[Congressional Record Volume 140, Number 102 (Friday, July 29, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 29, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. INOUYE:
  S. 2336. A bill to amend the Communications Act of 1934 to extend the 
authorization of appropriations of the Federal Communications 
Commission, and for other purposes; to the Committee on Commerce, 
Science, and Transportation.


    the federal communications commission authorization act of 1994

 Mr. INOUYE. Mr. President, I introduce the Federal 
Communications Commission [FCC] Authorization Act of 1994. This bill 
authorizes funding for the FCC in the amount of $163,500,000 for fiscal 
year 1994 and $198,232,000 for fiscal year 1995. The amount for fiscal 
year 1994 represents the amount appropriated for fiscal year 1994. The 
amount for fiscal year 1995 represents a much needed increase in order 
for the FCC to carry out its new statutory responsibilities and to keep 
up with the increasing workload under its traditional responsibilities.
  The bill I am introducing today also includes a number of provisions 
that the FCC has asked the Congress to consider. While I do not 
necessarily endorse every one of these suggestions, I believe that they 
are all worthy of consideration. I have thus included these 
recommendations in the bill I introduce today in order to initiate a 
discussion on the merits of these proposals.
  The FCC is an independent regulatory agency that oversees interstate 
and foreign communications by wire and radio. With advances in new 
technologies and the opening of markets to competition, the FCC is 
constantly making key policy decisions that fundamentally affect the 
marketplace. The importance of the FCC and its actions cannot be 
underestimated, especially in today's dynamic communications industry. 
The responsibilities of the FCC have grown dramatically over the past 
decade while the resources have declined. As our society becomes more 
and more dependent upon our ability to communicate with each other the 
decisions of the FCC have an increasingly important effect on the 
public interest.
  Under the Communications Act, the FCC has primary jurisdiction over 
wire and radio communications. As a result, the FCC has regulatory 
authority over the interstate services of local and long distance 
telephone companies, radio and television broadcasters, satellite 
companies, cellular and other mobile telephone providers, cable 
television providers, private radio services--such as those used by 
taxis and ambulances--and local government and public safety services. 
The FCC also has ancillary--or secondary--authority over equipment 
manufacturers and information service providers. Because of the 
tremendous breadth of the FCC's regulatory authority, the decisions 
taken by the Commission have a direct and important impact on the lives 
of almost every citizen of this country.
  The increased levels of funding for fiscal year 1995 will allow the 
FCC to hire an additional 250 full-time equivalent [FTE] positions to 
handle increased workloads resulting from increases in ongoing 
functions and implementing the PCS auctions and licenses. Since 1980, 
the FCC's staff has been reduced by over 500 FTE positions while the 
FCC's legislated responsibilities have grown.
  In the policy and rulemaking area, filings requesting or commenting 
on Commission actions have increased from 80,435 to 125,768, a 56 
percent increase in only 5 years. In the enforcement area, telephone 
company tariffs submitted for review and approval have increased from 
1,900 in 1980 to 4,430 in 1993. In 1993 alone, the FCC received over 
32,000 complaints from the public and common carriers on various 
aspects of telephone services. In the licensing area, workloads have 
increased throughout the agency. The Mass Media Bureau assignment and 
license transfers have increased from 186 in 1980 to 731 in 1993.
  The following is a summary of major provisions in the FCC 
Authorization bill I am introducing today:
  1. Travel Reimbursement Program. The bill deletes section 4(g)(2) of 
the act regarding the FCC-specific travel reimbursement authority.
  2. Communications support from older Americans. This section extends 
the Older Americans Program through fiscal year 1996.
  3. Hawaii monitoring station. This section extends the provision 
authorizing the relocation of the Hawaii monitoring station through 
fiscal year 1997.
  4. Inspection of ship radio stations. Amends section 4(f)(3), 362(b) 
and 385 of the act to authorize non-FCC ship inspections and more FCC 
flexibility on inspection requirements.
  5. Clarification of FCC refund authority. This section clarifies FCC 
authority to make refunds to redress common carrier rule violations.
  6. Expedited instructional television fixed service [ITFS] 
processing. Amends Section 5(c)(1) of the act to allow the FCC to 
delegate to its processing staff authority to act on routine cases 
involving ITFS authorizations.
  7. Application fees. Amends section 8 of the act to authorize the FCC 
to retain fees above a certain sum sent to the Treasury, to change or 
create new section 8 fees, to allocate costs associated with legal and 
executive services, and to continue to collect application fees at the 
prior year's rates until the effective date of a new fee schedule.
  8. Application fees. Amends section 8(g) of the act to establish a 
fee schedule for PCS.
  9. Regulatory fees. Amends section 9 of the act to authorize the FCC 
to allocate and recover legal and executive costs it incurs in the 
discharge of enforcement, policy and rulemaking, user information 
services and international activities, to continue to collect 
regulatory fees at prior year's rates until the effective date of a new 
fee schedule and to provide 45 days notice of fee changes.
  10. Tariff rejection authority. Amends section 203 of the act to 
clarify FCC's authority to reject a common carrier tariff.
  11. Refund authority. Amends section 205 of the act to clarify FCC's 
authority to make refunds to redress common carrier rule violations.
  12. Licensing of aviation, maritime and personal radio services by 
rule. Amends section 307(e) of the act to authorize the Commission to 
issue blanket licenses by rule for radio equipment on airplanes, ships 
and for personal radio services. The provision removes the requirement 
that recreational boaters need to apply for a license or pay any 
administrative licensing costs.
  13. Auction technical amendments. Amends section 309(j)(8)(B) to 
provide the FCC with more flexibility in the collection and use of 
auction funds and to authorize the FCC to establish an interest bearing 
escrow account and to pay interest to unsuccessful bidders.
  14. Forfeiture for act or rule violations imperiling safety of life. 
Amends sections 312(a) and 503(b)(1) to authorize the FCC to issue 
forfeitures for violation of the Communications Act or FCC rules 
imperiling safety of life.
  15. Statute of limitations for forfeiture proceedings against common 
carriers. Amends section 503(b)(6) to increase the statute of 
limitations period from 1 to 5 years to assist in enforcement of the 
jurisdictional separations and cost allocation rules.
  As mentioned earlier, these provisions have been submitted to the 
Congress by the FCC for consideration. I encourage parties to contact 
the Commerce Committee with their views of these proposals.
  Mr. President, I look forward to continuing to work with the FCC 
Chairman, Mr. Reed Hundt, and the other Commissioners at the FCC, to 
develop policies that will respond to the needs of the citizens of the 
United States and serve the public interest.
  I ask unanimous consent that the full text of the bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2336

       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 ``Federal Communications 
     Commission Authorization Act of 1994''.

     SEC. 2. EXTENSION OF AUTHORITY.

       Section 6 of the Communications Act of 1934 (47 U.S.C. 156) 
     is amended to read as follows:


                   ``authorization of appropriations

       ``Sec. 6. There are authorized to be appropriated for the 
     administration of this Act by the Commission $160,300,000 for 
     fiscal year 1994 and $198,232,000 for fiscal year 1995, 
     together with such sums as may be necessary for increases 
     resulting from adjustments in salary, pay, retirement, other 
     employee benefits required by law, and other nondiscretionary 
     costs, for fiscal year 1995. Of the sum appropriated in any 
     fiscal year, a portion, in an amount determined under 
     sections 8(b) and 9(b), shall be derived from fees authorized 
     by sections 8 and 9.''.

     SEC. 3. TRAVEL REIMBURSEMENT AUTHORITY.

       Subsection (g) of section 4 of the Communications Act of 
     1934 (47 U.S.C. 154) is amended--
       (1) by striking paragraph (2), and
       (2) by redesignating paragraph (3) as (2).

     SEC. 4. COMMUNICATIONS SUPPORT FROM OLDER AMERICANS.

       Section 6(a) of the Federal Communications Commission 
     Authorization Act of 1988 (47 U.S.C. 154 note) is amended by 
     striking ``1992 and 1993,'' and inserting ``1995 and 1996,''.

     SEC. 5. HAWAII MONITORING STATION.

       Section 9(a) of the Federal Communications Commission 
     Authorization Act of 1988 (Public Law 100-594; 102 Stat. 
     3024) is amended by striking ``1991, 1992, 1993, and 1994'' 
     and inserting ``1995, 1996, and 1997''.

