Order Code RL32275
CRS Report for Congress
Received through the CRS Web
Small Business Tax Preferences:
Legislative Proposals in
the 108th Congress
March 12, 2004
Gary Guenther
Analyst in Business Taxation and Finance
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

---

Small Business Tax Preferences:
Legislative Proposals in the 108th Congress
Summary
Some policy issues seem to be permanent fixtures on the congressional
legislative agenda. One such issue is the taxation of small firms and its effects on
their formation, performance, and growth. Some contend that the current tax burden
on small firms serves as a drag on their growth and thus should be reduced. Others
see no solid economic rationale for targeting tax relief at small business owners.
The federal tax code contains a number of provisions that bestow tax relief on
small firms in a wide range of industries. Most of these provisions take the form of
deductions, exclusions and exemptions, credits, deferrals, and preferential tax rates.
Nonetheless, some policymakers want to do more to lessen the tax burden on small
business owners. A variety of proposals to enhance existing small business tax
preferences or create new ones have been introduced in the 108th Congress. This
report describes those proposals. It will be updated as legislative activity warrants.
In the first session of the 108th Congress, one bill lowering the tax burden on
many small business owners was enacted: the Jobs and Growth Tax Relief
Reconciliation Act of 2003 (JGTRRA, P.L. 108-27). The act moved forward to 2003
the phased-in cuts in individual income tax rates established by the Economic
Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16), and it temporarily
enhanced the small business expensing allowance under section 179 of the Internal
Revenue Code (IRC).
In addition, a number of proposals to expand certain existing small business tax
preferences or to create new ones are being considered. In the wake of JGTRRA’s
enactment, at least four bills (H.R. 2638, H.R. 2896, S. 1885, and S. 1637) would
either extend the changes in the expensing allowance made by JGTRRA or further
enhance them. At least three bills (S. 106, S. 842, and S. 1885) would expand the
partial exclusion of long-term capital gains on the sale or exchange of qualified small
business stock under IRC section 1202. And five bills to modify the statutory
provisions governing subchapter S corporations with the intent of increasing their
access to financial capital have been introduced: H.R. 714, H.R. 1498, H.R. 1896,
H.R. 2896, and S. 850.
At least three new small business tax preferences would be created by legislative
proposals in the current Congress. A total of seven bills (H.R. 450, H.R. 3607, S. 53,
S. 86, S. 414, S. 906, and S. 2163) would establish either a refundable or non-
refundable tax credit for a portion of the cost to small employers of offering health
benefits to employees. Under H.R. 1222 and S. 1371, taxpayers could claim a special
amortization deduction for certain intangible assets acquired from qualified small
firms. And S. 1885 would add a new section to the tax code to permit eligible small
corporations to pay their federal income tax liabilities for a specific tax year in four
equal installments spread out over a period not to exceed six years.

---

Contents
Existing Small Business Tax Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legislative Proposals in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Current Small Business Tax Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Expensing Allowance Under IRC Section 179 . . . . . . . . . . . . . . . . . . . 4
Partial Exclusion of Gains on Certain Small Business Stock . . . . . . . . 5
Subchapter S Corporation Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Graduated Corporate Income Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . 6
New Small Business Tax Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Credit for Employee Health Insurance . . . . . . . . . . . . . . . . . . . . . . 7
Special Amortization Deduction for Intangible Assets Acquired
from Certain Small Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Delayed Payment of Federal Income Tax by Certain Small Firms . . . . 8

