Page Friends Committee on National Legislation, paper- 1323 Gallo, Joseph I., Westwood Townhouse Management Corp. No. 3, letter.. 779 2233 German, Chadwick A., Silver Spring, Md., letter. 680 Gilligan, John J., Council on National Priorities and Resources, statementGinsburg, Martin D., New York State Bar Association, letters and reports Griffiths, Hon. Martha W., Farmington Hills, Mich., statement. 1333 2786 Gude, Hon. Gilbert, a Representative in Congress from the State of Maryland, statement_ 2944 Guilford College, Grimsley T. Hobbs, letter.. 3798 H. & R. Block, Inc., Henry W. Bloch, statement. 723 Haigler, J. Fred, Iowa Beef Processors, Inc., statement. 2348 Harlow, Donald L., Air Force Sergeants Association, statement 1734 Harr, Karl G., Jr., Aerospace Industries Association of America, letter.... 2341 Hatfield, Hon. Mark O., a U.S. Senator from the State of Oregon, statement.. Hedrick, F. Cleveland, Jr., and Theodore R. Groom, Prudential Insurance Co. of America, letter. 2786 Hicks, Robert E., Taxation With Representation, statement.. 1238 3799 3798 Hoffman, Peter, First National Bank & Trust Co. of Oklahoma City, letter. Holt, Hon. Marjorie S., a Representative in Congress from the State of 3532 2242 2949 2950 Hood, Edwin M., Shipbuilders Council of America, letter. 2810 3804 Huber, J. M., Corp., statement.. 2233 Hughes, Peter W., American Association of Retired Persons, National 1292 Illinois State Chamber of Commerce, Richard C. Tveter, Joel H. Levin, and William E. Stowe, statements. 2756, 3534 Instrumentation Specialties Co., Robert W. Allington, statement_ 2346 665 Iowa Beef Processors, Inc., J. Fred Haigler, statement-. 2348 Iowa-Des Moines National Bank, John R. Fitzgibbon, letter 3538 Ireland United States Council for Commerce and Industry, Michael 1649 Jingo, John J., YMCA of Greater Bergen County (N.J.), letter enclosing letter to Congressman Helstoski. 3806 Jones, Carlyle H., Washington, D.C., letter and statement.. 3278 1305 Krasicky, Eugene, U.S. Catholic Conference, statement. 1356 Krueger, Everett H., City National Bank & Trust Co., letter. 3532 2420 1736 2756, 3534 3643 Loree, Philip J., Federation of American Controlled Shipping, statement-- 2749 842 685 McClennan, W. H., International Association of Fire Fighters, letter... 665 McFall, Hon. John J., a Representative in Congress from the State of McFarland, Stanely J., National Education Association, letter - 2950 1335 Page McMullen, Robert L., American Society of Travel Agents, letter- 1648 2786 2757 2760 Musgrave, Peggy B., Northeastern University, statement. 2761 3538 National Association of Mutual Savings Banks, Kenneth L. Birchby, letter. 1602 National Association of Retail Grocers, Frank D. Register, letter.. 695 2417 2145 2763 National Education Association, Stanley J. McFarland, letter.. 1335 1393 695 1605 1394 National Housing Partnership, George W. DeFranceaux, statement.... 1603 2240 1400 1337 National Retail Merchants Association, James R. Williams, letter 3539 1292 National Sand and Gravel Association, William E. Hole, Jr., statement.. 2242 3644 New York, Association of the Bar of the State of, Robert H. Preiskel, letter and paper--- Nelson, Hon. Gaylord, a U.S. Senator from the State of Wisconsin, statement. - . 2951 1675 New York State Bar Association, Martin D. Ginsburg, letters and reports- 748, 2768 Nolan, Hon. Richard, a Representative in Congress from the State of 2914 O'Hara, Clifford B., American Association of Port Authorities, letter. 2343 1693 2760 Palumbo, Frank A., International Association of Fire Fighters, letter_ 665 Paralyzed Veterans of America, John A. Lancaster, statement.. 1736 Parsons, Floyd W., Association for the Advancement of International 1755 Pasquini, Armando P., Milton, Fla., letter with enclosures.- 686 1736 Pettinos, Lewis McM., National Industrial Sand Association, statement. 