[Congressional Record Volume 140, Number 69 (Tuesday, June 7, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 7, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mrs. MURRAY:
  S. 2159. A bill to amend title 46, United States Code, to prevent 
certain masters and seamen from being taxed on wages by more than one 
State or political subdivision thereof, and for other purposes; to the 
Committee on Finance.


        Transportation Employee equitable treatment act of 1994

 Mrs. MURRAY. Madam President, I introduce the Transportation 
Employee Equitable Treatment Act of 1994.
  In 1979 and again in 1990, the Congress wisely passed legislation 
that exempted interstate transportation workers from paying income 
taxes to States in which they do not reside. This legislation was based 
on common sense. It was based on the belief that taxation without 
representation is wrong.
  In the previous bills, working women and men in the air 
transportation were covered. So were ground and rail workers. But, our 
Nation's waterway workers were somehow left out of the mix.
  Madam President, this legislation corrects that oversight. It allows 
Americans who work on ships, tugs, and other types of vessels that 
operate in waters shared by more than one State to pay income taxes 
only in their State of residence. I think all Americans would agree 
that this is fair.
  Some people might not think this legislation is very important, but I 
can assure you, Madam President, the workers on Washington State's 
border waterways do. Members of this body might not think $1,000 or 
$2,000 per year is a lot of money, but workers on Washington State's 
border waterways do. And, I do, too.
  This legislation is supported by the American Pilots Association, the 
International Organization of Masters, Mates & Pilots, American 
Waterways Operators, Seafarers International Union, American Maritime 
Officers, and Inland Boatmen's Union.
  By introducing this bill, I am joining forces with my good friend in 
the other body, Congresswoman Jolene Unsoeld. Congresswoman Unsoeld has 
shown great leadership on this issue and I wish to applaud her efforts 
to correct this inequity.
  Madam President, I ask unanimous consent that the bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2159

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Transportation Employee 
     Equitable Treatment Act of 1994''.

     SEC. 2. EQUITABLE TREATMENT FOR INDIVIDUALS EMPLOYED ON 
                   VESSELS WITH RESPECT TO STATE AND LOCAL TAXES.

       Section 11108 of title 46, United States Code, is amended--
       (1) by inserting ``(a)'' before the first sentence;
       (2) in subsection (a) (as designated by paragraph (1))--
       (A) by inserting ``or other income'' after ``Wages'';
       (B) by striking ``noncontiguous trade or'' and inserting 
     ``noncontiguous trade, to''; and
       (C) by inserting after ``fish processing vessel'' the 
     following: ``, or to a pilot licensed under section 7101 or 
     licensed or authorized under the laws of a State and engaged 
     on a vessel''; and
       (3) by adding at the end the following new subsection:
       ``(b) An individual who regularly performs services in more 
     than one State on a vessel as a master or seaman or as a 
     pilot licensed under section 7101 or licensed or authorized 
     under the laws of a State, may not be subject to the laws of 
     any State or political subdivision of a State (other than the 
     State and political subdivision of the State in which the 
     individual resides) that impose a tax or fee on the privilege 
     of performing such services or on gross receipts or income 
     received for such services.''.
                                 ______

      By Mr. DANFORTH (for himself and Mr. Boren):
  S. 2160. A bill to amend the Internal Revenue Code of 1986 to replace 
the corporate income tax and a broad-based business activities tax, to 
provide relief from such tax for individuals with moderate incomes, and 
for other purposes to the Committee on Finance.


     comprehensive tax restructuring and simplification act of 1994

 Mr. DANFORTH. Mr. President, I am pleased to join with my good 
friend and colleague from Oklahoma, Senator David L. Boren, in 
introducing the Comprehensive Tax Restructuring and Simplification Act 
of 1994, a comprehensive proposal which attempts to fix much of what is 
broken in the present Federal income tax system. This legislation is 
among the most ambitious plans for tax reform to be offered in many 
years. The complexity of the issues involved and the magnitude of the 
changes suggests that this package is only a first volley. We do not 
pretend to have all the answers. We do believe that the bill is a 
responsible plan which balances good tax and economic policy, political 
feasibility and fairness issues.
  Democrats, Republicans, public servants and private citizens, rich 
and poor, all recognize that the current means by which the Federal 
Government collects revenue is a mess. The sheer complexity of the 
system and the cost of compliance breeds resentment. Further, the 
system adversely impacts the competitiveness of U.S. businesses as 
compared with their foreign counterparts, discourages savings and 
investment, and creates serious biases that distort economic decisions.
  The corporate income tax system contains some of the most complex and 
arcane rules in all of the tax code, including the rules for 
depreciation, alternative minimum tax, transfer pricing, foreign tax 
credits and uniform capitalization. Costs to comply with such rules are 
outrageous. For example, a 1990 study by the Tax Foundation concluded 
that compliance costs for businesses were $112 billion--an incredible 
75 percent of net income tax revenue from such businesses. This means 
that businesses were paying $75 to find out they owed $100. Small 
businesses--under $1 million in assets--fared even worse. Their tax 
compliance costs were estimated in 1900 to be $15.9 billion--an 
unbelievable 390 percent of net income tax revenue from such 
businesses. In other words, the small businesses are forced to spend 
$390 to find out that they owe the Government $100. This is absurd.
  Further, the Federal income tax system puts U.S. goods at a 
competitive disadvantage compared with foreign goods, to the detriment 
of our performance in increasingly competitive world markets. The 
income tax on business profits was written in and evolved in a 
different era. The U.S. system of taxing both domestic and 
international businesses was conceived in the late 1920's, when global 
competition between multinationals and substantial international 
movement of capital was rare. Domestic companies competed amongst 
themselves, and all were subject to the same tax system. Immediately 
after World War II, U.S. firms dominated world commerce and investment, 
and cross-border investment was modest. Although each country had its 
own insular taxing system, the U.S. economy was so powerful that 
foreign countries' tax systems were virtually irrelevant, and foreign 
companies presented no serious competition in our domestic market. The 
reality now is a global market with many strong trading partners.

  The international trend is to rely heavily on some form of a 
national, border-adjustable consumption tax. However, unlike all our 
major trading partners, and 80 countries in total, the United States 
has not adopted a consumption tax which is border-adjustable--that is, 
tax is rebated on exports and levied on imports. Thus, we are 
penalizing ourselves. To illustrate, a U.S. manufacturer must bear the 
full cost of U.S. corporate income taxes and payroll taxes, regardless 
of whether it exports its goods or sells them domestically. However, 
those exported goods will face a second tax on reaching the border of a 
country that has a value-added tax [VAT]. In a sense, the exports are 
taxed twice, rather than once as the products with which they compete. 
Exporters from VAT countries, however, have the VAT rebated on all 
their exports to the United States and face little or no new taxes, 
other than tariffs, when the products enter the United States. This 
discrimination is a penalty we inflict on ourselves by ignoring the 
advantages of a border-adjustable consumption tax. If the United States 
replaces some or all of current business taxes with border-adjustable 
taxes, the playing field would be leveled considerably.
  The Federal income tax system also discourages savings and investment 
primarily because it taxes the return on savings and new investment. As 
a result, the United States has the lowest national savings rate--2.5 
percent of GNP--of any industrialized country. A low savings rate leads 
to reduced investment, lower economic growth, fewer jobs, and a lower 
standard of living. In addition, the United States has an investment 
rate that is lower than all of our trading partners. Over the past 30 
years, the average investment rate in Japan was 2\1/2\ times that of 
the United States, while Germany's rate has been more than two-thirds 
greater. Low investment in U.S. companies results in higher investment 
costs which increase the cost of capital in the United States, 
disadvantaging U.S. investment relative to foreign investment.
  Finally, the Federal income tax structure creates serious biases that 
distort economic decisions. For example, there is a bias in favor of 
debt financing compared with equity financing because interest paid by 
corporations is deductible yet dividends paid to equity holders are 
taxed. The buyout boom of the 1980's, which resulted in widespread 
failures of debt-laden companies, is often cited as a result of the 
favored treatment of debt.

  Moreover, the system is increasingly immune to improvement. Many 
studies have been done on the problems of subchapter C, but no 
meaningful actions have been taken. For example, a study that was begun 
in 1986 was completed by Treasury 6 years later with no meaningful 
solutions to the many problems cited by such officials.
  For these reasons, modest changes and reforms are not sufficient. 
Tinkering at the margin of the current tax code cannot adequately 
address the core problems and could prove to be counterproductive. The 
income tax system has been bled dry--we must change the system 
dramatically to restore it to health.
  The Comprehensive Tax Restructuring and Simplification Act of 1994 is 
an attempt to craft much-needed Federal income tax reform. The package 
repeals the corporate income tax, cuts the payroll tax and increases 
the standard deduction--cutting $400 billion in revenue. To replace the 
$400 billion in revenue, the package includes a business activities tax 
[BAT] which is simple to comply with and compute, border-adjustable and 
economically neutral. In addition, according to the Joint Committee on 
Taxation, the Danforth-Boren proposal is revenue neutral.
  Repealing the corporate income tax would relieve businesses from 
figuring out and complying with the most complex provisions of current 
corporate tax law including, depreciation, uniform capitalization, the 
alternative minimum tax, transfer pricing rules and foreign tax 
credits.
  The package also cuts the payroll tax in half for employers and 
employees. Cutting the payroll tax will benefit all businesses, 
particularly labor-intensive and small businesses which may pay more in 
payroll taxes than in income taxes. For small businesses, payment of 
payroll taxes represents one of the greatest tax burdens on their 
operations and acts as a disincentive to employ workers. The payroll 
tax cuts will not affect the Social Security Trust Fund because 
revenues from the BAT will be used to replace the lost revenue.
  In addition, the Danforth-Boren proposal triples the standard 
deduction for low- and middle-income Americans. This will remove at 
least 20 million Americans from the tax rolls. The sheer number of 
Americans removed from the tax rolls will reduce administrative costs 
with little loss in revenue. Further, the proposal provides lower-
income Americans with a quarterly BAT refund, similar to the current 
earned income tax credit.

  To replace the $400 billion in lost revenue, the package includes a 
business activities tax. This tax is simply computed by subtracting the 
gross cost of property and services used by a business--business 
purchases--from the company's gross receipts from its sales of goods 
and services. The resulting amount equals the company's total business 
activity and is subject to a flat tax rate of 14.5 percent. If business 
purchases exceed gross receipts, the taxpayer would get a refund.
  We chose this subtraction method to compute BAT liability, rather 
than the credit-invoice method used by most other countries, for a 
number of reasons. First, this method offers the simplest and most 
familiar means to compute the tax because it allows a company to use 
its most basic financial data--gross sales and purchases--when 
computing the tax. In addition, all U.S. businesses are familiar with 
the business activities tax methodology because the computations are 
the same as the computations under the Federal income tax--that is, 
gross income minus deductions equals taxable income.
  The BAT is also border-adjustable so that it can be levied on imports 
and removed from exports, consistent with the rules of international 
trade. This change will level the playing field for U.S. companies, 
allowing them to compete fairly with foreign competitors in both United 
States and foreign markets.
  Further, the BAT is an economically neutral tax. The BAT eliminates 
the current bias in favor of borrowing capital by denying deductions 
for interest paid on debt. Moreover, it applies equally to labor and 
capital--for example, equipment and machinery--because it does not 
allow a deduction for compensation or for interest paid on debt used to 
finance the purchase of capital. In this way, there is no bias toward 
using either more or less capital or labor.
  Finally, the business activities tax removes 15 million businesses 
from the tax rolls by exempting certain small companies, those with 
gross receipts of $100,000 or less, from the BAT. This exemption will 
cut the number of taxpayers from 24 million to nine million, slash 
government administrative costs by 33 percent, while lowering 
government revenues by less than three percent.
  Mr. President, I ask unanimous consent that the text of the 
Comprehensive Tax Restructuring and Simplification Act of 1994, 
accompanying technical explanation prepared by staff and Senator 
Boren's comments be included in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2160

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Comprehensive Tax 
     Restructuring and Simplification Act of 1994''.

     SEC. 2. AMENDMENT OF 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     Act an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Internal Revenue Code of 1986.
                TITLE I--REPEAL OF CORPORATE INCOME TAX

     SEC. 101. REPEAL OF CORPORATE INCOME TAX.

       (a) In General.--Chapter 1 (relating to normal taxes and 
     surtaxes) is amended by adding at the end the following new 
     subchapter:

          ``Subchapter W--Termination of Corporate Income Tax

``Sec. 1400. Termination of corporate income tax.
``Sec. 1401. Corporate distributions.
``Sec. 1402. Election of certain businesses to be taxed as domestic 
              corporations.

     ``SEC. 1400. TERMINATION OF CORPORATE INCOME TAX.