---

Small Business Tax Preferences:
Legislative Proposals in the 108th Congress
Some policy issues seem to be permanent fixtures on the congressional
legislative agenda. One such issue is the taxation of small firms and its effects on
their formation, performance, and growth. Some argue that the current tax burden
on small firms serves as a drag on their growth and should be reduced. Others can
see no sound economic rationale for targeting tax relief at small business.
Underscoring the allure and economic importance of small entrepreneurial firms
and the political influence of small business owners, the federal tax code contains a
number of provisions that bestow tax relief on small firms in a wide range of
industries. Nonetheless, some policymakers would like to do more to lessen the tax
burden on small business owners. A variety of proposals to enhance existing small
business tax preferences or create new ones have been introduced in the 108th
Congress. This report describes these proposals. It will be updated to reflect new
legislative activity.
Existing Small Business Tax Preferences
Firm size may play an important role in the performance of certain industries
and markets, but it has little influence on the organization of the federal tax code.
The code makes no explicit or formal distinction between the taxation of small firms
and all other firms. For example, there are no separate sections in the code
addressing the tax treatment of small and large firms. Instead, current tax law
contains a number of provisions scattered throughout that confer preferential
treatment on small firms but not on larger ones. Most of these provisions take the
form of deductions, exclusions and exemptions, credits, deferrals, and preferential
tax rates. Tax preferences such as these generally have the effect of reducing the tax
burden on the returns to new and old investments by small firms relative to all other
firms. A few tax code provisions benefit small firms by reducing the cost and
administrative burden of complying with tax laws, or by offering tax relief in
exchange for providing certain fringe benefits (e.g., pension plans) to employees.
Contrary to what one might expect, no uniform definition of a small firm
underlies existing small business tax preferences. As a result, a striking
inconsistency marks the criteria used to determine eligibility for current small
business tax benefits. For example, some such benefits are available only to firms
with annual gross receipts below a certain level, while other benefits can be had only
by firms under a certain asset size. Employment size is seldom used as a criterion for
determining eligibility for small business tax preferences. By contrast, the Small

---

CRS-2
Business Administration relies heavily on employment size to collect and publish
data on the economic condition of small business.
Not all small business tax preferences are equal in scope and importance. Some
apply only to small firms in specific industries such as life insurance, banking, and
energy production and distribution, while others have the potential to affect most
small firms. Those preferences with the broadest reach outside agriculture include
the taxation of passthrough entities (including subchapter S corporations), graduated
corporate income tax rates, the expensing allowance for certain depreciable business
assets, the exemption of small corporations from the corporate alternative minimum
tax, the amortization of business start-up costs, cash-basis accounting, the exclusion
of gains on certain small business stock, and the tax credit for pension plan start-up
costs of small firms.1 These specific preferences form the core of this report.
Although it is unclear how much federal revenue is forgone because of small
business tax preferences, recent estimates by the Joint Committee on Taxation and
the Treasury Department indicate that the preferences may exceed $6.5 billion in
FY2004.2
Legislative Proposals in the 108th Congress
In the 107th Congress, many proposals to enhance or expand small business tax
benefits (broadly defined) were introduced. Of the legislation that was enacted, one
measure offered immediate and direct benefits for many small business owners: the
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-
16). Among other things, the act established a new 10% tax bracket and established
a timetable for the gradual reduction in the 28% bracket to 25%, the 31% bracket to
28%, the 36% bracket to 33%, and the 39.6% bracket to 35%, between July 1, 2001
and July 1, 2006. These rate reductions increased the tax advantage of operating a
small firm as a passthrough entity rather than as a subchapter C corporation and
shrank the tax burden on owners of such entities.3 There is some fresh evidence that
1 For a description of existing small business tax preferences and the economic arguments
that have been raised for and against them, see CRS Report RL32254, Small Business Tax
Benefits: Overview and Economic Analysis, by Gary Guenther.
2 For estimates of the revenue losses in FY2004 associated with selected small business tax
preferences, see U.S. Congress, Joint Committee on Taxation, Estimates of Federal Tax
Expenditures for Fiscal Years 2004-2008, JCS-8-03 (Washington: GPO, 2003), table 1; and
Office of Management and Budget, Analytical Perspectives, Budget of the United States
Government, Fiscal Year 2005 (Washington: GPO, 2004), table 18-1.
3 In early 2001, President Bush proposed lowering the top individual tax rate from 39.6%
to 33% between 2001 and 2006. The Treasury Department’s Office of Tax Analysis
estimated that 800,000 small business owners and entrepreneurs would benefit from this cut.
It also estimated that these same individuals would receive 77% of the tax relief provided
by this reduction. See Patti Mohr, “O’Neill Gives Small Businesses Reassuring Tax Cut
Prognosis,” Tax Notes, vol. 91, no. 7, May 14, 2001, pp. 1053-1055.