2240 2154 Pickens Co., Inc., James R. Sivess, letter and statement__ 3540 Preiskel, Robert H., Association of the Bar of the State of New York, letter and paper 1675 Provo, Larry S., Chicago & North Western Transportation Co., statement. 3140 2786 Raby, William L., Phoenix, Ariz., letter and statement.. 133 Register, Frank D., National Association of Retail Grocers, letter. 695 1706 2416 Richard, Edward H., Council of Smaller Enterprises, letter... 2345 728 Roberts, Sidney I., New York, N. Y., letter and memorandum _ 743 2154 Rosario Resources Corp., Thomas P. Townsend, letter 2811 Rose, Hon. Charles G., a Representative in Congress from the State of 2968 Royal Bank of Canada, statement forwarded by U.S. Department of State- 3280 2420 2787 Schroeder, Hon. Patricia S., a Representative in Congress from the State of Colorado, statement... 2975 Schwab, Donald H., Veterans of Foreign Wars of the United States, statement___ Schwaemmle, Fred J., Jr., Fred J. Schwaemmle Construction Co., letter___ Page 1736 1601 1394 Shapiro, Irving S., E. I. du Pont de Nemours & Co., letter and statement__ 2746 2154 Shipbuilders Council of America, Edwin M. Hood, letter 2810 Sivess, James R., Pickens Co., Inc., letter and statement_ 3540 1693 Smollan, David L., Association of Enrolled Agents, statement.. 716 Spanish Speaking Research & Development Associates, Ricardo A. Callejo, letter__ 849 Stowe, William E., Illinois State Chamber of Commerce, statements-- 2756, 3534 Sun Oil Co., H. Robert Sharbaugh, statement... 2154 Swanstrom, Most Rev. Edward E., Catholic Relief Services, U.S. Catholic 1754 Swearinger, John E., American Petroleum Institute, statement... _ 2089 Tax Equality Now, Inc., E. L. Buckner, letter with enclosures forwarded by Congressman Van Deerlin__. 1343 Taxation With Representation: Harold Bierman, Cornell University, statement. 1229 1231 1234 Roberta Grower Carey, Richmond College, CCNY, statement_ Robert E. Hicks, Florida Technical University, statement. Thiele Kaolin Co., statement.. 1236 1238 1240 2233 Thoré, Eugene M., Metropolitan Life Insurance Co., letter 2786 Tierney, Paul J., Transportation Association of America, letter.. 3542 Tifft, Kenneth A., Houghton College, letter.. 3804 Townsend, Thomas P., Rosario Resources Corp., letter. 2811 Trans World Airlines, Inc., Hilton International, Richard S. Tribbe, letter___ 1651 Transportation Association of America, Paul J. Tierney, letter. 3542 3533 Tribbe, Richard S., Trans World Airlines, Inc., Hilton International, letter_ 1651 TRW Systems Corp., Robert C. Anderson, letter and statement forwarded by Congresswoman Pettis__ 2812 Unishops, Jersey City, N.J., letter in behalf of 20 companies. Tveter, Richard C., Illinois State Chamber of Commerce, statements. 2756, 3534 Tysseland, Milford S., University of Florida, letter and paper. Varnon, Robert L., Jr., Dunbar Construction Co., letter. 694 Veterans of Foreign Wars of the United States, Donald H. Schwab, statement__ 1736 Waller, Jack A., International Association of Fire Fighters, letter.. 665 799 2468 Westwood Townhouse Management Corp. No. 3, Joseph I. Gallo, letter.. 779 2820 1240 3539 3804 3806 BY THE ADMINISTRATION Administration proposal to encourage construction of non-petroleumburning electric power generating facilities: TAX REFORM FRIDAY, JULY 18, 1975 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D.C. The committee met at 9 a.m., pursuant to notice, in the committee hearing room, Longworth Office Building, Hon. James A. Burke, presiding. Mr. BURKE. The committee will come to order. This is a continuation of the hearings by the House Ways and Means Committee on tax reform. The schedule of witnesses today will be led off by the Commonwealth of Puerto Rico, with the Resident Commissioner, Jaime Benitez, and his associates. We welcome you, Commissioner. If you will introduce your associates, you may proceed. Subject: INCOME EARNED ABROAD (U.S. POSSESSION CORPORATIONS) STATEMENTS OF HON. JAIME BENITEZ, RESIDENT COMMISSIONER, COMMONWEALTH OF PUERTO RICO; SALVADOR CASELLAS, SECRETARY OF THE TREASURY; AND TEODORO