     SEC. 6. INSPECTION OF SHIP RADIO STATIONS.

       (a) Contracting Out Inspections.--Section 4(f)(3) of the 
     Communications Act of 1934 (47 U.S.C. 154(f)(3)) is amended 
     by adding at the end the following: ``Notwithstanding the 
     preceding provisions of this paragraph, the Commission may 
     designate an entity to make the inspection referred to in 
     this paragraph.''.
       (b) Annual Inspection Required.--Section 362(b) of the 
     Communications Act of 1934 (47 U.S.C. 360(b)) is amended--
       (1) by striking ``as may'' in the third sentence and 
     inserting ``as the Commission determines to'', and
       (2) by striking ``thereby'' and all that follows and 
     inserting the following: ``thereby--
       ``(1) waive the annual inspection required under this 
     section for a period of 90 days for the sole purpose of 
     enabling a vessel to complete its voyage and proceed to a 
     port in the United States where an inspection can be held, or
       ``(2) waive the annual inspection required under this 
     section for a vessel that is in compliance with the radio 
     provisions of the Safety Convention and that is operating 
     solely in waters beyond the jurisdiction of the United 
     States, but the inspection shall be performed within 30 days 
     after the vessel's return to the United States.''.
       (c) Conforming Amendment.--Section 385 of the 
     Communications Act of 1934 (47 U.S.C. 385) is amended--
       (1) by inserting ``or an entity designated by the 
     Commission'' after ``Commission'', and
       (2) by striking out ``as may'' and inserting ``as the 
     Commission determines to''.

     SEC. 7. EXPEDITED ITFS PROCESSING.

       Section 5(c)(1) of the Communications Act of 1934 (47 
     U.S.C. 155(c)(1)) is amended by striking ``Nothing'' and 
     inserting ``Except for cases involving the authorization of 
     service in the Instructional Television Fixed Service, or as 
     otherwise provided in this Act, nothing''.

     SEC. 8. APPLICATION FEES.

       (a) Modification of Fees.--Subsection (b) of section 8 of 
     the Communications Act of 1934 (47 U.S.C. 158) is amended--
       (1) by redesignating paragraph (2) as (6), and
       (2) by striking out so much of such subsection as precedes 
     paragraph (6), as redesignated and inserting the following:
       ``(b)(1) For fiscal year 1995 and each fiscal year 
     thereafter, the Commission shall, by regulation, modify the 
     application fees by proportionate increases or decreases so 
     as to result in estimated total collections for the fiscal 
     year equal to the sum of--
       ``(A) $40,000,000, plus
       ``(B) the amount specified in an appropriation Act for the 
     Commission for that fiscal year to be collected and credited 
     to such appropriation, but to exceed necessary expenses of 
     the Commission.
       ``(2) The Commission may round the modified fees to the 
     nearest $5, in the case of fees under $100, or to the nearest 
     $20, in the case of fees of $100 or more. The Commission 
     shall transmit to the Congress notification of any adjustment 
     made under this paragraph immediately upon the adoption of 
     the adjustment.
       ``(3) The Commission may collect fees at the prior year's 
     rate until the effective date of modifications, adjustments, 
     or amendments under this subsection.
       ``(4) The Commission by regulation shall add, delete, or 
     reclassify services, categories, applications, or other 
     filings subject to application fees to reflect additions, 
     deletions, or changes in the nature of its services or 
     authorization of service processes as a consequence of 
     rulemaking proceedings or changes in law.
       ``(5) The amount of any fee modified or amended as a 
     consequence of action taken under paragraph (4) shall be 
     derived by determining the fulltime equivalent number of 
     employees performing application activities adjusted to take 
     into account other expenses that are reasonably related to 
     the cost of processing the application or other filing, 
     including all executive and legal costs incurred by the 
     Commission in the discharge of these functions, and other 
     factors the Commission determines to be in the public 
     interest. The Commission shall transmit to the Congress 
     notification of--
       ``(A) any proposed modification of a fee immediately upon 
     adoption of the proposal, and
       ``(B) any amendment immediately upon adoption of an amended 
     fee.''.
       (b) Reimbursement of Appropriations.--Section 8(e) of such 
     Act (47 U.S.C. 8(e)) is amended to read as follows:
       ``(e) Of the moneys received from fees authorized under 
     this section, $40,000,000 shall be deposited in the general 
     fund of the Treasury to reimburse the United States for 
     amount appropriated for use by the Commission in carrying out 
     its functions under this Act, and the remainder shall be 
     deposited as an offsetting collection in, and credited to, 
     the account providing appropriations to carry out the 
     functions of the Commission.''.
       (c) Derivation of Appropriated Funds.--Section 6(d) of such 
     Act (47 U.S.C. 156(d)) is amended--
       (1) by striking ``section 9(b)'' and inserting ``sections 
     8(b) and 9(b)'', and
       (2) by striking ``section 9'' and inserting ``sections 8 
     and 9, respectively''.

     SEC. 9. SCHEDULE OF APPLICATION FEES FOR PERSONAL 
                   COMMUNICATIONS SERVICES.

       The Schedule of Application Fees set forth in section 8(g) 
     of the Communications Act of 1934 (47 U.S.C. 158(g)) is 
     amended by adding at the end of the part relating to Common 
     Carrier Services the following:

``23. Personal Communications Services
  ``a. Initial or new Application..................................230 
  ``b. Amendment to Pending Application.............................35 
  ``c. Application for Assignment or Transfer of Control...........230 
  ``d. Application for Renewal of License...........................35 
  ``e. Request for Special Temporary Authority.....................200 
  ``f. Notification of Completion of Construction...................35 
  ``g. Request to Combine Service Areas..........................50.''.

     SEC. 10. REGULATORY FEES.

       (a) In General.--Section 9(a) of the Communications Act of 
     1934 (47 U.S.C. 159(a)) is amended to read as follows:
       ``(a) General Authority.--The Commission, in accordance 
     with this section, shall assess and collect regulatory fees 
     to recover its costs arising from all executive and legal 
     costs incurred by the Commission in the discharge of these 
     functions.''.
       (b) Notice to Congress of Adjustments and Amendments.--
     Section 9(b)(4)(B) of such Act (47 U.S.C. 159(b)(4)(B)) is 
     amended by striking ``90 days'' and inserting ``30 days''.
       (c) Authority to Collect at Old Rate Pending Effective Date 
     of New Rates.--Section 9(b) of such Act (47 U.S.C. 9(b)) is 
     amended by adding at the end thereof the following:
       ``(5) Rates pending effective date of modifications.--The 
     Commission may continue to collect any fee imposed under this 
     section at the prior year's rate until the effective date of 
     any adjustment or amendment of that fee under this section.''

     SEC. 11. REPORT OF FEE MODIFICATIONS.

       Section 4(k) of the Communications Act of 1934 (47 U.S.C. 
     154(k)) is amended--
       (1) by striking ``and'' at the end of paragraph (3),
       (2) by redesignating paragraph (4) as (5), and
       (3) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) a detailed explanation of any modification, 
     adjustment, or amendment of any fees the amount of which was 
     increased or decreased under section 8 or 9 in the preceding 
     year, setting forth the reasons for the modification, 
     adjustment, or amendment, together with a statement of 
     anticipated modifications, adjustments, or amendments of fees 
     under those sections in the year in which the report is 
     submitted and an explanation of the reason such action is 
     anticipated; and

     SEC. 12. TARIFF REJECTION AUTHORITY.

       Section 203(e) of the Communications Act of 1934 (47 U.S.C. 
     230(d)) is amended by inserting the following after the first 
     sentence: ``The Commission may, after inviting comment from 
     interested parties, reject a proposed tariff filing in whole 
     or in part if the filing or any part thereof is patently 
     unlawful. In evaluating whether a proposed tariff filing is 
     patently unlawful, the Commission may consider additional 
     information filed by the carrier or any interested party and 
     shall presume the facts alleged by the carrier to be true.''

     SEC. 13. REFUND AUTHORITY.

