[Congressional Record Volume 141, Number 113 (Thursday, July 13, 1995)]
[Senate]
[Pages S9913-S9915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            BLM LEGISLATION

  Mr. THOMAS. Mr. President, I rise to introduce legislation that would 
transfer the lands managed by the BLM in the various States to State 
control. This bill is not a new one. We have had it in last year. But 
it is a commonsense approach that supports the goal of good government, 
supports the goal of bringing government closer to the people, and a 
necessary reform in the way that public lands are managed.
  Currently, the BLM, the Bureau of Land Management, manages nearly 270 
million acres of land in the United States, most of it, of course, in 
the West. Wyoming, for example--nearly 50 percent of Wyoming is owned 
by the Federal Government, much of it managed by the BLM. In some other 
States, it is more--86 percent in Nevada. So when half of your State is 
managed by the Federal Government, it has a great deal to do with your 
future. It has a great deal to do with the economy and growth, because 
these are multiple use lands.
  Let me make a point originally that is very important to this bill. 
We are talking about Bureau of Land Management lands. We are not 
talking about Forest Service. We are not talking about wilderness. We 
are not talking about parks--lands that are set aside with particular 
purpose, lands that had a particular character. BLM lands are residual 
lands that were left when the homesteaders came in the West and took 
the land that is along the river and took the winter feed and took the 
best land. That land that was left was managed by the Federal 
Government.
  Indeed, in the early acts that had to do with managing that land, it 
said ``manage it pending disposal.'' The notion was never to maintain 
them. So we are talking about a fundamental change and that is sort of 
what we are doing in this Congress, looking at some fundamental changes 
in the way we operate Government. It moves Government closer to the 
people, and that is what it is all about. It helps to reduce the size 
and cost of the Federal Government and transfers this function to the 
State as we are talking about transferring others.
  It would have to do with the budget. It would, indeed, save money for 
the budget of the United States. There will be less money going to the 
Department of Interior. That is just the way it is. So the priorities 
will have to be established. We heard a lot about not being able to 
finance national parks, and that is actually going to be the case. So 
what it does is set some priorities as to where that money ought to be.
  There is a fairness doctrine here. The States east of the Missouri 
River do not have half of their lands belong to the Federal Government. 
So there is a fairness question. Why should the State not have these 
lands? There is a question of States rights. Many maintain the 
Constitution does not provide the authority for the Federal Government 
to maintain those lands that have no specific use. I do not argue that. 
Others say we ought to get control by having the counties do zoning. 
They do that some in Arizona. That is an idea. I say, let us move them 
back to the States and let the States manage them as public lands. 
These will be multiple use lands, for hunting, for fishing, for 
grazing, for mineral development.
  If you have ever seen a map of the West, you will see a strange 
ownership pattern. There are lands spread around over the whole State. 
One of the most unusual is the checkerboard, what we call the 
checkerboard, that runs all the way through Wyoming and through much of 
the West, when every other section was given to the railroads early on, 
20 miles on either side of the railroad. So those checkerboards still 
belong to the Federal Government with deeded lands in between.
  These are low production lands. These are not national parks. These 
are very low rainfall, low moisture content areas, so they are very 
unproductive. It takes a great deal of land to support one cow-calf 
unit.
  Along with the House--there will be an identical bill in the House 
that will be introduced to transfer these lands to the State. Actually, 
in order to have time to accommodate that, in order to do something 
with the budgeting, that would be a 10-year period before they would be 
transferred. But we almost constantly have a conflict between the 
States, between the users --whatever they are, whether they are 
commodity users or recreational users--and the Federal land managers. 
And these folks do a good job. I have no quarrel with the managers. I 
just think, as many 

