CRS — A Brief Overview of Business Types and Their Tax Treatment
A Brief Overview of Business Types and Their Tax Treatment (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
In the United States, how a business is taxed at the federal level is partly dependent on how it is organized. The income of subchapter C corporations, also known as “regular” corporations, is taxed once at the corporate level according to the corporate tax system, and then a second time at the individual-shareholder level according to the individual tax rates when corporate dividend payments are made or capital gains are recognized. This leads to the so-called “double taxation” of corporate income. Businesses that choose any other form of organization are, in general, not subject to the corporate income tax. Instead, the income of these businesses passes through to their owners and is taxed according to individual income tax rates. Examples of these alternative “pass-through” forms of organization include sole proprietorships, partnerships, subchapter S corporations, and limited liability companies.
This report summarizes the general tax treatment of corporate and pass-through businesses. The intent is to introduce those who are unfamiliar with the current U.S. business tax environment to the basics of corporate and pass-through taxation. Understanding how various businesses are taxed provides a starting point from which one can evaluate current and future proposals to change the taxation of corporations and pass-throughs. Additionally, since pass-through income is typically taxed only at individual income tax rates, this report is also a useful starting point for understanding the effects on pass-through businesses from a change to individual income tax rates. A list of related CRS products on business taxation may be found at the end of the report.
CRS — Recess Appointments Made by President Barack Obama
Recess Appointments Made by President Barack Obama (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Under the Constitution, the President and the Senate share the power to make appointments to the highest-level politically appointed positions in the federal government. The Constitution also empowers the President unilaterally to make a temporary appointment to such a position if it is vacant and the Senate is in recess. Such an appointment, termed a recess appointment, expires at the end of the following session of the Senate. This report identifies recess appointments by President Barack Obama, from the beginning of his presidency, on January 20, 2009, until June 3, 2013. The report discusses these appointments in the context of recess appointment authorities and practices generally, and it provides related statistics. Congressional efforts to prevent further recess appointments are also discussed.
As of June 3, 2013, President Obama had made 32 recess appointments, all to full-time positions. By the same point in his presidency, President William J. Clinton had made 36 recess appointments, 22 to full-time positions and 14 to part-time positions. President George W. Bush had made 120 recess appointments, 67 to full-time positions and 53 to part-time positions. Six of President Obama’s recess appointments had been made during recesses between Congresses or between sessions of Congress (intersession recess appointments). The remaining 26 had been made during recesses within sessions of Congress (intrasession recess appointments).
In each of the 32 instances in which President Obama had made a recess appointment, the individual had also been nominated to the position to which he or she was appointed. In all of these cases, a related nomination to the position preceded the recess appointment. In 19 of the 32 cases, as of June 3, 2013, the Senate had later confirmed the nominee to the position to which he or she had been recess appointed. With regard to the 13 remaining individuals, nominations of 3 were pending; nominations for the other 10 were not.
During the 110th, 111th, and 112th Congresses, the Senate periodically used pro forma sessions to prevent the occurrence of a recess of more than three days. There appears to have been an expectation that this scheduling would block the President from making recess appointments, based on an argument that an absence of the Senate of three days or less would not constitute a “recess” long enough to permit the use of this authority. However, consistent with a January 2012 opinion of the Office of Legal Counsel at the Department of Justice, the President reached a different conclusion as to the effect of this scheduling practice. On January 4, 2012, during a three-day period of adjournment between two pro forma sessions of the Senate, the White House announced President Obama’s intent to make four recess appointments.
As of June 3, 2013, two federal courts of appeals had issued decisions related to the 2012 appointments and had found the appointments at issue in each case to be unconstitutional. For further information on these cases and the issues involved, see CRS Report RL33009, Recess Appointments: A Legal Overview, by Vivian S. Chu; CRS Report R43030, The Recess Appointment Power After Noel Canning v. NLRB: Constitutional Implications, by Todd Garvey and David H. Carpenter; CRS Report R43032, Practical Implications of Noel Canning on the NLRB and CFPB, by David H. Carpenter and Todd Garvey; and CRS Report WSLG521, 3 rd Circuit: President’s Recess Appointment Power Only Extends to Intersession Recesses, by David H. Carpenter.
Additional information on recess appointments may be found in other CRS reports: CRS Report RS21308, Recess Appointments: Frequently Asked Questions, by Henry B. Hogue; CRS Report RL33310, Recess Appointments Made by President George W. Bush, by Henry B. Hogue and Maureen Bearden; and CRS Report RL32971, Judicial Recess Appointments: A Legal Overview, by T. J. Halstead.