       ``(a) Termination.--Except as provided in this section, no 
     tax shall be imposed under this chapter on any corporation 
     for any taxable year.
       ``(b) Passive Investment Tax.--
       ``(1) Imposition of tax.--
       ``(A) In general.--If, for any taxable year--
       ``(i) a C corporation has nonbusiness gross income, and
       ``(ii) the percentage determined by dividing the 
     nonbusiness gross income by the gross income of the C 
     corporation for such taxable year exceeds the applicable 
     working capital percentage,

     then there is hereby imposed on such corporation a tax in the 
     amount determined under subparagraph (B).
       ``(B) Amount of tax.--The amount of tax determined under 
     this subparagraph shall be equal to the product of--
       ``(i) the nonbusiness gross income described in paragraph 
     (1)(A), and
       ``(ii) the highest rate of tax under section 1 for taxable 
     years beginning in the same calendar year as the taxable year 
     of the C corporation.
       ``(C) No credit against tax.--No credit shall be allowed 
     under this chapter against the tax imposed by subparagraph 
     (A).
       ``(D) Special rule for foreign corporations.--No tax shall 
     be imposed under subparagraph (A) on any foreign corporation 
     unless the foreign corporation is exempt from the tax imposed 
     by section 884 (relating to branch profits tax).
       ``(2) Reduction for certain distributions.--
       ``(A) In general.--The amount of the nonbusiness gross 
     income for any taxable year shall be reduced by the aggregate 
     amount of any distributions by the corporation to its 
     shareholders with respect to its stock--
       ``(i) which are made during the taxable year and not taken 
     into account under clause (ii) for the preceding taxable 
     year, or
       ``(ii) which--

       ``(I) are made after the close of the taxable year and on 
     or before the 45th day following the close of the taxable 
     year, and
       ``(II) are designated, at such time and in such manner as 
     the Secretary may prescribe, as distributions for purposes of 
     this paragraph.

       ``(B) Inclusion in income.--Any distribution described in 
     subparagraph (A)(ii) shall be included in the gross income of 
     the shareholder for the shareholder's taxable year which 
     includes the last day of the taxable year of the corporation 
     for which the reduction under subparagraph (A) was made.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Applicable working capital percentage.--
       ``(i) In general.--The Secretary shall establish an 
     applicable working capital percentage which, on the basis of 
     the best information available, represents the ratio which 
     the average nonbusiness gross income of corporations which is 
     derived from assets held to provide reasonably required 
     working capital bears to the average gross income of 
     corporations.
       ``(ii) Adjustments.--The Secretary may prescribe more than 
     one percentage under clause (i) to reflect differences in 
     industries, size, or other factors which affect reasonably 
     required working capital.
       ``(B) Nonbusiness gross income.--For purposes of this 
     subsection--
       ``(i) In general.--The term `nonbusiness gross income' 
     means gross income other than gross income from a business 
     activity (determined in the same manner as under chapter 
     100).
       ``(ii) Exceptions.--The term `nonbusiness gross income' 
     shall not include any gross income derived from a transaction 
     to the extent the gross receipts from the transaction are not 
     taken into account under chapter 100 by reason of section 
     10016.
       ``(4) Special rules.--For purposes of this subsection--
       ``(A) Aggregation rules.--The Secretary shall prescribe 
     regulations providing for the aggregation of 2 or more 
     persons to the extent appropriate to carry out the purposes 
     of this section.
       ``(B) Startup companies.--A corporation shall not be 
     treated as described in paragraph (1) for the first taxable 
     year the corporation has gross income if--
       ``(i) no predecessor of the corporation was described in 
     paragraph (1),
       ``(ii) it is established to the satisfaction of the 
     Secretary that the corporation will not be described in 
     paragraph (1) for either of the 1st 2 taxable years following 
     such first taxable year, and
       ``(iii) the corporation is not described in paragraph (1) 
     for either of such 2 taxable years.
       ``(C) Companies changing business.--A corporation shall not 
     be treated as described in paragraph (1) for any taxable year 
     if--
       ``(i) neither the corporation nor any predecessor was 
     described in paragraph (1) for any taxable year,
       ``(ii) it is established to the satisfaction of the 
     Secretary that--

       ``(I) substantially all of the nonbusiness gross income of 
     the corporation for the taxable year is attributable to 
     proceeds from the disposition of 1 or more active trades or 
     businesses, and
       ``(II) the corporation will not be described in paragraph 
     (1) for either of the 1st 2 taxable years following the 
     taxable year, and

       ``(iii) the corporation is not described in paragraph (1) 
     for either of such 2 taxable years.
       ``(D) Computation of gross receipts.--In determining gross 
     income for purposes of this subsection, gross receipts for 
     any taxable year shall be reduced by returns and allowances 
     made during such taxable year, and bad debt deductions for 
     such taxable year.
       ``(E) Passive foreign investment company interests.--Any 
     taxpayer who owns (or is treated under section 1297(a) as 
     owning) stock in a passive foreign investment company shall 
     be treated as owning stock in a qualified electing fund 
     without regard to whether the requirements of paragraphs (1) 
     and (2) of section 1295(a) are met.
       ``(c) Exception for Certain Taxes on Foreign 
     Corporations.--Subsection (a) shall not apply to any tax 
     imposed by section 881 or 884.

     ``SEC. 1401. CORPORATE DISTRIBUTIONS.

       ``(a) In General.--Except as provided in subsection (b), 
     all distributions made by a corporation to a shareholder with 
     respect to its stock shall be treated as ordinary income of 
     the shareholder.
       ``(b) Exceptions.--Except as provided in regulations, 
     subsection (a) shall not apply to any distribution--
       ``(1) which is pursuant to a plan of liquidation,
       ``(2) which is in complete redemption of all of a 
     shareholder's stock in the corporation,
       ``(3) in the case of a corporation which maintains adequate 
     accounts of its earnings and profits, which does not 
     constitute a dividend under section 316, or
       ``(4) which represents a return of capital to the extent 
     the distribution does not exceed the shareholder's 
     contributions to capital during the 60-day period ending with 
     the date of the distribution.

     This subsection shall not apply to any distribution to which 
     section 1400(b)(2) applies.

     ``SEC. 1402. ELECTION OF CERTAIN BUSINESSES TO BE TAXED AS 
                   DOMESTIC CORPORATIONS.

       ``(a) General Rule.--If an election is made under this 
     section with respect to any business which is not a C 
     corporation--
       ``(1) such business shall be treated as a domestic C 
     corporation for purposes of this subtitle (other than chapter 
     2 thereof), and
       ``(2) each owner of an equity interest in such business 
     shall be treated as a shareholder thereof in proportion to 
     such interest.
       ``(b) Election.--
       ``(1) In general.--An election under this section--
       ``(A) shall be made not later than 2\1/2\ months after the 
     close of the first taxable year to which it applies, and
       ``(B) shall remain in effect until terminated as provided 
     in paragraph (2).
       ``(2) Termination.--An election may be terminated by an 
     entity if made not later than 2\1/2\ months after the 
     beginning of the first taxable year to which the termination 
     applies. A taxpayer terminating an election under this 
     paragraph may not make an election under paragraph (1) for 
     any succeeding taxable year without the consent of the 
     Secretary.
       ``(c) Special Rules.--For purposes of this section--
       ``(1) Fringe benefits.--Notwithstanding subsection (a), a 
     business to which subsection (a) applies shall not be treated 
     as a domestic C corporation for purposes of applying the 
     provisions of this subtitle which relate to employee fringe 
     benefits (within the meaning of section 1372).
       ``(2) Corporate distributions and adjustments.--The 
     Secretary shall provide regulations to provide for the 
     application of subchapter C of this chapter to distributions 
     (including liquidations) from a business to which subsection 
     (a) applies and to organizations and reorganizations of such 
     a business.''
       (b) Conforming Amendment.--The table of subchapters for 
     chapter 1 is amended by adding at the end the following new 
     item:

``Subchapter W. Termination of corporate income tax.''

     SEC. 102. TECHNICAL AND CONFORMING CHANGES.

       The Secretary of the Treasury shall, not later than 6 
     months after the date of the enactment of this Act, submit to 
     the Congress such technical and conforming changes as are 
     necessary to implement the amendments made by this title.
                 TITLE II--INDIVIDUAL INCOME TAX RELIEF

     SEC. 201. REDUCTION OF OASDI PAYROLL TAX RATE BY 50 PERCENT.

       (a) Reduction of Rate.--
       (1) Employees.--Subsection (a) of section 3101 (relating to 
     old-age, survivors, and disability insurance) is amended to 
     read as follows:
       ``(a) Old-Age, Survivors, and Disability Insurance.--In 
     addition to other taxes, there is hereby imposed on the 
     income of every individual a tax equal to 3.1 percent of the 
     wages (as defined in section 3121(a)) received by such 
     individual with respect to employment (as defined in section 
     3121(b)).''
       (2) Employers.--Subsection (a) of section 3111 (relating to 
     old-age, survivors, and disability insurance) is amended to 
     read as follows:
       ``(a) Old-Age, Survivors, and Disability Insurance.--In 
     addition to other taxes, there is hereby imposed on every 
     employer an excise tax, with respect to having individuals in 
     such employer's employ, equal to 3.1 percent of the wages (as 
     defined in section 3121(a)) paid by such employer with 
     respect to employment (as defined in section 3121(b)).''
       (3) Self-employed.--Subsection (a) of section 1401 
     (relating to old-age, survivors, and disability insurance) is 
     amended to read as follows:
       ``(a) Old-Age, Survivors, and Disability Insurance.--In 
     addition to other taxes, there shall be imposed for each 
     taxable year, on the self-employment income of every 
     individual, a tax equal to 6.2 percent of the amount of self-
     employment income for such taxable year.''
       (b) Transfer of Revenues to Trust Funds To reflect Reduced 
     Taxes.--
       (1) OAS trust fund.--Section 201(a) of the Social Security 
     Act (42 U.S.C. 401(a)) is amended by striking ``and'' at the 
     end of paragraph (3), by striking the period at the end of 
     paragraph (4) and inserting ``; and'', and by inserting after 
     paragraph (4) the following new paragraph:
       ``(5) such percentage of the taxes imposed by subtitle K of 
     the Internal Revenue Code of 1986 (relating to business 
     activities tax) as the Secretary of the Treasury determines 
     is necessary to equal the amounts appropriated by clause 
     (4).''
       (2) DI trust fund.--Section 201(b) of such Act (42 U.S.C. 
     401(b)) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``; and'', and by inserting after paragraph 
     (2) the following new paragraph:
       ``(3) such percentage of the taxes imposed by subtitle K of 
     the Internal Revenue Code of 1986 (relating to business 
     activities tax) as the Secretary of the Treasury determines 
     is necessary to equal the amounts appropriated by clause 
     (2).''
       (3) Conforming amendments.--
       (A) Section 201(a) of such Act (42 U.S.C. 401(a)) is 
     amended--
       (i) by striking ``amounts equivalent to 100 per centum of'' 
     in the matter preceding paragraph (1) and inserting ``amounts 
     equivalent to'',
       (ii) by inserting ``100 per centum of'' before ``the 
     taxes'' in paragraphs (1), (2), (3), and (4),
       (iii) by striking ``clauses (3) and (4)'' each place it 
     appears and inserting ``clauses (3), (4), and (5)'', and
       (iv) by striking ``clauses (1) and (2)'' and inserting 
     ``clauses (1), (2), and (3)''.
       (B) Section 201(b) of such Act (42 U.S.C. 401(b)) is 
     amended--
       (i) by striking ``amounts equivalent to 100 per centum of'' 
     in the matter preceding paragraph (1) and inserting ``amounts 
     equivalent to'',
       (ii) by inserting ``100 per centum of'' before ``(A) \1/2\ 
     of 1 per centum'' in paragraph (1),
       (iii) by striking ``and before January 1, 2000, and so 
     reported, and (P) 1.42 per centum of the wages (as so 
     defined) paid after December 31, 1999, and so reported,'' in 
     paragraph (1) and inserting ``and before January 1 of the 
     year following the date of the enactment of the Comprehensive 
     Tax Restructuring and Simplification Act, and so reported, 
     (P) .60 per centum of the wages (as so defined) paid on and 
     after January 1 or such year, and before January 1, 2000, and 
     so reported, and (Q) .71 per centum of the wages (as so 
     defined) paid after December 31, 1999, and so reported,'',
       (iv) by inserting ``100 per centum of'' before ``(A) \3/8\ 
     of 1 per centum'' in paragraph (2), and
       (v) by striking ``and before January 1, 2000, and (P) 1.42 
     per centum of the self-employment income (as so defined) so 
     reported for any taxable year beginning after December 31, 
     1999,'' in paragraph (2) and inserting ``and before January 1 
     of the year following the date of the enactment of the 
     Comprehensive Tax Restructuring and Simplification Act, (P) 
     .60 per centum of the self-employment income (as so defined) 
     so reported for any taxable year beginning on or after 
     January 1 of such year, and before January 1, 2000, and (Q) 
     .71 per centum of the self-employment income (as so defined) 
     so reported for any taxable year beginning after December 31, 
     1999,''.