[[Page S 9914]]
others do, the closer you are, with Government, to the people who are 
governed, the more likely it is to be a successful effort.
  So I urge my colleagues to support this legislation. It will help 
reduce the Federal budget. It will certainly increase individual States 
rights. It will keep the BLM lands in public lands so they are 
available for access for everyone. Finally, and perhaps most important 
of all, it provides fairness and equity for Western States, each of 
whom would have the option.
  The time has come for the Federal Government to release the 
stranglehold on the Western States and let us manage our own affairs.
  I join my colleagues in the effort to reform the way public lands are 
managed.
 Mr. CRAIG. Mr. President, I would like to compliment Senator 
Thomas for bringing this bill forward and opening what I hope will be 
an enlightening discussion.
  The subject matter of this bill is of great consequence in the 
Western States. The sheer size and proportion of Federal ownership in 
the West not only contrasts dramatically with the situation in Eastern 
States, but it is the source of much of the conflict in this country 
over the use of public lands. A quick look at a U.S. map of government 
lands dramatically illustrates the differences. Sixty to 80 percent of 
many Western States are federally owned, while the comparison east of 
the 100th meridian is typically less than 5 percent. Westerners feel 
this is inequitable, and some claim it is unconstitutional. They feel 
burdened by Federal regulation in their daily lives. They feel burdened 
by Federal regulation in their daily lives. Such sentiment is poorly 
understood in nonpublic land States.
  This bill would improve the balance of State and Federal lands in the 
West and dissolve some of the source of discontent. It would give 
citizens more control over their lives through State government. For 
example, in Idaho BLM controls 12 million acres, or 22 percent of the 
State. Other Federal agencies control an additional 41 percent. 
Transfer of BLM ownership to the State would dramatically change the 
ownership equation to one of much fairer balance.
  Nationwide, the Bureau of Land Management oversees 272 million acres, 
or 41 percent of the total Federal ownership. Nearly all of this is in 
the West, and it consists largely of those lands remaining in the 
public domain after the national parks, national wildlife refuges and 
national forests were set apart and placed under management of other 
Federal agencies.
  The concept of State management or ownership of Federal lands, in 
this case the lands of the Bureau of Land Management, has surfaced 
before. But there has never been a better time to seriously examine the 
issue.
  Congress has agreed to balance the Federal budget by 2002. That goal 
demands that we investigate new ways of doing business throughout the 
Federal Government. It may be that the States can own and manage the 
BLM lands and the underlying mineral estate at much less cost, while 
protecting the environment and maintaining public access and the many 
uses of these lands and waters.
  I see no reason why that can't be done, and if it can, it would be 
desirable in several ways: Management costs would decrease, placing 
less burden on the taxpayers in the long run; management decisions 
would be made instate with more opportunity for residents to have their 
voices heard; existing State programs for recreation, grazing, wildfire 
suppression and environmental protections, such as water quality 
standards, could be integrated with similar BLM programs for economies 
of scale and consistency.
  I am cosponsoring Senator Thomas' bill to encourage debate on these 
issues. This bill is a starting point. The considerations in each State 
will differ, of course, and there are a number of amendments which 
would be needed to address the situation in the State of Idaho. The 
bill already protects designated wilderness, but we would need to 
provide for State consideration of more than 900,000 acres recommended 
for wilderness additions. Our national historic trails, wild and scenic 
rivers, the Snake River Birds of Prey Area, and other areas of special 
concern must be maintained.
  I should emphasize this bill would not require State ownership. It 
would offer the opportunity for States to accept ownership and 
management, only if they elect to do so. Governor Batt, the State 
legislature, and Idaho interest groups would have 2 years to consider 
whether to accept the 11 million acres of BLM lands in the State. That 
seems sufficient time for a thorough airing of the pros and cons. 
Governor Batt has indicated his willingness to explore the 
possibilities.
  I am sensitive to the fact that mere consideration of this 
legislation will cause some anxiety among BLM employees, and that 
concerns me. I will guarantee that employee options will be thoroughly 
discussed, and resolution on a fair transition reached, as this bill 
moves through the legislative process. The bill already provides a 10-
year transition period from the time of acceptance by a State to actual 
transfer of ownership.
  Some interest groups will immediately attack this legislation as a 
threat to environmental protections. They should stop and think. These 
same groups have shown their obvious dissatisfaction with Federal 
ownership through appeals and court challenges of management decisions. 
They have complained to me that the short tenure of Federal managers 
weakens decisionmaking and discourages accountability in the long run. 
They have argued that the citizens of Idaho support environmental 
programs and want a greater voice in their management. Potentially, 
this bill could satisfy all those concerns, and at far less cost to the 
taxpayers.
  For all these reasons, I am an original cosponsor of this 
legislation.
                                 ______

