (R-Tex.).
"If anyone thinks I'm overstating the case, I would urge him to read his mail. Simply put, we were wrong," exhorted Rep. Buddy Roemer (D-La.).
Farmers, business people, sales representatives and others have been protesting in droves the Internal Revenue Service's new regulations implementing the law. The regulations require that a daily log be kept to substantiate most business uses of automobiles and trucks, as well as limited kinds of equipment.
The IRS, deluged with complaints, has relaxed the regulations once. But the betting is that Congress will abolish them or weaken them further even though the law establishing the requirement was passed only eight months ago.
Eighteen members of the House of Representatives and one senator, most of them sponsors of repeal legislation, testified before the Ways and Means panel, as did witnesses from such industries as agriculture, auto dealers, construction and trucking. Today, a Senate Appropriations subcommittee is to hold a hearing on the same subject. More than 50 senators and 200 representatives are pushing various types of legislation to overturn the IRS regulations.
Their message has been heard.
Assistant Treasury Secretary Ronald A. Pearlman, looking distinctly uncomfortable as he testified before the Ways and Means panel, said "we are obviously sensitive to the numerous repeal bills pending in Congress. Mr. Chairman, we want to respond in a constructive and positive manner."
Treasury and the IRS still believe the only way to verify to what extent vehicles are used for business is through individual records made at the time of use, but the department will work with the Ways and Means panel "to the extent the committee is interested in making further changes in the legislation," Pearlman said.
The change in law, part of the Deficit Reduction Act of 1984, required that "adequate contemporaneous" records be kept to justify deductions and credits for business vehicles and some equipment. Logs of that kind already were required for travel away from home; the new law -- which was fairly weak in the House but was stiffened up by the Senate -- said they must be kept for in-town travel as well.
The IRS modifications issued last month said businesses could make fewer log entries per day, that vehicles used 100 percent of the time for business were exempt, that vehicles whose only personal use is for employe commuting were exempt so long as the employe paid taxes on commuting benefits of $3 a day, and that two kinds of workers, those who spend lots of time making calls and farmers, can allocate at least 70 percent of the total use of a vehicle for business purposes without keeping a log.
Ways and Means Chairman Dan Rostenkowski (D-Ill.) is reluctant to repeal the provision. Although he admitted at the hearing that it had "struck a raw nerve among the taxpaying public," he said repeal would raise "serious doubts about Congress' resolve in pursuit of reform."
Senate Finance Committee Chairman Bob Packwood (R-Ore.), who was not the head of the committee last year when the law was passed, pointed out that any problem with it belongs to former committee chairman, now majority leader, Sen. Robert J. Dole (R-Kan.). If protests continue, Packwood will support repeal, according to a spokesman for the committee.
The previous system, however, resulted in considerable abuse, IRS Commissioner Roscoe L. Egger Jr. told the committee. When companies only had to supply "adequate records," taxpayers claimed as much as $3 billion in "excess tax benefits" per a year, Egger said.