       Section 205 of the Communications Act of 1934 (47 U.S.C. 
     205) is amended by adding at the end thereof the following:
       ``(c) The Commission may require by order the refund of a 
     portion of any charge by a carrier that results from 
     violation of this Act, or of any rule promulgated under this 
     Act. The refund shall be paid, with interest, to the person 
     by or on whose behalf the charge was paid. The Commission may 
     not require payment of a refund under this subsection 
     unless--
       ``(1) it issues an order advising the carrier of its 
     potential refund liability and provides the carrier with an 
     opportunity to file written comments as to why the refund 
     should not be required, and
       ``(2) it issues the order not later than 5 years after the 
     date on which the charge was paid''.

     SEC. 14. LICENSING OF AVIATION, MARITIME, AND PERSONAL RADIO 
                   SERVICES BY RULE.

       Section 307(e) of the Communications Act of 1934 (47 U.S.C. 
     307(e)) is amended--
       (1) by striking ``radio control service and the citizens 
     band radio service'' in paragraph (1) and inserting: 
     ``following radio services: (A) personal radio services, (B) 
     aviation radio service for aircraft stations operated on 
     domestic flights when such aircraft are not otherwise 
     required to carry a radio station, and (C) maritime radio 
     service for ship stations navigated on domestic voyages when 
     such ships are not otherwise required to carry a radio 
     station'', and
       (2) by striking out ``the terms `radio control service' and 
     `citizens band radio service' shall'' in paragraph (3) and 
     inserting ``the terms `personal radio services', `aircraft 
     station', and `ship station' shall''.

     SEC. 15. AUCTION TECHNICAL AMENDMENTS.

       Section 309(j)(8) of the Communications Act of 1934 (47 
     U.S.C. 309(j)(8)) is amended--
       (1) by inserting ``are authorized to remain available until 
     expended and'' after ``Such offsetting collections'' in the 
     second sentence of subparagraph (B), and
       (2) by adding at the end thereof the following:
       ``(C) Revenues on deposit.--The Commission is authorized, 
     based on the competitive bidding methodology selected, to 
     provide for the deposit of monies for bids in an interest-
     bearing account until such time as the Commission accepts a 
     deposit from the high bidder. All interest earned on bid 
     monies received from the winning bidder shall be deposited 
     into the general fund of the Treasury. All interest earned on 
     bid monies deposited from unsuccessful bidders shall be paid 
     to those bidders, less any applicable fees and penalties.''.

     SEC. 16. FORFEITURE FOR ACT OR RULE VIOLATIONS IMPERILING 
                   SAFETY OF LIFE.

       (a) Administrative Sanctions.--Section 312(a) of the 
     Communications Act of 1934 (47 U.S.C. 312(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (6),

       (2) by striking the period at the end of paragraph (7) and 
     inserting a semicolon and the word ``or'', and
       (3) by adding at the end thereof the following:
       ``(8) for failure to comply with any requirement of this 
     Act or the Commission's rules that imperils the safety of 
     life.''.
       (b) Forfeitures.--Section 503(b)(1) of such Act (47 U.S.C. 
     503(b)(1)) is amended--
       (1) by striking out ``or'' at the end of subparagraph (C);
       (2) by inserting ``or'' after the semicolon at the end of 
     subparagraph (D), and
       (3) by inserting after subparagraph (D) the following:
       ``(E) failed to comply with any requirement of this Act or 
     the Commission's rules that imperils the safety of life;''.

     SEC. 17. STATUTE OF LIMITATIONS FOR FORFEITURE PROCEEDINGS 
                   AGAINST COMMON CARRIERS.

       Section 503(b)(6) of the Communications Act of 1934 (47 
     U.S.C. 503(b)(6)) is amended--
       (1) by striking ``or'' at the end of subparagraph (A),
       (2) by inserting ``and is not a common carrier'' after 
     ``Act'' in subparagraph (B),
       (3) by redesignating subparagraph (B) and (C), and
       (4) by inserting after subparagraph (A) the following:
       ``(B) such person is a common carrier and the required 
     notice of apparent liability is issued more than 5 years 
     after the date on which the violation occurred; or''.
                                 ______

      By Mr. BROWN:
  S. 2338. A bill to provide that for taxable years beginning before 
1980 the Federal income tax deductibility of flight training expenses 
shall be determined without regard to whether such expenses were 
reimbursed through certain veterans educational assistance allowances; 
to the Committee on Finance.


           flight training expenses tax deduction act of 1994

 Mr. BROWN. Mr. President, I introduce a bill which will 
restore some fairness to our current tax system. Approximately 200 
veteran pilots throughout the country are currently unable to obtain 
refunds from the Internal Revenue Service [IRS] for taxes they paid 
which the IRS later ruled were unnecessary. This bill would create a 1-
year grace period during which veteran pilots would be able to file for 
tax refunds.
  In 1980, the IRS issued a rule, Revenue Rule 80-173, which 
retroactively repealed a provision which had been enforced since 1962. 
The IRS issued this rule against veteran pilots who had previously been 
allowed to receive educational benefits from the Department of Veteran 
Affairs and to claim a deduction for tuition expenses. The result of 
the IRS reversing its own ruling retroactively was that veteran pilots 
were charged back taxes, interest, and penalties. It seems unfair to me 
to apply a revenue ruling retroactively to the detriment of taxpayers 
who took a deduction as instructed.
  An 11th Circuit Court decision allowed for some veteran pilots to 
successfully receive refunds of the tax they had been required to pay. 
However, 200 pilots throughout this country have not been as fortunate 
because they do not fall within the geographic jurisdiction of the 11th 
Circuit Court. There is no provision under the law which would allow 
the IRS to cancel the tax and refund the overpayment because claims for 
refund or credit must be filed within 3 years of the due date of the 
return or 2 years from the date the tax was paid, whichever is later. 
This legislation would enable the remaining 200 veteran pilots a 1-year 
opportunity to file for a refund.
  These pilots are frustrated by this inequity and it is time to 
provide them the opportunity to settle this matter with the Federal 
Government.
  Similar legislation--H.R. 641--has been introduced in the House of 
Representatives by Representative Sundquist. The issue is fairness. I 
hope my colleagues will agree and cosponsor this important 
bill.
                                 ______

      By Mr. HOLLINGS:
  S. 2339. A bill to authorize a certificate of documentation for the 
vessel Why Knot; to the Committee on Commerce, Science, and 
Transportation.


               why knot certificate of documentation act

 Mr. HOLLINGS. Mr. President, I am introducing a bill today to 
direct that the vessel Why Knot, U.S. official number 688570, be 
accorded coastwise trading and fisheries privileges and be issued a 
Coast Guard certificate of documentation under title 46 of the U.S. 
Code.
  The Why Knot was constructed in Taiwan in 1985 as a recreational 
vessel. It is 44 feet in length, 13.5 feet in breadth, has a depth of 
7.8 feet, and is self-propelled.
  The vessel was purchased on December 21, 1989, by Keith Rogerson of 
the Isle of Palms, SC, who intended to use it for short harbor tours in 
Charleston harbor as well as for overnight excursions. Both of these 
operations would be limited to six passengers per tour.
  When Mr. Rogerson purchased the boat, he was unaware of the specific 
coastwise trade and fisheries restrictions of the Jones Act. Due to the 
fact that the vessel was foreign built, it did not meet the 
requirements for a coastwise license endorsement in the United States. 
Such documentation is mandatory to enable the owner to use the vessel 
for its intended purpose.
  The owner of the Why Knot is thus seeking a waiver of existing law 
because he wishes to use the vessel in his chartering business. If he 
is granted this waiver, he intends to comply fully with U.S. 
documentation and safety requirements. The purpose of the legislation I 
am introducing is to allow the Why Knot to engage in the coastwise 
trade and fisheries of the United States.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2339

       Be it enacted by the Senate and the House of 
     Representatives of the United States of America in Congress 
     assembled, That, notwithstanding sections 12106, 12107, and 
     12108 of title 46, United States Code, and section 27 of the 
     Merchant Marine Act, 1920 (46 App. U.S.C. 883), as applicable 
     on the date of enactment of this Act, the Secretary of 
     Transportation may issue a certificate of documentation for 
     the vessel WHY KNOT, United States official number 
     688570.
                                 ______

      By Mr. DeCONCINI:
  S. 2340. A bill to recognize and grant a Federal charter to the 
National Alliance for the Mentally Ill; to the Committee on the 
Judiciary.