     SEC. 202. INCREASE IN STANDARD DEDUCTION.

       (a) In General.--Subsection (f) of section 63 (defining 
     taxable income) is amended--
       (1) by redesignating paragraphs (1) through (4) as 
     paragraphs (2) through (5), respectively,
       (2) by inserting before paragraph (2) (as so redesignated) 
     the following new paragraph:
       ``(1) Additional amounts for low-income taxpayers.--
       ``(A) In general.--The taxpayer shall be entitled to an 
     additional amount equal to--
       ``(i) $8,650 in the case of --

       ``(I) a joint return, or
       ``(II) a surviving spouse (as defined in section 2(a)),

       ``(ii) $7,600 in the case of a head of household (as 
     defined in section 2(b)),
       ``(iii) $5,200 in the case of an individual who is not 
     married and who is not a surviving spouse or head of 
     household, or
       ``(iv) $4,325 in the case of a married individual filing a 
     separate return.
       ``(B) Phase out of additional amount.--
       ``(i) In general.--Each dollar amount contained in 
     subparagraph (A) shall be reduced (but not below 0) by $20 
     for each $100 (or fraction thereof) by which the individual's 
     adjusted gross income for such taxable year exceeds the 
     applicable amount.
       ``(ii) Applicable amount.--For purposes of clause (i), the 
     applicable amount for a taxpayer described in--

       ``(I) subparagraph (A)(i), is $45,000,
       ``(II) subparagraph (A)(ii), is $37,000,
       ``(III) subparagraph (A)(iii), is $27,000, and
       ``(IV) subparagraph (A)(iv), is $22,500.

       ``(C) Adjustments for inflation.--In the case of any 
     taxable year beginning after the first calendar year 
     beginning after the effective date of this paragraph, each 
     dollar amount contained in subparagraphs (A) and (B)(ii) 
     shall be increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `the calendar year in which the 
     effective date of section 63(f)((1) occurs' for `calendar 
     year 1992' in subparagraph (B) thereof.'', and
       (3) by striking ``Aged'' in the heading and inserting 
     ``Low-Income, Aged,''.
       (b) Conforming Amendments.--
       (1) Section 1(f)(6) is amended by inserting ``section 
     63(f)(1)(C),'' after ``63(c)(4),''.
       (2) The heading for section 63(c)(3) is amended by striking 
     ``aged'' and inserting ``low-income, aged,''.
       (3) Section 63(c)(4) is amended by inserting ``(other than 
     paragraph (1))'' after ``or subsection (f)''.

     SEC. 203. INDIVIDUAL REFUNDABLE TAX CREDIT.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 (relating to refundable personal credits) is 
     amended by inserting after section 32 the following new 
     section:

     ``SEC. 32A. INDIVIDUAL TAX CREDIT.

       ``(a) Allowance of Credit.--
       ``(1) In general.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     subtitle for the taxable year an amount equal to the product 
     of--
       ``(A) so much of the taxpayer's adjusted gross income for 
     such taxable year as does not exceed the adjusted gross 
     income amount, and
       ``(B) the rate of tax under section 10001 for the calendar 
     year in which the taxable year begins.
       ``(2) Adjusted gross income amount.--For purposes of 
     paragraph (1), the adjusted gross income amount in the case 
     of--
       ``(A) a joint return or a surviving spouse (as defined in 
     section 2(a)), is $9,500,
       ``(B) a head of household (as defined in section 2(b)), is 
     $7,900,
       ``(C) an individual who is not married and who is not a 
     surviving spouse or head of household, is $5,700, and
       ``(D) a married individual filing a separate return, is 
     $4,750.
       ``(b) Phase Out of Credit Amount.--
       ``(1) In general.--The amount determined under subsection 
     (a)(1) shall be reduced (but not below 0) by $20 for each 
     $100 (or fraction thereof) by which the individual's modified 
     adjusted gross income for such taxable year exceeds the 
     applicable amount.
       ``(2) Applicable amount.--For purposes of paragraph (1), 
     the applicable amount for a taxpayer described in--
       ``(A) subsection (a)(2)(A), is $15,000,
       ``(B) subsection (a)(2)(B), is $13,200,
       ``(C) subsection (a)(2)(C), is $9,000, and
       ``(D) subsection (a)(2)(D), is $7,500.
       ``(3) Modified adjusted gross income.--For purposes of 
     paragraph (1), the term `modified adjusted gross income' 
     means adjusted gross income--
       ``(A) determined without regard to sections 135, 911, 931, 
     and 933,
       ``(B) without regard to the deduction allowable under 
     section 219,
       ``(C) increased by the amount of social security benefits 
     not included in gross income under section 86, and
       ``(D) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       ``(c) Adjustments for inflation.--In the case of any 
     taxable year beginning after the first calendar year 
     beginning after the effective date of this section, each 
     dollar amount contained in subsections (a)(2) and (b)(2) 
     shall be increased by an amount equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `the calendar year in which the 
     effective date of section 32A occurs' for `calendar year 
     1992' in subparagraph (B) thereof.''
       ``(d) Applicable Rules.--Rules similar to the rules of 
     subsections (d), (e), (g), and (h) of section 32 shall apply 
     to any credit to which this section applies.''
       (b) Advance Payment of Credit.--Chapter 25 (relating to 
     general provisions relating to employment taxes) is amended 
     by inserting after section 3507 the following new section:

     ``SEC. 3507A. ADVANCE PAYMENT OF INDIVIDUAL TAX CREDIT.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, every employer making payment of wages with respect 
     to whom an individual tax credit eligibility certificate is 
     in effect shall, at the time of paying such wages, make an 
     additional payment equal to such employee's individual tax 
     credit advance amount.
       ``(b) Individual Tax Credit Eligibility Certificate.--For 
     purposes of this title, an individual tax credit eligibility 
     certificate is a statement furnished by an employee to the 
     employer which--
       ``(1) certifies that the employee will be eligible to 
     receive the credit provided by section 32A for the taxable 
     year,
       ``(2) certifies that the employee does not have an 
     individual tax credit eligibility certificate in effect for 
     the calendar year with respect to the payment of wages by 
     another employer,
       ``(3) states whether or not the employee's spouse has an 
     individual tax credit eligibility certificate in effect, and
       ``(4) estimates the individual's adjusted gross income and 
     modified adjusted gross income for the calendar year.

     For purposes of this section, a certificate shall be treated 
     as being in effect with respect to a spouse if such a 
     certificate will be in effect on the first status 
     determination date following the date on which the employee 
     furnishes the statement in question.
       ``(c) Individual Tax Credit Advance Amount.--
       ``(1) In general.--For purposes of this title, the term 
     `individual tax credit advance amount' means, with respect to 
     any payroll period, the amount determined--
       ``(A) on the basis of the employee's wages from the 
     employer for such period,
       ``(B) on the basis of the employee's estimated adjusted 
     gross income and modified adjusted gross income included in 
     the individual tax credit eligibility certificate, and
       ``(C) in accordance with tables provided by the Secretary.
       ``(2) Advance amount tables.--The tables referred to in 
     paragraph (1)(C) shall be similar in form to the tables 
     prescribed under section 3402 and, to the maximum extent 
     feasible, shall be coordinated with such tables and the 
     tables prescribed under section 3507(c).
       ``(d) Other Rules.--For purposes of this section, rules 
     similar to the rules of subsections (d) and (e) of section 
     3507 shall apply.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''
       (c) Conforming Amendment.--Section 1(f)(6), as amended by 
     section 202(b)(1), is amended by inserting ``section 
     32A(c),'' before ``63(c)(4),''.
       (d) Clerical Amendments.--
       (1) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 32 the following new item:

``Sec. 32A. Individual tax credit.''

       (2) The table of sections for chapter 25 is amended by 
     adding after the item relating to section 3507 the following 
     new item:

``Sec. 3507A. Advance payment of individual tax credit.''
                   TITLE III--BUSINESS ACTIVITIES TAX

     SEC. 301. BUSINESS ACTIVITIES TAX IMPOSED.

       The Internal Revenue Code of 1986 is amended by adding at 
     the end the following new subtitle:
                 ``Subtitle K--Business Activities Tax
``Chapter 100. Business activities tax.

                 ``CHAPTER 100--BUSINESS ACTIVITIES TAX

``Subchapter A. Imposition of tax.
``Subchapter B. Computation of tax.
``Subchapter C. General rules.
``Subchapter D. Special rules.
``Subchapter E. Refunds; small business exemption.
``Subchapter F. Definitions.
``Subchapter G. Administration.

                   ``Subchapter A--Imposition of Tax

``Sec. 10001. Tax imposed.

     ``SEC. 10001. TAX IMPOSED.

       ``In the case of any person engaged in any business 
     activity, there is hereby imposed for each taxable period a 
     tax in an amount equal to 14.5 percent of the taxable amount.

                   ``Subchapter B--Computation of Tax

``Sec. 10011. Taxable amount.
``Sec. 10012. Business activity.
``Sec. 10013. Activities not treated as business activity.
``Sec. 10014. Gross receipts from business activities.
``Sec. 10015. Business purchases.
``Sec. 10016. Exemption for certain nontaxable exchanges.

     ``SEC. 10011. TAXABLE AMOUNT.

       ``(a) In General.--For purposes of this chapter, the term 
     `taxable amount' means the amount by which--
       ``(1) the gross receipts of any person from business 
     activities for a taxable period, exceed
       ``(2) the business purchases of such person for the taxable 
     period.
       ``(b) Cross References.--For special rules, see sections 
     10022, 10032, and 10034.

     ``SEC. 10012. BUSINESS ACTIVITY.

       ``For purposes of this chapter, the term `business 
     activity' means--
       ``(1) the sale of property or services in the United States 
     by any person in connection with a business,
       ``(2) the import of property or services into the United 
     States, or
       ``(3) the export of property or services from the United 
     States in connection with a business.

     ``SEC. 10013. ACTIVITIES NOT TREATED AS BUSINESS ACTIVITY.

       ``For purposes of this chapter, the term `business 
     activity' does not include--
       ``(1) the performance of services by an employee for the 
     employee's employer, or
       ``(2) any import of an article that is free of duty under 
     chapter 98 of the Harmonized Tariff Schedule of the United 
     States.

     ``SEC. 10014. GROSS RECEIPTS FROM BUSINESS ACTIVITIES.

       ``(a) In General.--For purposes of this chapter, the term 
     `gross receipts' means all receipts from a business activity.
       ``(b) Exchanges.--For purposes of this chapter, the amount 
     treated as gross receipts from the exchange of property or 
     services is the fair market value of the property or services 
     received, plus any money received.
       ``(c) Exports and Imports.--
       ``(1) Exports of property or services.--For treatment of 
     exports, see section 10031.
       ``(2) Imports of property or services.--For treatment of 
     imports, see section 10032.
       ``(3) International transportation.--For treatment of 
     international transportation services, see section 10033.
       ``(d) Certain Insurance Proceeds.--For purposes of this 
     chapter, the term `gross receipts' includes the proceeds of 
     property and casualty insurance for losses in connection with 
     business property or services.
       ``(e) Taxes.--For purposes of this chapter, the term `gross 
     receipts' includes any excise tax, sales tax, customs duty, 
     or other separately stated levy imposed by a Federal, State, 
     or local government on property or services sold in a 
     business activity received or collected by the seller in 
     connection with the sale. Gross receipts shall not include 
     any tax imposed by chapter 31, 32, 33, 34, 35, 36, 39, 51, 
     52, or 53.
       ``(f) Transfers to Related Persons.--
       ``(1) In general.--For purposes of this chapter, any 
     transfer of property or services to a related person shall be 
     treated as a sale of such property or services for an amount 
     equal to the fair market value of the property or services.
       ``(2) Related person.--For purposes of this subsection, the 
     term `related person' means--
       ``(A) in the case of an employment relationship, an 
     employer and employee,
       ``(B) in the case of any entity, an owner of the entity,
       ``(C) any person specified in regulations, and
       ``(D) any member of the family (within the meaning of 
     section 267(c)(4)) of any individual described in 
     subparagraph (A), (B), or (C).
       ``(3) Owner.--For purposes of paragraph (2), the term 
     `owner' means--
       ``(A) the proprietor of a sole proprietorship, and
       ``(B) any holder of a beneficial interest in a corporation, 
     partnership, trust, or other entity.

     ``SEC. 10015. BUSINESS PURCHASES.