This report will be updated as developments warrant.
CRS — Cuba: U.S. Policy and Issues for the 113th Congress
Cuba: U.S. Policy and Issues for the 113th Congress (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Cuba remains a one-party communist state with a poor record on human rights. The country’s political succession in 2006 from the long-ruling Fidel Castro to his brother Raúl was characterized by a remarkable degree of stability. In February 2013, Castro was reappointed to a second five-year term as president (until 2018, when he would be 86 years old), and selected a 52-year old former Education Minister Miguel Díaz-Canel as his First Vice President, making him the official successor in the event that Castro cannot serve out his term. Raúl Castro has implemented a number of gradual economic policy changes over the past several years, including an expansion of self-employment. A party congress held in April 2011 laid out numerous economic goals that, if implemented, could significantly alter Cuba’s state-dominated economic model. Few observers, however, expect the government to ease its tight control over the political system. While the government reduced the number of political prisoners in 2010-2011, the number increased in 2012; moreover, short-term detentions and harassment have increased significantly.
U.S. Policy
Over the years, Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening and at times easing various U.S. economic sanctions. While U.S. policy has consisted largely of isolating Cuba through economic sanctions, a second policy component has consisted of support measures for the Cuban people, including U.S. government-sponsored broadcasting (Radio and TV Martí) and support for human rights and democracy projects. The Obama Administration has continued this similar dual-track approach. While the Administration has lifted all restrictions on family travel and remittances, eased restrictions on other types of purposeful travel, and moved to reengage Cuba on several bilateral issues, it has also maintained most U.S. economic sanctions in place. On human rights, the Administration welcomed the release of many political prisoners in 2010 and 2011, but it has also criticized Cuba’s continued harsh repression of political dissidents through thousands of shortterm detentions and targeted violence. The Administration has continued to call for the release of U.S. government subcontractor Alan Gross, detained in 2009 and sentenced to 15 years in prison in March 2011. Gross’s continued detention has been a major impediment toward improved relations.
Legislative Activity
Strong interest on Cuba is expected to continue in the 113th Congress with attention focused on economic and political developments, especially the human rights situation, and U.S. policy toward the island nation. The continued imprisonment of Alan Gross remains a key concern for many Members. Now that Congress has completed action on FY2013 appropriations, it will soon be considering the Administration’s FY2014 request for the State Department and Foreign Operations, which includes funding for Cuba democracy programs and Cuba broadcasting. For many years, U.S. sanctions, particularly restrictions on travel, remittances, and agricultural exports to Cuba, have been topics of congressional debate, and this could be possible again in the 113th Congress.
To date in the 113th Congress, eight initiatives on Cuba have been introduced. Several would lift or ease U.S. economic sanctions on Cuba: H.R. 214 and H.R. 872 (overall embargo); H.R. 871 (travel); and H.R. 873 (travel and agricultural exports). H.R. 215 would allow Cubans to play organized professional baseball in the United States. H.R. 1917, among its provisions, would lift the embargo and extend nondiscriminatory trade treatment to the products of Cuba after Cuba releases Alan Gross from prison. Identical initiatives, H.R. 778/S. 647 would modify a 1998 trademark sanction; in contrast, H.R. 214, H.R. 872, H.R. 873, and H.R. 1917 each have a provision that would repeal the trademark sanction. H.Res. 121 would honor the work of Cuban blogger Yoani Sánchez in challenging the oppression of the Castro regime. In addition, in March 2013, Congress completed action on full-year FY2013 appropriations with the approval of H.R. 933 (P.L. 113-6), which continues to provide funding for Cuba democracy and human rights projects and Cuba broadcasting (Radio and TV Martí).
This report will be updated periodically during the 113th Congress. For additional information, see CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances.
CRS — Foreign Assistance to North Korea
Foreign Assistance to North Korea (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Between 1995 and 2008, the United States provided North Korea with over $1.3 billion in assistance: slightly more than 50% for food aid and about 40% for energy assistance. Since early 2009, the United States has provided virtually no aid to North Korea, though episodically there have been discussions about resuming large-scale food aid. Additionally, the Obama Administration officials have said that they would be willing to consider other types of aid if North Korea takes steps indicating that it will dismantle its nuclear program. However, barring an unexpected breakthrough, there appears little likelihood the Obama Administration will provide large-scale assistance of any type to North Korea in the near future. In February 2013, North Korea announced it had conducted its third test of a nuclear device, a move that came weeks after its apparently successful launch of a long-range missile. Members of Congress have a number of tools they could use to influence the development and implementation of aid programs with North Korea.
