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SUBCOMMITTEE ON FINANCE AND TAX 

HEARING ON HOW THE COMPLEXITY OF 

THE TAX CODE HINDERS SMALL BUSINESSES 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

MAY 7, 2009 

Small Business Committee Document Number 111-020 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

PARKER GRIFFITH, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Schrader, Hon. Kurt ................................................................................................ 1 

Buchanan, Hon. Vern .............................................................................................. 2 

WITNESSES 

Chin Ryan, Ms. Christine, Synergy Consulting, Inc., Portland, Oregon, On 

behalf of The Oregon Small Business for Responsible Leadership .................. 3 

Blackledge, Mr. Eric, Blackledge Furniture, Corvallis, Oregon .......................... 5 

Hall, Mr. Keith, National Tax Advisor, NASE, Grapevine, Texas ...................... 7 

Stathis, Mr. Stam, CPA, CPA Associates, Bradenton, Florida ............................ 9 

APPENDIX 

Prepared Statements: 

Schrader, Hon. Kurt ................................................................................................ 29 

Buchanan, Hon. Vern .............................................................................................. 31 

Chin Ryan, Ms. Christine, Synergy Consulting, Inc., Portland, Oregon, On 

behalf of The Oregon Small Business for Responsible Leadership .................. 32 

Blackledge, Mr. Eric, Blackledge Furniture, Corvallis, Oregon .......................... 36 

Hall, Mr. Keith, National Tax Advisor, NASE, Grapevine, Texas ...................... 52 

Stathis, Mr. Stam, CPA, CPA Associates, Bradenton, Florida ............................ 59 

(V) 

(1) 

SUBCOMMITTEE ON FINANCE AND TAX 

HEARING ON HOW THE COMPLEXITY OF 

THE TAX CODE HINDERS SMALL BUSINESSES 

Thursday, May 7, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:02 a.m., in Room 

2360, Rayburn House Office Building, Hon. Kurt Schrader [chairman of the Subcommittee] presiding. 

Present: Representatives Schrader, Moore, Kirkpatrick, Ellsworth, Halvorson, Buchanan, Luetkemeyer and Coffman. 

Chairman SCHRADER. Well, I would like to call the first meeting 

of the Subcommittee on Finance and Tax to order here on May 7, 

2009. 

Welcome everybody in attendance, especially our guests, many of 

which have come a long ways. I appreciate their efforts to come 

here and give us a little background on small business tax simplification issues and perhaps some other points they might want 

to bring up. 

Talk to any entrepreneur, and they will tell you the same thing: 

Whether it is good times or bad, the Tax Codes become a huge obstacle to any efficient business. In an effort to untangle that complexity, the current administration has recently launched a bipartisan reform panel. That group will work to overhaul the Tax Code 

and make sure it meets current economic standards and demands. 

For entrepreneurs, this is going to be extremely important. 

In its current ever-expanding state, the States’ tax codes, maze 

of write-offs, and regulations restrict small business growth, as 

does the Federal. Whether talking about tax to dollars or tax complexity, it is an enormous drain on small firms. This should come 

as no surprise. Over 3.7 million words and over 70,000 pages, the 

Tax Code is just a nightmare to navigate. 

In an average year, individuals and companies spent close to $265 billion just doing their taxes; and small businesses paid the 

lion’s share of that sum. In fact, entrepreneurs spend an estimated 

$1,304 per employee, roughly twice the amount that big companies 

pay. In today’s hearing, we are going to examine some of these 

costs and look for ways in which the Tax Code can be simplified 

for small businesses. 

When it comes to tax compliance, mounting expenses are compounded by an element of uncertainty. Many small firms struggle 

to determine what they owe and what they can write off, just like 

2 

we do in our daily lives. With the Tax Code changing at a rate of 

roughly one alteration a day, it is no wonder entrepreneurs find it 

very difficult to follow. 

In the face of daily tinkering, undefined deadlines, expiring provisions, small firms struggle to calculate these long-term budgets. 

Given this uncertainty, it is next to impossible to even plan for the 

future. That confusion translates into postponed investments and, 

without a doubt, fewer new hires. 

At a time when we are counting on startups to jump-start our 

economy, we just can’t afford that sort of setback. Tax regulation 

should not be a stumbling block. For many entrepreneurs, they 

have the potential to encourage growth. In fact, small firms often 

make decisions based on the promise of write-offs alone. We could 

discuss that. For that reason, we need to be sure entrepreneurs are 

aware of every incentive available to them. 

Just as importantly, they should know how to take advantage of 

these provisions. A good example of this is the home office deduction. Fifty-two percent of entrepreneurs operate out of their homes, 

and yet only a small handful even claim the deduction. 

To address this disconnect, Representative John McHugh and I 

introduced the Home Office Deduction Simplification Act. That bill 

should go a long way, hopefully, to streamline the compliance process for entrepreneurs. 

Whether it is creating a standard home office deduction or just 

generally modifying the Tax Code, there are ways to ease the small 

business burden. Of course, everyone has an opinion on how to 

make this happen. We will hear some today. 

I am also pleased that our small business representatives, as I 

said before, from all over the country could join us from the Far 

West, the Far South and some that are here on a little more regular basis to share their wisdom. So at the very least, hopefully as 

a result of this hearing, we will find out ways to blunt the burden 

in the short term and set the stage for long-term reform as we go 

forward. 

I would like to recognize the ranking member, Congressman Buchanan, for his opening statement now. 

Mr. BUCHANAN. Thank you, Mr. Chairman Schrader, for calling 

this important hearing for simplifying the Tax Code for American 

small business. 

I would also like to extend my thanks to our witnesses today, especially my constituent from my district, who have taken the time 

out of their schedule to provide us some important testimony today. 

The present Tax Code—it is hard for me to believe, but I wanted 

our people to look at that—is 67,000 pages long—67,000 pages. The 

Internal Revenue Service says it takes an estimated 37 hours to 

complete the 1040 short form. The most basic tax form that—return that we have. So it should come as no surprise that a recent 

survey conducted by the Tax Foundation revealed that four out of 

five adults think the Tax Code is way too complicated and complex, 

while 85 percent say the system needs to be completely overhauled. 

Small business are the most prolific job creators, creating 70 percent of the jobs nationwide, but small business have taken the 

blunt of this current recession downturn. I know my experience 

being involved with the Florida Chamber, the chairman of that, 

3 

about 4 or 5 years ago. In our federation, we had 137,000 businesses. Most of them were small business, 90 percent 50 employees 

or less. As I stated earlier, created 70 percent of the jobs. 

It does concern me that the administration has proposed several 

tax changes or policy changes that I think will have a very, very 

negative impact on small business. Instead of raising taxes, we 

should be encouraging an environment that creates jobs and investment. 

I know myself, being in business for 30 years, as someone selfemployed, I can tell you most small businesses have pass-through 

income. So someone making 200—a lot of these small businesses 

might make 400, but they only take home 60 or 70. They are putting the money back in there. They are paying their taxes. Most 

small business are sub-S, LLCs, partnerships, sole proprietorships. 

And that is all pass-through income. It is a job they can’t create. 

It is a piece of equipment they can’t buy. 

While Fortune 100 businesses hire an army of lawyers and accountants to find loopholes, exemptions, deductions of the Tax 

Code, small businesses are forced to dig deep into their pockets for 

help in simply just trying to comply with the law. 

So I look forward to the hearing today with our witnesses, and 

I yield back. 

Chairman SCHRADER. Thank you very much, Ranking Member 

Buchanan. 

Well, let us move to the testimony from our witnesses. The witnesses will have 5 minutes. We have your prepared remarks. They 

will be included in the record. 

You will have 5 minutes, basically, to summarize your testimony. 

The timer begins when the green light goes on, 1 minute of time 

remaining is the yellow light, and the red light means I have got 

to interrupt you if you are still talking. So I apologize for that up 

front. We are trying to get to everybody and allow for good questions to hopefully get us some good policy. 

Chairman SCHRADER. The first witness today will be Ms. Christine Chin Ryan. She is President and Founder of Synergy Consulting, Incorporated, located in Portland, Oregon. She is also the 

first woman and Asian American to serve as chairperson of the 

Governor’s Small Business Council. She is here to testify on behalf 

of the Oregon Small Business for Responsible Leadership group. It 

is a nonpartisan advocacy organization committed to the creation, 

promotion, and preservation of small business in Oregon. She is a 

good friend and a good friend of small business. 

Ms. Ryan. 

STATEMENT OF CHRISTINE CHIN RYAN 

Ms. CHIN RYAN. Thank you, Chairman Schrader and members of 

the Committee. For the record, I am Christine Chin Ryan; and I 

have been a small business owner since 1988. 

First, I want to give you some statistics on small businesses in 

Oregon. Small businesses’ definition is 100 employees or less and 

account for 51 percent of the private-sector employees in Oregon. 

Ninety-eight percent of the approximately 112,203 employer firms 

in Oregon are small businesses. The 20- to 49-size class provides 

the largest number of small business jobs, around 203,339. The 

4 

source is the Oregon Employment Department for the Oregon Economic and Development Department. 