       national alliance for the mentally ill federal charter act

 Mr. DeCONCINI. Mr. President, today I am introducing 
legislation to recognize and grant a Federal Charter to the National 
Alliance for the Mentally Ill [NAMI] as a veterans' service 
organization [VSO].
  NAMI's record since 1980 demonstrates that it has the capacity to 
provide critical support to mentally ill veterans and their families. 
This support will enhance inpatient care and post-discharge services, 
prevent factors that exacerbate mental illness, and enhance those 
interventions which are required to prevent costly long-term 
rehospitalization. I am proud to note that NAMI's 19 local affiliates 
[AMI's] in the State of Arizona have been of invaluable assistance to 
mentally ill veterans and their families.
  To recognize the crucial role while NAMI can play, we need only look 
at Bay Pines Hospital in Florida where NAMI and the Veterans' 
Administration Medical Center [VAMC] have combined to develop a model 
for the Nation. By enacting this legislation, we will be able to 
provide the means to replicate the successful model throughout the 
Nation.
  NAMI can also play a valuable role in facilitating better 
coordination between the veterans' inpatient setting and the community 
mental health system. NAMI believes that total, continuing, and cost-
effective health care for veterans with mental illnesses is shaped by 
various factors including the structure of health insurance, housing, 
and social services. In addition, voluntary programs dedicated to 
improving the quality of life for psychiatrically disabled veterans can 
prevent what often becomes an irrevocable break in health care for some 
of these veterans. Effective mental health services require a full 
utilization of community support programs.
  Mr. President, NAMI also provides a mechanism for consumer 
empowerment and support. This will be critical as Congress holds 
hearings on the integration of the VA into any adopted plan for 
national health care reform. Despite the valuable role which families 
can play in enhancing treatment outcomes, doctors and other mental 
health providers are often resistant to their input. Official 
chartering as a VSO will provide NAMI families with a more forceful 
voice--one that is more likely to be listened to--and hence more likely 
to lead to positive outcomes for veterans with severe mental illness.
  Mr. President, NAMI has a strong record in the area of veterans' 
affairs. On June 15, 1994, I received a letter from Mr. Joseph C. 
Zengerle, immediate past president of the Disabled American Veterans 
and a veteran counsel for the distinguished firm of Bingham, Cana & 
Gould. Mr. Zengerle wrote,

       * * * Given our experience with NAMI on this issue 
     [incompetent vets] since 1991, it is clear that the 
     organization is not only zealous to protect the rights of 
     those with mental disabilities but also has no hesitation 
     forcefully to express its interests in fields like veterans 
     affairs * * * and to do so with respect to legislative, 
     executive and judicial actions as well as membership 
     activities and publications * * * that in my view fully 
     support its request for a Congressional charter * * *.

  A review of the hearing record shows that psychiatric disorders are 
extremely expensive for the VA. Expenditures for VA mental health for 
fiscal year 1993 were $1.3 billion. Moreover, annual VA disability 
payments for just schizophrenia and manic depressive illness total 
approxtimately $1.8 billion. The combined totals of fiscal year 1993 VA 
expenditures for disability payments and services for all chronically 
mentally ill veterans exceed $3.1 billion.
  Mr. President, in these times of increasing national debt and 
increasingly tight budgets, it would be irresponsible not to spend 
veterans' health care and rehabilitation monies effectively and 
efficiently. Utilizing the nonprofit experience of NAMI can lead to 
long-term decreases in the overall costs to the VA system and provide 
critical linkages to the community as well as supportive services to 
veterans with severe mental illnesses and their families.
  Mr. President, I ask unanimous consent that a letter from Mr. Joseph 
C. Zengerle, dated June 15, 1994, be inserted in the Record immediately 
following my remarks. Mr. President, I further ask unanimous consent 
that the full text of the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2340

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

     SECTION 1. FEDERAL CHARTER.

       The National Alliance for the Mentally Ill, a nonprofit 
     corporation organized under the laws of the State of Missouri 
     (hereafter in this Act referred to as the ``corporation''), 
     is recognized as such and is granted a Federal charter.

     SEC. 2. OBJECTS AND PURPOSES OF CORPORATION.

       The objects and purposes of the corporation are those 
     provided in its articles of incorporation, bylaws, and policy 
     platform and shall include the following:
       (1) Promoting a system of treatment and rehabilitation for 
     chronically mentally ill veterans in VA hospitals and in the 
     community.
       (2) Promoting increased emphasis on biomedical and services 
     research for chronically mentally ill veterans.
       (3) Conducting educational programs and activities with the 
     Department of Veterans Affairs to facilitate increased 
     knowledge about mental illness and reducing stigma and 
     misinformation about these disorders.
       (4) Developing community support groups within the 
     Department of Veterans Affairs Medical Centers for 
     chronically mentally ill veterans and their families.
       (5) Fostering expertise and resource allocation in 
     treatment and supportive services for chronically mentally 
     ill veterans who are homeless or in jeopardy of becoming 
     homeless.
       (6) Improving the interface of the Department of Veterans 
     Affairs with other important governmental and private 
     entities serving chronically mentally ill veterans.

     SEC. 3. NONDISCRIMINATION.

       In establishing the conditions of membership in the 
     corporation and in determining the requirements for serving 
     on the board of directors or as an officer of the 
     corporation, the corporation may not discriminate on the 
     basis of race, color, religion, sex, handicap, age, or 
     national origin.

     SEC. 4. RESTRICTIONS.

       (a) Loans.--The corporation may not make any loan to any 
     officer, director, or employee of the corporation.
       (b) Stock.--The corporation shall have no power to issue 
     any shares of stock or to declare or pay any dividends.
       (c) Congressional Approval.--The corporation shall not 
     claim congressional approval or the authorization of the 
     Federal Government for any of its activities.

     SEC. 5. AUDIT OF FINANCIAL TRANSACTIONS.

       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:
       ``The National Alliance for the Mentally Ill.''.

     SEC. 6. ANNUAL REPORT.

       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 required by 
     section 5 of this Act. The report shall not be printed as a 
     public document.

     SEC. 7. TAX-EXEMPT STATUS.

       The corporation shall maintain its status as an 
     organization exempt from taxation as provided in the Internal 
     Revenue Code of 1986. If the corporation fails to maintain 
     such status, the charter granted by this Act shall expire.

     SEC. 8. TERMINATION.

       The charter granted by this Act shall expire if the 
     corporation fails to comply with--
       (1) any restriction or other provision of this Act,
       (2) any provision of its bylaws or articles of 
     incorporation, or
       (3) any provision of the laws of the District of Columbia.
                                  ____

                                            Bingham, Dana & Gould,
                                    Washington, DC, June 15, 1994.
     Re NAMI Charter.

     Senator Dennis DeConcini,
     Hart Senate Office Building
     Washington, DC.