---

CRS-3
tax rate reductions can spur faster growth in small business output in the short run.4
EGTRRA also created a 50% non-refundable tax credit for the first $1,000 in
administrative and educational expenses incurred by certain small firms in setting up
new qualified pension plans for employees.
Legislation reducing the tax burden on most small business owners has also
been enacted during the 108th Congress: the Jobs and Growth Tax Relief and
Reconciliation Act of 2003 (JGTRRA; P.L. 108-27). The act moved forward to 2003
the individual income tax rate cuts established by EGTRRA and scheduled to take
effect in 2006. More specifically, it lowered the 27% rate to 25%, the 30% rate to
28%, the 35% rate to 33% and the 38.6% rate to 35%. These reductions will remain
in effect through 2010. And JGTRRA sought to stimulate small business investment
by increasing the maximum expensing allowance small firms may claim under
section 179 of the Internal Revenue Code (IRC) from $25,000 to $100,000 in 2003
through 2005. The act also raised the phase-out threshold for the allowance from
$200,000 to $400,000, indexed both the maximum expensing allowance and the
phase-out threshold for increases in inflation in 2004 and 2005, and made purchases
of off-the-shelf business software eligible for the allowance in the same period.5
In addition, numerous proposals to enhance existing small business tax
preferences or create new ones are being considered in the current Congress. They
vary in scope from something as seemingly minor as relaxing the eligibility
requirements for S corporations to something as seemingly major as creating a new
permanent tax credit for a portion of the costs to small firms of offering health
insurance coverage to their uninsured employees for the first time. While there is
bipartisan support for many of these proposals in both houses, considerable
uncertainty surrounds their prospects for enactment in the second session of the 108th
Congress. Some of this uncertainty stems from a widespread concern over the large
and growing federal budget deficit. The tax cuts under EGTRRA and JGTRRA have
made significant contributions to the deterioration in the federal budget since the late
1990s, and some Members of Congress are reluctant to enact additional tax cuts that
might worsen the existing outlook for the budget. The proposals are described below
under the existing small business tax preferences they would alter or the new
preferences they would establish.
4 In an analysis of the impact of shifts in personal income tax rates on the growth of small
firms using tax return data from just before and just after the Tax Reform Act of 1986 took
effect, Robert Carroll, Douglas Holtz-Eakin, Mark Rider, and Harvey S. Rosen found that
when a sole proprietor’s marginal tax rate rose by 10%, his business receipts went up 8.4%.
This implied that a reduction in the marginal tax rate levied on a sole proprietor from 50%
to 33% would lead to a 28% increase in his or her receipts. See Robert Carroll, Douglas
Holtz-Eakin, Mark Rider, and Harvey S. Rosen, Personal Income Taxes and the Growth of
Small Firms, Working Paper 7980, National Bureau of Economic Research (Cambridge,
MA: Oct. 2000).
5 For more details on the expensing allowance, the changes made by JGTRRA, and their
short-term economic effects, see CRS Report RL31852, Small Business Expensing
Allowance Under the Jobs and Growth Tax Relief Reconciliation Act of 2003: Changes and
Likely Economic Effects, by Gary Guenther.