The main issues addressed in the written testimony that affect 

small business owners are the complexity of the Tax Code, the true 

cost of Social Security, and the AMT. Most small business owners 

need to hire a tax professional because of the complexity of the Tax 

Code. The time spent on keeping records to make sure they are in 

compliance with the law is extremely time consuming for small 

businesses and takes away from the day-to-day operations. 

I spend approximately $10,000 to $15,000 a year for my CPA and 

bookkeeper services. This money can be spent on capital costs towards hiring a part-time employee. 

The Tax Code is written in Congress, the regulations are written 

by IRS, and the Tax Court cases memorandum interrupts the law. 

This has contributed to the complexity. 

In addition, the IRS generated revenue procedures, revenue ruling, circulars, and on and on. Originally, some forms were only 2 

to 3 pages, example, form 990 and 5500. Now there are 9 to 11 

pages, plus schedules. Originally, the tax rates were high and the 

Code was simpler. 

The government needs money to operate. When the tax rates 

were lowered, then the amount of money the government got was 

less. In order to increase tax revenue, the government put in rules 

to limit the deductions, thereby increasing taxable income and tax 

revenues and adding to complexity. As a result, the past 3 to 4 decades, the complexity of the Code rules have been compounded. 

I have two examples in my written testimony that I will not go 

through because of time limitations. 

The next one is the true cost of Social Security. The true cost of 

Social Security also adds to complexity. Currently, sole proprietorships automatically have to pay 15 percent of income up to 

$100,000 into Social Security and Medicare before any itemized deductions and then pay tax on that income again at the regular tax 

rate. 

Why does this affect small businesses? 15.3 percent is a significant percentage to operating capital. The income is taxed again, 

and this takes away from the small business owner’s ability to plan 

for retirement. 

Another issue is the alternative minimum tax, AMT, which adds 

another level of complexity. The AMT was originally established to 

ensure that wealthy individuals paid enough taxes. However, it has 

not been indexed to inflation. Many individuals fall into AMT. This 

is due to the adjustments for taxes, excess medical deductions, and 

miscellaneous itemized deductions which include a deduction for 

unreimbursed business expenses. 

Another example not in my written testimony that Chairman 

Schrader mentioned is the home office deduction. Standardizing 

home office deduction would be huge for small businesses. Currently, the home office deductions are complex. It depends on the 

square footage you use in your home for your business, and that 

percentage is used to calculate other expenses. So it will make it 

a lot easier for home business; and thank you, Chairman Schrader, 

for doing this. 

5 

This testimony was not intended to be how much we know about 

the Tax Code as written in my written testimony but to identify 

the complexity and frustration for small business owners. It has become apparent to us that most businesses, large and small, recognize their civic responsibility and are willing to pay their fair share 

for their business footprint. I would like to underscore the word 

′′fair′′, as a fair Tax Code ensures participation, rather than encourages searching for intricate ways to pay as little as the law allows. 

Thank you. 

Chairman SCHRADER. Thank you very much. Good testimony. 

[The statement of Ms. Chin Ryan is included in the appendix at 

page 32.] 

Chairman SCHRADER. Well, our next witness is Mr. Blackledge. 

He is the President of Blackledge Furniture in Corvallis, Oregon. 

Founded in 1901, Blackledge Furniture is Corvallis’ oldest and 

largest home furnishing center. 

Mr. Blackledge has served as the regional tax advisory chair to 

the SBA Office of Advocacy and has chaired the U.S. Chamber of 

Commerce Small Business Council on Tax Policy; and I know from 

his work in Oregon, an avid proponent of simplification of tax law 

across the spectrum. 

Mr. Blackledge. 

STATEMENT OF ERIC BLACKLEDGE 

Mr. BLACKLEDGE. Thank you, Chairman Schrader and Ranking 

Member Buchanan, for inviting me to talk today about simplification of the Tax Code. 

There have been many suggestions to simplify the tax system by 

completely changing our tax structure to a consumption tax, a 

value-added tax or a flat income-based tax, but the potential negative economic impacts of the transition make such a major systemic 

change unlikely in the near future. I will therefore limit my comments to eight key principles for good tax legislation that could 

make the current tax system simpler and easier for small businesses and all taxpayers to comply with. 

I will also suggest priorities for legislation that implements these 

principles. The details for each proposal are included in my written 

testimony. Many of these proposals have been supported by Committee members and the Congress in the past, and I hope you will 

continue to support their passage in this Congress. 

Principle number one is to remove outdated and unnecessary recordkeeping burdens that don’t significantly impact tax revenues. 

The top priority would be removal of the outdated ′′listed property′′ 

recordkeeping requirements and deduction limiting on business cell 

phones and computers. 

Principle number two, periodically update all dollar limitations 

and rate break points in the Tax Code by a single and standardized 

inflation factor. This could be done with a one-time adjustment for 

inflation that has occurred since each provision’s adoption or last 

change, and the addition of a standard inflation adjustment provision for all dollar limits in the Code that do not have a greater specific adjustment. Examples of this with provisions needing modernization are the badly outdated $25 business gift limitation and 

the very poorly written luxury automobile depreciation limitation. 

6 

Principle number three, as much as possible, take tax considerations out of the issues involved in choosing a business entity by 

applying the same equitable rules and offering comparable tax advantages to all forms of business organization. A top priority is the 

equal and simple deductibility of group health insurance for all 

small businesses at the entity level. Another priority would be removing the inequitable limitations on small businesses other than 

C Corporations offering a cafeteria benefit plan to their employees. 

And a third priority would be to correct the inequitable impact for 

the personal alternative minimum tax on the business income of 

pass-through entities such as S Corporations and partnerships 

which are impacted at a much lower level than is true of C Corporations. 

Principle number four, do not create new tax expenditure benefits and then take them away from any taxpayers through complicated phaseouts, limitations, adjustments, recapture or a lack of 

matching exemptions in the alternative minimum tax provisions. A 

prime example is the ineffectiveness now of Section 1202 small 

business stock, which is largely negated by the AMT impact. 

Principle five, reduce cost recovery periods and complex recordkeeping for all small business equipment purchases and facility improvements. Keep the current section 179 small business expensing 

provisions, which are a key factor in helping small businesses survive and grow, but recognize that the changing needs of small businesses now would call for the inclusion of nonstructural real property improvements under Section 179 property. 

Principle number six, provide alternative simple provisions in the 

Tax Code that provide equitable tax deduction benefits to small 

businesses without excessive administrative requirements and 

costs that often become a barrier to small businesses using a tax 

benefit. A high priority would be passage, as has been mentioned, 

of a simple home office deduction and a change of the outdated and 

unrealistic requirements for physical customer presence and exclusive use that prevents most small businesses from deducting their 

home office. 

Principle number seven, reduce the burden on taxpayers to create complex legal arrangements to preserve family businesses for 

their children. It is important this year that we finally enact the 

provisions in the recent budget reconciliation for a permanent unified gift and estate tax exclusion of $3.5 million per individual and 

a maximum tax rate of 45 percent, while still maintaining the current Code provisions intended to help family farms and businesses 

survive generation transfers. 

Principle number eight, and perhaps the most important one, is 

that it is important for Congress to regularly evaluate the actual 

impacts of the tax system and the financial and regulatory environment on the ability of small businesses to succeed and grow. The 

Congress and administration should seek broad-based input from 

small businesses about the problems that they face and the ideas 

they can develop for improving the small business economy by authorizing a National Small Business Summit on Economic Recovery 

for 2010. 

If we are going to rebuild a growing and sustainable economy, 

government needs to better understand and address the unique 

7 

needs of the small business community, particularly in the area of 

taxation and regulation. 

This year marks the beginning of a new presidency, with many 

new leaders in the administration and in Federal agencies and in 

the Congress. For these leaders to be effective in helping rebuild 

the small business economy, they need to better understand its 

needs. Yet it has been over 14 years since the Federal Government 

last sought broad-based and balanced input on the problems affecting small businesses through the 1995 White House Conference on 

Small Business. 

To implement a restart of this summit process, I ask that the 

House Small Business Committee add a provision to an SBA reauthorization bill matching the provision that currently exists in the 

Senate reauthorization bill which would authorize a National 

Small Business Summit on Economic Recovery in 2010. 

Thank you very much, and I would be happy to answer any questions later. 

Chairman SCHRADER. Very good. Thank you, Mr. Blackledge. 

[The statement of Mr. Blackledge is included in the appendix at 

page 36.] 

Chairman SCHRADER. Well, our next witness is no stranger to 

this body, Mr. Keith Hall. He serves as a National Tax Advisor for 

the National Association for the Self-Employed. 

As owner of his own accounting firm, Mr. Hall has been involved 

in providing consulting and tax services to small businesses for the 

last 10 years. The National Association for the Self-Employed was 

founded in 1981 and represents hundreds of thousands of entrepreneurs and micro businesses. 

We welcome you to the hearing. 

STATEMENT OF KEITH HALL 

Mr. HALL. Thank you. Mr. Chairman, Ranking Member Buchanan, members of the Committee, thank you so much for holding 

this hearing and mostly thank you for the chance to be here myself. 

Again, my name is Keith Hall; and I am a small business owner. 

