[Congressional Record Volume 143, Number 5 (Wednesday, January 22, 1997)]
[Senate]
[Pages S634-S652]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mrs. HUTCHISON:
S. 179. A bill to reform the financing of Federal elections, and for
other purposes; to the Committee on Rules and Administration.
the campaign finance reform and disclosure act of 1997
Mrs. HUTCHISON. Mr. President, the bill that I introduce is the
Campaign Finance Reform and Disclosure Act of 1997. This important
legislation will correct several of the abuses that we have seen take
place under the present system and will demonstrate to the American
people that we in Congress intend to do everything possible to bring
campaign-related activities into the light of day. Moreover, this bill
will not force the American taxpayer to further subsidize Federal
campaigns, nor will it impose an elaborate new system of costly and
burdensome campaign regulations. First, the act will require that at
least 60 percent of a Senate candidate's campaign funds come from
individuals within that Senator's home State. It will terminate the
mass mail franking privilege for Senators during the year in which he
or she is seeking election, and thereby end one of the more substantial
advantages of incumbents over challengers.
The bill will also make the contribution limits for political action
committees equal to those in place for individuals, and will index that
uniform limit to the rate of inflation. I believe PAC's serve a
beneficial and necessary purpose in our system by allowing groups of
individuals, whether at their place of employment, through an issue
advocacy group, or elsewhere, to participate in a more direct way in
the grassroots political process that is at the heart of our electoral
system. But I want those PACs to have the same allowances and the same
limitations as individuals, so that one does not have a
disproportionate advantage over the other. The bill accomplishes this
in a simple and responsible way by leveling the playing field between
people who contribute to candidates directly and those who choose to
leverage their contribution through PAC's. Individuals who wish to
contribute money should continue to have that choice.
However, I do not believe that candidates should have the right to
buy and then resell their office. Therefore, this bill will also place
a limitation of $250,000 on the amount that a congressional candidate
may repay himself from campaign funds for personal loans he or she
makes to the campaign. Again, this will help level the playing field
for all candidates.
In addition, the Campaign Finance Reform and Disclosure Act will ban
once and for all campaign contributions by noncitizens. The use of
campaign funds for personal use will also be totally banned. And
political parties will be prohibited from accepting contributions
earmarked for specific candidates, thereby bypassing the limitations
that are in our laws today.
Mr. President, these are the main provisions of my legislation to
reform our campaign finance laws. As the Senate continues to address
this most important issue, I encourage my colleagues to review these
simple and workable proposals and to answer the American people's call
for reform in this area.
______
By Mrs. HUTCHISON:
S. 180. A bill to amend the Internal Revenue Code of 1986 to allow
married individuals to contribute to an IRA even if their spouse is a
participant in a pension plan; to the Committee on Finance.
homemaker ira legislation
Mrs. HUTCHISON. Mr. President, this bill closes a loophole in the
homemaker IRA bill that we passed in the last Congress. We made the
homemakers of our country equal to wage earners in their ability to
save for their retirement futures through individual retirement
accounts. Presently, every person who is working at home or working
outside the home can set aside $2,000 a year that earns tax-free
interest for their retirement security. However, what families are not
able to do under existing law and what this bill will enable them to
do, up to $40,000 in income, is to save under a homemaker IRA even if
the homemaker's spouse has a pension plan. This revision is critical to
encourage average-income families to save for their retirement.
Mr. President, if our young people will avail themselves of this
wonderful new opportunity which Congress has given them to allow
homemakers as well as those who work outside the home to contribute
$2,000 a year to an IRA, by the time they retire at age 65, they will
be able to build a nest egg of a remarkable $1 million, if they both
start contributing the maximum allowable amount from age 25--$1 million
for this working, one-income family. If they even wait until they are
35, they would be able to build up $500,000 for retirement.
This is an opportunity that I hope every young couple will look at
and take advantage of to provide for their retirement security. Last
year we in Congress did the right thing by extending the IRA to
homemakers. Now we simply need to ensure that this opportunity is
available to all families of up to $40,000 of income. This bill will do
just that.