---

CRS-4
Current Small Business Tax Preferences
Expensing Allowance Under IRC Section 179.
Under IRC section 179, business taxpayers buying qualified property may
deduct (or expense) some or all of its cost (depending on the amount) in the year
when it is placed into service, provided certain conditions are met. For the most part,
qualified property consists of machinery and equipment, including motor vehicles.
The alternative to expensing is to recover the acquisition cost of this property over
longer periods through allowable depreciation deductions. Between 2003 and 2005,
the maximum expensing allowance is $100,000 for firms operating outside
empowerment zones. For firms that conduct all their business within such zones, the
maximum allowance during that period is the lesser of $35,000 or the cost of
qualified property. In 2006, assuming no change in current law, the maximum
allowance for firms operating outside empowerment zones falls to $25,000, its level
before the enactment of JGTRRA. The allowance begins to phase out, dollar for
dollar, when the total cost of qualified property placed in service in a tax year from
2003 through 2005 reaches $400,000.
Before the enactment of JGTRRA, there was considerable interest in the 108th
Congress in making the expensing allowance available under IRC section 179 more
generous, either temporarily or permanently. This interest manifested itself in the
numerous bills to liberalize the allowance introduced in the months leading up to the
passage of JGTRRA.6 Some of the bills were modeled after a proposal included in
President Bush’s budget request for FY2004 to raise the expensing allowance from
$25,000 to $75,000 and the phase-out threshold from $200,000 to $325,000, index
both amounts for inflation, and include off-the-shelf computer software in the
depreciable assets eligible for expensing, as of January 1, 2003 and thereafter.
In the wake of JGTRRA’s enactment, there is some interest in Congress in
extending its expansion of the small business expensing allowance. Bills introduced
by Representative Herger (H.R. 2638) and Senator Daschle (S. 1885) would
permanently extend the changes in the allowance made by JGTRRA. In late October
2003, the House Ways and Means Committee passed a measure (H.R. 2896; H.Rept.
108-393) that included a provision extending the changes in the allowance under
JGTRRA by another two years, meaning that the allowance would revert to its pre-
JGTRRA status beginning in 2008 instead of 2006. And under a bill (S. 1637;
S.Rept. 108-192) favorably reported by the Senate Finance Committee in November
2003, the expensing allowance would be enhanced by making the reduction in the
allowance in the phase-out range equal to 50% of the amount above the phase-out
threshold, instead of 100% under current law.
In the budget request for FY2005 that he submitted to Congress in early
February 2004, President Bush is proposing to extend permanently the changes in the
expensing allowance made under JGTRRA.
6 The bills are H.R. 2, H.R. 22, H.R. 179, H.R. 224, H.R. 1079, H.R. 1126, S. 2 (identical
to H.R. 2), S. 106, S. 158 (identical to H.R. 179), S. 414, S. 513, and S. 842.

---

CRS-5
Partial Exclusion of Gains on Certain Small Business Stock.
Under IRC section 1202, taxpayers other than C corporations may exclude 50%
of any gain from the sale or exchange of qualified small business stock that has been
held for more than five years. The gain that may be excluded in a tax year is limited
to the greater of 10 times the taxpayer’s adjusted basis in the stock or $10 million,
reduced by the amount of any gain previously excluded. Any remaining gain is taxed
at a rate of 28%. This provision effectively lowers the capital gains tax rate on the
sale or exchange of qualified small business stock held for longer than five years to
14%.
At least three bills (S. 106 introduced by Senator Snowe, S. 842 introduced by
Senator Kerry, and S. 1885 introduced by Senator Daschle) would expand the partial
exclusion of long-term capital gains on the sale or exchange of small business stock
under IRC section 1202. S. 106 would increase the share of gains that can be
excluded from 50% to 75% for firms not classified for tax purposes as
“empowerment-zone businesses.” It would also shrink the minimum holding period
for small business stock to qualify for the exclusion from five years to three years,
repeal the current requirement that 42% of any excluded gain be treated as an
individual AMT preference item, relax existing restrictions on working capital held
by qualified small firms, increase the cap on the gain eligible for the exclusion from
$10 million to $20 million for married couples filing joint tax returns, and expand the
range of business activities eligible for the exclusion to include biotechnology and
fish farming.
Under S. 842 and S. 1885, eligible taxpayers would be able to exclude 75% of
the capital gains on qualified small business stock, but the exclusion would rise to
100% for stock issued by “critical technology” corporations and specialized small
business investment companies. A corporation would be considered a “critical
technology corporation” if, during the minimum holding period for the exclusion,
“substantially all” the firm’s active business is focused on technologies related to
national defense, homeland security, transportation, anti-terrorism, environmental
improvement, or improved energy efficiency. S. 1885 would raise the exclusion to
100% for stock issued by eligible manufacturing corporations. In addition, both bills
would reduce the minimum holding period for qualified small business stock from
five to four years, allow corporations — as well as individual taxpayers — to claim
the exclusion, and double the maximum asset size (from $50 million to $100 million)
of corporations eligible to issue qualified small business stock and index that limit
for inflation beginning in 2005.
Subchapter S Corporation Reform.
Subchapter S corporations are a type of passthrough entity that combines some
of the defining characteristics of C corporations and partnerships. On the one hand,
S corporations are closely held firms whose income is not taxed at the corporate level
but is passed through to their shareholders who are required to include it in their
income, which is subject to taxation at individual tax rates. On the other hand, S
corporations are organized as small corporations, which entitles their shareholders
to many of the rights held by shareholders of subchapter C corporations, including
limited liability for a firm’s debt and claims against it. To qualify as an S