      By Mr. ROTH (for himself and Mr. Baucus):
  S. 1032. A bill to amend the Internal Revenue Code of 1986 to provide 
nonrecognition treatment for certain transfers by common trust funds to 
regulated investment companies; to the Committee on Finance.


                     common trust fund legislation

 Mr. ROTH. Mr. President, today together with Senator Baucus, I 
am introducing the Common Trust Fund Improvement Act of 1995--In short, 
this legislation would allow banks to move assets of their common trust 
funds to one or more mutual funds without gain or loss being recognized 
by the trust funds or their participants.
  Bank common trust funds have been used by banks since World War II to 
collectively invest pools of monies in their capacities as trustees, 
executors, administrators, or guardians of certain customer accounts 
for which they have a fiduciary responsibility. At present, there are 
more than $120 billion in assets residing in bank common trust funds, 
but little if any new money is flowing into these common trust funds. 
By allowing the conversions under this legislation, banks can reduce 
investment risk and, in some cases, increase total investment return 
for their customer accounts by using larger, more diversified and 
efficient investment pools for asset allocation.
  Mutual funds are the pooling vehicle of choice because they can grow 
into much larger investment pools than can common trust funds. By law, 
the participants in a bank's common trust fund are limited to that 
bank's fiduciary customers. Mutual funds can be offered to all types of 
investors. Thus, the conversion of bank common trust fund assets into 
mutual funds is really a transitional issue, permitting financial 
institutions the ability to provide their existing trust customers with 
the same efficient and safe investment vehicles that they are providing 
to their new customers. The conversion of their common trust funds into 
one or more mutual funds would also benefit banks by providing them 
with one set of investment pools to manage.
  This legislation is necessary because it appears that the conversion 
of common trust fund assets into one or more mutual funds would, under 
current law, trigger tax to the participants of the common trust fund, 
an event that could be viewed under State laws as a breach of a bank's 
fiduciary responsibilites. Thus, at present, banks generally are 
finding it prohibitive to convert their common trust funds into more 
economically efficient mutal funds.
  Permitting tax-free conversions of a common trust fund's assets to 
more 

[[Page S 9915]]
than one mutual fund would allow the more diverse common trust assets 
to be allocated to several mutual funds according to the appropriate 
investment and other objectives of the mutual funds. While the multiple 
conversion feature will benefit all banking institutions, it is 
particularly significant for small and medium-size banks with smaller 
common trust funds; these institutions generally find it far too costly 
to create their own mutual funds, and they are not likely to find a 
single third party mutual fund for each common trust fund able to 
accept substantially all the assets of the common trust fund.
  While this legislation has been estimated to cost less than $100 
million over five years, I am very mindful of the need to ensure that 
tax-law changes, no matter how appropriate and essential, do not add to 
the federal deficit that we are all trying so hard to eliminate. 
Therefore, it may be necessary to modify this proposal in order to 
reduce its revenue cost to a negligible level. Unfortunately, as is the 
case with many tax policy changes, modifications to the legislation 
that address revenue concerns may make the proposal more complex to 
administer, however, I am willing to make this trade off if it becomes 
absolutely necessary in order to include this legislation in a revenue 
bill later this year. In addition, I intend to introduce legislation 
soon--also related to financial institutions--to create financial 
securitization investment trusts [FASITs] that should provide the 
necessary revenue offset to pay for this proposal.
  My legislation addresses an important business issue for large and 
small banks, and an important investment issue for their customers. 
Versions of this legislation have passed the Congress on two separate 
occasions with my strong support in the Senate. Given its modest cost, 
its noncontroversial nature and its widespread support, I am hopeful 
that this much needed legislation will be enacted this year.
  Let me make a few short comments to summarize why I believe this 
legislation to permit conversions of common trust funds into mutual 
funds without the recognition of gain or loss should be enacted:
  It will permit all bank customers, not just trust customers, more 
options for investing their savings.
  It will make banks more competitive. Many savers are abandoning bank 
certificates of deposit for the competition, and banks are unable to 
offer their customers an option.
  Customers are unfamiliar with common trust funds, but do understand 
mutual funds. Therefore, mutual funds are more attractive to them.
  The conversion is like a merger of two existing registered funds 
which allows securities to move intact from one fund to another with no 
tax consequences, so there is no ``sale''. The participant's underlying 
investment is unchanged. As a result, we also believe that there should 
not be a revenue loss associated with this proposal. No revenue would 
be gained under current law, because banks have a fiduciary duty to 
their customers and they would not incur a capital gains tax in order 
to make the conversion unless this law is changed. Therefore, the idea 
that retaining current law will somehow result in more revenue is 
misplaced.