______
By Mr. GRASSLEY (for himself, Mr. Dorgan, Mr. Gorton, Mr. Baucus,
Mr. Lott, Mr. Nickles, Mr. Gramm, Mr. Hatch, Mr. Breaux, Ms.
Moseley-Braun, Mr. Conrad, Mr. Kerrey, Mr. Daschle, Mr. Shelby,
Mr. Bumpers, Mr. Hutchinson, Mr. McCain, Mrs. Feinstein, Mr.
Campbell, Mr. Harkin, Mr. Craig, Mr. Kempthorne, Mr. Durbin,
Mr. Lugar, Mr. Coats, Mr. Brownback, Mr. Roberts, Mr. Ford, Mr.
McConnell, Mr. Sarbanes, Ms. Snowe, Mr. Abraham, Mr. Grams, Mr.
Bond, Mr. Cochran, Mr. Burns, Mr. Helms, Mr. Hagel, Mr.
Bingaman, Mr. DeWine, Mr. Inhofe, Mr. Wyden, Mr. Johnson, Mrs.
Hutchison, Mr. Warner, Mrs. Murray, Mr. Enzi, Mr. Kohl, Ms.
Mikulski, Mrs. Boxer, Mr. Robb, Mr. Gregg,
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Mr. Ashcroft, and Mr. Wellstone):
S. 181. A bill to amend the Internal Revenue Code of 1986 to provide
that installment sales of certain farmers not be treated as a
preference item for purposes of the alternative minimum tax; to the
Committee on Finance.
the family farm alternative minimum tax relief act of 1997
Mr. GRASSLEY. Mr. President, today, as I introduce this legislation
called the Family Farm Alternative Minimum Tax Relief Act of 1997, it
is a way that 54 of us in this body--and we will still yet get more
cosponsors, I am sure--are saying, ``Shame on the Internal Revenue
Service.'' This is our effort to hold the tax-collecting bureaucracy of
the U.S. Government accountable to what Congress intended. We are
holding them accountable to the taxpayers, and we will reduce somewhat
the power of the IRS which comes through intimidation. I have worked
very closely with three other Senators in a bipartisan fashion, Senator
Dorgan, Senator Gorton, and Senator Baucus. I thank them for their
leadership and their cooperation. We have been joined now by 50 of our
colleagues in a broad bipartisan effort, with the support of the
leadership of both parties, meaning Senator Lott and Senator Daschle. I
think that the sort of membership cosponsoring this legislation speaks
louder, frankly, than anything I can say about the rationale behind
this bill.
This bill repeals a very large problem created by the IRS regarding
farmer-deferred contract arrangements. The problem is currently at a
crisis level because it is income tax time. Particularly, it is income
tax time for the farmers of America who must file earlier than others.
The IRS has found a way to tax farmers for their deferred sales
contracts. This is contrary to congressional intent. I know the
Presiding Officer is from Kansas and he understands this, but some
might not. A deferred sales contract is a situation where a farmer
delivers his crop this year and gets paid by the local cooperative
elevator, or privately owned elevator, or some other buyer next year.
Since Congress intends farmers to be able to use the cash accounting
method, deferred contracts have been a perfectly acceptable method to
defer income to another year for taxation. It has been perfectly legal
over a long period of time.
Now the IRS has unilaterally decided to deem these traditional
deferred sales contracts as if, in the words of the IRS, these were
``installment sales'' agreements. The problem is that installment sales
are subject to the alternative minimum tax. Then, of course, by doing
this, the IRS puts the family farmer in trouble for things that, over a
long period of time, have been entirely legal.
This IRS initiative is a way for the IRS to deny farmers the use of
the cash accounting method. When Congress passed the Tax Reform Act of
1986, it specifically intended that farmers retain the cash accounting
method. That same act repealed the income averaging method for farmers.
Income averaging was a way for farmers to level out their regularly
large fluctuations of income between years. Farmers can have those
fluctuations because, while local farmers are affected by local weather
and the weather all over the world.