Food Aid. North Korea has suffered from chronic, massive food shortages since the mid-1990s. Food aid—largely from China, South Korea, and the United States—has been essential in filling the gap. As of mid-2013, according to many observers, it appears that while North Korea’s continued food shortages are not severe enough to create a crisis situation, they are causing chronic malnutrition and stunting in vulnerable populations in certain regions. Many analysts think the Obama Administration will be reluctant to provide large-scale aid after the breakdown of a February 2012 deal, in which the United States announced it would provide North Korea with large-scale food aid in return for concessions by Pyongyang on its nuclear and missile programs. The deal unraveled in April 2012 after North Korea launched a long-range rocket in defiance of United Nations sanctions. Since then, the United States and North Korea have not reached any agreements, including on food aid. In June 2012, the Senate voted to prohibit food aid to North Korea.
Providing food to North Korea poses a number of dilemmas. Pyongyang has resisted reforms that would allow the equitable distribution of food and help pay for food imports. The North Korean government restricts the ability of donors to operate in the country. Additionally, multiple sources have asserted that some of the food assistance is routinely diverted for resale in private markets or other uses. However, it is likely that food aid has helped feed millions of North Koreans, at times possibly staving off a repeat of the famine conditions that existed in North Korea in the mid-late 1990s, when 5%-10% of the population died. South Korean President Park Geun-hye’s government has indicated that they would be willing to offer North Korea food aid as part of her plan to foster a “new era” in inter-Korean relations.
Energy Assistance. Between 1995 and 2009, the United States provided around $600 million in energy assistance to North Korea. The aid was given over two time periods—1995-2003 and 2007-2009—in exchange for North Korea freezing its plutonium-based nuclear facilities. In 2008 and 2009, North Korea also took steps to disable these facilities. However, no additional energy assistance has been provided since 2009, when Pyongyang withdrew from the Six-Party Talks— involving North Korea, the United States, China, Japan, and Russia—over North Korea’s nuclear program. The move followed condemnation and sanctions by the U.N. Security Council for North Korea’s April 2009 launch of a suspected long-range missile and May 2009 test of a nuclear device.
In 2007 and 2008, the United States also provided technical assistance to help in North Korea’s nuclear disablement process. In 2008, Congress took steps to legally enable the President to give expanded assistance for this purpose. However, following North Korea’s actions in the spring of 2009, Congress rejected the Obama Administration’s requests for funds to supplement existing resources in the event of a breakthrough. Congress did approve monies for the State Department’s general emergency nonproliferation fund that the Administration could use in North Korea.
CRS — U.S.-Mexican Security Cooperation: the Merida Initiative and Beyond
U.S.-Mexican Security Cooperation: the Merida Initiative and Beyond (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Brazen violence perpetrated by drug trafficking organizations and other criminal groups is threatening citizen security and governance in some parts of Mexico, a country with which the United States shares a nearly 2,000 mile border and $500 billion in annual trade. Although the violence in Mexico has generally declined since late 2011, analysts estimate that it may have claimed more than 60,000 lives between December 2006 and November 2012. The violence has increased U.S. concerns about stability in Mexico, a key political and economic ally, and about the possibility of violence spilling over into the United States.
U.S.-Mexican security cooperation increased significantly as a result of the development and implementation of the Mérida Initiative, a counterdrug and anticrime assistance package for Mexico and Central America first funded in FY2008. Whereas U.S. assistance initially focused on training and equipping Mexican counterdrug forces, it now places more emphasis on addressing the weak institutions and underlying societal problems that have allowed the drug trade to flourish in Mexico. The Mérida strategy now focuses on (1) disrupting organized criminal groups, (2) institutionalizing the rule of law, (3) creating a 21st century border, and (4) building strong and resilient communities. As part of the Mérida Initiative, the Mexican government pledged to intensify its anticrime efforts and the U.S. government pledged to address drug demand and the illicit trafficking of firearms and bulk currency to Mexico.