 proposal to permit tax-free conversion of common trust fund assets to 
                        one or more mutual funds

                              current law

  Banks historically have established common trust funds in order to 
maintain pooled funds of small fiduciary accounts. Under section 584, 
common trust funds must be maintained by banks exclusively for the 
collective investment of monies in the banks' capacity as trustee, 
executor administrator, or guardian of certain accounts, in conformity 
with rules established by the Federal Reserve and the Comptroller of 
the Currency. Common trust funds are not subject to income tax, and 
they are not treated as corporations. They are a conduit, with income 
``passed through'' to fund participants for tax purposes.
  Mutual funds are also considered conduits under the Tax Code. Unlike 
common trust funds, however, mutual funds are treated as corporations. 
As a result of this differing tax treatment, it is unclear whether a 
mutual fund may merge with or acquire the assets of a common trust fund 
in a transaction that is tax-free to the common trust fund and its 
participants.


                           reasons for change

  The economic efficiencies, diversification, and liquidity of mutual 
funds are key reasons for their popularity and growth in recent years. 
These are attributes that are not generally found in common trust 
funds. It would be desirable for banks to convert their existing common 
trust funds into mutual funds so that bank customers, including trust 
participants, may take advantage of the benefits of mutual funds. The 
conversion of its common trust funds into one or more mutual funds 
would also benefit banks by providing them with one set of investment 
pools to manage.
  Permitting tax-free conversions of a common trust fund to more than 
one mutual fund would allow the more diverse common trust fund assets 
to be allocated to several mutual funds according to the appropriate 
investment and other objectives of the mutual funds. The multiple 
conversions feature is particularly significant for banks with small 
common trust funds, which probably would not be able to find a single 
mutual fund with the same investment objectives of a common trust fund.
  However, until current law is clarified, it appears that the 
conversion of common trust fund assets into one or more mutual funds 
would trigger tax to the participants of the common trust fund, an 
event that could be viewed under State laws as a breach of a bank's 
fiduciary responsibilities. Thus, at present, banks generally are 
finding it prohibitive to convert their common trust funds into more 
economically efficient mutual funds.


                                proposal

  This proposal would allow a common trust fund to transfer 
substantially all of its assets to one or more mutual funds without 
gain or loss being recognized by the trust fund or its participants.
  The common trust fund would transfer it assets to the mutual funds 
solely in exchange for shares of the mutual funds, and the common trust 
fund would then distribute the mutual fund shares to its participants 
in exchange for the participants' interests in the common trust fund. 
The basis of any asset received by the mutual fund would be the basis 
of the asset in the hands of the common trust fund prior to the 
conversion. In a conversion to more than one mutual fund, the basis in 
each mutual fund would be determined by allocating the basis in the 
common trust fund units among the mutual funds in proportion to the 
fair market value of the transferred assets.
  This proposal has been designed to have a minimal cost to the Federal 
Treasury, and versions of this proposal have been passed by the 
Congress on two previous occasions. The benefits of such a change would 
be felt by customers of large and small banking institutions throughout 
the country, and has the support of both the mutual funds and banking 
industries.


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