       ``(a) In General.--For purposes of this chapter, the term 
     `business purchase' means any amount paid or incurred to 
     purchase property or services for use in a business activity 
     other than--
       ``(1) amounts the payment of which is unlawful under 
     Federal, State, or local law, or
       ``(2) except as provided in subsection (d)--
       ``(A) interest,
       ``(B) premiums for insurance other than property and 
     casualty insurance, or
       ``(C) other implicit intermediation fees.
       ``(b) Compensation Expense Not Included.--The term 
     `business purchase' does not include any amount paid or 
     incurred as current or deferred compensation to employees, or 
     for employee benefits.
       ``(c) Exports and Imports.--
       ``(1) Exports.--For treatment of exports, see section 
     10033(b)(1).
       ``(2) Imports.--For treatment of imports, see section 
     10032.
       ``(3) International transportation.--For treatment of 
     international transportation services, see section 10033.
       ``(d) Financial Intermediation Services.--
       ``(1) In general.-- For purposes of this chapter, business 
     purchases include amounts allocable to the business activity 
     for which a person has received notice under section 10034(d) 
     (relating to implicit financial intermediation fees) and 
     which have otherwise not been taken into account.
       ``(2) Cross reference.--For additional treatment of 
     financial intermediation services, see section 10034.
       ``(e) Exchanges.--For purposes of this chapter, the amount 
     treated as paid or incurred for business purchases in 
     connection with the exchange of property or services is the 
     fair market value of the property or services exchanged, plus 
     any money paid.
       ``(f) Taxes.--For purposes of this chapter, the term 
     `business purchase' includes any excise tax, sales tax, 
     customs duty, or other separately stated levy imposed by a 
     Federal, State, or local government on property or services 
     purchased for use in a business activity.
       ``(g) Gambling Payments.--Except as provided in subsection 
     (a)(1), in the case of a business activity involving 
     gambling, lotteries, or other games of chance, business 
     purchases include amounts paid to winners.

     ``SEC. 10016. EXEMPTION FOR CERTAIN NONTAXABLE EXCHANGES.

       ``(a) General Rule.--For purposes of this chapter, gross 
     receipts shall not include gross receipts from an applicable 
     nontaxable transaction except to the extent attributable to 
     money or other property received in the transaction.
       ``(b) Applicable Nontaxable Transactions.--For purposes of 
     this section, the term `applicable nontaxable transaction' 
     means any transaction--
       ``(1) to which section 332, 351, 368, or 721 applies, or
       ``(2) which is specified by the Secretary and with respect 
     to which gain is not recognized in whole or in part under 
     chapter 1.

                     ``Subchapter C--General Rules

``Sec. 10021. Accounting methods.
``Sec. 10022. Governmental entities and exempt organizations.
``Sec. 10023. Post-sale price adjustments and refunds; bad debts.
``Sec. 10024 Source rules.
``Sec. 10025. Transfer in satisfaction of debt.
``Sec. 10026. Conversions.

     ``SEC. 10021. ACCOUNTING METHODS.

       ``(a) In General.--Except as provided in this section, a 
     person subject to tax under this chapter may use any of the 
     following methods of accounting for purposes of this chapter:
       ``(1) The cash receipts and disbursements method.
       ``(2) An accrual method.
       ``(3) Any other method permitted by the Secretary.

     The Secretary may require a person to modify any method to 
     clearly reflect gross receipts and business purchases.
       ``(b) Consistency Requirement.--All persons which are 
     members of a controlled group of corporations which does not 
     elect to be treated as one person for purposes of this 
     chapter under section 10063(a)(2) shall use the same method 
     of accounting for purposes of this chapter.
       ``(c) Special Rules for Long-Term Contracts.--
       ``(1) In general.--In the case of any sale pursuant to a 
     long-term contract (as defined in section 460(f))--
       ``(A) the seller shall use the percentage of completion 
     method in computing gross receipts from the contract, and
       ``(B) the purchaser shall use the cash receipts and 
     disbursements method in computing business purchases from the 
     contract.
       ``(2) Reporting.--The Secretary may require taxpayers to 
     file statements containing such information with respect to 
     long-term contracts as the Secretary may prescribe.
       ``(d) Installment Method Prohibited.--Gross receipts from 
     the sale of property shall not be taken into account for 
     purposes of this chapter under the installment method.

     ``SEC. 10022. GOVERNMENTAL ENTITIES AND EXEMPT ORGANIZATIONS.

       ``(a) Governmental Entities.--For purposes of this chapter, 
     the transfer of property or furnishing of services by a 
     governmental entity with respect to any of the following 
     activities shall be treated as a business activity:
       ``(1) Public utility services.
       ``(2) Mass transit services.
       ``(3) Postal services.
       ``(4) Any activity not involving the exercise of any 
     essential governmental function (within the meaning of 
     section 115).
       ``(b) Exempt Organizations.--For purposes of this chapter--
       ``(1) In general.--Except as provided in this subsection, 
     the transfer of property or furnishing of services by an 
     exempt organization shall be treated as a business activity.
       ``(2) Exception for section 501 (c)(3) organizations.--
     Paragraph (1) shall not apply to an exempt organization 
     described in section 501(c)(3) unless the activity 
     constitutes an unrelated trade or business (within the 
     meaning of section 513) of the organization.
       ``(c) Gross Receipts.--If there is no separately stated 
     charge with respect to any transfer or furnishing to which 
     subsection (a) or (b) applies, gross receipts shall be 
     determined on the basis of the fair market value of the 
     property transferred or services furnished.
       ``(d) Allocation.--The Secretary shall by regulation 
     provide for the proper allocation of gross receipts and 
     business purchases between business activities and other 
     activities.
       ``(e) Self-Consumption of Property or Services.--
     Notwithstanding the provisions of this section, the Secretary 
     may by regulation provide that property produced, or services 
     furnished, by a governmental entity or an exempt organization 
     for use by itself are to be treated as sold in a business 
     activity if such treatment is necessary to carry out the 
     purposes of this chapter. In any such case the taxable amount 
     shall be determined by reference to the fair market value of 
     the property or services.

     ``SEC. 10023. POST-SALE PRICE ADJUSTMENTS AND REFUNDS; BAD 
                   DEBTS.

       ``(a) Price Adjustments and Refunds.--
       ``(1) Receipt treated as reduction in business purchases.--
     If a person subject to tax under this chapter receives a 
     post-sale price adjustment attributable to a business 
     purchase which was taken into account in computing the 
     taxable amount for a prior taxable period, then the amount of 
     such adjustment shall be treated as a reduction in business 
     purchases for the taxable period in which it is received.
       ``(2) Issuance treated as reduction in gross receipts.--If 
     a person subject to tax under this chapter issues a post-sale 
     price adjustment for a sale the gross receipts from which 
     were taken into account in computing the taxable amount for a 
     prior taxable period, then the amount of such adjustment 
     shall be treated as a reduction in gross receipts for the 
     taxable period in which it is issued.
       ``(3) Post-sale price adjustment.--For purposes of this 
     subsection, the term `post-sale price adjustment' means a 
     refund, rebate, or other price allowance attributable to a 
     sale of property or services.
       ``(b) Bad Debts.--
       ``(1) Seller.--
       ``(A) Writeoffs and writedowns.--If an amount owed to a 
     seller of business property or services that was taken into 
     account as gross receipts in computing the taxable amount of 
     the seller for a prior taxable period becomes wholly or 
     partially uncollectible during any subsequent taxable period, 
     then the seller shall treat the amount (or part thereof that 
     is uncollectible) as a reduction in gross receipts for the 
     taxable period in which it becomes wholly or partially 
     uncollectible.
       ``(B) Notice.--Whenever a seller treats an amount as wholly 
     or partially uncollectible under subparagraph (A), the seller 
     shall notify the purchaser of the amount the seller is 
     treating as uncollectible. The notice shall set forth with 
     specificity the purchase or purchases to which the treatment 
     relates and shall be sent to the purchaser at the purchaser's 
     last known address within 10 days after close of the taxable 
     period in which the seller treats the amount as wholly or 
     partially uncollectible.
       ``(C) Recoveries.--If a seller receives payment for an 
     amount that was treated as a reduction in gross receipts 
     under subparagraph (A) in a prior taxable period, then the 
     seller shall treat the payment as a gross receipt for the 
     taxable period in which it is received.
       ``(2) Purchaser.--
       ``(A) Writeoffs and writedowns.--If a purchaser receives 
     notice under paragraph (1)(B) from a seller for all or a 
     portion of the amount owed for business property or services 
     that the purchaser treated as a business purchase in a prior 
     taxable period, then the purchaser shall treat such amount as 
     a reduction in business purchases for the taxable period in 
     which the notice is received.
       ``(B) Repayments.--If a purchaser pays all or part of an 
     amount treated as a reduction in business purchases under 
     subparagraph (A) in a prior taxable period, then the 
     purchaser shall treat the amount paid as a business purchase 
     for the taxable period in which the payment is made.

     ``SEC. 10024. SOURCE RULES.

       ``(a) Sales of Property.--For purposes of this chapter, a 
     sale of property shall be treated as occurring in the United 
     States if the property is located in the United States at the 
     time of the sale.
       ``(b) Sales of Services.--
       ``(1) General rule.--For purposes of this chapter, a sale 
     of services shall be treated as occurring in the United 
     States to the extent that--
       ``(A) the services are provided from a place of business, 
     or with respect to property, in the United States, or
       ``(B) the services are incidental to the provision of 
     services within the United States.
       ``(2) Cross reference.--For treatment of international 
     transportation services, see section 10033.

     ``SEC. 10025. TRANSFER IN SATISFACTION OF DEBT.

       ``For purposes of this chapter, the transfer of property or 
     services by a debtor to a creditor in exchange for a 
     reduction of debt shall be treated as a sale of such property 
     or services for an amount equal to the amount by which the 
     debt is reduced.

     ``SEC. 10026. CONVERSIONS.

       For purposes of this chapter, any conversion of property or 
     services from use in a business activity to use in any other 
     activity, or from use in any other activity to use in a 
     business activity, shall be treated as a sale of the property 
     or services for their fair market value.

                     ``Subchapter D--Special Rules

``Sec. 10031. Exports of property or services.
``Sec. 10032. Imports of property or services.
``Sec. 10033. International transportation services.
``Sec. 10034. Financial intermediation services.
``Sec. 10035. Other special rules.

     ``SEC. 10031. EXPORTS OF PROPERTY OR SERVICES.

       ``(a) General Rule.--For purposes of this chapter, the term 
     `gross receipts' does not include amounts received by the 
     exporter thereof for property or services exported from the 
     United States for use or consumption outside the United 
     States.
       ``(b) Export Through Nonbusiness Entity.--For purposes of 
     subsection (a), if property or services are sold to a 
     governmental entity or exempt organization for export and are 
     exported other than in a business activity of such entity or 
     organization, then the seller of such property or services is 
     deemed to be the exporter thereof.

     ``SEC. 10032. IMPORTS OF PROPERTY OR SERVICES.

       ``(a) In General.--For purposes of this chapter, the 
     taxable amount with respect to the import of property or 
     services for use or consumption within the United States is 
     the sum of--
       ``(1) the amount paid or incurred for the property or 
     services, plus
       ``(2) in the case of property, any amounts paid or incurred 
     for transportation costs (if such costs are not included in 
     the amount paid for the property).
       ``(b) Imports of Previously Exported Property.--
       ``(1) In general.--For purposes of this chapter, the 
     taxable amount for any import of property that is returned to 
     the United States--
       ``(A) after export for repairs or alterations abroad, or
       ``(B) after export to undergo assembly, processing, 
     manufacture, or other changes in condition abroad,

     is the net cost to the importer of such repairs, alterations, 
     assembly, processing, manufacture, or other change in 
     condition.
       ``(2) Limitation for previously exported property.--
     Paragraph (1) shall apply only to property--
       ``(A) that the importer acquired before export, and
       ``(B) as to which there has been no transfer of ownership 
     between the time of export and import.
       ``(c) Business Purchases of Imports.--For purposes of this 
     chapter--
       ``(1) In general.--The term `business purchase' includes--
       ``(A) the amount determined under subsection (a) for 
     property or services, plus
       ``(B) the amount of tax payable under this chapter with 
     respect to the import of such property or services.
       ``(2) Business activity required.--A person may not include 
     any amount described in paragraph (1) in business purchases 
     unless the person uses the property or services in a business 
     activity.

     ``SEC. 10033. INTERNATIONAL TRANSPORTATION SERVICES.