I have a small accounting practice in Dallas. I am here on behalf 

of myself but also on behalf of the National Association for the SelfEmployed, which represents 250,000 members and over 500,000 

workers. 

These are micro business owners from all 50 States, all ages, all 

races, all sexes, any other demographic that you want to name. But 

all of them have one thing in common. They all struggle with their 

tax return. Most don’t like to do their tax return, but they know 

they have to deal with it. Everyone does. 

The IRS is the one government agency that all micro business 

owners must deal with at some level; and, quite frankly, most of 

them are a bit intimidated, maybe even a little bit scared of the 

big bad IRS. That is not because the IRS intends to be intimidating 

or scary but because the Code is so complicated. I understand there 

are three times as many words in the Internal Revenue Code as 

there are in the Bible. There are not a lot of books out there that 

are longer or more pervasive than the Bible, but apparently the Internal Revenue Code is one of those. 

8 

Again, the fear is not because of the IRS itself but because of the 

Code. 

I feel that the IRS has done a great job in helping small businesses with their Web site, with access to education. They have 

done a lot of good things to help us, and they have been successful. 

But still the IRS— 

Ranking Member Buchanan mentioned that there is 37 hours to 

fill out a 1040, but the IRS says that it takes 57 hours to fill out 

a Schedule C with a 1040. For a small business owner, that is over 

one workweek. That is roughly 2 percent of their work year. That 

doesn’t sound like a lot. But if we could all have a 2 percent growth 

in our 401(k) plan or 2 percent growth in the economy, we would 

be really happy with that. So that is a big chunk of their work. 

Now, in my opinion, the answer is pretty simple. But, apparently, simple can be complicated, which is also complicated. For 

micro business owners, simplifying the Code is the right answer for 

them in growing their business. But it is also the answer for the 

tax gap as well, $353 billion in taxes that should be paid that 

aren’t. I believe a big chunk of that is because people just don’t 

know how to do the taxes the way they should. 

I believe most people want to do the right thing and will do the 

right thing. They just don’t know which line to put the right thing 

on, and I think that is where simplifying the Tax Code comes into 

play. 

Now, everybody recognizes that. I think the administration has 

a new tax force working on tax simplification. We are here today 

meeting for it. So I think we are heading in the right direction, and 

I believe we are on the right track. 

There are three bills right now that you guys are working on: 

One, H.R. 946, the Plain Language Act. Its sole purpose is to simplify language in all government forms and publications. We 

strongly support that bill. Just making the forms easier to read 

will be a good first step. 

Second is H.R. 1562, as Chairman Schrader had mentioned. That 

is the Home Office Deduction Simplification Act. It basically provides a $1,500 standard home office deduction. 

Ranking Member Buchanan also mentioned that only a handful 

of people who qualify for the home office deduction actually take 

the home office deduction. Now, the very purpose of that rule is to 

make the playing field level, because big businesses clearly deduct 

their facility expense. But some of the small guys don’t just because it is so complicated. 

Again, on that form, the home office deduction form, 14 different 

times appears the phrase ′′see instructions′′. That is very difficult. 

Now the NASE has done a survey with its members back in 

2008. You mentioned only a handful of people claim the deduction. 

Of the people who qualify for the home office deduction, only 27 

percent actually take the deduction, and that is because it is so 

complicated. That is just not fair. 

A third bill is H.R. 1470, which is Tax Equity for Our Nation’s 

Self-Employed Act; and that basically just moves the self-employed 

health insurance deduction over to Schedule C. Mr. Blackledge 

mentioned that, taking the deduction at the entity level. That just 

9 

levels the playing field and removes a significant complexity in the 

Tax Code. 

The last thing I will mention is we need some continued work, 

I believe, and the NASE supports a continued clarification on the 

definition of independent contractors. Lots of small businesses really struggle with whether they have an employee or have an independent contractor. There is a 20-point checklist that the IRS gives 

us. Each of those points is very difficult. Even if you answer all 20 

of those questions, you are still not sure you get to the right answer. So additional work on that clarification would be very useful. 

Again, thank you very much for everything you guys do; and 

thanks for the chance to be here. 

Chairman SCHRADER. Thank you much, Mr. Hall. Good testimony again. 

[The statement of Mr. Hall is included in the appendix at page 

52.] 

Chairman SCHRADER. For our last witness, I will defer to Ranking Member Buchanan to introduce him. 

Mr. BUCHANAN. Thank you, Mr. Chairman. 

It is a pleasure—we have a gentleman from one of our local 

firms, a constituent in my district, Stan Stathis to the Committee 

today. We appreciate you coming. 

He is a certified public accountant with CPA Associates in Bradenton, Florida. They are one of the larger regional firms in the 

area, highly regarded and respected certified financial planner. He 

also does a lot of personal financial planning, specialist in terms of 

small business, an expert in financial planning and consulting. He 

does all different types of small businesses and some larger businesses, including construction, manufacturing, real estate, medical, 

legal, and agriculture. 

I want to welcome you today to the Subcommittee and look forward to hearing your testimony. 

STATEMENT OF STAM STATHIS 

Mr. STATHIS. Thank you, Ranking Member Buchanan and Chairman Schrader and Committee members. 

Name my is Stan Stathis. As you heard, I am a partner in the 

firm of CPA Associates located in Bradenton, Florida. It is my 

honor and pleasure to come before you today to testify. 

During the span of my career, I have gone from posting manual 

books to the computer age. As you have heard, you have many 

thousands of pages in the Internal Revenue Code. When I first 

started, we had two small books. We could carry the entire Internal 

Revenue Code basically around in our hand. The regulations were 

three separate books. So you literally could walk in and place on 

your table a stack of books about this high. 

I have no idea how large that would be now. I don’t want to 

know. I have it on my computer, and I can access it in a much 

more expedient manner. 

You would think that with the advent of the computer age that 

you could have more quickly and accurately prepared information. 

The problem that we have found is that you are only as good—the 

information is only as good as the people who input the information. So that if you put a lot of garbage in, you get a lot of garbage 

10 

out; and you just produced a very easily readable piece of garbage. 

So we have had a large change in the way we report information, 

but we don’t have the knowledge that has gone along with it. 

I spend hundreds of hours every year reading material just to 

keep abreast of the current tax law and trying to understand currently what is going on; and it is darn well near impossible for me, 

let alone a small business owner, to be able to keep up and not run 

afoul of the Tax Code. 

So what have they done? With the added complexity of preparing 

an accurate tax return, many small business owners have either 

been forced to hire a competent professional to aid them in preparing their tax return, at considerable expense, I might add, or go 

it on their own and hope they don’t prepare a return with too many 

inaccuracies. 

However, incorrect preparation of tax returns is not the only risk 

the business owner faces. The Internal Revenue Code as currently 

written has very complex and in some cases arcane rules for the 

uninformed small business owner. 

If there is one thing I want you to take away from what I am 

going to talk about on some of these issues is that if you could sit 

in my seat and feel the anger and frustration from the small business owner and the anger at how much they have to pay me a lot 

of times to come in and fix things to make sure that they are not 

running afoul of the Internal Revenue Code, If you could do that, 

this Code would be changed tomorrow. It is just way too complex, 

and it has way too many rules. 

I have identified 13 different areas in my testimony that I 

thought were pertinent; and we will start with the first one, which 

was choice of entity. 

Choice of entity, what you have there is you have LLCs, you 

have corporations, you have S Corporations. One of the things we 

could do there is even out the playing field on what the benefits 

are to make sure that we have more consistency. One of the things 

you would also like to do is allow partners and sole proprietors to 

participate in the system so they could pay their taxes on a regular 

basis. 

Capital formation, as you heard, most owners plow their money 

right back into the business. They don’t understand how come they 

owe so much in taxes, and that is because they are putting their 

money back into the business. 

Shareholder health insurance for deduction on the return. It is 

passed out for S Corporations, and it is deductible in a full corporation, and then you have sole proprietor rules. These things should 

be evened back and put into the business. We don’t need to just 

change paper here on things like that. 

Shareholder loans to an S Corporation, they need to be part of 

basis for losses. 

Inadvertent S Corporation terminations, we need have much 

more relaxed rules in being able to maintain your S Corporation. 

Listed property record keeping is way too onerous for most people. I mean, the cell phone, I understand we had bills introduced 

a number of times to get that corrected. 

We have automobile records that have been mentioned, business 

gifts and promotion, home office deductions. I could go on hours 

11 

about that. Unless you get rid of the exclusivity of use provision in 

there, you are going to have problems. 

Fiscal year flexibility to go to other than a counter year, fixed 

asset addition, retirement plans, they all need reform to be equalized among the different kinds of entities. 

I would also like to say my spouse is a small business owner, and 

I spend hours preparing her own tax return, which is included in 

ours. It is a Schedule C, and it is difficult to do every year. And 

I have her maintain automobile records, and I have had her tell me 

that other attorneys laugh at her when they see her out in the car 

writing down the mileage. Because I won’t go without having those 

records kept on a contemporaneous basis. 

So it is very difficult for a small business to keep those kind of 

records; and if anybody has any question, I would be more than 

happy to answer them. Thank you. 