Listen to the prices of soybeans today. You will find that whether or
not it rains right now in Brazil or Argentina is impacting the price of
soybeans in Iowa and Kansas. The crop prices are affected by crop
disease and a host of other things that ordinary taxpayers take for
granted, that farmers have no control over. When income averaging was
repealed, Congress intended farmers to retain the cash method of
accounting. We are here today with this bill because the IRS has
effectively repealed cash accounting, in opposition to the intent of
Congress.
Cash accounting is repealed because the traditional deferred sales
contracts are the practical application of cash accounting. By applying
the alternative minimum tax, IRS has repealed the deferral in deferred
contracts. They are contracts but no longer deferred income. Thus, the
IRS has unilaterally broken the promise that Congress made to farmers,
and our legislation rights that wrong.
Ironically, the IRS knows it is in the wrong on this matter, but, of
course, the IRS is going to go ahead anyway. After all, they encourage,
from the top to the bottom of the IRS bureaucracy, auditors to go out
and find all the income they can to tax, and to stretch the law as far
as they can. And if they do it in this instance, in the case of taxing
deferred sales contracts, do you think the Internal Revenue
Commissioner or the Secretary of the Treasury is going to say to some
auditor out there--slap their hands and say, ``You are wrong''? No,
they are not going to do that. That would be the right thing to do, but
they are not going to do that because that would discourage this
attitude we have had in the IRS. They want to go out and get every
dollar they can, even if they have to stretch the law to do it.
Well, in a sense, the Secretary of the Treasury, Robert Rubin--and I
thank him--and IRS Commissioner Richardson--and I thank her--have
agreed that this problem results from what they call legislative
oversight in 1986, because they do not want to say their auditors may
be wrong. So, they have agreed, in the spirit of this Presidency, this
second term of office, that we are going to be bipartisan and we are
going to work together to solve these problems. So Secretary Rubin and
IRS Commissioner Richardson have said they would not oppose this
legislation. They agree that Congress did not intend for farmer
deferred contracts to make these contract incomes subject to the AMT.
However, as I indicated, these two individuals believe they still must
enforce what they know to be a bad law. Hence, the urgent need for our
legislation.
You know, it would be really simple for the Commissioner to say, ``We
are wrong. We are not going to collect this money.'' But they cannot do
that, presumably.
Not only is this ruling of the IRS effective right now and into the
future, it is also retroactive. It is retroactive because, since it is
a new interpretation of an old law, the IRS can pretend it has not
changed its position, though it obviously has. Since it is retroactive,
farmers are exposed to audit, not only for the current year and upon
future years, but also on previous years. This problem is now in crisis
proportions for farmers. The IRS made its retroactive change in October
of 1996. At that time, much of the 1996 crop was already harvested.
Farmers had already entered the traditional binding deferred contracts.
They normally do this throughout the 12 months of the year. So, do we
wonder why it is all of a sudden a crisis among farmers?
Before the IRS release, farmers had every reason to believe they
would enjoy the same legal tax treatment previously allowed by IRS.
Congress and the President must address and solve this problem as
soon as possible. Farmers are required to file their tax returns before
March 1, 1997. This is unlike most other taxpayers who have until April
15. If Congress waits until after March 1 to fix this problem, then
hundreds of thousands of farmers all across this country will already
have been injured.
The IRS knows it is wrong on this issue, but it is out of control. It
injures its own public relations by actions such as this. It is a sad
commentary that it takes an emergency action of Congress to make the
IRS do its job as Congress intended. Nonetheless, our bill will do
exactly that.
Mr. President, besides being on the Finance Committee where this
legislation will be considered, I happen to also be a member of a
commission the Congress set up last year to restructure the IRS. There
are two Senators, two House Members, and 13 people from the private
sector on that commission. We have 1 year from last fall to make our
report to the Congress.