---

CRS-6
corporation, a firm must satisfy certain requirements, most notably that it have no
more than 75 shareholders, issue only one class of stock, not have partnerships or C
corporations as shareholders, and not be a financial institution using the reserve
method of accounting for bad debts, an insurance company, a corporation benefitting
from the Puerto Rico and possessions tax credit, or a Domestic International Sales
Corporation.
At least five bills (H.R. 714, H.R. 1498, H.R. 1896, H.R. 2896 — as reported
by the House Ways and Means Committee — and S. 850) would modify some of the
provisions in the tax code governing S corporations.7 A chief aim of these proposals
is to increase their access to financial capital.
Among other things, H.R. 714 and its companion in the Senate, S. 850, would
exclude certain investment income from the definition of passive income for S
corporation banks, increase the maximum number of shareholders an S corporation
may have from 75 to 150, allow trusts that are individual retirement accounts (IRAs)
to become S corporation shareholders, treat the members of a family owing S
corporation stock as a single shareholder, allow a bank director to own stock in an
S corporation without the stock being considered a disqualifying second class of
stock, and allow S corporations to issue qualified preferred stock.
H.R. 1498 would exempt S corporations that re-invest recognized built-in gains
in their business from the built-in gains tax under IRC section 1374.
H.R. 1896 would treat members of a family owning S corporation stock as a
single shareholder, allow S corporations to issue qualified preferred stock, permit
financial institutions to own convertible debt issued by S corporations, and exclude
certain investment income from the definition of passive income for banks organized
as S corporations, among other things.
And H.R. 2896 would increase the maximum number of shareholders to 100,
allow IRAs to be shareholders of banks organized as S corporations under certain
conditions, treat the members of a family as a single S corporation shareholder, and
exclude certain investment income from the definition of passive income for S
corporation banks.
Graduated Corporate Income Tax Rates.
Under current federal tax law, corporations with less than $10 million in taxable
income are subject to graduated income tax rates, which in some cases are much
lower than the rates that apply to corporations with taxable income in excess of $10
million. Specifically, the corporate income tax rate is 15% on the first $50,000 of
taxable income, 25% on the next $25,000, and 34% on selected amounts up to $10
million. The benefits of the first two rates are phased out by a 5% surcharge for
corporations with taxable incomes between $100,000 and $335,000, and the benefits
7 For an explanation of the changes these bills would make in the tax code provisions
governing S corporations, see U.S. Congress, Joint Committee on Taxation, Background and
Proposals Relating to S Corporations, JCX-62-03 (Washington: June 18, 2003), pp. 23-28.