MOSCOSO, ECONOMIC DEVELOPMENT ADMINISTRATION Mr. BENITEZ. Yes. Mr. Chairman and members of the committee: Thank you very much for this opportunity. To my left is the secretary of the treasury of Puerto Rico, Salvador Casellas. To my right, the director of the Economic Development Administration of Puerto Rico, former Ambassador of the United States to Venezuela, the Honorable Teodoro Moscoso. Mr. Chairman, we have prepared and submitted our written testi mony. Mr. BURKE. If you wish to summarize, you may. Your entire statement will appear in the record. Mr. BENITEZ. Thank you, Mr. Chairman. I will very briefly refer to the matter which concerns us, and then, with your permission, shall ask the gentlemen to be available for questions on the matters which bring us here. (1653) The basic situation is this: The section of the Code, 931, has been in existence since 1921. It provides under certain circumstances for exemption from Federal taxation on corporations operating in Puerto Rico. This section has become throughout the years the backbone of Puerto Rico's development, what has been known as Operation Bootstrap, which Mr. Moscoso was responsible for directing for many, many years, and again directs. We, in Puerto Rico, on our side have dovetailed our own taxing Puerto Rico and so that we might grow in keeping with the basic goals of civilized development on an island which has one of the largest density populations in the world, 900 people per square mile. This development together with the advancement of education and the control of population have provided Puerto Rico with the largest development and standard of living anywhere in the Spanish-speaking world. However, it is very far from what we need and to what we aspire. Last year, the whole issue of tax reform was reviewed by this committee and after a total examination the committee unanimously agreed on retaining the basic structures and making adjustments which will help both the United States and Puerto Rico. We are here to request that the work that was done last year be continued in this year and we must say that if the situation justified that arrangement for last year, it is particularly needed now when, because of the recession in the United States and the price of oil and other manufactures, our official unemployment rate has risen to 16.2 percent. So, we come here to explain in detail for the record the circumstances which make it not only desirable but imperative that the basis of the economic relationship of the United States and Puerto Rico be maintained as agreed upon in the report of last year and in the bill that was prepared last year. If I may, I would now like to refer to the secretary of the treasury of Puerto Rico who will have a statement. Mr. BURKE. You are recognized, Mr. Secretary. Mr. CASELLAS. We thank the committee for affording us the opportunity to discuss with you the provisions in the Internal Revenue Code affecting Puerto Rico. These provisions are the backbone of the industrial development and of the whole economy of Puerto Rico. One of the last acts of the Ways and Means Committee in the last session of Congress was to thoroughly consider these provisions and to make certain recommendations which were incorporated in a new proposed section 936 of the Internal Revenue Code, and related changes in other sections of the code. We strongly endorse these recommendations and believe they should be quickly enacted into law. Under section 931 of the code, a corporation organized under U.S. laws is exempt from Federal income taxes on its income from sources outside the United States, if it derives at least 80 percent of its gross income from sources within Puerto Rico in a 3-year period, and 50 percent of its gross income from the active conduct of a trade or business in Puerto Rico for such a period. In the last session of Congress, the Ways and Means Committee thoroughly reconsidered the provisions affecting Puerto Rico. After |