The charter from the Congress to all 17 of us is to, in a sense, make
the IRS more user friendly. Although we are at the same time kept from
recommending changes in tax policy, how we administer the existing Tax
Code is what we are dealing. We are examining how the IRS does its work
and what we can do to enhance that from an efficiency standpoint. We
want to save the taxpayers money and also to make IRS more customer
friendly.
After 6 months of being on this commission--though the ultimate good
is
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making the IRS more efficient and more customer friendly--it is my
opinion that we need to make the Tax Code so simple that every single
taxpayer understands the Tax Code as well as any IRS auditor
understands that Tax Code. The complexity of the Tax Code gives the IRS
its power. It is the mystery of the Tax Code, a mystery that the
bureaucrat can sort through and understand, and the inability of the
taxpayer to do that which brings the power of the auditor that gives
IRS its power. The power to intimidate comes through the tax system.
So I ask my colleagues to observe the action of the commission to
restructure the IRS and work with Senator Kerrey from Nebraska and
myself as representatives of the Senate on this issue. Let us know your
opinions, but also understand that the complexity of the Tax Code is
the major problem that we must fix. The bill that I am introducing
today is just one very small example of the complexity of the Tax Code.
It is an action against the intimidation of the IRS and impacts. In
most cases, IRS usually attacks maybe just a few hundred taxpayers
throughout the United States on some issues. On this particular issue,
affecting a practice that has been legal by the farmers of the United
States of America for decades, they are attacking thousands and
thousands. They want farmers to think that all of a sudden what they
have been doing is now presumably wrong.
I hope that Congress will work very quickly to pass this legislation
before that March 1 deadline. It is badly needed to prevent an
irreparable injury to farmers, and to make the Tax Code more
understandable for the taxpayers. We also are sending a clear signal to
the IRS: Shame on you.
Mr. President, I ask unanimous consent that additional material be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 181
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 ``Family Farm Alternative
Minimum Tax Relief Act of 1997''.
SEC. 2. MINIMUM TAX NOT TO APPLY TO FARMERS' INSTALLMENT
SALES.
(a) In General.--The last sentence of paragraph (6) of
section 56(a) (relating to treatment of installment sales in
computing alternative minimum taxable income) is amended to
read as follows: ``This paragraph shall not apply to any
disposition--
``(A) in the case of a taxpayer using the cash receipts and
disbursements method of accounting, described in section
453(l)(2)(A) (relating to farm property), or
``(B) with respect to which an election is in effect under
section 453(l)(2)(B) (relating to timeshares and residential
lots).''
(b) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply to taxable years beginning after December 31, 1987.
(2) Special rule for 1987.--In the case of taxable years
beginning in 1987, the last sentence of section 56(a)(6) of
the Internal Revenue Code of 1986 (as in effect for such
taxable years) shall be applied by inserting ``or in the case
of a taxpayer using the cash receipts and disbursements
method of accounting, any disposition described in section
453(l)(2)(A)'' after ``section 453C(e)(4)''.
____
Department of the Treasury,
Internal Revenue Service,
Washington, DC, December 19, 1996.
Hon. Charles E. Grassley,
U.S. Senate,
Washington, DC.
Dear Senator Grassley: Thank you for giving me the
opportunity to meet with you to discuss your concerns about
an Internal Revenue Service Technical Advice Memorandum or
TAM concerning the tax treatment of farmers. The TAM stated
that farmers utilizing deferred payment contracts for the
sale of farm commodities were required to include the amount
of the advanced sale for Alternative Minimum Tax or AMT
purposes in the year of sale.
As I told you in our meeting, we believe that this TAM
correctly interprets current law. I understand that Congress
may consider legislation early next session to change this
result for farmers who use the cash method of accounting. As
you may be aware, Secretary Rubin, in a letter to Senator
Daschle on the same issue, stated the following regarding
this legislative change, ``We would support the goals of this
effort, as a reasonable tax policy, and recognize it is
likely that Congress was not aware of the effect that its
1986 amendments to the AMT would have on farmers. I welcome
the opportunity to work with you to address this matter
through corrective legislation.''
We also will be pleased to work with you and Treasury on
the corrective legislation. Please feel free to contact me if
I can be of any further assistance.