       ``(a) Gross Receipts.--For purposes of this chapter--
       ``(1) Exports.--The term `gross receipts' does not include 
     receipts from transportation of property exported from the 
     United States.
       ``(2) Imports.--The term `gross receipts' does not include 
     receipts from the transportation of property imported into 
     the United States unless such receipts are not taken into 
     account under section 10032 in computing the taxable amount 
     with respect to the property.
       ``(b) Business Purchases.--For purposes of this chapter--
       ``(1) Exports.--The term `business purchase' does not 
     include amounts paid or incurred for transportation of 
     property exported from the United States.
       ``(2) Imports.--For treatment as business purchases of 
     amounts paid or incurred for transportation of property 
     imported into the United States, see section 10032(c).
       ``(c) International Transportation of Passengers.--For 
     purposes of this chapter--
       ``(1) Gross receipts.--Gross receipts--
       ``(A) include receipts from the transportation of 
     passengers from outside the United States to a destination in 
     the United States, but
       ``(B) do not include receipts from the transportation of 
     passengers from the United States to a destination outside 
     the United States.
       ``(2) Business purchases.--Business purchases--
       ``(A) include amounts paid or incurred in a business 
     activity for the transportation of passengers from outside 
     the United States to a destination in the United States, but
       ``(B) do not include amounts paid or incurred in a business 
     activity for the transportation of passengers from the United 
     States to a destination outside the United States.

     ``SEC. 10034. FINANCIAL INTERMEDIATION SERVICES.

       ``(a) General Rule.--For purposes of this chapter--
       ``(1) the providing of financial intermediation services 
     shall be treated as a business activity, and
       ``(2) this chapter shall be applied to the business 
     activity by substituting financial receipts and adjusted 
     business purchases properly allocable to such business 
     activity for gross receipts and business purchases.
       ``(b) Financial Receipts.--For purposes of this section, 
     the term `financial receipts' means all receipts other than 
     amounts received as contributions to capital.
       ``(c) Adjusted Business Purchases.--For purposes of this 
     section, the term `adjusted business purchases' means 
     business purchases, adjusted as follows:
       ``(1) Principal and interest.--Business purchases include 
     any principal or interest payments properly allocable to the 
     business activity described in subsection (a). The preceding 
     sentence shall not apply to any principal or interest 
     payments otherwise allocable to business purchases 
     (determined without regard to this section or section 
     10015(b)).
       ``(2) Financial instruments.--Notwithstanding section 
     10051(3), business purchases include the cost of, and 
     payments under, financial instruments (other than financial 
     instruments representing equity interests in the person 
     subject to the tax imposed by this chapter).
       ``(3) Insurance claims.--Business purchases include claims 
     and cash surrender values paid in connection with insurance 
     or reinsurance services.
       ``(4) Reinsurance.--Business purchases include amounts paid 
     for reinsurance.
       ``(d) Reporting to Customers.--
       ``(1) Allocation and reporting.--
       ``(A) In general.--A person engaged in the business 
     activity of providing financial intermediation services 
     shall--
       ``(i) allocate fees received for such services (other than 
     services for which separately stated fees are charged) among 
     recipients of such services on a reasonable and consistent 
     basis, and
       ``(ii) report to each recipient the fees so allocated.
       ``(B) Timing.--The report under subparagraph (A)(ii) shall 
     be furnished to the recipient no later than the 45th day 
     after the close of a taxable period.
       ``(2) Exception.--The Secretary shall establish procedures 
     under which notice need not be given under this subsection to 
     persons with respect to whom services are not provided in 
     connection with a business activity.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Financial intermediation service.--The term 
     `financial intermediation service' means--
       ``(A) lending services,
       ``(B) insurance services,
       ``(C) market-making and dealer services, and
       ``(D) any other service provided as a business activity in 
     which a person acts as an intermediary in--
       ``(i) the transfer of property, services, or financial 
     assets, liabilities, risks, or instruments (or income or 
     expense derived therefrom) between two or more other persons, 
     or
       ``(ii) the pooling of economic risk among other persons,

     and derives all or a portion of such person's gross receipts 
     from streams of income or expense, discounts, or other 
     financial flows associated with the matter with respect to 
     which such person is acting as an intermediary.
       ``(2) Lending services.--The term `lending services' means 
     the regular making of loans and providing credit to, or 
     taking deposits from, customers, but does not include an 
     installment or delayed payment arrangement provided by a 
     seller of property or services under which additional charges 
     or fees are imposed by the seller for late payment and for 
     which no interest is charged.
       ``(3) Market-making or dealer services.--The term `market-
     making or dealer services' means services provided by a 
     person who--
       ``(A) regularly purchases financial instruments from or 
     sells financial instruments to customers in the ordinary 
     course of a trade or business, or
       ``(B) regularly offers to enter into, assume, offset, 
     assign, or otherwise terminate positions in financial 
     instruments with customers in the ordinary course of a trade 
     or business.

     ``SEC. 10035. OTHER SPECIAL RULES.

       ``(a) Exchanges Classified by Consideration Given.--For 
     purposes of this chapter--
       ``(1) an exchange of property for property or services is 
     treated as a sale of property, and
       ``(2) an exchange of services for property or services is 
     treated as a sale of services,

     without regard, in either instance, to whether other 
     consideration is received.
       ``(b) Special Rule Where Sale of Property Includes 
     Incidental Sale of Services.--For purposes of this chapter, 
     if in connection with the sale of any property there is an 
     incidental sale of services, such sale of services shall be 
     treated as part of the sale of such property.
       ``(c) Special Rule Where Sale of Services Includes 
     Incidental Sale of Property.--For purposes of this chapter, 
     if in connection with the sale of any services there is an 
     incidental sale of property, such sale of property shall be 
     treated as part of the sale of such services.

           ``Subchapter E--Refunds; Small Business Exemption

``Sec. 10041. Refund for excess business purchase periods.
``Sec. 10042. Small business exemption.

     ``SEC. 10041. REFUND FOR EXCESS BUSINESS PURCHASE PERIODS.

       ``(a) Credit Allowed.--There shall be allowed as a credit 
     against the tax imposed by section 10001 for any taxable 
     period an amount equal to the amount determined under 
     subsection (b), multiplied by the tax rate provided in 
     section 10001 in effect for such period.
       ``(b) Determination of Amount.--
       ``(1) In general.--For purposes of subsection (a), the 
     amount determined under this subsection for any taxable 
     period is the amount by which--
       ``(A) the business purchases of any person for a taxable 
     period, exceed
       ``(B) the gross receipts of that person for such period.
       ``(2) Governmental entities.--For purposes of paragraph 
     (1), the business purchases of a governmental entity subject 
     to tax under this chapter for a business activity shall be 
     reduced by the amount of any subsidy provided for that 
     activity. For purposes of this paragraph, the term `subsidy' 
     includes the value of property or services used in such 
     activity for which no amount was paid or incurred, together 
     with any amounts paid or obligated from appropriated funds 
     (except to the extent that such funds represent operating 
     revenues or other receipts from the activity).
       ``(c) Refund or Credit of Amount.--The amount of the credit 
     allowed under subsection (a) for any taxable period is 
     treated as an overpayment of the tax imposed by section 10001 
     for that taxable period.

     ``SEC. 10042. SMALL BUSINESS EXEMPTION.

       ``(a) Exemption.--Except as provided in subsection (b), if 
     the aggregate amount of gross receipts of any person for any 
     taxable period and the 3 preceding taxable periods does not 
     exceed the exemption amount, no tax shall be imposed under 
     this chapter (and no credit shall be allowed under section 
     10041) for the taxable period.
       ``(b) Exceptions.--
       ``(1) Person must always be exempt.--Subsection (a) shall 
     not apply to any person for a taxable period unless the 
     person was exempt from the tax imposed by this chapter for 
     all preceding taxable periods.
       ``(2) Election.--Subsection (a) shall not apply to any 
     person for a taxable period if the person elects not to have 
     subsection (a) apply for the taxable period.
       ``(c) Statements.--A person to which this section applies 
     for any taxable period shall file a statement containing such 
     information as the Secretary may prescribe.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Exemption amount.--The term `exemption amount' means 
     $100,000 (or an equivalent amount if the taxable period is 
     not a calendar quarter).
       ``(2) Persons not engaged in business for entire period.--
     If a person was not engaged in a business activity for the 
     entire period referred to in subsection (a), such subsection 
     shall be applied on the basis of the period the person was so 
     engaged.
       ``(3) Predecessors.--Any reference in this section to a 
     person shall include a reference to any predecessor of the 
     person.

                      ``Subchapter F--Definitions

``Sec. 10051. Definitions.

     ``SEC. 10051. DEFINITIONS.

       ``For purposes of this chapter--
       ``(1) Sale of services.--The term `sale of services' means 
     the performance of services for consideration, and includes--
       ``(A) the granting of the right to use property, whether 
     tangible or intangible, for consideration, and
       ``(B) the granting of a right to the performance of 
     services or to reimbursement (including the granting of 
     warranties, insurance, and similar items) for consideration.
       ``(2) Sale of property.--The term `sale of property' means 
     the transfer of ownership of property from a seller to a 
     purchaser for consideration.
       ``(3) Property.--The term `property' means any tangible or 
     intangible property, other than money or any financial 
     instrument.
       ``(4) Business.--The term `business' includes any activity 
     carried on continuously or regularly, whether or not for 
     profit, that involves or is intended to involve the sale of 
     property or services.
       ``(5) Business property or service.--The term `business 
     property or service' means any property or service the sale 
     of which by the owner or provider thereof would be a business 
     activity or which is used by the owner or provider in a 
     business activity.
       ``(6) Employee.--The term `employee' has the same meaning 
     as when such term is used for purposes of chapter 24 
     (relating to withholding).
       ``(7) Person.--The term `person' has the meaning given such 
     term by section 7701(a)(1), but also includes any 
     governmental entity.
       ``(8) United states.--The term `United States', when used 
     in a geographic sense, includes the customs territory of the 
     United States (as defined in General Headnote 2 of the 
     Harmonized Tariff Schedules of the United States) and any 
     area seaward of the States lying within the outer boundaries 
     of the outer continental shelf (as defined in section 1331 of 
     title 43, United States Code).
       ``(9) Governmental entity.--The term `governmental entity' 
     means the United States, any State or political subdivision 
     thereof, the District of Columbia, a Commonwealth or 
     possession of the United States, or any agency or 
     instrumentality of any of the foregoing.
       ``(10) Exempt organization.--The term `exempt organization' 
     means any organization exempt from taxation under section 501 
     (c) or (d).
       ``(11) Financial instrument defined.--The term `financial 
     instrument' means any--
       ``(A) share of stock in a corporation,
       ``(B) partnership or beneficial ownership interest in a 
     widely held or publicly traded partnership or trust,
       ``(C) note, bond, debenture, or other evidence of 
     indebtedness,
       ``(D) interest rate, currency, or equity notional principal 
     contract,
       ``(E) evidence of an interest in, or a derivative financial 
     instrument in, any financial instrument described in 
     subparagraph (A), (B), (C), or (D), or any currency, 
     including any option, forward contract, short position, and 
     any similar financial instrument in such a financial 
     instrument or currency, and
       ``(F) position which--
       ``(i) is not a financial instrument described in 
     subparagraph (A), (B), (C), (D), or (E),
       ``(ii) is a hedge with respect to such a financial 
     instrument, and
       ``(iii) is clearly identified in the dealer's records as 
     being described in this subparagraph before the close of the 
     day on which it was acquired or entered into (or such other 
     time as the Secretary may by regulations prescribe).
       ``(12) Use includes held for use.--Property or services 
     held for use by any person shall be treated as used by that 
     person.

                     ``Subchapter G--Administration

``Sec. 10061. Liability for tax.
``Sec. 10062. Time for filing return; taxable period.
``Sec. 10063. Treatment of related businesses.
``Sec. 10064. Secretary to be notified of certain events.
``Sec. 10065. Regulations.

     ``SEC. 10061. LIABILITY FOR TAX.

       ``The person selling or importing property or services 
     shall be liable for the tax imposed by section 10001.

     ``SEC. 10062. TIME FOR FILING RETURN; TAXABLE PERIOD.

       ``(a) Filing Return.--Before the sixteenth day of the 
     second calendar month beginning after the close of each 
     taxable period, each person subject to tax under this chapter 
     shall file a return of the tax imposed by section 10001 for 
     such taxable period.
       ``(b) Taxable Period.--For purposes of this chapter--
       ``(1) In general.--The term `taxable period' means a 
     calendar quarter, except that if a taxpayer has a taxable 
     year under chapter 1 other than the calendar year, then such 
     term means a quarter of that taxable year.
       ``(2) Other periods.--To the extent provided in 
     regulations, the term `taxable period' includes a period 
     selected by a person other than a calendar quarter.
       ``(3) Authority to shorten length of tax period.--The 
     Secretary may shorten the length of a person's taxable period 
     under this subsection to the extent the Secretary deems such 
     action necessary to protect the revenue.

     ``SEC. 10063. TREATMENT OF RELATED BUSINESSES.