Inaugurated on December 1, 2012, Mexican President Enrique Peña Nieto has vowed to continue U.S.-Mexican security cooperation, albeit with a shift in focus toward reducing violent crime in Mexico. Peña Nieto has begun to adjust the process and priorities of U.S.-Mexican efforts, adjustments which President Obama has pledged to support. The Interior Ministry is now the primary entity through which Mérida training and equipment requests are coordinated and intelligence is channeled. The Mexican government is requesting increased assistance for judicial reform and prevention efforts, but limiting U.S. involvement in some law enforcement and intelligence operations. As the Peña Nieto government fleshes out its security strategy, Mérida programs are likely to be adjusted in order to support those efforts that align with U.S. priorities.
The 113th Congress is likely to continue funding and overseeing the Mérida Initiative and related domestic initiatives, but may also consider supporting new programs. From FY2008 to FY2012, Congress appropriated $1.9 billion in Mérida assistance for Mexico, roughly $1.2 billion of which had been delivered as of April 2013. The Obama Administration asked for $234.0 million for Mérida programs in in its FY2013 budget request and $183 million in its FY2014 request.
Congress may wish to examine how well the Mexican government’s security strategy supports U.S. interests in Mexico. Congressional approval will be needed should the State Department seek to reprogram some of the funding already in the pipeline for Mérida, or shift new funding to better align with Mexico’s new priorities. Should disagreements occur between Mexican and U.S. priorities, Congress may weigh in on how those disagreements should be resolved. Congress may also debate how to measure the impact of Mérida Initiative programs, as well as the extent to which Mérida has evolved to respond to changing security conditions in Mexico. Another issue of congressional interest involves whether Mexico is meeting the human rights conditions placed on Mérida Initiative funding.
CRS — Israel: Background and U.S. Relations
Israel: Background and U.S. Relations (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Since Israel’s founding in 1948, successive U.S. Presidents and many Members of Congress have demonstrated a commitment to Israel’s security and to maintaining close U.S.-Israel defense, diplomatic, and economic cooperation. U.S. and Israeli leaders have developed close relations based on common perceptions of shared democratic values and religious affinities. U.S. policymakers often seek to determine how regional events and U.S. policy choices may affect Israel’s security, and Congress provides active oversight of executive branch dealings with Israel and the broader Middle East. Some Members of Congress and some analysts criticize what they perceive as U.S. support for Israel without sufficient scrutiny of its actions. Israel is a leading recipient of U.S. foreign aid and is a frequent purchaser of major U.S. weapons systems. The United States and Israel maintain close security cooperation—predicated on a U.S. commitment to maintain Israel’s “qualitative military edge” over other countries in its region. The two countries signed a free trade agreement in 1985, and the United States is Israel’s largest trading partner. For more information, see CRS Report RL33222, U.S. Foreign Aid to Israel, by Jeremy M. Sharp.
Israel has many regional security concerns. Israeli leaders calling for urgent international action against Iran’s nuclear program hint at the possibility of a unilateral military strike against Iran’s nuclear facilities. In addition to concerns over Iran, Israel’s perceptions of security around its borders have changed since early 2011 as several surrounding Arab countries—including Egypt and Syria—have experienced political upheaval. Israel has shown particular concern about threats from Hezbollah and other non-state groups in ungoverned or minimally governed areas in Syria, Lebanon, and Egypt’s Sinai Peninsula, as well as from Hamas and other Palestinian militants in the Gaza Strip.
Israel’s political impasse with the Palestinians on core issues in their longstanding conflict shows little or no sign of abating. Since the end of the 1967 Arab-Israeli War, Israel has militarily occupied and administered the West Bank, with the Palestinian Authority exercising limited selfrule in some areas since 1995. Israeli settlement of that area, facilitated by successive Israeli governments, has resulted in a population of approximately 500,000 Israelis living in residential neighborhoods or settlements in the West Bank (including East Jerusalem). These settlements are of disputed legality under international law. Israel considers all of Jerusalem to be the “eternal, undivided capital of Israel,” but Palestinians claim a capital in East Jerusalem and some international actors’ advocate special political classification for the city or specific Muslim and Christian holy sites. Although Israel withdrew its permanent military presence and its settlers from the Gaza Strip in 2005, it still controls most access points and legal commerce to and from the territory.