Sincerely,
Margaret Miner Richardson.
sMr. DORGAN. Mr. President, today Senator Grassley and I are
introducing legislation called the Family Farm Alternative Minimum Tax
Relief Act. This legislation deals with a tax matter affecting farmers
that is a foreign subject to some people. But, simplified, what has
happened is the Internal Revenue Service has turned logic on its head
and said to family farmers, ``We're going to ask you to pay taxes on
income you have not yet received.'' There is no basis for them doing
that. That is not what we ever intended them to do.
It is not the way they interpreted the law previously or the
instructions for IRS auditors and accountants all across the country or
farmers across the country, but they have now decided to change the way
they do business. The brain is apparently disconnected from the hand,
and the hand writes that farmers should pay taxes on income they have
not received.
I introduced the first piece of legislation on this. The Senator from
Washington pointed out it was introduced in the House. But 18 months
before it was introduced in the House in the last Congress, I
introduced legislation to try to correct this.
When we introduced it today, Senator Grassley from Iowa and I have
organized a group of 54 Senators who support this legislation,
including the cosponsorship of the Republican leader and the Democratic
leader, including the support of the Treasury Secretary and of the
agricultural community.
We are going to pass this. It ought not be necessary for us to pass
this legislation, because the IRS should not have made the mistake it
made. It should not have turned logic on its head. But we must pass it
because in this country when the IRS makes a mistake, everybody pays.
Somebody once said, ``You have a right to be wrong in America.'' But
the IRS does not have that right. When they are wrong in this case,
family farmers are going to have to pay unfairly. And we are going to
change that.
Mr. President, today I'm joined by Senator Grassley and a majority of
our colleagues in the Senate in reintroducing my legislation to rectify
a serious tax problem confronting our family farmers.
The Internal Revenue Service [IRS] has, in my opinion, mistakenly
taken a position that threatens to hit many farmers with huge tax bills
for using deferred payment commodity contracts, which have been
routinely used in their businesses for decades. In my judgment, the
IRS's position is dead-wrong and is going to impose an unintended and
unacceptable financial hardship on the farming industry.
For years, family farmers have used deferred payment contracts to
sell their commodities in order to better manage their business income.
For example, a typical grain contract between a farmer and grain
elevator calls upon a farmer to sell and deliver grain to a grain
elevator--often because the farmer does not have adequate storage--for
a fixed amount. In many cases, one or more payments paid by the
elevator to the farmer under the contract occur after the close of the
farmer's taxable year.
For regular tax purposes, farmers are allowed to defer income from
the deferred payments under the grain contracts in computing their
regular tax liability. But because the IRS apparently now views all
deferred payment grain contracts as installment sales, it now requires
them to add back this income in computing the Alternative Minimum Tax
[AMT] in the tax year preceding the year of payment. As a result,
thousands of family farmers are potentially facing hefty tax bills
because they are being whip-sawed by a new IRS policy which effectively
repeals their ability to use such contracts, and to benefit from the
cash basis method of accounting.
To make matters worse, many farmers were advised by tax experts and
IRS field representatives, for that matter, that some traditional
deferred payment commodity contracts will not amount to an installment
sale that would require an AMT calculation. For this reason, many
farmers have not made AMT adjustments on their income tax returns. Now
they are being
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told by the IRS that they may owe large tax bills on income that they
will not receive until later. This position is based upon an incorrect
interpretation by the IRS which ignores the fact that our family
farmers are, by law, permitted to manage their business operations on a
cash basis.
That's why we are reintroducing my legislation from the last Congress
to ensure that our family farmers are allowed to engage in deferred
payment transactions and get the same kind of tax treatment they have
always received.
We do not believe that Congress intended this kind of tax treatment
for farmers using deferred payment commodity contracts for legitimate
business purposes. Moreover, Treasury Department officials, who agree
that this misguided IRS position was likely not the intent of Congress,
support the goals of this effort as ``reasonable tax policy, and * * *
welcome the opportunity to work with Congress to address this matter
through corrective legislation.''