       Dear Senator DeConcini: I received a letter dated June 8, 
     1994 from Jim Cromwell on behalf of the National Association 
     for the Mentally Ill (``NAMI''), indicating that you were 
     considering legislation that would grant a Congressional 
     charter to NAMI and asking if I would convey to you the 
     nature of NAMI's assistance to veterans rated mentally 
     incompetent to handle their financial affairs (``incompetent 
     vets''). I'm glad to do so.
       As you may recall, we represented about 7,000 incompetent 
     vets in a class action against the U.S. Department of 
     Veterans Affairs (``VA'') before the U.S. District Court for 
     the Southern District of New York. The class claimed that a 
     provision of the Omnibus Budget Reconciliation Act of 1990 
     (``OBRA'') violated its Equal Protection and Due Process 
     rights. The District Court agreed with plaintiffs and granted 
     a preliminary injunction against enforcement of the statute, 
     which had cut off benefits for certain incompetent vets who 
     had assets above a specified minimum. The VA was not 
     successful in obtaining a stay of the injunction in either 
     the District Court or the U.S. Court of Appeals for the 
     Second Circuit, and disability payments to class members 
     resumed.
       The VA appealed the injunction to the Second Circuit on an 
     expedited schedule. At that point, NAMI had already been 
     active in supporting legislation to repeal the challenged 
     OBRA provision. NAMI readily agreed to support the class on 
     appeal as well, through a brief amicus curiae. NAMI filed a 
     brief before the Second Circuit, concentrating on the Due 
     Process deficiencies of the statute, for itself, the National 
     Mental Health Association, the American Psychiatric 
     Association and the Mental Health Law Project.
       When the appeals court reversed the District Court ruling 
     and remanded the case for further proceedings, the VA 
     declared the payments the class had received under the 
     injunction to be overpayments. Plaintiffs not only challenged 
     the VA's assertion of recoupment rights in the District 
     Court, but also invoked the Title 38 provision on forgiveness 
     of individual debts for reasons of ``equity and good 
     conscience'' in a letter to the Secretary of Veterans 
     Affairs, indicating the possibility of filing a claim 
     directly with the VA seeking administrative relief for all 
     members of the class if the VA continued to seek recoupment.
       Faced with further District Court proceedings, the threat 
     of a separate administrative claim, a Senate budget 
     resolution condemning the statute and pending legislation 
     with widespread, bipartisan support in the House to repeal 
     the statute, the VA, represented by the Justice Department, 
     agreed to forego recoupment of the injunction payments to the 
     class in exchange for plaintiffs' agreement to forego further 
     litigative and administrative proceedings. The end result was 
     that the class received as a result of the injunction, and 
     was able to retain, $55 million in disability payments of 
     which the OBRA provision otherwise would have deprived them.
       NAMI's persistent efforts to help incompetent vets was 
     important to legislative actions that demonstrated broad 
     support for class relief and to litigation that showed the 
     mental health community was also strongly behind the class, 
     both of which were essential ingredients in striking a 
     favorable settlement with the VA. Moreover, notwithstanding 
     earlier statements to the contrary, the Bush administration 
     abandoned its plans to seek renewal of the statute, sunsetted 
     by its terms after two years, because of the supportive 
     climate NAMI helped generate. Finally, even after the 
     important achievements of the settlement and the sunset had 
     been realized, NAMI continued to press for legislative relief 
     to secure for incompetent vets the balance of the disability 
     compensation kept from them by the statute and not recovered 
     through the settlement.
       Given our experience with NAMI on this issue since 1991, it 
     is clear that the organization is not only zealous to protect 
     the rights of those with mental disabilities but also has no 
     hesitation forcefully to express its interests in fields like 
     veterans affairs, which do not lie in NAMI's traditional 
     backyard, and to do so with respect to legislative, 
     executive, and judicial actions as well as membership 
     activities and publications. NAMI shows the kind of across-
     the-board involvement, and determination to serve its 
     constituents, that in my view fully support its request for a 
     Congressional charter.
       If I can provide any further information, please do not 
     hesitate to contact me.
           Sincerely,

                                       Joseph C. Zengerle.

                                 ______

      By Mr. DeCONCINI.
  S. 2341. A bill to amend chapter 30 of title 35, United States Code, 
to afford third parties an opportunity for greater participation in 
reexamination proceedings before the United States Patent and Trademark 
Office, and for other purposes; to the Committee on the Judiciary.


              the patent reexamination reform act of 1994

 Mr. DeCONCINI. Mr. President, today I would like to introduce 
a bill, the Patent Reexamination Reform Act of 1994, with the support 
of the Clinton administration. This legislation will improve our patent 
reexamination system by broadening the basis for and scope of 
reexamination proceedings at the Patent and Trademark Office [PTO], 
increasing participation on reexamination procedures and appeals, and 
precluding reexamination in specified circumstances. Make these changes 
will provide patent owners and third parties alike with a cost-
effective alternative to patent litigation in Federal courts to resolve 
many questions of patent validity.


          why is the current reexamination process inadequate?

  In 1981, Congress provided for the reexamination of patents at the 
PTO. The purpose of reexamination is to provide an alternative to 
litigation over the validity of a patent. The administrative procedures 
for reexamination are Ex Parte in nature and allow the patent owner to 
file amendments, conduct interviews and make appeals. This provides 
patent owners an efficient means to confirm the patentability of issued 
patents and to reduce the likelihood of validity challenges, 
Reexamination concludes with a reexamination certificate which may 
cancel any claims found to be unpatentable and which confirms the 
patentability of claims found patentable.
  However, the Ex Parte nature of reexamination discourages its use as 
an alternative to validity challenges in Federal Court. Third parties 
do not perceive the reexamination process to be fair because of their 
limit ability to participate in the proceedings. Third parties are 
limited to filing the initial request and filing a reply if the patent 
owner files a statement in response to the order for reexamination. If 
the patent owner amends the claims during the reexamination, which 
occur in over two-thirds of all reexamination proceedings, the third 
party has no opportunity to comment on the significance of those 
changes.
  The restrictions incorporated into the current system have made 
reexamination a very unattractive option for third parties to challenge 
patent validity. Complicating this problem is the perception, 
particularly among juries, that the validity of a patent that 
successfully emerges from a reexamination is somehow enhanced. This 
imposes an increased burden upon third parties to prove invalidity in 
the courts and makes third parties reluctant to request reexamination 
at the PTO. Therefore, third parties believe that it is not in their 
best interest to request reexamination and, instead, take the question 
of validity directly to court.
  The limited basis and scope of reexamination is another reason third 
parties become discouraged. Patent claims are currently reexamined only 
in light of previously issued patents or printed publications. Only new 
or amended claims are Examined under the disclosure and claim 
requirements of the patent law. To ensure that only valid patents are 
issued, patent claims should also be reexamined for compliance with the 
disclosure and claim requirements of the patent law. This means that 
the PTO would be able to reevaluate compliance with every statutory 
basis of patentability, other than Sec. 101 compliance, that is 
typically reviewed during the original examination. The Patent 
Reexamination Reform Act of 1994 provides for this type of 
reexamination.


      how else would this bill improve the reexamination process?

  Third parties would have the opportunity for meaningful participation 
in reexamination proceedings under this bill. In place of the current 
limitations on participation, third parties could submit written 
comments throughout the reexamination proceedings with minimal added 
expense or opportunity to harass the patent owner. The PTO also intends 
to provide, through rule making, the right of third parties to 
participate in any examiner interview initiated by either the patent 
owner or the examiner.
  The bill also would give appeal rights which parallel the rights of 
patent owners to third parties. This change provides third parties the 
opportunity to receive judicial review of reexamination decisions and 
further encourages the use of reexamination as an alternative to 
litigation. However, third parties are estopped from litigating 
validity, in any forum, after the U.S. Court of Appeals determines that 
a claim is patentable. This maintains a desirable balance between third 
party participation and an expedited proceeding to reexamination patent 
validity.
  This bill contains numerous provisions which would make reexamination 
proceedings more desirable to third parties. Many positive steps are 
taken to alleviate the perception of unfairness in the system. A 
consensus has developed within the patent community and representative 
patent organizations that there is, in fact, a problem with the 
reexamination process and that reform is needed. The patent bar, 
including the American Intellectual Property Law Association [AIPLA], 
as well as industry trade associations such as Intellectual Property 
Owners [IPO], National Association of Manufacturers [NAM], the Business 
Software Alliance, and the Software Publishers Association all have 
indicated their support for a reexamination system that provides 
greater third party participation.
  This bill addresses many of the concerns surrounding the issue 
without upsetting the balance needed to ensure confidence in the patent 
system. The reforms made by this bill will help build confidence in the 
patent system in all industries by ensuring that invalid patents can be 
invalidated more readily, and, conversely, by assuring the public that 
a patent that survives reexamination will remain valid if subsequently 
enforced in court. I support the changes made by this legislation and 
feel confident the bill will provide clear benefits for patent owners 
and third parties alike, and will improve the operation of the U.S. 
patent system.
  Mr. President, I ask unanimous consent that the entire text of the 
bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2341

       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 ``Patent Reexamination Reform 
     Act of 1994''.

     SEC. 2. DEFINITIONS.

       Section 100 of title 35, United States Code, is amended by 
     adding at the end thereof the following new subsection:
       ``(e) The term `third-party requester' means a person 
     requesting reexamination under section 302 of this title who 
     is not the patent owner.''.

     SEC. 3. REEXAMINATION PROCEDURES.