       ``(a) General Rule.--For purposes of this chapter--
       ``(1) Affiliated groups and businesses under common 
     control.--Except to the extent otherwise provided in 
     regulations--
       ``(A) an affiliated group of corporations (as defined in 
     section 1504(a) without regard to paragraphs (2), (4), and 
     (7) of section 1504(b)), or
       ``(B) two or more businesses (whether or not incorporated) 
     under common control within the meaning of section 52(b) and 
     the regulations thereunder,
     shall be treated as one person.
       ``(2) Controlled group.--A controlled group of 
     corporations, as defined in section 1563(a) (determined 
     without regard to the second sentence of paragraph (4) of 
     such section and without regard to section 1563(e)(3)(C)), 
     may elect to be treated as one person.
       ``(b) Related Party Transactions.--For purposes of this 
     chapter, transactions in the United States between 
     corporations or other businesses that are treated, or that 
     may elect to be treated, as one person under subsection (a) 
     shall not be taken into account in computing the gross 
     receipts or business purchases of any such corporation or 
     business.

     ``SEC. 10064. SECRETARY TO BE NOTIFIED OF CERTAIN EVENTS.

       ``To the extent provided in regulations, each person 
     engaged in a business shall notify the Secretary (at such 
     time or times as may be prescribed by regulation) of--
       ``(1) any change in the form in which the business is 
     conducted, and
       ``(2) any other change that might affect--
       ``(A) the liability for the tax imposed by section 10001,
       ``(B) the amount of such tax or any credit against such 
     tax, or
       ``(C) the administration of such tax in the case of such 
     person.

     ``SEC. 10065. REGULATIONS.

       ``The Secretary shall prescribe such regulations as may be 
     necessary to carry out the provisions of this chapter.''

     SEC. 302. REFUND AUTHORITY.

       Section 6402 (relating to authority to make credits or 
     refunds) is amended by designating subsection (h) as 
     subsection (j) and by inserting after subsection (g) the 
     following new subsection:
       ``(h) Repayment of Business Activities Tax.--Within 45 days 
     after the date on which a business activities tax return is 
     filed pursuant to section 10062 showing an overpayment, the 
     Secretary shall make, to the extent the Secretary deems 
     practical, a limited examination of the return to discover 
     omissions and errors of computation, and shall determine the 
     amount of the overpayment, if any, for the taxable period to 
     which the return relates and refund the amount of such 
     overpayment to the person who filed the return.''

 Mr. BOREN. Mr. President, I am pleased today to join with my 
good friend and colleague, Mr. Danforth, in introducing the 
Comprehensive Tax Restructuring and Simplification Act of 1994. This 
tax package, which includes the business activities tax as a 
replacement for the corporate income tax, part of the payroll tax, and 
some individual income taxes, is the result of over 2 years of study 
and work. I hope that we have made a contribution to the effort to 
transform our tax system that can serve as a basis for broad reform in 
the next few years.
  I have long been troubled that our tax system discourages savings and 
investment, impedes productivity and efficiency, and retards our 
ability to compete internationally. As chairman of the Subcommittee on 
Taxation, I have held hearings in which we explored the economic 
consequences of our current income tax regime and searched for new and 
less destructive ways to raise the revenue required to keep our 
Government functioning.
  Frankly, I was shocked at much of the information I learned during 
these hearings. Our country compares very unfavorably to other Western 
economies with respect to savings, investment, and the cost of capital. 
Our national savings rate is a paltry 2.5 percent of GDP, the lowest 
rate of any OECD country. For three decades, our investment rate has 
been substantially lower than those of other countries. During that 
time, the average investment rate in Japan was two times greater than 
the United States rate, while Germany's has been two-thirds greater.
  A University of Maryland study presented to the subcommittee 
indicated that the cost of capital in our country is much higher than 
the cost of capital in other countries--partly as a result of our 
system of taxation. A U.S. company paying the alternative minimum tax 
will recover only 34 percent of its investment in the first 5 years. 
Over the same period of time, a German company recovers 87 percent of 
its investment; a Japanese company recovers 64 percent; and a Korean 
company recovers an astonishing 95 percent.
  If our companies are going to compete successfully with businesses 
that face significantly lower capital costs, they will have no choice 
but to reduce other expenses. This may well mean lower wages for our 
workers and a reduced standard of living for all Americans. It is no 
surprise that real wages have recently declined in comparison to 
historic trends. For example, from 1947 to 1973, the real incomes of 
Americans doubled every 28 years. After 1973, the growth rate has 
slowed so much that it would take 17,000 years for them to double 
again.
  Our current income tax system harms our companies' ability to compete 
globally in another way. Under GATT rules, direct taxes, like corporate 
income taxes and payroll taxes, cannot be adjusted at the border. In 
other words, they cannot be imposed on imports, nor can they be removed 
from our exports before they enter the world market. Indirect taxes, 
like the European VAT, are border-adjustable, however. Thus, countries 
that rely on value-added taxes can place an additional cost on U.S. 
goods entering their countries. Not only do our goods carry the burden 
of U.S. corporate and payroll taxes, but they are also subject to the 
indirect taxes of other countries.

  The GATT rules may well be one reason that over 80 countries impose 
value-added taxes. Yet we continue to make our tax policy in a vacuum, 
either unaware of or uninterested in the tax practices of the countries 
against whom we must compete. We continue to believe that we live in 
the post-World War II world where U.S. firms dominate world commerce 
and investment, and competition between multinationals was rare. Modern 
reality is a global market with many strong trading partners. In that 
context, a comparative analysis is demanded.
  Convinced that the current tax system is unquestionably broken, 
Senator Danforth and I proceeded to consult with tax experts, 
economists, and others to find a solution. We heard the same advice 
repeated over and over again: We must seriously consider replacing 
current taxes with a border-adjustment tax. It is advice that many 
policy makers have been hearing. For example, members of the 
administration have suggested that we must carefully consider this kind 
of tax reform in the near future. Most recently, Laura D'Andrea Tyson 
stated that belief, but it is a refrain we have heard from Leon 
Panetta, Alice Rivlin, Lawrence Summers, and even the President 
himself. Many of my colleagues, most notably Senators Nunn and 
Domenici, have been actively studying the issues surrounding the 
consumption tax and working on their own proposals.
  In the hope that we can contribute to what I believe is the 
inevitable adoption of a new kind of tax system to replace part or all 
of the current tax system, we introduce today the Comprehensive Tax 
Restructuring and Simplification Act of 1994. We hope that this 
legislation will serve as the basis for further discussion of this 
important topic and will be on the agenda of hearings that we will hold 
in the next few months in the Subcommittee on Taxation in the Senate 
Committee on Finance.
  At the outset, let me emphasize that we are not proposing additional 
new taxes. Indeed, I could not support the adoption of a business 
activities tax as an add-on to the current, seriously flawed tax system 
that we have now. This proposal is revenue-neutral. For every dollar 
that the business activities tax raises, a dollar of current tax is 
replaced. We raise exactly the same amount of money--we do it more 
efficiently and with less harm to our businesses' ability to compete 
and produce.
  The tax reform package repeals numerous existing taxes. First, we 
repeal the corporate income tax in its entirety. In addition, 
partnerships, sole proprietorships, and subchapter S corporations will 
not pay tax currently on income retained in their businesses for 
investment and expansion. This sweeping reform of business taxes 
results in an enormous amount of simplification. For example, 
businesses no longer must worry about complicated depreciation or 
amortization schedules, complex calculations under the alternative 
minimum tax, or the arcane rules surrounding foreign tax provisions.
  We also cut the Social Security portion of the payroll tax in half, 
reducing both the employer and employee contribution. We do not affect 
the Social Security trust fund because an appropriate amount of revenue 
raised by the new business activities tax will be credited to the trust 
fund. This reduction in payroll taxes should be of great help to small 
businesses and labor-intensive companies that bear the brunt of the 
payroll tax burden. In addition, the payroll tax, which falls heavily 
on lower- and middle-income working Americans is quite regressive, so a 
reduction in this tax reduces the burden on these citizens by over $160 
billion.
  With respect to the individual income tax system, our tax reform 
package triples the standard deduction for lower- and middle-income 
individuals. This provision will remove 15 to 20 million Americans from 
the tax rolls entirely. Again, this change reduces the tax burden on 
middle-income Americans and makes the tax system much simpler.
  Implementing these tax changes eliminates over $400 billion of 
current income and payroll taxes. To make up this revenue shortfall, we 
have proposed a business activities tax. The business activities tax 
[BAT] is computed simply by subtracting the gross cost of property and 
services used by a business--business purchases--from the company's 
gross receipts derived from its sales of goods and services. The 
resulting amount represents the company's total business activity and 
is subject to a flat rate of 14.5 percent.
  This tax is imposed on virtually all business activity in the United 
States. We define ``business activity'' simply: It is ``any activity 
carried on continuously or regularly, whether or not for profit, that 
involves or is intended to involve the sale of property or services.'' 
Thus, the tax would not apply to the family garage sale or the sale of 
one's residence. It does apply broadly, however, to property and 
services produced in any business activity.
  We intend the BAT to be a very simple tax. The system allows a 
company to use its most basic financial data--gross sales and 
purchases--when computing the tax. The BAT is a single-rate tax with 
virtually no exemptions. Every study of current indirect tax systems 
concludes that a complex system increases audit costs by 30 to 50 
percent and substantially increases compliance costs. Most countries 
have adopted multiple rates and exemptions of certain goods in an 
attempt to ameliorate the regressive effects of a value-added tax. We 
have ensured that the business activities tax does not unduly burden 
the poor by allowing them a quarterly BAT refund.

  In another provision that simplifies the system, the legislation 
exempts small businesses--with annual gross receipts less than 
$100,000--from the BAT. This reduces the number of taxpayers from 24 to 
9 million, cuts administrative costs by an additional 33 percent, and 
has very little impact on revenue.
  The business activities tax is a border-adjustable indirect tax for 
purposes of GATT and can therefore be removed from U.S. exports of 
goods and services. In addition, it can be levied at the border on 
imported goods and services, allowing our domestic goods to compete on 
a level playing field with imports in the U.S. market.
  Mr. President, I am pleased that I have been involved in this effort 
to construct real and important tax reform. The package that we propose 
today allows us to consider the transformation of the current tax 
system in a more concrete and specific way. We have not found all the 
answers, but our proposal indicates the right direction for meaningful 
change. Ultimately, we must replace the current counterproductive tax 
system with a Tax Code that doesn't hamper our competitiveness both 
here and abroad.
                                 ______

      By Mr. RIEGLE (for himself, Mr. Feingold, and Mr. Pryor):
  S. 2161. A bill to amend title XVI of the Social Security Act to 
improve work incentives for people with disabilities; to the Committee 
on Finance.


           social security disability amendments act of 1994

  Mr. RIEGLE. Mr. President, I rise today with my colleagues Senator 
Feingold and Senator Pryor to introduce the Social Security Disability 
Amendments Act of 1994. This legislation makes a number of technical 
improvements to the Supplemental Security Income Disability program to 
ensure that disabled individuals can have a full and independent life.
  Congress has recognized that many disabled Americans need special 
assistance to obtain adequate housing, education, transportation, and 
health insurance. The Supplemental Security Income [SSI] Program has 
made great progress in securing the basic necessities of life for 
people with disabilities. However, despite the positive goals of this 
important program, many beneficiaries have found the rules and 
administration of the SSI disability program to be very limiting. These 
regulatory and administrative hurdles often impede the ability of 
disabled people to become truly independent. One of the best examples 
of this type of barrier concerns the issue of marriage.
  Current SSI rules effectively prevent many disabled Americans from 
getting married. Because the asset restrictions for the SSI program are 
so severe, many beneficiaries realize that if they marry, the assets of 
their future spouse, no matter how modest, will make them ineligible 
for SSI disability benefits. For the disabled, the health insurance 
provided by the SSI program is essential for them to live and function 
at full capacity.
  The bill I and my colleagues introduce today will allow disabled 
people participating in the 1619(b) Work Incentive Program to marry 
without fear of losing SSI benefits. The assets of the ineligible 
spouse would not be used in calculating the eligibility of the disabled 
individual. This change in SSI rules will allow disabled beneficiaries 
the same simple dignity of getting married that most Americans enjoy.
  This legislation also allows disabled SSI beneficiaries to save money 
for improvements in their housing situation, without losing their SSI 
benefits due to excess assets. Housing improvements could include 
moving furniture and personal possessions into more accessible housing, 
converting space in a family member's home into an independent living 
unit, acquiring the initial security deposit and other costs related to 
a person moving into a new apartment or house, acquiring the down 
payment on an individual's own home or condominium, or achieving any of 
these goals with another person.
  The bill also will change SSI rules so that grant, scholarship, and 
fellowship income will be treated as earned income for the purpose of 
calculating SSI eligibility, and will also allow disabled students 
enrolled in U.S. educational institutions the option to study overseas 
without losing SSI eligibility.
  Mr. President, these modest changes to the SSI program mean greater 
housing, education, and personal freedom for many disabled Americans. I 
encourage my colleagues in the Senate to join me in supporting this 
legislation which will help make independent living a reality for 
people with disabilities.
  Mr. President, I ask unanimous consent that a section-by-section 
analysis with the full text of S. 2161 be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2161

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (A) Short Title.--This Act may be cited as the Social 
     Security Disability Amendments Act of 1994''.
       (b) Table of Contents.--The table of contents is as 
     follows:

Sec. 1. Short title; table of contents.
Sec. 2. Disregard deemed income and resources of ineligible spouse when 
              determining continued eligibility under section 1619(b).
Sec. 3. Plans for achieving self-support not disapproved within 60 days 
              to be deemed approved.
Sec. 4. Expansion of plans for achieving self-support to include 
              housing goals.
Sec. 5. Regulations regarding completion of plans for achieving self-
              support.
Sec. 6. Treatment of certain grant, scholarship, or fellowship income 
              as earned income for SSI purposes.
Sec. 7. SSI eligibility for students temporarily abroad.
Sec. 8. Effective date.