Our bill simply makes clear the original intent of Congress which is
to allow farmers to continue to receive the tax benefit provided from
the use of cash method accounting and from installment sales for their
deferred payment transactions.
I urge my colleagues to include this much-needed legislation--which
is strongly supported by the agricultural community--in any revenue
measure considered by the Senate this year. This measure needs to be
considered quickly to resolve any lingering doubt about the correct tax
treatment for farmers using deferred commodity contracts.
Mr. ABRAHAM. Mr. President, today I join several of my colleagues in
cosponsoring the Family Farm Alternative Minimum Tax Relief Act of
1997. This legislation will permit farmers to continue to defer tax
liability through the use of deferred payment contracts.
Like other businesses, farmers are subject to the same peaks and
valleys in consumer demand that govern product pricing and earned
income. Unlike other businesses, however, farmers are also subject to
the uncertainties of Mother Nature. In agriculture, poor growing
seasons are inevitable. Probably every farmer has had a crop devastated
by harsh weather or been challenged to feed their livestock because of
resulting shortages.
The ability to defer tax liability on deferred payment contracts
helps farmers prepare for these difficult times. To put it simply,
deferred payment contracts allow farmers to receive a portion of
payment on a crop in the next year. In addition to deferring payment,
farmers also defer their resulting tax liability to the following year.
Deferring payments and tax liabilities is a limited form of income
averaging that allows individuals to cope with seasonal difficulties.
Now, a recent IRS decision has put this important economic tool in
jeopardy. The IRS has stated that payments made under a deferred
payment contract are subject to the Alternative Minimum Tax [AMT].
Under the IRS ruling, taxes on the latter year's payments are now due
in the first year of the contract. With the sudden repeal of deferred
tax liability, farmers all across the country now face unexpected,
sizable tax bills and many could be driven out of business. This is
absolutely unacceptable.
Mr. President, for the sake of this Nation's farmers, the IRS
interpretation must be repealed. Since 1986, the only tool left for
deferring tax liability has been the use of deferred payment contracts.
In just the last 4 years, however, farmers in the midwest have suffered
one of the centuries worst floods, the west has endured a terrible
drought and last year, a long winter and tremendous rainfall
significantly reduced Michigan's drybean, soybean, corn, and wheat
harvests.
The Family Farm Alternative Minimum Tax Relief Act of 1997 will
permit farmers to continue to defer tax liability through the use of
deferred payment contracts and I am pleased to be a cosponsor. With tax
time fast approaching, I hope that this bill can be acted upon by both
Chambers of Congress and sent to the President for his signature as
soon as possible.
Mr. President, the President of the Michigan Farm Bureau, Jack
Laurie, recently explained the significance of the IRS's ruling in the
Michigan Farm Bureau's Farm News. I think this article illustrates
clearly the reasons why this legislation is necessary and I ask
unanimous consent that this article be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Recent Tax Policy Issues Profound for Agriculture
As the year draws to a close, many of us will be making
crucial tax management decisions as a normal course of
business. Making advance purchases of inputs for next year,
delaying sales, and/or deferred payment contracts allow
producers to manage tax burdens in good and in bad years.
Tax code provisions, such as cash accounting and deferred
payment contracts, provide important financial and tax
management tools for producers. Recognizing the impact of
budget cuts for agricultural programs, Congress included
language in the 1996 budget resolution that pledged to
reexamine agricultural cuts unless, among other things,
Congress acted to provide mechanisms to allow farmers to
average tax loads over strong and weak income years.
Several pieces of Farm Bureau-supported legislation to
allow income averaging were considered by the 104th Congress
but were not enacted into law. Farm Bureau will be working to
secure their passage as the bills are reintroduced next year.
Farm Bureau supports the option of cash accounting for
farmers and the continuation and expansion of tax code
provisions that allow farmers to match income with expenses.
Farm Bureau also supports the reinstatement of income
averaging for farm income and the creation of ``farmer
savings plans,'' which would allow farmers to put money into
a pre-tax account for use during emergencies.