Chairman SCHRADER. Thank you very much, Mr. Stathis. Excellent testimony. 

[The statement of Mr. Stathis is included in the appendix at page 

59.] 

Chairman SCHRADER. Let us move into some questions of our 

witnesses, and I guess I will start off. 

Let us start with Mr. Blackledge. You have referenced the National Small Business Summit. Could you elaborate on that? And 

is there any precedence for that before? 

Mr. BLACKLEDGE. Yes, actually, there have been three small 

business—they were called White House Conferences on Small 

Business in the past, the last one being in 1995. But it has been 

14 years now since that last summit, and a lot has changed for the 

world of small business in that time. The Tax Code has changed. 

The regulatory environment has changed. 

What is particularly important now is that the world of the economy has changed with the result of our current recession. Businesses are radically impacted by the recession. Many of them are 

failing, and there are many things that government could do and 

has been trying to do to help small businesses. But, at the moment, 

it is flying blind, because it doesn’t really understand what is happening in the small business community and isn’t getting as much 

input directly from small businesses as it could. 

That would be the purpose of a White House Small Business 

Summit on Economic Recovery, would be to let small businesses actually, just as we are today, talk to the Congress, talk to the administration, talk to Federal administrators and the agencies about 

what needs to be done to help small business. It would allow the 

Congress to spend the money that it spends to assist small business more wisely and would also certainly improve the small business economy. 

Chairman SCHRADER. Thank you. 

Mr. Hall, your organization represents millions of home-based 

businesses. In your view—could you elaborate a little bit more? You 

testified on it somewhat already. Why they are not taking this 

home office deduction? How complicated is that, really? 

Mr. HALL. I think it is very complicated. 

Again, the form itself has—I think I mentioned in my testimony 

has ′′see instructions′′ 14 different times. There is a publication, 

12 

Publication 957, that is designed to help complete one form. So 

there is an entire publication that you can read. I think the publication is 57 pages. That 57 pages goes along with the one-page 

form. So I think it is very complicated. 

I think there is also this fear of the IRS that I talked about as 

well. There is this—I heard at the library or heard at the water 

cooler that if I take the home office deduction there is a better 

chance I am going to get audited. So it is that fear of not putting 

the right thing on the right line that just becomes more and more 

cumbersome, and they choose to just forego the deduction. And I 

think that clearly is not what the intent of the Internal Revenue 

Code was for, nor was that deduction to discourage taking that deduction. It was designed to recognize their facility’s expenses there 

at their house and should be recognized on their tax return. 

I think that is the best thing about the standard deduction. You 

know, let the scoring work out so that it can be revenue neutral. 

If $1,500 is not the right number, $1,400 might be the right number. But whatever number should recognize the cost of operating 

a business out of that office in the home. There ought to be a deduction for that. 

Chairman SCHRADER. So Congressman McHugh and I have introduced that simplification act, H.R. 1509. Would you hazard a guess 

as to how many more small businesses might take advantage of the 

home office deduction if that bill is enacted? 

Mr. HALL. It would be difficult to say, but, depending on which 

paper you read, there are 20 million small businesses out there. I 

think that the IRS estimates there will be 23 million tax returns 

with a Schedule C attached to it. If only 27 percent of those, which 

is what the NASE survey indicates, only a fourth of those people 

actually take the home office deduction, just using those numbers 

there, that is another 15 million small business owners out there 

that would benefit from that bill and that standard deduction. 

Chairman SCHRADER. I appreciate the comments on the tax neutrality, too. That is very, very good. 

Ms. Ryan—Chin Ryan. I will get it correct. Sorry, Christine—the 

Tax Code is pretty darn complex. You alluded to having professionals prepare tax returns. A lot of small business folks can hardly 

do that on their own. What has been your experience since you 

have been in business starting and now at this point in time and 

where do you think we need to be heading for many small businessmen and women? 

Mr. BLACKLEDGE. When I first started, I knew infrastructure was 

very important, so I hired a consultant to help me with my financials. So that has enabled me to set everything in place that I currently use now. 

I used to be an 8(a) firm through SBA, so I had four different 

entities to account for in my accounting system, not only through 

the SBA but also through the IRS and Federal Government contracts. There are some allowable and unallowable costs. And then 

my banks for a credit line, which was required for an 8(a) firm, for 

my 8(a) application is when I get a contract, how will I be able to 

meet payroll and expenses before I get my first payment. 

So I had all these different entities to report to, especially the 

Federal Government, what was not allowed as expenses or not. So 

13 

I pretty much had to have infrastructure. So I hired a consultant, 

and through the SBA also they have had consultants to help me. 

So, fortunately, I had help and I had the vision to know that infrastructure is very important. But it does cost me. 

I at one point had 31 employees in the 1990s through the tech 

boom, and I needed that infrastructure. So I have also been audited 

by the IRS because they thought I was a professional services corporation, therefore, higher tax bracket. I passed with flying colors. 

I have been audited by the Federal Government internal audit 

group, passed with flying colors. So, fortunately, I have no issues. 

Every penny is accounted for. 

But as Chair of the Governor’s Small Business Council and the 

Oregon Small Business Responsible Leadership, many small businesses around the State don’t have the advantages I did, do not 

really understand that infrastructure is very important. 

I have had friends who started businesses that really couldn’t 

even go to the banks for loans because their financials were not in 

order, and it is because a lot of them really didn’t graduate with 

an MBA. They are entrepreneurs. They had the creativity. They 

were either technical folks that started the business. And, like 

many of us, we learned the hard way; and we then, of course— 

what you hear a lot—we started loaning ourselves money to start 

the business. 

So I think that is the majority, small businesses out there. Even 

though it has improved, there is a lot—at least in Oregon, there 

is a lot of free consultations that are very inexpensive through the 

SBDCs and through the targeted service providers and so on in the 

community colleges. But there are still a lot out there that do not 

know these services are available and do start off on a shoestring. 

Thank you. 

Chairman SCHRADER. Thank you very much. 

I was one of those 30 years ago when I did my own taxes and 

started my own business, because I felt I could do that. I hazard 

to guess, as a budding veterinarian coming out of veterinarian college right now, I would not be starting my own business in large 

part because of some of the rules and regulations we now have 

upon us that are so onerous. 

I am going to switch over to Ranking Member Buchanan and let 

him ask some questions. 

Mr. BUCHANAN. Thank you, Mr. Chairman. 

Ms. Chin Ryan, let me ask you, Mr. Stathis said something about 

people being angry and upset, a lot of small business, that passion 

about taxes being as complex as they seem to be or they are. What 

is your sense of that, I mean, when you are dealing with a lot of 

different small business people? 

Ms. CHIN RYAN. First, as myself, when I first started and my accountant and the CPA tried to explain to me some of the accounting rules, I pretty much told them that this is not for me, it is way 

over my head, and whatever you say is fine with me. You just give 

me direction. 

So I still remember that from almost 20 years ago, and I think 

small businesses feel the same way. I don’t think anything has 

changed. And I just think it is too complicated. I gave some examples with solutions. 

14 

By the way, one of my steering committee members was a CPA 

that helped me prepare my testimony, and he could have gone on 

and on and on, and I just said, let us hold it. So it is still very complicated. I just think it needs to be simplified in all aspects. I don’t 

think it has really gotten any better. 

I don’t know if I answered your question. 

Mr. BUCHANAN. Yeah. The other thing that—the chairman and 

I were having lunch yesterday, talking about different things. But, 

you know, you look at, of course, States like Oregon, a great State, 

California. But now—this is a little off of tax simplification, but it 

is one of my big passions. 

As we are looking at taxes being 39 percent or so, 40 percent 

Federal, a State like Oregon—California I know is 10 plus percent, 

maybe as high as 15. So if someone starts out, takes the risk, puts 

up their house, all these—your personal guarantees, where is the 

incentive anymore for someone to do all this? Then they have got 

to pay property taxes and all—assuming you have got property 

taxes now—other taxes on top of that. 

And it is one thing if you are making less than 100, but I know 

people that end up being when they become successful, they start 

making 3 or 4 or 500. They need that capital to reinvest for jobs. 

And that is the big thing I think we need today for small business. 

What is the sentiment out there, just out of curiosity? Someone 

said when they get successful and big, they move to another State 

or something. But what do you sense of that? Because a lot of that 

is pass-through income. Is that a factor or are people concerned 

about that? 

It is one thing when we were at 33 and now we are at 40, 39. 

Now you add 13, 12 on top of that. Where is the incentive to take 

the risk and all the personal guarantees and everything? I think 

it is going completely in the wrong direction. I really feel like it 

hurts small business. But that is just my opinion. 

Ms. CHIN RYAN. I think most small businesses that are what you 

call true entrepreneurs that start up that do not have the formal 

education like an MBA, I don’t think they think about that. I certainly didn’t. And we go into it because it is a chance to be your 

own boss, be creative, make decisions based on what you think is 

right or good for the company. And I think we think about that 

first, less about the negative aspects of your businesses. 

Personally, I felt after about 10, 15 years, I still had the—how 

do you say—the spirit of being a business owner. Now that wears 

you down as time goes by. But I—you just don’t think about it. 