       (a) Request for Reexamination.--Section 302 of title 35, 
     United States Code, is amended to read as follows:

     ``Sec. 302. Request for reexamination

       ``Any person at any time may file a request for 
     reexamination by the Office of a patent on the basis of any 
     prior art cited under the provisions of section 301 of this 
     title or on the basis of the requirements of section 112 of 
     this title except for the best mode requirement. The request 
     must be in writing and must be accompanied by payment of a 
     reexamination fee established by the Commissioner of Patents 
     and Trademarks pursuant to the provisions of section 41 of 
     this title. The request must set forth the pertinency and 
     manner of applying cited prior art to every claim for which 
     reexamination is requested or the manner in which the patent 
     specification or claims fail to comply with the requirements 
     of section 112 of this title. Unless the requesting person is 
     the owner of the patent, the Commissioner promptly will send 
     a copy of the request to the owner of record of the 
     patent.''.
       (b) Determination of Issue by Commissioner.--Section 303 of 
     title 35, United States Code, is amended to read as follows:

     ``Sec. 303. Determination of issue by Commissioner

       ``(a) Within three months following the filing of a request 
     for reexamination under the provisions of section 302 of this 
     title, the Commissioner will determine whether a substantial 
     new question of patentability affecting any claim of the 
     patent concerned is raised by the request, with or without 
     consideration of other patents or printed publications. On 
     his own initiative, and at any time, the Commissioner may 
     determine whether a substantial new question of patentability 
     is raised by patents and publications discovered by him or 
     cited under the provisions of section 301 of this title or by 
     the failure of the patent specification or claims to comply 
     with the requirements of section 112 of this title except for 
     the best mode requirement.
       ``(b) A record of the Commissioner's determination under 
     subsection (a) of this section will be placed in the official 
     file of the patent, and a copy promptly will be given or 
     mailed to the owner of record of the patent and to the third-
     party requester, if any.
       ``(c) A determination by the Commissioner pursuant to 
     subsection (a) of this section will be final and 
     nonappealable. Upon a determination that no substantial new 
     question of patentability has been raised, the Commissioner 
     may refund a portion of the reexamination fee required under 
     section 302 of this title.''.
       (c) Reexamination Order by Commissioner.--Section 304 of 
     title 35, United States Code, is amended to read as follows:

     ``Sec. 304. Reexamination order by Commissioner

       ``If, in a determination made under the provisions of 
     section 303(a) of this title, the Commissioner finds that a 
     substantial new question of patentability affecting any claim 
     of a patent is raised, the determination will include an 
     order for reexamination of the patent for resolution of the 
     question. The order may be accompanied by the initial Office 
     action on the merits of the reexamination conducted in 
     accordance with section 305 of this title.''.
       (d) Conduct of Reexamination Proceedings.--Section 305 of 
     title 35, United States Code, is amended to read as follows:

     ``Sec. 305. Conduct of reexamination proceedings

       ``(a) Subject to subsection (b) of this section, 
     reexamination will be conducted according to the procedures 
     established for initial examination under the provisions of 
     sections 132 and 133 of this title. In any reexamination 
     proceeding under this chapter, the patent owner will be 
     permitted to propose any amendment to the patent and a new 
     claim or claims thereto in response to a decision adverse to 
     the patentability of a claim of a patent. No proposed amended 
     or new claim enlarging the scope of the claims of the patent 
     will be permitted in a reexamination proceeding under this 
     chapter.
       ``(b)(1) This subsection shall apply to any reexamination 
     proceeding in which the order for reexamination is based upon 
     a third-party reexamination request.
       ``(2) Any document (other than the reexamination request) 
     filed in a reexamination proceeding by either the patent 
     owner or the third-party requester shall be served on any 
     other party.
       ``(3)(A) If the patent owner files a response to any Office 
     action on the merits, the third-party requester may once file 
     written comments within a reasonable period. At a minimum, 
     such comments may be filed within 1 month after the date of 
     service of the patent owner's response.
       ``(B) Comments filed under this paragraph shall be limited 
     to issues covered by the Office action or the patent owner's 
     response.
       ``(c) Unless otherwise provided by the Commissioner for 
     good cause, all reexamination proceedings under this section, 
     including any appeal to the Board of Patent Appeals and 
     Interferences, will be conducted with special dispatch within 
     the Office.''.
       (e) Appeal.--Section 306 of title 35, United States Code, 
     is amended to read as follows:

     ``Sec. 306. Appeal

       ``(a) The patent owner involved in a reexamination 
     proceeding under this chapter may--
       ``(1) appeal under the provisions of section 134 of this 
     title, and may appeal under the provisions of sections 141 
     through 144 of this title, with respect to any decision 
     adverse to the patentability of any original or proposed 
     amended or new claim of the patent; or
       ``(2) be a party to any appeal taken by a third-party 
     requester under subsection (b) of this section.
       ``(b) A third-party requester may--
       ``(1) appeal under the provisions of section 134 of this 
     title, and may appeal under the provisions of sections 141 
     through 144 of this title, with respect to any final decision 
     favorable to the patentability of any original or proposed 
     amended or new claim of the patent; or
       ``(2) be a party to any appeal taken by the patent owner, 
     subject to subsection (c) of this section.
       ``(c) A third-party requester who files a notice of appeal 
     or who participates as a party to an appeal by the patent 
     owner under the provisions of sections 141 through 144 of 
     this title is estopped from later asserting, in any forum, 
     the invalidity of any claim determined to be patentable on 
     appeal on any ground which the third-party requester raised 
     or could have raised during the reexamination proceedings. A 
     third-party requester is deemed not to have participated as a 
     party to an appeal by the patent owner unless, within twenty 
     days after the patent owner has filed notice of appeal, the 
     third-party requester files notice with the Commissioner 
     electing to participate.''.
       (f) Reexamination Prohibited.--(1) Chapter 30 of title 35, 
     United States Code, is amended by adding the following 
     section at the end thereof:

     ``Sec. 308. Reexamination prohibited

       ``(a) Notwithstanding any provision of this chapter, once 
     an order for reexamination of a patent has been issued under 
     section 304 of this title, neither the patent owner nor the 
     third-party requester, if any, nor privies of either, may 
     file a subsequent request for reexamination of the patent 
     until a reexamination certificate is issued and published 
     under section 307 of this title, unless authorized by the 
     Commissioner.
       ``(b) Once a final decision has been entered against a 
     party in a civil action arising in whole or in part under 
     section 1338 of title 28 that the party has not sustained its 
     burden of proving the invalidity of any patent claim in suit, 
     then neither that party nor its privies may thereafter 
     request reexamination of any such patent claim on the basis 
     of issues which that party or its privies raised or could 
     have raised in such civil action, and a reexamination 
     requested by that party or its privies on the basis of such 
     issues may not thereafter be maintained by the Office, 
     notwithstanding any provision of this chapter.''.
       (2) The table of sections for chapter 30 of title 35, 
     United States Code, is amended by adding the following at the 
     end thereof:

``308. Reexamination prohibited.''.

     SEC. 4. CONFORMING AMENDMENTS.

       (a) Board of Patent Appeals and Interferences.--The first 
     sentence of section 7(b) of title 35, United States Code, is 
     amended to read as follows: ``The Board of Patent Appeals and 
     Interferences shall, on written appeal of an applicant, or a 
     patent owner or a third-party requester in a reexamination 
     proceeding, review adverse decisions of examiners upon 
     applications for patents and decisions of examiners in 
     reexamination proceedings, and shall determine priority and 
     patentability of invention in interferences declared under 
     section 135(a) of this title.''.
       (b) Patent Fees; Patent and Trademark Search Systems.--
     Section 41(a)(7) of title 35, United States Code, is amended 
     by inserting ``or for an unintentionally delayed response by 
     the patent owner in a re-examination proceeding,'' after 
     ``issuing each patent,''.
       (c) Appeal to the Board of Patent Appeals and 
     Interferences.--Section 134 of title 35, United States Code, 
     is amended to read as follows:

     ``Sec. 134. Appeal to the Board of Patent Appeals and 
       Interferences

       ``(a) An applicant for a patent, any of whose claims has 
     been twice rejected, may appeal from the decision of the 
     primary examiner to the Board of Patent Appeals and 
     Interferences, having once paid the fee for such appeal.
       ``(b) A patent owner in a reexamination proceeding may 
     appeal from the final rejection of any claim by the primary 
     examiner to the Board of Patent Appeals and Interferences, 
     having once paid the fee for such appeal.
       ``(c) A third-party requester may appeal to the Board of 
     Patent Appeals and Interferences from the final decision of 
     the primary examiner favorable to the patentability of any 
     original or proposed amended or new claim of a patent, having 
     once paid the fee for such appeal.''.
       (d) Appeal to Court of Appeals for the Federal Circuit.--
     Section 141 of title 35, United States Code, is amended by 
     amending the first sentence to read as follows: ``An 
     applicant, a patent owner or a third-party requester, 
     dissatisfied with the final decision in an appeal to the 
     Board of Patent Appeals and Interferences under section 134 
     of this title, may appeal the decision to the United States 
     Court of Appeals for the Federal Circuit.''.
       (e) Proceedings on Appeal.--Section 143 of title 35, United 
     States Code, is amended by amending the third sentence to 
     read as follows: ``In ex parte and reexamination cases, the 
     Commissioner shall submit to the court in writing the grounds 
     for the decision of the Patent and Trademark Office, 
     addressing all the issues involved in the appeal.''.