     SEC. 2. DISREGARD DEEMED INCOME AND RESOURCES OF INELIGIBLE 
                   SPOUSE WHEN DETERMINING CONTINUED ELIGIBILITY 
                   UNDER SECTION 1619(B).

       Section 1614(f)(1) of the Social Security Act (42 U.S.C. 
     1382c(f)(1)) is amended by inserting ``(other than under 
     section 1619(b))'' after ``benefits''.

     SEC. 3. PLANS FOR ACHIEVING SELF-SUPPORT NOT DISAPPROVED 
                   WITHIN 60 DAYS TO BE DEEMED APPROVED.

       (A) Amendments to Income Exclusion Rules.--Section 
     1612(b)(4) of the Social Security Act (42 U.S.C. 
     1382a(b)(4)(A)) is amended in each of subparagraphs (A) and 
     (B) by inserting ``and, for purposes of this clause, a 
     completed plan for achieving self-support which is not 
     disapproved by the Secretary within 60 days after the date of 
     submission shall be deemed to be approved by the Secretary 
     until subsequently disapproved by the Secretary (with 
     appropriate notification to the individual),'' after 
     ``plan,''.
       (b) Amendment to Resource Exclusion Rule.--Section 
     1613(a)(4) of such Act (42 U.S.C. 1382b(a)(4) is amended by 
     inserting ``, and, for purposes of this paragraph, a 
     completed plan for achieving self-support which is not 
     disapproved by the Secretary within 60 days after the date of 
     submission shall be deemed to be approved by the Secretary 
     until 6 months after subsequently disapproved by the 
     Secretary (with appropriate notification to the individual)'' 
     after ``such plan''.

     SEC. 4 EXPANSION OF PLANS FOR ACHIEVING SELF-SUPPORT TO 
                   INCLUDE HOUSING GOALS.

       (a) Income Disregard Rules.--Section 1612(b)(4) of the 
     Social Security Act (42 U.S.C. 1382A(B)(4)) is amended in 
     each of subparagraph (A)(iii) and (B)(iv), by inserting ``, 
     containing a career or housing goal, that has been'' before 
     ``approved''.
       (b) Resource Disregard Rules.--Section 1613(a)(4) of such 
     Act (42 U.S.C. 1382b(a)(4)) is amended by inserting ``, 
     containing a career or housing goals, that has been'' before 
     ``approved''.

     SEC. 5. REGULATIONS REGARDING COMPLETION OF PLANS FOR 
                   ACHIEVING SELF-SUPPORT.

       Section 1633 of the Social Security Act (42 U.S.C. 1383b) 
     is amended by adding at the end the following:
       ``(d) The Secretary shall establish by regulation time 
     limits and other criteria--
       ``(1) which are related to an individual's career or 
     housing goal included in a plan for achieving self-support, 
     and
       ``(2) that take into account the difficulty of achieving 
     self-support based on the needs of the individual and the 
     goals of the plan.''.

     SEC. 6. TREATMENT OF CERTAIN GRANT, SCHOLARSHIP, OR 
                   FELLOWSHIP INCOME AS EARNED INCOME FOR SSI 
                   PURPOSES.

       Section 1612(a)(1) of the Social Security Act (42 U.S.C. 
     1382a(a)(1)), as amended by section 309 of this Act, is 
     amended--
       (1) by striking ``and'' at the end of subparagraph (E); and
       (2) by adding at the end the following:
       ``(G) any grant, scholarship, or fellowship described in 
     section 1617(b)(7) to the extent not excluded from income 
     pursuant to such section; and''.

     SEC. 7. SSI ELIGIBILITY FOR STUDENTS TEMPORARILY ABROAD.

       Section 1611(f) of the Social Security Act (42 U.S.C. 
     1382(f)) is amended by adding at the end the following: ``The 
     first sentence of this subsection shall not apply to any 
     individual who was eligible to receive a benefit under this 
     title for the month immediately preceding the first month 
     during all of which such individual is outside the United 
     States and who demonstrates to the satisfaction of the 
     Secretary that the individual's absence from the United 
     States will be temporary and for the purpose of conducting 
     studies as part of an educational program designed to prepare 
     the individual for gainful employment and sponsored by a 
     school, college, or university in the United States.''.

     SEC. 8. EFFECTIVE DATE.

       Except as otherwise provided in this Act, the amendments 
     made by this Act shall take effect on the 1st day of the 1st 
     calendar month that begins 90 or more days after the date of 
     the enactment of this Act.
                                  ____


 Section-by-Section Analysis of Social Security Disability Amendments 
                              Act of 1994


               section 1. short title; table of contents

     section 2. Disregard Deemed Income of Ineligible Spouse When 
    Determining Continued Medicaid Eligibility Under Section 1619(b)

       Under current law and regulations, if an SSI recipient who 
     is working and benefiting from the Section 1619 work 
     incentives marries, the income deemed from an ineligible 
     spouse may increase their income to the point that they do 
     not meet the requirement in Section 1619(b) that they would 
     be eligible for cash benefits but for earnings. This 
     amendment would disregard the income of the ineligible spouse 
     in determining eligibility under Section 1619(b) for 
     Medicaid.
       This amendment is based on the SSI Modernization Panel's 
     recommendations. CBO estimates this provision as an ``*''--
     $500,000 per year or less.


  section 3. self support plans not disapproved within 60 days to be 
                            deemed approved

       This provision provides that unless the Social Security 
     Administration acts within 60 days of an individual 
     submitting a Plan for Achieving Self Support to the Social 
     Security Administration that the PASS plan would be deemed to 
     be in effect. It does make it clear that after the deemed 
     approval that the Secretary can subsequently disapprove the 
     PASS prospectively.
       This amendment is based on a SSI Modernization Panel's 
     recommendation. CBO estimates this provision as an ``*''--
     $500,000 per year or less.


  Section 4. Regulations Regarding Completion of Plan for Self-Support

       Under current regulations, a Plan for Achieving Self 
     Support (PASS) can be up to four years in length. This 
     amendment would require that the Secretary would be required 
     to have regulations which would vary according to ``the 
     difficulty of achieving self support based on the nature and 
     severity of the disability.''
       This amendment is based on a SSI Modernization Panel's 
     recommendation. CBO unable to estimate the cost of this 
     provision.


  section 5. expansion of self-support plans to include housing goals

       Under present SSI law, income of an individual which is 
     identified and earmarked for eventual use under a ``Plan for 
     Achieving Self Support'' (PASS) by an SSI recipient is not 
     considered to be countable income or resources in determining 
     eligibility for or amount of SSI. The disregards under these 
     ``PASS'' plans are for such items as education costs related 
     to the persons career goals for employment or special costs 
     for a specially equipped van for transportation to employment 
     related to a person's physical limitations.
       This amendment to SSI PASS provisions would provide that a 
     Plan for Achieving Self Support could be either for the 
     purpose of achieving a ``career goal or a housing goal.'' 
     That is, it would add to the current income disregards and 
     disregards for countable resource under the SSI program the 
     disregard of the income received in a month and resources 
     saved which are for the purpose of enabling an individual to 
     achieve a housing goal.
       As in the case of PASS plans under current law, a PASS plan 
     which deals with achieving greater independence in housing 
     must be developed by the individual. The plan would also have 
     to be approved by SSA and for such housing plans the goals 
     are to relate to enabling the individual to live as 
     independently as possible.
       This provision CBO estimate no cost for this provision.


section 6. treatment of certain grant, scholarship or fellowship income 
                            as earned income

       Under present law, SSI excludes from being counted as 
     income any portion of any grant, scholarship or fellowship 
     received for use in paying the cost of tuition and fees at 
     any educational institution. However, such funds received by 
     a person with a severe disability not used for those purposes 
     are treated as unearned income and only the first $20 a month 
     is disregarded.
       The amendment would treat such funds not used to pay for 
     tuition and fees as earned income with the earned income 
     disregard of $65 plus one-half the remaining earnings 
     disregarded. The main impact would be to keep such students 
     eligible for Medicaid under the provisions of Section 
     1619(b).
       CBO unable to estimate cost.


       section 7. ssi eligibility for students temporarily abroad

       Under present law, if an SSI recipient is out of the United 
     States for an entire calendar month they lose their 
     eligibility for SSI benefits. When they return, they must be 
     in the United States for no less than 30 days to again become 
     eligible for SSI benefits. This causes severe problems for a 
     small number of severely disabled individuals who are 
     pursuing their education which includes study in other 
     countries. This amendment would allow the Social Security 
     Administration to waive that requirement when it would cause 
     severe disruption for persons with severe disabilities who 
     are pursuing an education to further their career.
       This provision CBO unable to estimate the cost of this 
     provision.
                                 ______

      By Mrs. FEINSTEIN (for herself, Mrs. Murray, Mr. D'Amato, and Mr. 
        Lieberman):
  S. 2162. A bill to provide protection from sexual predators; to the 
Committee on the Judiciary.


              protection from sexual predators act of 1994

  Mrs. FEINSTEIN. Mr. President, my point in rising this afternoon is 
to introduce the Protection from Sexual Predators Act of 1994. Similar 
legislation has been introduced in the House of Representatives by 
Representative Louise Slaughter of New York.
  The goal of this legislation is to keep sex offenders behind bars for 
life.
  It is rather innovative legislation because under the bill, State and 
local law enforcement would be given the option of prosecuting repeat 
sex offenders under either State or Federal law after the first 
offense. This key change in the Federal law means that prosecutors will 
be able to seek the punishment of life imprisonment without parole for 
violent and dangerous repeat sex offenders.
  In the past, Federal law only applied when an incident occurred on 
Federal land. Under this legislation, Federal prosecution of repeat sex 
offenders will be possible no matter where the offender's crimes 
occurred.
  Significantly, this legislation says, ``Two strikes and you are in.'' 
It would mean that if someone is convicted of a first sex offense and 
then goes on to commit a second aggravated sex offense, the predator 
could be sentenced to prison for life without parole.
  Let me tell you briefly why this legislation is necessary.
  The man who kidnaped and murdered 12-year-old Polly Klaas last 
September, Richard Allen Davis, had an 11-page rap sheet that included 
a 1976 sexual assault. At the time he dragged Polly at knifepoint from 
her suburban bedroom, he was on parole after serving just one half of a 
16-year sentence for kidnaping.
  Another case in California: Melvin Carter, convicted in 1982 on 12 
counts of sexual assault, confessed to raping more than 100 women. His 
release to a prison camp recently in Modoc County caused an uproar from 
citizens and former victims. Federal authorities moved to shut the camp 
down by withdrawing its permit to use Forest Service land.
  The statistics also are chilling. California alone is estimated to be 
home to 65,000 sex offenders. Twenty-five percent of all rapists are 
expected to rape again. There is thus very real reason to provide the 
option to prosecutors created by this legislation.
  It will permit State district attorneys and U.S. attorneys to seek 
Federal prosecution and life imprisonment of any sex offender who has 
already been convicted of a State sex offense--one that would have 
violated Federal law if committed in Federal territory--and who is 
charged for a second crime that meets the definition now in Federal law 
of ``aggravated sexual abuse.''
  That broad term includes any crime in which the offender used, or 
threatened to use, force to compel another person to engage in a sexual 
act. It also includes engaging in sex with a child under the age of 12, 
or forcing another person into sex by taking advantage of their mental 
or physical inability to refuse.
  I think that the time for this legislation has come. I send it to the 
desk, and ask unanimous consent that Senators Murray, D'Amato, and 
Lieberman be added as original cosponsors of this bill. I am delighted 
to have them aboard.
  I also ask unanimous consent that the legislation be printed in its 
entirety at this point in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2162

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Protection from Sexual 
     Predators Act of 1994''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds that.--
       (1) rape and sexual assaults continue to be serious threats 
     to the safety of communities across America;
       (2) sexual offenders are much more likely than any other 
     category of criminals to repeat their crimes again and again, 
     even after serving time in prison; and
       (3) the average rape sentence is just 10\1/2\ years, and 
     the average time served is half of that, approximately 5 
     years.
       (b) Sense of Congress.--It is the sense of Congress that--
       (1) States should more seriously consider the relatively 
     high recidivism rate of sexual offenders when deciding 
     whether to plea bargain with a first-time sexual offender and 
     whether to grant parole to sexual offenders; and
       (2) States should review their treatment and parole 
     supervision programs for sexual offenders to assure that 
     these programs are fulfilling their goals, and, if they are 
     not, these programs should be immediately replaced or 
     abandoned.