When you started—and most of us were younger then—you are 

fearless. You are going to succeed. You have that mentality. Until 

it really hits you, that is when you start being mature and seeing 

what the responsibilities are and the decisions that you have to 

make. 

So I don’t really see a lot of that changing, except for those who 

have gone on to higher education and who have, like you say, 

MBAs, who have formal training in marketing plans, business 

plans that can then take it to more of a structured type of approach, which is a little different than lot of the entrepreneurs that 

start off based on passion. 

15 

Mr. BUCHANAN. I think you are right on that. Probably especially 

at startup, you are not thinking about that. You are thinking about 

surviving. 

Mr. Blackledge, your company is in Oregon, a more mature, 

generational family business, I assume. Does that affect businesses 

that are out there that are more mature and starting to make some 

money? Is that a big issue or not? 

Mr. BLACKLEDGE. Clearly, it does. Frustration with the level of 

taxation is obviously an issue. 

In Oregon, we have a problem with that, just as you have in 

Florida. The State right next to us has no income tax. And one of 

the problems that we encounter in Oregon since Oregon has adopted—although at the moment we are disconnected from the Federal 

Tax Code. We normally follow the Federal Tax Code. As a result, 

a lot of businesses who are successful leave the State of Oregon, 

unfortunately, and move to Washington to escape that high level. 

We have about a 9 percent income tax rate in the State of Oregon. 

So the level of taxation is important. 

But one of the other issues that Ms. Ryan was talking about, 

that is, the frustration of small businesses is important, too. When 

you go back to the tax gap, some of it results from just the complexity of the Code and the fact that businesses just can’t completely comply with it. Even IRS staff people designed to help taxpayers fail 25 percent of the time to get the right answer to tax 

questions based on GAO audits. 

But some of it also is just frustration with the Tax Code in the 

sense that when the Code becomes so outdated and illogical, issues 

like having to report cell phone use and computer use, for example, 

when businesses know that there is no additional cost for the personal use of it, or the outdated limitations on many of the deductions, businesses have a tendency to rebel. 

Business people are very practical people; and when the Tax 

Code gets so out of sync with the reality of the world today, business people rebel and sometimes fail to properly pay the taxes as 

they should. And, unfortunately, even though those items may be 

forgivable, once that process starts, it gets much easier for them to 

make the next decision not to comply with the Tax Code and the 

next one after that. So it is really important that Congress keep 

the Tax Code fair and logical. 

Mr. BUCHANAN. Thank you. 

Mr. Hall, the self-employed, did you say how many folks are in 

that group? 

Mr. HALL. Two hundred and fifty thousand members, about half 

a million workers. 

Mr. BUCHANAN. And you brought up a lot of different things, but 

if you distill it down to one or two of the top things we could do 

in terms of simplifying the Tax Code, what would they be? And I 

am sure there are 10 things, but if you were to say one, two, or 

three or something like that just off the top— 

Mr. HALL. One, because the bill is pending, which is the home 

office deduction, I think that makes a big difference. That makes 

an immediate help. 

16 

Maybe the more pervasive of the issues I talked about was clarification of the worker status, independent contractor versus employee, and what we were just talking about here. 

Back in the day, I started my career with Peat Marwick, which 

is a giant accounting firm. And I have been through a lot of Presidential elections and congressional elections and everybody always 

talks about creating jobs. And I know when I decided to start my 

accounting practice, I was thinking about that. A little bit naive 

again. We won’t talk about how long ago that was. But about creating jobs. 

And my firm supports four families. There are four jobs that I 

created, and I am very proud of that, and I think that is the incentive to start businesses. And I think that back in the day that was 

always the incentive to start business. 

That has changed a little bit. Back in March, I did a tax seminar 

in connection with the SBA’s Small Business Development Centers; 

and I spoke to 62 small businesses. And during that seminar, we 

would ask a question and there were 16 of those 62 that had just 

started their new business within the last 30 days. And most of 

those had started that business not because they wanted to go out 

and create a job or because they had a great idea. It is because 

they had been laid off. 

And they didn’t choose self-employment. They became self-employed, and they spent a day with me trying to figure out how to 

run their business and not let the Tax Code get in the way of them 

creating jobs. And not knowing the difference between an employee 

or an independent contractor, my real fear for that complexity is 

that they choose not to hire the person. And choosing not to hire 

the person when you have the economic base to create a job, if you 

choose not to create a job just because the Tax Code is complicated, 

now we truly have cost all of us money based on just that choice. 

So that would be very important. 

Mr. BUCHANAN. The sense is today—and I want to pick up one 

point—is that a lot of these kids are coming out of some of the top 

schools, there is not job opportunities, so they will probably have 

the next guy, the next Microsoft and all that. You are going to see 

a lot of people—but we have got to make sure we have incentives 

for the people willing to take the risks, create the jobs, go out and 

guarantee notes. 

Because a lot of these businesses—I have seen the U.S. Chamber 

put out 20 years ago, 100 people go in business; in 5 years, there 

is only 90 that are—there is only 10 left or 8 left. So they are taking big risks to create jobs to help move the economy forward. 

Let me just—Mr. Stathis, one of the things that in tax simplification also got mentioned was fairness. I know like in our businesses 

or friends that have businesses, they will have a building or something and they write the building off 39 years. But the CPAs will 

come and say, look, you can take component depreciation, take it 

over 5, but that is going to cost you 5 grand. It is more complicated. 

You have got to get involved. But the small businessperson that is 

starting out can’t afford that. 

But yet if you don’t have the documentation—so I am just thinking about things like that, again, where small businesses don’t 

have the same advantage. These are not loopholes. They are just 

17 

legal. But because they don’t have the lawyers and the CPAs, they 

can’t have the same advantages as businesses a little bit larger. 

What is your thought on that? 

Mr. STATHIS. What you are talking about is a cost segregation 

study that is done on a building and its components in order to 

write it off over a shorter period of time; and, hopefully, we usually 

show that you save the money in income taxes to pay for it. The 

small business owner who is uninformed who goes into business 

and doesn’t get the proper advice will not be able to take advantage 

of those things. 

When I deal with most small business people, they are risk takers. I once had a very wealthy individual sit down with me; and 

he said, you could never do what I do, and I could never do what 

you do. And I asked him why. And he said, you are a wage slave. 

You take wages. You don’t want to take the risk of not having a 

paycheck. 

Well, I do take that risk now with owning my business. But at 

the time I was just a salaried employee. 

He, on the other hand, said he could lose everything every day. 

He was always rolling the dice. He was always taking risks. And 

that is what made him an entrepreneur. 

And the older I have gotten, the more I have gotten to appreciate 

that, that small business owners will cut corners. They will be ignorant of the law. One of the sayings in our office is ignorance is 

cheap. Because if you know what the law is and you have got to 

comply with it, you have to spend the hours and time and get it 

right. Because if you don’t and you get caught, then you have a 

problem. And that is what most people hire like a CPA for or another financial advisor that is helping them with their business, is 

to keep them from running afoul of these arcane rules is what I 

want to call them. 

Going back to the home and the office deduction, I have a former 

agent in my office; and he said a home in the office deduction is 

like taking candy from the baby. Very few people are able to actually meet all the rules that are in place in order to have a home 

office deduction. And the fear of that that has been permeated 

through the public is why it is not taken. Because most people feel 

that it is an audit flag. And it is an audit flag. Just plain and simple, it is an audit flag. You put it on your return, and chances are 

you are going to have an audit. 

And it should be legitimate business reasons to have it, and you 

shouldn’t have to have exclusive use of that for business use. I 

mean, you use your business 8 hours a day. Sometimes, like I am 

in there maybe 15, 17 hours. But why should you have to maintain 

that office for 24 hours as an office in your home? 

I mean, people can’t afford to have all that space go to waste. So 

if they keep storing personal items in there, that would be a reason 

to disallow it as an office if you have got personal items stored in 

there. 

I have known people that have legitimate reasons for having 

home office businesses, and in our society today many people are 

employed at home. That is where they work. You talk to them, and 

they are at home. That is where they are. That is where their busiVerDate Aug 31 2005 20:04 Jun 12, 2009 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48882.TXT DARIEN
18 

ness is located. And I have even seen some of those not take the 

deduction. 

So when you are looking at the small business owner and what 

they have to comply with as far as regulations are concerned, most 

of them are going to take the risk and say, I am not going to know 

what that law is and I am just going to go ahead; and if I get 

caught, then I will work on it. And it is a shame that they get put 

in that position, and they shouldn’t be put that position. They 

should be able to simply understand what the law is and simply 

comply with it. 

Mr. BUCHANAN. Can you expound just a little bit more on the 

frustration and anger? What are the top one or two things you 

see—because you guys deal with a lot of small businesses—in 

terms of tax simplification that outrages people the most in the 

small business community that—over the last 5 or 10 years or 

whatever? I know there is probably a lot, but can you distill it 

down to two or three that really come to mind for you? 

Mr. STATHIS. I will give you the major one. The major one is that 

they come in and they look down at the return and they go, I made 

how much and I owe how much? They are incredulous at the number. Because they go, I didn’t take that home. They equate income 

with cash. Okay? So if they don’t have the cash, they didn’t make 

it. 