Despite its unstable regional environment, Israel has developed a robust diversified economy and a vibrant democracy. Recent discoveries and exploitation of offshore natural gas raise the prospect of a more energy-independent future, while economic debates focus largely on cost-ofliving and income and labor distribution issues. Israel’s demographic profile has evolved in a way that appears to be affecting its political orientation. Along with secular and nationalist Jews from various ethnic backgrounds, Jewish ultra-Orthodox, Russian-speaking, and Arab citizens significantly influence societal debates. The government formed by Prime Minister Binyamin Netanyahu in March 2013 features a set of coalition partners that is different from the previous government, largely due to electoral gains on socioeconomic issues by new national leaders and possible future prime ministerial candidates Yair Lapid and Naftali Bennett.
CRS — The United States and Europe: Responding to Change in the Middle East and North Africa
The United States and Europe: Responding to Change in the Middle East and North Africa (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
U.S. and European Responses to Changes in the Middle East and North Africa
Over the last two years, many U.S. policymakers, Members of Congress, and their European counterparts have struggled with how best to respond to the wide range of challenges posed by the popular uprisings and political upheaval in many countries in the Middle East and North Africa (MENA). Almost immediately after the onset of the so-called “Arab Spring” in early 2011, U.S. and European leaders alike declared their intention to put greater emphasis than in the past on democratic reform and economic development in formulating their respective policies toward countries such as Egypt, Tunisia, Jordan, and Morocco. In Libya, the United States and many European allies participated in the NATO-led military intervention in support of rebel forces that ultimately toppled the Qadhafi regime. And as demonstrations in Syria escalated into a bloody civil war, the United States and the European Union (EU) have imposed sanctions, called for an end to the ruling Asad regime, and are considering greater material and financial support to the Syrian political and armed opposition.Possibilities for U.S.-European Cooperation and Potential Obstacles
In light of the immense changes and what many have long viewed as common U.S. and European interests in the Middle East and North Africa, numerous analysts have advocated for significant U.S.-European cooperation to promote a more peaceful and prosperous MENA region. Such collaboration, they argued, would help prevent a wasteful duplication of Western diplomatic and economic resources amid competing domestic political priorities and financial constraints on both sides of the Atlantic. Despite notable cultural, historical, and geopolitical differences, some commentators early on drew analogies with the way the United States and its West European allies worked together to support the transitions in Central and Eastern Europe after the end of the Cold War, and hopes were high for a similar robust transatlantic effort in the MENA region.
As events in the MENA region have unfolded, U.S. and European policymakers have been in frequent contact with each other. Analysts suggest that U.S. and European policies have been closely aligned on most issues regarding the changes underway. There have been some U.S.- European efforts to promote a more coherent international response through institutions such as the G8, the European Bank for Reconstruction and Development, and the International Monetary Fund (especially with respect to reaching a financial assistance agreement for Egypt).
Nevertheless, many observers contend that so far, tangible joint or coordinated U.S.-European initiatives to encourage political transitions and economic opportunities in the MENA countries have been modest at best. Debate thus continues about the prospects for greater U.S.-European collaboration and the possible benefits of it for U.S. interests. Skeptics point out that both the United States and Europe are limited in what they can do to influence events in the region and they worry that the political and economic difficulties facing many MENA countries in transition, combined with deeply problematic issues involving Iran, the Israeli-Palestinian conflict, and Syria, could lead to a progressively worse regional situation in the years ahead. Others are also concerned that more intensive Western involvement could be counterproductive if viewed in the region as an attempt to protect U.S.-European interests, or if used by some MENA leaders to deflect blame for domestic and regional problems.
Issues for Congress
Many Members of Congress have closely followed events in the MENA region. Congress has been and will be considering the appropriation of U.S. aid to the MENA countries. As such, some Members may be interested in ways to coordinate U.S. and European foreign assistance, debt relief, and trade and investment policies in order to maximize their effectiveness as well as to conserve U.S. political capital and economic assets in the years ahead. Members may also be interested in European responses to the transitions in the MENA region, and the degree of U.S.- European cooperation, as a test of whether Europe can be an effective partner for the United States in protecting shared global interests and addressing common challenges.
At the same time, many Members of Congress are concerned about the eventual political orientation of emerging regimes in countries such as Egypt and Tunisia, and about the implications of regional change for Israel’s security and U.S. counterterrorism efforts. Some Members may be apprehensive about working too closely with European governments or the EU if policy differences begin to emerge between the two sides, or if doing so might constrain future U.S. policy choices toward the MENA countries. Congress may also want to consider whether more robust U.S.-European cooperation in the MENA region could have implications for U.S. options in addressing challenges elsewhere in the greater Middle East (such as those related to Iran or the Israeli-Palestinian conflict).