---

CRS-7
of the 34% rate are phased out by a 3% surcharge for corporations with taxable
incomes between $15 million and $18.3 million. Corporations with taxable incomes
between $10 million and $15 million and above $18.3 million pay a marginal rate of
35%.
H.R. 2896, as reported favorably by the Ways and Means Committee, would
reduce corporate income tax rates for taxable incomes greater than $75,000.
Specifically, under the bill, corporations with taxable incomes between $75,000 and
$1 million would be taxed at a rate of 33% in 2004 through 2006 and 32% in 2007
and 2008. In 2009 through 2011, the 32% rate would apply to taxable incomes
between $75,000 and $5 million. Corporations with taxable incomes in excess of $1
million would pay a marginal tax rate of 34% from 2004 through 2008; and from
2009 through 2011, the 34% rate would apply to corporate taxable incomes in excess
of $5 million. The benefits of the rates below 34% would be phased out by a 5%
surcharge for corporations with taxable incomes between $1 million and $1.42
million in 2004 through 2006 and between $1 million and $1.605 million in 2007 and
2008 (making the marginal tax rate in these ranges 39%); in 2009 through 2011, the
surcharge would apply to taxable incomes between $5 million and $7.205 million.
From 2004 through 2011, a marginal tax rate of 34% would apply to taxable incomes
between the phase-out ranges and $10 million, and incomes above $10 million would
be subject to a flat rate of 35%.
In 2012 and thereafter, H.R. 2896 would impose a marginal tax rate of 32% on
corporate taxable incomes between $75,000 and $20 million. The benefits of the
rates below 35% would be phased out by a 3% surcharge for corporate taxable
incomes between $20 million and $40,341,667 (making the marginal tax rate in that
range 38%). Taxable incomes above the phase-out range would be taxed at a flat rate
of 35%.
New Small Business Tax Preferences
Tax Credit for Employee Health Insurance.
Current federal tax law offers no tax credit for employers that provide health
insurance to employees. But at least seven bills would establish either a refundable
or non-refundable tax credit for a portion of the cost to small employers of offering
health benefits to employees: H.R. 450, H.R. 3607, S. 53, S. 86, S. 414, S. 906, and
S. 2163. While they differ in such important details as the credit rate and eligibility
criteria for firms and their employees, they share the important policy aim of
expanding health insurance coverage by giving small employers who currently do not
offer health insurance coverage to employees an incentive to do so.
For example, H.R. 450 would establish a refundable tax credit equal to 50% of
employer health insurance contributions for firms with 10 or fewer employees; the
credit rate drops to 25% for firms with 11 to 15 employees; and it reaches 0% for
firms with 16 or more employees. The credit applies only to health insurance
premium payments made on behalf of employees who work at least 400 hours and
earn $40,000 or less in a calendar year. In addition, the employer must cover at least
75% of the cost of the insurance coverage. By contrast, S. 53 would create a non-
refundable tax credit equal to 25% of the cost of individual health insurance coverage

---

CRS-8
up to $750 per eligible employee and 35% of the cost of family coverage up to
$2,450 per eligible employee. The credit may be claimed only by firms employing
an average of 25 or fewer workers in either of the two preceding calendar years.
Special Amortization Deduction for Intangible Assets Acquired
from Certain Small Firms.
Under IRC section 197, the value of intangible assets must be amortized over
15 years. Assets eligible for this treatment include goodwill, covenants not to
compete, patents, copyrights, licenses, permits, and trademarks.
Two bills, H.R. 1222 and S. 1371, would modify this provision to permit
taxpayers to claim a special amortization deduction for any intangible assets acquired
from an eligible small firm. The bills would allow the owner of the acquiring firm
to write off the first $5 million in intangible assets acquired from an eligible firm in
the year of purchase, and the remainder (if any) would be amortized over 14 years,
including the year of purchase. An eligible firm is defined as one with annual gross
receipts of $5 million or less in each of the three previous tax years.
Delayed Payment of Federal Income Tax by Certain Small Firms.
In general, a business taxpayer’s tax liability is to be paid by the due date for
filing its tax returns. Under IRC section 6161, however, the Internal Revenue
Service may extend the time of tax payment for up to six months if a taxpayer can
demonstrate that earlier payment would lead to undue hardship. To receive an
extension, a taxpayer must file Form 1127 on or before the original due date for
payment of the tax. The application must be accompanied by evidence showing the
undue hardship that would result if the extension were refused, a statement of the
taxpayer’s assets and liabilities, and a statement of the taxpayer’s receipts and
disbursements during the three months preceding the original due date for the
payment of tax.
S. 1885 would add a new section to the tax code (section 6168) that would make
it possible for eligible small firms to pay their federal income tax liabilities in four
equal installments, and eligible small manufacturing firms to do so in six equal
installments. To be eligible, a firm must use at least 80% of its assets in the pursuit
of a trade or business outside of farming, insurance, financial services, mineral
extraction, health care, law, engineering, architecture, accounting, actuarial science,
the performing arts, consulting, and athletics; its gross receipts must not exceed $10
million in the current tax year; its gross receipts in the current tax year must be at
least 10% greater than its average annual gross receipts in the previous two tax years;
and it must use the accrual method of accounting. Eligible small manufacturing
firms must meet the same criteria and be classified as a manufacturing enterprise
under the North American Industrial Classification System. The due date for the first
installment would be the earlier of a date selected by the taxpayer or two years after
the due date for the tax under current law. Each additional installment would be paid
no later than one year after the due date for the previous installment.

---