And if you are sitting there and you are looking at a K-1 say 

from your business and it says you made half a million dollars, 

well, $350,000 went back into the inventory, went back to pay 

debts, went to purchase other pieces of equipment. And then by the 

time you pay taxes on the other $150,000, you are back down to 

where you are making a hundred. If you are paying State taxes, 

it is even lower. So it much less than you really think. 

People that are entrepreneurs are always constantly taking that 

money and putting it back into their business. So they get very 

angry and frustrated when they are saying, where am I going to 

come up with this money? I don’t have it. It is in the business. So 

then they are put in a position where they have to go borrow 

money to pay the taxes, and that gets them frustrated. 

The second part that I see a lot of anger with is Social Security 

tax. You can actually have a profit on a Schedule C, have no taxes, 

no income taxes, yet have substantial taxes for self-employment 

tax; and that is very hard to explain also to individuals, alternative 

minimum tax. 

That one, when that pops on there and I am going down my 

sheet in explaining it to them, well, this is the alternative minimum tax. What is that? Well, what the government giveth the 

government taketh away. So you get a deduction here, but because 

you got too many deductions now we are put in a position to have 

to pay taxes for that. So you actually lost that for this year. 

That is another one that really just rankles them immensely. 

Probably when I sit there and explain to them that they can’t take 

a deduction for something that they think is a legitimate deduction, 

they get angry at that. 

Gifts are an item. Currently, when I sit there and say—they 

come in and say, well, I want to give some Christmas gifts out to 

some of my friends that are referral sources to my business; and 

19 

I tell them, well, you are limited to $25. And they go $25? You can’t 

buy anything for $25. What am I supposed to give them, movie 

tickets? 

Really, you should be looking at what the promotional value of 

those items are. Because, really, you are promoting your business. 

You are promoting yourself. You are promoting being able to get 

more business from them. And that should be a legitimate expense. 

I don’t advocate giving away lavish gifts, but there should be the 

ability there to do that. And you have a hard time explaining that. 

I think that probably the other thing is when I start getting into 

record keeping, talk about cell phones, cell phone usage, personal 

use, it is de minimis. It has no business being listed property. 

Telling them they have to keep records for their automobile log, 

and I am calling them on the phone, what was your beginning 

mileage, what was your ending mileage, you know, how much was 

business, how much was personal. When I start going into that and 

they go, I don’t know. You got that last year. My bookkeeper has 

it. 

And that is another point that should be brought up. When you 

are in a large business, it is very easy to maintain the proper 

records because you have an accounting department. You have people that are responsible for saying, hey, give me those expense 

slips, give me your records. And there is a real threat of not getting 

your money back because you are an employee in the business and 

you don’t get paid if you don’t give them the proper records. 

But when you are the owner and you look at yourself, yeah, give 

me the records and you stick your head around the other corner, 

no, sir, what are you going to do? Fire yourself? It is not going to 

help. And the self-discipline part is there. 

And then when they come in and they are talking to me and I 

say, we have to have this. My other accountant didn’t want that. 

Why do you need it? I say, well, I am trying to keep you out of 

trouble. 

And so it really gets down to—like I said, ignorance can be 

cheap. Because if you don’t require certain things, it is more expensive. Because then I have to spend the time chasing this stuff down 

and making sure they are in compliance. 

Mr. BUCHANAN. One thing you are saying is that as a CPA you 

also have to have a little expertise in anger management? 

Mr. STATHIS. Yes, sir. 

Mr. BUCHANAN. I yield back. Thank you. 

Chairman SCHRADER. Thank you. Good discussion. 

Well, let us recognize the gentlelady from Arizona, Mrs. Kirkpatrick. 

Mrs. KIRKPATRICK. Thank you, Chairman Schrader. Excellent 

panel, excellent. 

Chairman, like you, I established my own law firm, and so I 

went through the business formation myself, and I was a managing 

partner. So I have dealt with all of these issues. I understand. 

But also part of my law practice was advising clients on business 

formation, and it is so difficult when you are comparing the various 

entities to really come up with a clear picture of what is best. 

I also found out—I practiced in a small town—that it was hard 

to find bookkeepers and that the level of advice from accountants 

20 

varied and not—and they were all competent, but it is just that it 

is hard to understand the Tax Code. So you talk about these provisions, but interpretation can vary. 

I have three questions. The first one is about retirement plans. 

We haven’t really talked about that. And of course that is part of 

what you look at in setting up the small business. I think the last 

time I counted there were more than 20 IRA plans to consider. 

So I guess my question is for the entire panel. If you could just 

maybe touch on your thoughts about what we could do to help 

small businesses with retirement planning. Maybe, Mr. Stathis, 

start with you. 

Mr. STATHIS. Well, you know, the major thing that you see with 

retirement plans is a structure that they are set up for in order to 

get various benefits back to the owner. We went from a period of 

time back in the late 1970s and early 1980s when we had very 

complex plans being written in order to skew benefits to the owner, 

and we went to very simple plans and we did away with a lot of 

the skewing that went on. And now we are going back again the 

other way, where there is a lot of complexities that are involved. 

The cost of maintaining these different plans is horrendous for 

the small business owner. A lot of small business owners will get 

talked into putting in plans, and they will drop them after a couple 

of year, simply because it costs so much to maintain them. Not only 

for the benefits that are going to the employee but also the benefits 

that they are not getting because they are putting the cash into 

there and they are having to maintain them and do tax returns. 

There needs to be a lot fewer plans, and they need to be more 

level across the playing field as to the benefits that are available 

to not only the employee but to the owner. So I would say that 

when you are looking at plans, the fewer, the better. 

And I know my actuarial friends are going to be screaming at me 

for that. But, really, they are way out of control; and it is hard to 

explain them. I am not an expert in them. I don’t pretend to. When 

a client of mine wants to go that way, I go and send them to people 

that are experts in that arena. But, really, it is just—I think personally it is out of hand. 

Mrs. KIRKPATRICK. Any other thoughts? 

Mr. HALL. I know we are supposed to be simplifying things 

today, so I am going to take the opposite opinion. 

Part of the difference, though, with the NASE, we have so many 

micro business owners, mom and pop shops. I think the retirement 

plan options is a prototype for simplification that the IRS and Congress have done a great job with over the last 4 or 5 years. 

Because, just taking one example, self-employed pension plans, 

SEP accounts, are as easy to set up as opening a bank account. If 

you know where your Edward Jones office is or your Charles 

Schwab office is, you walk in there, fill out a form, give them a 

check, and you have a plan. 

The key for retirement planning for most small business owners 

is that they do it. Pick something and do it. So I do agree that the 

more plans you have, 20 different IRAs, it is cumbersome, it is 

complicated, lots of options. But, in this case, part of what the plan 

should be is to just make sure you do something. Pick it and then 

do it every year. 

21 

Because we can talk about the Social Security system, we can 

talk about whether it is going to be available for us or even for our 

kids, and that is very scary. But, regardless of what happens, what 

is funded, what is unfunded, if we can encourage people to put 

money aside for their own future, that is exactly what we should 

do. So the SEP plans, the IRA plans for the smallest businesses I 

think are outstanding. 

I think when you get to bigger businesses with lots of employees 

and you have pension calculations and guaranteed funded amounts 

and unfunded amounts and possibilities of losing your qualified 

status, those things become very complicated. I think it is fortunate 

that the more complicated the plans are, typically the companies 

are bigger, and those are the ones who do have the accounting departments and the resources that perhaps maybe that cost is allocated appropriately. 

But what I would hate to see happen is take away some of those 

options like the SEP plans that are available to the micro business 

owners, because that is the way they are investing in their own retirement today, And I like that part. 

Mrs. KIRKPATRICK. In the interest of not consuming too much 

time, let me go to my other question. Thank you, Mr. Chairman. 

And, Mr. Blackledge, I will ask you this. There is a requirement 

that the small business show that it is a going concern, and I am 

concerned about that right now with our economy. And I just would 

like your thoughts about should we address that as well. 

Mr. BLACKLEDGE. You are talking about the hobby business 

rules? 

Mrs. KIRKPATRICK. Yes. 

Mr. BLACKLEDGE. I think that is an ongoing issue, one that IRS 

has tried over the years to try and define. But, unfortunately, it is 

a very complex area for adjudicating whether or not it truly is a 

small business effort or not. And it is more complicated now because the economy has made many businesses that might have 

been successful, might have been generating revenue over the short 

period of time required for the analysis but, unfortunately, because 

of the economy, they are simply not able to. 

I think that is something that can be handled. I think the IRS 

is moving—in fact, I have seen some things in the IRS publications 

that they are trying to take a little more understanding look at 

that. And I suspect you will see they will be pushing that issue less 

this year internally because they understand the nature of the 

economy. 

I want to raise one other point in terms of your first question. 

That, too, a lot of the complexity comes from the fact that we are 

connecting together things that people do as individuals. In this 

case, you are talking retirement plans, but the same analogy applies to health care. Those are things that really impact an individual. And the kind of business they work for shouldn’t necessarily determine what options an individual has to have a retirement plan or to have tax-subsidized medical care; and for passthrough entities, which most small businesses are, that greatly 

complicates the tax structure. And it also forces on us a lot of decisions we don’t want to make about what kind of retirement plan 

to offer our people or what kind of health care plan. 