     SEC. 5. EFFECTIVE DATES.

       (a) In General.--Sections 2 and 4 and subsections (a), (b), 
     (c), (d), and (e) of section 3 of this Act shall take effect 
     six months after the date of enactment of this Act and shall 
     apply to all reexamination requests filed on or after such 
     effective date.
       (b) Reexamination Prohibition Provision.--Section 1 and 
     subsections (f) and (g) of section 3 of this Act shall take 
     effect on the date of enactment of this Act.
                                 ______

      By Mr. DORGAN (for himself, Mr. Daschle, Mr. Simon, Mr. Conrad, 
        Mr. Feingold, Mr. Reid, Mr. Wellstone, and Mr. Levin):
  S. 2342. A bill to amend the Internal Revenue Code of 1986 to improve 
the collection of taxes of United States persons moving production 
abroad and foreign persons doing business in the United States, and for 
other purposes; to the Committee on Finance.


                 The foreign tax compliance act of 1994

 Mr. DORGAN. Mr. President, today, I'm joined by Senators 
Daschle, Simon, Conrad, Feingold, Reid, Wellstone, and Levin in 
introducing the Foreign Tax Compliance Act of 1994 to shut down 
perverse provisions in our tax laws that allow multinational 
corporations that do business in the United States to pay virtually no 
taxes here and that subsidize the flight of U.S. producers and jobs out 
of this country. House Majority Leader Richard Gephardt, Congressman 
Dave Obey, and 25 other distinguished members of Congress are 
introducing a companion bill in the House of Representatives.
  President Clinton's assessment about the gravity of this problem is 
absolutely right. These misguided policies are costing this country 
tens of billions of dollars.
  A review of recent IRS return data show that nearly three quarters of 
the foreign-based corporations that do business here pay no Federal 
income taxes. U.S.-based companies do not fare much better. I believe 
that we should not ask our domestic producers on Main Street to compete 
against tough international competitors that are not paying their fair 
share of U.S. taxes.
  For years, the IRS has been unduly hampered in its tax enforcement of 
multinational firms and foreign investors. It has been using outdated 
tax enforcement tools to deal with sophisticated multinations and well-
advised foreign investors of today.
  As though that weren't bad enough, the tax laws themselves dig the 
hole deeper for domestic producers. As things stand now, runaway 
factories get a special tax break called deferral that is not available 
to those that stay in the United States.
  The way this perverse tax bonus works is basically quite simple. If a 
U.S. company moves an operation abroad, it can defer its taxes on the 
resulting profits until it sends those profits back to the United 
States in the form of dividends.
  Incredible as it may seem, we actually reward companies that move 
their jobs and capital out of the United States. This deferral 
provision operates as an interest-free loan program to help our biggest 
and brightest companies invest outside of the United States. And that 
is precisely the way the corporate world uses it.
  A tax expert testifying before Congress offered an example that 
demonstrates the absurdity of our current policy. Consider two U.S. 
manufacturing companies that are identical in almost every respect. 
These companies produce virtually identical products and compete head-
to-head in the tough U.S. marketplace. However, company A will get an 
interest-free loan from the Federal Government because it has moved its 
operations to a tax haven and has not brought any earnings back into 
this country. Company B, deciding to keep it operations in the United 
States, does not receive such a government loan. As a result, company A 
will have a greater, tax-subsidized return than company B, and thus 
company A will be able to beat the American producer in the U.S. 
marketplace.
  Unfortunately, this interest-free loan program exists today. The 
Joint Tax Committee estimates the costs of this perverse incentive at 
$1.6 billion over 5 years. And that's why we introduced legislation to 
repeal tax deferral in these circumstances.
  This legislation is carefully targeted to end tax deferral only where 
U.S. multinationals produce abroad in foreign tax havens, and ship 
those tax haven products back in the United States. It's important to 
note that this bill does nothing to hinder U.S. multinationals that 
produce abroad from competing with foreign firms in foreign markets.
  The point is that we can no longer afford to subsidize the exodus of 
our biggest and brightest companies to countries peddling the lowest 
tax rates. It's unfair that American workers are losing thousands of 
jobs every year because of our own tax laws. Our Main Street businesses 
deserve a level playing field to compete against well-financed and 
well-advised multinationals.
  Our tax enforcement officials also have been forced to use 
antiquated, 19th century tax enforcement tools to deal with 
international taxpayers. As a result, many international firms are able 
to juggle income to their affiliates in the friendliest jurisdictions--
or into the black holes of their international balance sheets where 
corporate profits are reported to no country at all.
  Again, this is not mere polemics. According to the General Accounting 
Office [GAO], some 73 percent of the foreign-based corporations that do 
business in the United States are paying no Federal incomes taxes. 
Zero.
  This problem has festered at the IRS for decades, and only the 
explosion in world trade has forced it into the open. How to 
distinguish a corporation's U.S. income, from the income that should be 
reported elsewhere? It sounds simple, but in practice it can be 
devilishly complex. For example, a global enterprise operates through a 
multitude of subsidiaries throughout the world. Patents, parts, shared 
overhead, and a zillion other things flow freely through the company's 
worldwide web.

  By putting prices on these transfers, the company can easily shift 
its income off its U.S. books and into the black holes in its 
international balance sheets. For foreign-based firms, whose main 
records are thousands of miles away, such transfer pricing strategies 
are especially attractive.
  The way the IRS tries to uncover these shell games is straight out of 
the Keystone Kops. Beleaguered auditors have to comb through a 
corporation's thousands of internal transactions--one by one--and try a 
adjust the prices to a hypothetical market level.
  The IRS is overwhelmed, and big corporations know it. The result is 
massive tax avoidance, combined with medieval disputes over correct 
prices that are clogging the tax court at an increasing rate.
  Long ago, the States had to come to grips with corporations operating 
freely across their borders. They knew they couldn't possibly 
disentangle the spaghetti pile of a large corporation's internal 
accounting. So they devised a simple formula to do the job instead. 
Today, we can apply that basic approach to corporations operating 
across national borders as well, as some States do already.
  Early this summer, the U.S. Supreme Court once again upheld the 
States' use of a formula method as reasonable and fair. A simple 
formulaic approach would flush out the billions of dollars that 
currently disappear in the Treasury's lawyer-intensive comparable 
pricing approach. Better still, the formula approach would render the 
medieval accounting games irrelevant; corporations could focus on 
business instead of fancy tax strategies, and the Government could save 
money.
  This legislation expresses the Sense of the Congress that the 
Treasury Department should adopt a more streamlined and efficient 
method of enforcing Federal tax laws involving multinational 
corporations, especially those based abroad. In particular, we 
recommend using a simple formula approach where the current ``arm's 
length'' transaction rules don't work.
  Finally, there's evidence suggesting that international firms and 
foreign investors are artificially shifting their U.S. source income 
outside of the taxing jurisdiction of the United States by entering 
into derivative financial contracts. According to some recent 
estimates, the total amount of financial derivatives today is fast 
approaching $16 trillion. This emerging tax loophole may have a 
devastating impact on Federal revenues. In addition, our tax 
authorities have known for over a decade that the current enforcement 
tools used for administering tax treaty benefits were insufficient.