Farmers are also at risk of losing another tax management
tool, thanks in large part to a recent change in tax policy
interpretation by the Internal Revenue Service in how the
agency will treat deferred payments. Recent rulings in
Washington state and in Iowa penalize farmers attempting to
average their income and tax burdens from year to year
through the use of deferred payment contracts.
The IRS has begun classifying deferred payment contracts as
a tax preference by allowing farmers to delay income through
deferred payment contracts for their regular tax calculation
but not for their Alternative Minimum Tax calculation, which
can result in additional tax liabilities for farmers.
Several farmers in Washington state and Iowa are currently
being examined by the IRS regarding the use of forward
contracting in the sale of their crops. At least 35
Washington farm families are currently in IRS appeals
awaiting the opinion of the Tax Court. Commodities included
in the proposed adjustments include sweet corn, beans, hogs,
potatoes, onions, and various seed crops.
Why is the IRS pursuing this issue? The answer is pretty
simple. By disallowing farmers to defer income into the next
year via deferred payment, they essentially throw two years
of income into one year. This in turn increases the amount of
taxes due, significantly, in some cases. There has been no
change in the law, only a change in the IRS interpretation.
Legislation was introduced last year to provide that
installment sales not be treated as preference with respect
to the Alternative Minimum Tax. This language would have
retroactively exempted farmers who entered into deferred
payments contracts from being subject to Alternative Minimum
Tax.
Unfortunately, this legislation did not pass. However,
there is already a movement underway to pursue this issue
again at the start of the next congressional session. Several
senators from Iowa, North Dakota, Montana, and Washington
will introduce legislation in January to clarify that
deferred payment contracts are not a tax preference item that
subjects farmers to AMT.
Michigan Farm Bureau will be working to secure the support
of Sens. Carl Levin and Spencer Abraham for this legislation.
As you go through the process of completing your farm books
and begin tax preparation, I encourage you to take a moment
to let your respective U.S. Representative and both of your
Senators know how vital these tax management tools are and
what their loss will mean to your operation.
Sincerely,
Jack Laurie,
President.
Mr. CAMPBELL. Mr. President, today my colleagues, Senators Chuck
Grassley and Byron Dorgan, introduced legislation which will correct a
tax problem facing many farmers across the country, including many in
the State of Colorado. Along with over 40 of my Senate colleagues, I am
pleased to join Senators Grassley and Dorgan as an original cosponsor
to this bill.
Farmers have typically used the deferred payment contract system as a
means for managing their business income. It is common for a farmer to
forward contract to sell a product. Under this type of contract, a
farmer may deliver the product in a given tax year, and he may not
receive one lump-sum
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payment at the time of delivery. In fact, the payments may be spread
over 2 tax years.
Up until recently, the farmer was taxed on this income only for the
actual amount received in a given tax year. However, last October, the
Internal Revenue Service issued a ruling which disallows this practice.
Under the ruling, all payments received under a deferred payment
contract are subject to the Alternative Minimum Tax. Now, regardless of
whether the actual payments under the contract are spread out over a
multiple year period, the payments will be taxable in the year the
contract is made.
Needless to say, this ruling requiring farm families to pay a tax on
income they have not yet received places an unfair burden on those
families. Farmers cannot control the weather, especially in Colorado
where farmers fall victim to everything from tornados to droughts.
Because of the uncertainties inherent in farming, deferred payment
contracts offer farmers a critical financial management tool. We must
allow them to manage the risks without unfairly penalizing them.
With the farmers' early filing deadline looming on the horizon, there
is a need to act upon this legislation as quickly as possible. Many
farmers are already calculating their taxes for their early deadline
and without a reversal of the IRS' ruling, they will be forced to
comply at what will no doubt be a severe financial burden for many.
I urge my colleagues to support this important piece of legislation
and pass it in a timely manner.
Mr. GRASSLEY. Mr. President, I yield 5 minutes to the Senator from
Minnesota. I thank him for his cosponsorship of this legislation,
because in the State of Minnesota obviously he has, as in my State of
Iowa, many farmers who are affected by the action of the IRS. I yield 5
minutes.