22 

And because small businesses are inherently small and we have 

very few people to spread the administrative cost over, there also 

is a very high administration cost which makes us uncompetitive 

with the large businesses. So as much as possible, simplification 

could be disconnecting those things from the business and applying 

things such as health care deductibility and retirement plans at 

the individual level where they really belong. 

Mrs. KIRKPATRICK. Thank you. 

My last question is for Ms. Chin. Thank you. 

Do you see incentives for savings in the current Tax Code for 

businesses? And let me explain this to you. We were an S Corporation, and I am a big saver. But every year the accountant would 

say, you need to zero out your balance. So we would start the first 

of the year with nothing in the bank, and that was really difficult. 

And I just wondered if you have had that same experience, if you 

think we should put incentives for savings into the Tax Code. 

Ms. CHIN RYAN. Well, actually, Oregon is trying to do that right 

now at the State legislation, to deduct I think $1 or $2 from the 

employees. Right now, it is focused on employees for paid family 

leave, because, right now, it is unpaid. I don’t know if it is going 

to pass or not. There are numerous issues. 

Personally, I have had years where I have lost it because it was 

a decision whether to lay off an employee or keep them. And that 

really is the decision, whether you make a profit or not for me. 

With my responsibility, I decided to keep them and have a loss. 

So you carry the losses over. And the years that I do have a profit, 

I have gladly paid. Because there are many years I don’t pay the 

taxes because I carry over the losses. 

So as far as the savings, I don’t really—it is just business fluctuates. I don’t really remember coming across that. This year, I will 

show a profit, and I will pay taxes. 

But I do want to address very quickly the 401(k). I instituted a 

401(k) in the first few years of my businesses, because I wanted to 

also put the maximum deductions. The rules have changed, where 

officers can only put 2 percent more than with the formula. I would 

like that to go back the way it was, because that really hindered 

my ability to actually put what I can in retirement. Because, as 

was mentioned before, small business owners, we invest back into 

the business. And that is what I have done. And so comparable to 

actually some of my employee, I have less in my 401(k). 

It also is a very enticing employment benefit, especially in my industry which is high salaries and very excellent benefits, that I do 

have a match. And most financial planners say number one for retirement is 401(k) with employer matching. So I do offer all of that. 

I do entice my employees. I do try and have an employee-based 

type of company. 

So it is one thing if you were to look at it as to, if possible, take 

out the limitations for officers. Because I would actually be pretty 

good off now for almost 20 years if I didn’t have that limitation. 

Mrs. KIRKPATRICK. Thank you. 

Mr. Chairman, may I have the prerogative to go over my time? 

Chairman SCHRADER. You are already over your time. A short 

statement might be acceptable. 

23 

Mrs. KIRKPATRICK. I just saw the other members shaking their 

heads about the incentives for savings; and I don’t know, Mr. 

Blackledge, if you want— 

Chairman SCHRADER. Very quick comment. 

Mr. BLACKLEDGE. We also zero out our Triple A account every 

year. And I would agree that the nature of the IRS view of small 

businesses, particularly S Corporations, is that they should not be 

saving a lot. And I think some provisions in the Code to allow 

small businesses to accumulate more capital so they didn’t have to 

constantly be borrowing from banks would certainly be beneficial. 

But it is a complex issue. 

Mrs. KIRKPATRICK. Thank you, panel. Thank you, Chairman. 

Thank you very much. 

Chairman SCHRADER. The Chair now recognizes the distinguished gentleman from Missouri, Mr. Luetkemeyer. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

You know, the title of our discussion today is How the Complexity of the Tax Code Hinders Small Businesses. I would like to 

ask Mr. Hall, do you have any statistics on how many small businesses are deterred from even getting started as a result of the Tax 

Code or as a result of the complexity of trying to get started with 

all the different rules and regulations and besides taxes that—do 

you have any idea of that? 

Mr. HALL. I, unfortunately, don’t have any statistics on things 

that haven’t happened, but that is very scary to me. 

And back to my comment in Boston with that seminar, those 16 

people who started small businesses, my concern is that there are 

lots of people out there who may also have been laid off or changed 

positions and may have an idea for a consulting service or a small 

business, even a manufacturing idea, something that they may 

have in another economic setting, may have chose to do that because the economy is down now, availability for credit is down now. 

Maybe some of those things are not happening more today—this 

is strange—but they are not happening more today than they have 

never not happened before, and that is very concerning. Because, 

again, I think the ranking member had talked about 70 percent of 

all jobs come from small business; and every piece of discouragement to starting that small business is another discouragement for 

a new job. So although I don’t have statistics on that, I would be 

afraid to know what that statistic is. 

Mr. LUETKEMEYER. A lot of people think being the owner of your 

business is a really great thing. And it is. Whenever you start looking at all the problems that are associated with being a business 

owner, especially a small business owner, having to deal with the 

tax situation, getting an accountant, working with the insurance 

side of it, the financial side of it—then you have to deal with the 

employee side of it and the egos and the mismatch of all of the 

stuff. And then you wind up with trying to either produce or sell 

a product to the public on the whims of the public. 

I mean, people think it is really neat to be a small business person. Just sit in their shoes for a little while, and I am sure all of 

you can empathize with that. As a small business owner myself, it 

is quite a chore. 

24 

But I was just curious if you had some statistics on how big a 

barrier the Tax Code actually was to people actually getting into 

this. 

Along that line, then, I guess—at least my next question, what 

would be an alternative to the Code we have right now? We realize 

it is cumbersome, and I appreciate the efforts of the chairman. I 

simply support his efforts in trying to simplify it and having this 

hearing. Are there other things that we can do? Are there other 

types of taxation that we can go to? 

I know a couple of you alluded to in your testimony—if each one 

of you would take just a couple of quick seconds to—and I will start 

with Mr. Stathis on the end. 

Mr. STATHIS. They run the gamut. You have heard VAT tax, 

similar to what they use in Europe. You have heard of a flat tax. 

Mr. LUETKEMEYER. Do you have a preference? I am under the 

clock here. So I apologize for jumping in. 

Mr. STATHIS. A preference? I think that one of the other gentleman alluded to what the upheaval would to be the economy and 

the way it is right now that if you tried to make a massive change 

to, say, a flat tax, it could cause I think more damage than it did 

good. I think that is where we are right now. What we need to do 

is simplify what we have and maintain the structure, the simple 

structure but just simplify it. 

Mr. LUETKEMEYER. Great. 

Mr. Hall. 

Mr. HALL. I think the same thing. I think not only would it not 

be practical, but it probably couldn’t pass. I think simplification 

like the home office standard deduction. Back in the day, there was 

no standard deduction in lieu of itemized deductions. That is a nice 

roadmap for other potential standardized deductions. 

There could be standard deductions for appreciation. There could 

be easier deductions for retirement plans that we have talked 

about. Moving some of those deductions to the entity level, like Mr. 

Blackledge mentioned on the self-employed health insurance deduction. 

I think the Code itself accomplishes so many different things, not 

just revenue but social issues as well. I think just simplifying the 

issues now to make it easier to comply with is the path to go. 

Mr. BLACKLEDGE. I would concur, obviously. Other tax systems 

have advantages. They have been beneficial to other countries. But 

the cost of transition could be horrendous. 

Our tax system of many of the decisions that have been made in 

this country over the last 50 to 100 years have been based on this 

Tax Code; and if we changed it, just as when we changed the passive activity rules on business investments back when we had the 

savings and loan crisis, there could be some unintended consequences. But I think you can simplify the existing Code. Congress has made it complex. 

One of the things overall that I think would help, in addition to 

the specifics of simplifying, would be to have a better process for 

Congress to vet potential changes in the Tax Code. The problem is 

that this Code has been built by individual Congress people and 

their staffs; and, in many cases, they are not well connected. We 

do not have common definitions. They have not been vetted either 

25 

with any kind of cooperative body or particularly with the IRS that 

is going to have to administer them. Often, the IRS ends up—and 

I have served on the IRS Advisory Council for a number of years, 

and often the IRS is thrown a tax law that they really don’t know 

how to administer. And that has added to that complexity. 

Mr. LUETKEMEYER. This is a follow-up that you piqued my interest in, and I will let Ms. Chin Ryan here in a second. But it would 

be neat if we would have a time frame within which you could plan 

for your future with your accountant to say this tax is only going 

to go into force 2, 5, 10 years from now so that, all of a sudden, 

we in Congress decide tomorrow we are going to change the Tax 

Code and your whole future plans are screwed up because of what 

we did. I think something like that. 

Mr. BLACKLEDGE. If you do make a change, it is absolutely imperative that it somehow be transitioned in over a period of a number of years, which, unfortunately, will, of course, add to the complexity for that transition period. 

Mr. LUETKEMEYER. Ms. Chin. 

Ms. CHIN RYAN. In my written testimony, the examples I gave, 

I gave a solution. For example, the definition of accounting method, 

cash versus accrual, a solution could be if a business is 5 million 

or less, anyone can use the cash basis regardless of the type of entity. That would help reduce it. 