  That's why our legislation expresses the Sense of Congress that the 
Treasury Department use its existing authority to issue long-overdue 
regulations to ensure that U.S. tax treaty benefits are available only 
to those persons entitled to such benefits and to prevent the avoidance 
of U.S. tax by the use of derivative financial instruments. It's my 
understanding that Treasury Department is currently reexamining its 
rules in both of these areas. Clearly the current system is in need of 
fundamental change, and I applaud Treasury Department officials for 
their willingness to tackle these problems.
  In summary, we must get rid of the tax laws and IRS enforcement 
practices that favor tough international competitors and foreign 
production to the detriment of our domestic producers. I believe that 
the Treasury Department must act expeditiously under its existing 
authority to bring the Nation's multinational tax enforcement tools up 
to date. In addition, the time has come to end deferral for U.S. 
corporations that move jobs abroad, but then ship their products back 
into the United States.
  I ask unanimous consent that the full text of the legislation be 
included in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2342

       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 ``Foreign Tax Compliance Act 
     of 1994''.

     SEC. 2. TAXATION OF INCOME OF CONTROLLED FOREIGN CORPORATIONS 
                   ATTRIBUTABLE TO IMPORTED PROPERTY.

       (a) General Rule.--Subsection (a) of section 954 of the 
     Internal Revenue Code of 1986 (defining foreign base company 
     income) is amended by striking ``and'' at the end of 
     paragraph (4), by striking the period at the end of paragraph 
     (5) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(6) imported property income for the taxable year 
     (determined under subsection (h) and reduced as provided in 
     subsection (b)(5)).''
       (b) Definition of Imported Property Income.--Section 954 of 
     the Internal Revenue Code of 1986 is amended by adding at the 
     end the following new subsection:
       ``(h) Imported Property Income.--
       ``(1) In general.--For purposes of subsection (a)(6), the 
     term `imported property income' means income (whether in the 
     form of profits, commissions, fees, or otherwise) derived in 
     connection with--
       ``(A) manufacturing, producing, growing, or extracting 
     imported property,
       ``(B) the sale, exchange, or other disposition of imported 
     property, or
       ``(C) the lease, rental, or licensing of imported property.

     Such term shall not include any foreign oil and gas 
     extraction income (within the meaning of section 907(c)) or 
     any foreign oil related income (within the meaning of section 
     907(c)).
       ``(2) Imported property.--For purposes of this subsection--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `imported property' means property which 
     is imported into the United States by the controlled foreign 
     corporation or a related person.
       ``(B) Imported property includes certain property imported 
     by unrelated persons.--The term `imported property' includes 
     any property imported into the United States by an unrelated 
     person if, when such property was sold to the unrelated 
     person by the controlled foreign corporation (or a related 
     person), it was reasonable to expect that--
       ``(i) such property would be imported into the United 
     States, or
       ``(ii) such property would be used as a component in other 
     property which would be imported into the United States.
       ``(C) Exception for property subsequently exported.--The 
     term `imported property' does not include any property which 
     is imported into the United States and which--
       ``(i) before substantial use in the United States, is sold, 
     leased, or rented by the controlled foreign corporation or a 
     related person for direct use, consumption, or disposition 
     outside the United States, or
       ``(ii) is used by the controlled foreign corporation or a 
     related person as a component in other property which is so 
     sold, leased, or rented.
       ``(3) Definitions and special rules.--
       ``(A) Import.--For purposes of this subsection, the term 
     `import' means entering, or withdrawal from warehouse, for 
     consumption or use. Such term includes any grant of the right 
     to use an intangible (as defined in section 936(b)(3)(B)) in 
     the United States.
       ``(B) Unrelated person.--For purposes of this subsection, 
     the term `unrelated person' means any person who is not a 
     related person with respect to the controlled foreign 
     corporation.
       ``(C) Coordination with foreign base company sales 
     income.--For purposes of this section, the term `foreign base 
     company sales income' shall not include any imported property 
     income.''
       (c) Separate Application of Limitations on Foreign Tax 
     Credit for Imported Property Income.--
       (1) In general.--Paragraph (1) of section 904(d) of the 
     Internal Revenue Code of 1986 (relating to separate 
     application of section with respect to certain categories of 
     income) is amended by striking ``and'' at the end of 
     subparagraph (H), by redesignating subparagraph (I) as 
     subparagraph (J), and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) imported property income, and''.
       (2) Imported property income defined.--Paragraph (2) of 
     section 904(d) of such Code is amended by redesignating 
     subparagraphs (H) and (I) as subparagraphs (I) and (J), 
     respectively, and by inserting after subparagraph (G) the 
     following new subparagraph:
       ``(H) Imported property income.--The term `imported 
     property income' means any income received or accrued by any 
     person which is of a kind which would be imported property 
     income (as defined in section 954(h)).''
       (3) Look-thru rules to apply.--Clause (i) of section 
     904(d)(3)(F) of such Code is amended by striking ``or (E)'' 
     and inserting ``(E), or (H)''.
       (d) Technical Amendments.--
       (1) Clause (iii) of section 952(c)(1)(B) of the Internal 
     Revenue Code of 1986 (relating to certain prior year deficits 
     may be taken into account) is amended by inserting the 
     following subclause after subclause (II) (and by 
     redesignating the following subclauses accordingly):
       ``(III) imported property income,''.
       (2) Paragraph (5) of section 954(b) of such Code (relating 
     to deductions to be taken into account) is amended by 
     striking ``and the foreign base company oil related income'' 
     and inserting ``the foreign base company oil related income, 
     and the imported property income''.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     of foreign corporations beginning after December 31, 1994, 
     and to taxable years of United States shareholders within 
     which or with which such taxable years of such foreign 
     corporations end.
       (2) Subsection (c).--The amendments made by subsection (c) 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 3. IMPROVEMENTS IN THE COLLECTION OF UNITED STATES TAXES 
                   OWED BY FOREIGN PERSONS.

       (a) Findings.--The Congress finds that--
       (1) there is evidence suggesting that foreign-controlled 
     corporations doing business in the United States do not pay 
     their fair share of taxes;
       (2) over 70 percent of foreign-controlled corporations 
     doing business in the United States pay no Federal income 
     tax;
       (3) the United States Department of the Treasury has 
     limited its ability to protect the revenue base in the case 
     of cross-border transactions, to the detriment of taxpayers 
     engaged solely in domestic transactions;
       (4) the United States Department of the Treasury has been 
     using antiquated accounting concepts to deal with 
     sophisticated multinational corporations;
       (5) substantial Federal revenues are lost annually due to 
     the inability of the Internal Revenue Service to enforce the 
     ``arm's length'' transaction rules, along with substantial 
     amounts spent on administration and litigation;
       (6) current procedures of the Internal Revenue Service are 
     insufficient for ensuring that a foreigner who is not a 
     resident of a foreign country does not take advantage of the 
     treaty benefits of that country; and
       (7) current regulations and other positions adopted by the 
     Internal Revenue Service may permit foreign persons to avoid 
     United States taxes by utilizing derivative financial 
     products which replicate the economic features of United 
     States taxable investments.
       (b) Sense of the Congress.--It is the sense of the Congress 
     that deficit reduction should be achieved, in part, by ending 
     loopholes and enforcement breakdowns that now foster the 
     underpayment of taxes on income from cross-border 
     transactions and enable foreign-controlled corporations 
     operating in the United States, and foreign persons investing 
     in the United States, to pay no taxes, including by--
       (1) the adoption of a more streamlined and efficient method 
     of enforcing Federal tax laws involving multinational 
     corporations, especially those based abroad, and, in 
     particular, the use of by the Treasury Department of a 
     formulaic approach in cases in which the current ``arm's 
     length'' transaction rules do not work; and
       (2) the promulgation of regulations by the Secretary of the 
     Treasury or the Secretary's delegate no later than December 
     31, 1994, which--
       (A) establish certification, refund, or other procedures 
     which ensure that any treaty benefit relating to withholding 
     of tax under sections 1441 and 1442 of the Internal Revenue 
     Code of 1986 is available only to persons entitled to the 
     benefit, and
       (B) prevent the avoidance of withholding of tax under such 
     sections by use of derivative financial instruments, 
     including regulations providing for the sourcing of income of 
     foreign residents from notional principal contracts as income 
     from sources within the United States in appropriate 
     cases.

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