     SEC. 3. FEDERAL JURISDICTION OVER RAPE AND SEXUAL ASSAULT 
                   CASES.

       Section 2241 of title 18, United States Code, is amended by 
     adding at the end the following:
       ``(e) Punishment for Sexual Predators.--(1) Whoever, in a 
     circumstance described in paragraph (2) of this subsection--
       ``(A) violates this section; or
       ``(B) engages in conduct, in or affecting interstate or 
     foreign commerce, that would be a violation of subsection 
     (a), (b), or (c) of this section, if the offense had occurred 
     in the special maritime and territorial jurisdiction of the 
     United States;

     shall be imprisoned for life.
       ``(2) The circumstance referred to in paragraph (1) of this 
     subsection is that the defendant has previously been 
     convicted of another State or Federal offense for conduct 
     which--
       ``(A) is an offense (other than an attempt) under this 
     section or section 2242 of this title; or
       ``(B) would have been an offense under either of such 
     sections if the offense had occurred in the special maritime 
     or territorial jurisdiction of the United States.''.

     SEC. 4. REGISTRATION PROGRAM.

       (a) In General.--
       (1) State guidelines.--
       (A) Generally.--The Attorney General shall establish 
     guidelines for State programs requiring--
       (i) any person who is convicted of a sex offense to 
     register and keep up to date a current address with a 
     designated State law enforcement agency for 10 years after 
     release from prison, or being placed on parole, supervised 
     release, or probation; and
       (ii) each State to provide information obtained about the 
     registered person to the Attorney General on a prompt and 
     regular basis and in a uniform format.
       (B) Required content of guidelines.--Such guidelines shall 
     require the inclusion of such data about--
       (i) the registered person, including fingerprints and 
     photographs; and
       (ii) that person's offenses and modus operandi;

     as the Attorney General deems useful for assisting law 
     enforcement investigations by Federal, State, and other law 
     enforcement authorities.
       (2) Definition.--For purposes of this sub-section, the term 
     ``sex offense'' means any State or Federal offense that--
       (A) is an offense under section 2241 or 2242 of title 18, 
     Unites States Code; or
       (B) would have been an offense under either of such 
     sections if the offense had occurred in the special maritime 
     and territorial jurisdiction of the United States.
       (b) Availability of Information.--The Attorney General 
     shall maintain on-line availability of information obtained 
     under this section for use by authorized law enforcement 
     agencies in carrying out their functions. The Attorney 
     General shall by rule provide for the privacy of the 
     information so maintained.
       (c) Compliance.--
       (1) Compliance date.--Each State shall have 3 years from 
     the date of the enactment of this Act in which to implement 
     this section.
       (2) Ineligibility for funds.--The allocation of funds under 
     title I of the Omnibus Crime Control and Safe Streets Act of 
     1968 received by a State not complying with the guidelines 
     issued under this section 3 years after the date of enactment 
     of this Act may be reduced by 10 percent and the unallocated 
     funds shall be reallocated to the States in compliance with 
     this section.

     SEC. 5. STUDY OF PERSISTENT SEXUAL PREDATORS.

       The National Institute of Justice, either directly or 
     through grant, shall carry out a study of persistent sexual 
     predators. Not later than one year after the date of the 
     enactment of this Act, such Institute shall report to 
     Congress and the President the results of such study. Such 
     report shall include--
       (1) a synthesis of current research in psychology, 
     sociology, law, criminal justice, and other fields regarding 
     persistent sexual offenders, including--
       (A) common characteristics of such offenders;
       (B) recidivism rates for such offenders;
       (C) treatment techniques and their effectiveness;
       (D) responses of offenders to treatment and deterrence; and
       (E) the possibility of early intervention to prevent people 
     from becoming sexual predators; and
       (2) an agenda for future research in this area.
                                 ______

      By Mr. SARBANES (for himself and Ms. Mikulski):
  S. 2163. A bill to recognize the organization known as the 29th 
Division Associated, Incorporated; to the Committee on the Judiciary.


                  honoring the 29th infantry division

 Mr. SARBANES. Mr. President, as we commemorate the 50th 
anniversary of D-day and the courageous march by the Allied forces to 
liberate Europe, I wish to reintroduce legislation in honor of the 29th 
Infantry Division, which played such a major role in the success of the 
Normandy invasion. The courage and perseverance of the soldiers in the 
29th Division of June 6, 1944, in the face of withering German fire 
were remarkable. The 29th Division has had a close connection with the 
citizens of Maryland, and it is with great pride that I join Senator 
Mikulski in introducing legislation to grant the 29th Infantry Division 
Association a Federal charter.
  The 29th Division Association is a nonprofit corporation organized 
under the laws of the State of New Jersey. Its objects and purposes, as 
expressed in its articles of incorporation, include: 1. The promotion 
of fellowship among its members. 2. The perpetuation of the record of 
the 29th Division, U.S. Army, in the World Wars. 3. The promotion of 
the welfare of its members. 4. The consideration of questions 
concerning the military policy of the United States. 5. To uphold and 
defend the Constitution of the United States. The 29th Division 
Association was organized in 1921 by veterans of World War I who served 
with the 29th Division in Europe. It now has a membership of 3,500, 
including veterans from World War I and World War II, as well as young 
men and women now serving in the 29th Division.
  On August 17, 1917, the 29th Infantry Division was organized at Camp 
McClellan, AL. Comprised of National Guard units of citizen soldiers 
from Maryland, Delaware, Virginia, the District of Columbia, and New 
Jersey, the division consisted of two brigades with two infantry 
regiments, an artillery brigade, and supporting units. The division 
arrived in France in June 1918 and fought in the Alsace and Meuse-
Argonne campaigns, suffering over 5,700 casualties.
  In World War II, the 29th Infantry Division was mobilized in February 
1941 at Forth Meade, MD. The troops trained stateside and later in 
England, but no amount of preparation could have prepared them for 
their critical role in the D-day assault. Gen. Dwight D. Eisenhower's 
invasion on the coast of France's Normandy region was the largest 
amphibious attack in military history and the 29th Division was an 
integral part of its success. The division stormed ashore on Omaha 
Beach, one of the five points of engagement in the Allied invasion. 
Their battle was an especially fierce one and continued until late in 
the day, long after the beaches at the other landing points had been 
captured. Securing Omaha Beach was a critical triumph for the Allies, 
but the victory at ``Bloody Omaha,'' as the battle was nicknamed, was 
costly, and all but eliminated entire companies in the 29th. However, 
the troops in the division pressed on and eventually participated in 
four major campaigns prior to V-E Day including Normandy, Northern 
France, Rhineland, and Central Europe.
  In 1985 the division was again reactivated as the 29th Infantry 
Division (Light) with citizen soldiers from Maryland and Virginia. It 
is continuing the proud tradition established by the 29th in two world 
wars.
  The 29th Infantry Division has played a key role in the defense of 
this country and is still doing so. It is my hope that this legislation 
to grant the 29th Infantry Division Association a Federal charter will 
be approved, and I urge my colleagues to join in this effort to honor 
this distinguished military unit.
  Mr. President, I ask unanimous consent that the text of my bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2163

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled, That the 
     29th Division Association, Incorporated, a nonprofit 
     corporation organized under the laws of the State of New 
     Jersey, is recognized as such and is granted a Federal 
     charter.


                                 powers

       Sec. 2. The 29th Division Association, Incorporated 
     (hereinafter in this Act referred to as the ``corporation''), 
     shall have only those powers granted to it through its bylaws 
     and articles of incorporation filed in the State or States in 
     which it is incorporated and subject to the laws of such 
     State or States.


                  objects and purposes of corporation

       Sec. 3. The objects and purposes of the corporation are 
     those provided in its articles of incorporation and shall 
     include--
       (1) the promotion of fellowship among its members;
       (2) the perpetuation of the record of the 29th Division, 
     United States Army, in the World Wars;
       (3) the promotion of the welfare of its members, their 
     families, and the families of the members of the Division who 
     lost their lives in the service of Our Country;
       (4) the consideration of questions concerning the military 
     policy of the United States of America; and
       (5) to uphold and defend the Constitution of the United 
     States of America.


                           service of process

       Sec. 4. With respect to service of process, the corporation 
     shall comply with the laws of the State or States in which it 
     is incorporated and the State or States in which it carries 
     on its activities in furtherance of its corporate purposes.


                               membership

       Sec. 5. (a) Subject to subsection (b), eligibility for 
     membership in the corporation and the rights and privileges 
     of members of the corporation shall be as provided in the 
     constitution and bylaws of the corporation.
       (b) Terms of membership and requirements for holding office 
     within the corporation shall not discriminate on the basis of 
     race, color, national origin, sex, religion, or handicapped 
     status.


           board of directors; composition; responsibilities

       Sec. 6. The composition of the board of directors of the 
     corporation and the responsibilities of such board shall be 
     as provided in the articles of incorporation of the 
     corporation and shall be in conformity with the laws of the 
     State or States in which it is incorporated.


                        officers of corporation

       Sec. 7. The positions of officers of the corporation and 
     the election of members to such positions shall be as 
     provided in the articles of incorporation of the corporation 
     and shall be in conformity with the laws of the State or 
     States in which it is incorporated.


                              restrictions

       Sec. 8. (a) No part of the income or assets of the 
     corporation may inure to the benefit of any member, officer, 
     or director of the corporation or be distributed to any such 
     individual during the life of this charter. Nothing in this 
     subsection shall be construed to prevent the payment of 
     reasonable compensation to the officers of the corporation or 
     reimbursement for actual and necessary expenses in amounts 
     approved by the board of directors.
       (b) The corporation may not make any loan to any officer, 
     director, or employee of the corporation.
       (c) The corporation may not contribute to, support, or 
     otherwise participate in any political activity or attempt in 
     any manner to influence legislation. No officer or director 
     of the corporation, acting as such officer or director, may 
     commit any act prohibited under this subsection.
       (d) The corporation shall have no power to issue any shares 
     of stock nor to declare or pay any dividends.
       (e) The corporation shall not claim congressional approval 
     or Federal Government authority for any of its activities.


                               liability

       Sec. 9. The corporation shall be liable for the acts of its 
     officers and agents whenever such officers and agents have 
     acted within the scope of their authority.


                     books and records; inspection

       Sec. 10. The corporation shall keep correct and complete 
     books and records of account and minutes of any proceeding of 
     the corporation involving any of its members, the board of 
     directors, or any committee having authority under the board 
     of directors. The corporation shall keep, at its principal 
     office, a record of the names and addresses of all members 
     having the right to vote in any proceeding of the 
     corporation. All books and records of such corporation may be 
     inspected by any member having the right to vote in any 
     corporation proceeding, or by any agent or attorney of such 
     member, for any proper purpose at any reasonable time. 
     Nothing in this section shall be construed to contravene any 
     applicable State law.


                    audit of financial transactions

       Sec. 11. The first section of the Act entitled ``An Act to 
     provide for audit of accounts of private corporations 
     established under Federal law'', approved August 30, 1964 (36 
     U.S.C. 1101), is amended by adding at the end thereof the 
     following:
       ``(74) 29th Division Association, Incorporated.''.


                             annual report

       Sec. 12. The corporation shall report annually to the 
     Congress concerning the activities of the corporation during 
     the preceding fiscal year. Such annual report shall be 
     submitted at the same time as the report of the audit of the 
     corporation required by section 2 of the Act entitled ``An 
     Act to provide for audit of accounts of private corporations 
     established under Federal law'', approved August 30, 1964 (36 
     U.S.C. 1101). The report shall not be printed as a public 
     document.


        reservation of right to amend, alter, or repeal charter

       Sec. 13. The right to amend, alter, or repeal this Act is 
     expressly reserved to the Congress.


                          definition of state

       Sec. 14. For purposes of this Act, the term ``State'' 
     includes the District of Columbia, the Commonwealth of Puerto 
     Rico, the Commonwealth of the Northern Mariana Islands, and 
     the territories and possessions of the United States.


                           tax-exempt status

       Sec. 15. The corporation shall maintain its status as an 
     organization exempt from taxation as provided in the Internal 
     Revenue Code of 1986.


                              termination

       Sec. 16. If the corporation fails to comply with any of the 
     restrictions or provisions of this Act, the charter granted 
     by this Act shall expire.

                          ____________________