The different categories of income, a solution would be to eliminate the passive income and go back to earning other income. The 

same with Social Security is to—based— 

Mr. LUETKEMEYER. So you prefer to keep the present system and 

simplify it with changes and improve it? 

Ms. CHIN RYAN. As a business owner, you have long-term and 

short-term goals; and I think to completely rehaul the Tax Code is 

going to take a long time. But in the short term there could be a 

possible solution as we are parallel doing the long-term fix. 

Mr. LUETKEMEYER. I appreciate it. 

Thank you, Mr. Chairman. 

Chairman SCHRADER. Thank you very much. 

Let us go to the gentlelady from Illinois, Congressman 

Halvorson. 

Mrs. HALVORSON. Thank you, Mr. Chairman; and thank you, 

panel, for being here. This is very informative. 

I grew up with a self-employed father, and my husband and I 

are—we are owners of two small businesses ourselves. And I get 

quite angry at my husband when he doesn’t save receipts, and we 

are constantly scrambling at the last minute, and I try to keep everything in a shoe box, and it doesn’t always work. So I know how 

all of this happens at the last minute. You are trying to keep people like you in business. 

In fact, I tell everybody, become a CPA, because there is always 

going to be work for you. Not that we want to take business away, 

but in the economy the way it is, we are trying to simplify things. 

So some of the things you can do yourself. 

With talking about the itemization and keeping such records, 

whether it is about cell phones or all the different receipts you 

have to keep, what would you suggest or if you could elaborate? We 

may have touched on it a little bit, but how would you suggest we 

26 

do things differently with regards to keeping receipts or how to report things to make it easier on the business owner because of all 

the hours and hours we have to keep all the records straight? I 

don’t know if anyone wants to specifically elaborate on that. 

Mr. HALL. Again, I think the prototype is there. I think there are 

standard amounts that the IRS uses for a lot of things. There are 

standard deductions. We hope there is a standard home office deduction this term. There are per diem rates for travel. There is per 

diem rates for meals. It costs you a different amount to eat lunch 

in New York than it does in Sheboygan. So the per diem rate in 

Sheboygan is lower than the per diem rate in New York. 

So I think there are lots of opportunities, again based on the 

math, scoring methods to determine how much a cell phone should 

cost in a certain area, allocate what your expected business percentage is. I think a standard amount for a lot of deductions, it 

could be an option for simplification, and all of those things would 

alleviate recordkeeping. 

Mr. BLACKLEDGE. I think you just have to look at what the true 

impacts are on the Tax Code. In the Tax Code, you never collect 

every last dollar; and sometimes the complexity adds far more impact than the amount of revenue that is generated from it. On cell 

phones and computers, for example, there really is no marginal 

cost to the personal use of those cell phones. Plans now are unlimited. Cost of cell phones is inexpensive. 

The Code just needs to be updated and put thresholds that are 

reasonably high on all of those items. And if someone is buying a 

$50,000 computer, perhaps you would require them to keep records 

of it. But certainly not with the kinds of computers and the kinds 

of equipment used by most small businesses. So setting lots of safe 

harbor thresholds below which you simply don’t need to keep 

records would be a good approach. 

Mrs. HALVORSON. The only other thing I want to touch on, I 

heard many times someone bringing up the difference between an 

employee and an independent contractor. When I was a State legislator, I had a bill that made it specific what an independent contractor was versus an employee; and we brought along a lot of businesses kicking and screaming. They were very angry with me. 

But, in the end, I think people found out that I did not try to 

change anything. I did not try to make someone who was an independent contractor into an employee. And so it has really worked 

out. We have got step by step. And if there is anything I can do 

to help, maybe that is something we need to look at. It is written 

into the Illinois Tax Code, and it is really specifically stated what— 

if you follow these steps, you are automatically an independent contractor. It didn’t hurt anybody. It specifically told you who was 

who. 

Mr. BLACKLEDGE. I have worked with IRS and Treasury on that 

for probably 10 years, and I think the IRS is doing a good job now 

with their on-line determinator. Some of that could be further clarified, but it is always going to be an issue that is complicated. But 

I think the Congress and the IRS have done a good job of trying 

to clean up that issue. 

Mrs. HALVORSON. Thank you all again for being here. 

I yield back. 

27 

Chairman SCHRADER. Thank you. 

Well, let us go to the Congressman from Colorado, Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

One of the issues I think that is of concern to everybody is that 

of health care. We have had the health care savings account, which 

to me seems somewhat complicated for a small business to maneuver, but maybe it is not. And I wonder if you all can respond to 

that, how difficult it is to navigate or how simple it is to navigate 

for a small business. 

Mr. BLACKLEDGE. I have looked into HSAs now for the last four 

or five renewals of my insurance, and the problem is not so much 

the complication, although there clearly is some complexity. It is 

that a lot of the insurance companies are simply not offering combinations of high-deductible insurance policies that, when combined 

with the cost of an HSA, assuming the business was to subsidize 

the HSA, saying that they really come out to be that much more 

inexpensive. 

So I think that was a short-term step to try to make health insurance more affordable for small businesses, but a lot more needs 

to be done to really bring down the cost of health insurance overall. 

And HSAs I think are not proving to be the salvation that many 

people hoped they would be. 

Mr. HALL. I think I agree that HSA, the big limitation—I think 

the processing, the administrative part works pretty well with having a credit card, a debit card. The process itself is relatively simple. It is the limited plans. You have to have a specific type of a 

health plan in order to take advantage of an HSA. Whether that 

plan works for your family or not then becomes the issue, and it 

becomes difficult. 

That is why I like so much what H.R. 1470 does, which basically 

moves the self-employed health insurance deduction from page 1 of 

the 1040 over to the Schedule C. Most businesses pay for health 

insurance for their employees and get a full deduction for that, for 

Federal income taxes and FICA and Medicare and Social Security, 

everything. It is deductible for everything. But since that deduction 

is on Page 1 of the 1040, the small business owner does not get an 

SE tax deduction for it, which, basically, pure and simple means 

it is a 15.3 percent increase in health costs for the sole proprietor. 

And that is just not fair. 

So, regardless of what type of plan, there is no limit. You don’t 

have to have a high-deductible plan. Just moving that deduction, 

passing H.R. 1470, moving that to Schedule C is an immediate 15 

percent reduction in health care costs for as many as 23 million 

small business owners out there. 

Mr. STATHIS. I have seen similar results in my practice. We have 

HSAs, and our employees have been happy with it, and we have 

seen some real savings from it. And the administration of it is not 

very onerous. I have also seen smaller businesses that have put it 

in where they have not received as much benefit. 

So I am kind of torn between—I think there is a size limit there, 

where a little bit larger businesses may be seeing some benefit 

than the smaller ones are. And that all gets down to cost. I don’t 

think it is an administration thing. It is more about are you saving 

28 

money on the plan overall as compared to offering a traditional insurance plan. 

Mr. COFFMAN. If you were going to offer—if the Congress were 

to offer a tax deduction for the sole proprietor, for the individuals 

purchasing health insurance to take the pressure off of the small 

business owner and to cover more people, what do you think that 

should look like? Should it be 100 percent? Should it be 35 percent? 

What would you—25 percent? 

Mr. STATHIS. Are you looking at that time where he is only covering himself and not his employees? 

Mr. COFFMAN. Correct. 

Mr. STATHIS. If you are going to do that, it is not going to be on 

a level playing field with what other businesses have, because they 

are providing all of their employees health insurance benefits; and 

I think that probably the more correct answer would be to provide 

them incentive to cover their employees. Because uncovered employee health costs is rampant in this country. I deal with a lot of 

physicians, and they are frustrated in that, basically, they end up 

giving free medical care to a lot of people. And they look at that 

as their burden on society, but they do that. 

Mr. COFFMAN. We are talking really about the independent contractor that doesn’t have employees. The person that is out there 

or an individual that for some reason doesn’t have COBRA and 

they are in between jobs, what would you offer them? It is getting 

a little beyond our discussion here. 

Mr. STATHIS. If you are an independent contractor that has one 

employee, then you should be able to have the same full deduction 

that someone has that runs a multi-person company. 

Mr. COFFMAN. Okay. 

Mr. BLACKLEDGE. I think the real issue, too, is that health care 

is a tax expenditure; and every taxpayer, whether they work for a 

large business or a small business or no business at all, pays that 

cost of the tax expenditure. And I think every individual at the individual level should have the right to deduct a certain amount, 

with limitations, of health care insurance. There is no reason why 

a large corporation should be able to get a tax advantage and the 

small business or an individual should not. 

Mr. COFFMAN. Okay. Mr. Chairman, I yield back the balance of 

my time. 

Chairman SCHRADER. Well, thank you very much. It is very timely. We have been called for votes. So I appreciate the panel very, 

very much. A lively discussion. A lot of interest by members, and 

I appreciate the thoroughness of your responses. 

I will ask unanimous consent that the members have 5 days to 

submit statements and supporting materials for the record. Without objection, so ordered. 

This hearing is now adjourned. Thank you all very, very much. 

[Whereupon, at 11:27 a.m., the Subcommittee was adjourned.] 

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