Mr. GRAMS. Thank you very much.
Mr. President, I rise in strong support of the bill introduced today
by my colleagues, Senator Grassley and Senator Dorgan, to clarify the
intent of Congress and to allow farmers and ranchers to use deferred
payment contracts without tax penalty under the alternative minimum
tax.
Last year this Congress passed, and the President signed, the most
sweeping reforms in agricultural policy in 60 years, giving our farmers
and ranchers the freedom to farm. Farmers can now plant for the market,
not for Uncle Sam.
But our commitment to agriculture did not--and cannot--end there. We
promised farmers and ranchers regulatory reform, free and fair trade,
market-oriented tools to better manage their risk, and tax relief.
Unfortunately, the Internal Revenue Service has caused us to radically
depart from this commitment in regard to tax relief. By ruling that
producers are subject to tax liability on deferred payment contracts in
the year the contract is signed, instead of when he or she actually
receives the payment, the IRS has dealt American agriculture a very
serious blow.
Cash-based accounting, as it is often called, is extremely important
to Minnesota farmers because incomes fluctuate so radically from year
to year depending on what Mother Nature decides to unleash on us. This
is especially important in my home State of Minnesota because, as many
of you know, some say it is the land of 9 months of winter and then 3
months of poor sledding.
But adding further to the importance of cash-based accounting is the
fact that farmers and ranchers are only paid once or twice a year.
Understandably, many farmers and ranchers like to receive their
payments in installments. And that is much the way school teachers do
over the summer months. Getting paid in increments can ease their cash
flow problems that might otherwise occur.
Congress, to its credit, has always understood these unique
circumstances and therefore always intended agriculture to have the
benefit of cash-based accounting. As late as 1980, Congress reaffirmed
this. But according to the IRS, this all changed in amendments to the
Tax Code in 1986. I disagree. Without rehashing all of the arguments of
why this decision is in error, let me offer just one.
As one Rutgers University tax law professor observed, had this been
the intent of the proposed changes to the Tax Code in 1986, surely
there would have been large-scale opposition at that time. And, no
doubt, the opposition would have been spearheaded by Senator Grassley,
who sits on the tax writing committee. But there was not a word about
it. Maybe that is why it took the IRS a decade to find out why.
None of us want to point fingers at who is responsible for this
mistake. We only want congressional intent carried out. If the most
efficient way of accomplishing this end is to pass legislation to
clarify things, then that is what we should do.
Mr. President, I am proud to be an original cosponsor of this bill. I
commend Senators Grassley and Dorgan for their leadership on this
issue. I urge timely consideration and passage of this extremely
important bill.
Mr. GORTON. Mr. President, the Senator from Iowa, Mr. Grassley, my
friend Senator Dorgan from North Dakota, who is on the floor, and I and
51 other Senators have introduced today a bill on the alternative
minimum tax as it is being unjustly and without precedent applied to
farmers in all of our States and across the United States of America.
In short, farmers are now being told that they must pay taxes on
income that they have not received. I repeat that, Mr. President. Our
farmers are now being told by the Internal Revenue Service that they
are to pay taxes on income that they have not received when they have
transferred ownership of their crops to some other entity but are not
to receive payment for those crops until the next tax year.
Mr. President, that is unprecedented. It is unjust. It is a terrible
burden on many farmers who live under difficult circumstances and from
hand to mouth. And it is not what Congress has intended in any of its
amendments to the Internal Revenue Code.
It is wrong, Mr. President. It was discovered or started initially, I
regret to say, in the State of Washington last year aimed against a
particular potato farmer. It has now spread like wildfire all across
the country and it has become the policy of the Internal Revenue
Service.
A year ago, one Member of the House of Representatives from my State,
George Nethercutt, introduced a bill on this without it being able to
attain the attention that has been focused on it since that time. As I
said, there are now 54 Members of this body who are sponsors of this
bill to bring pure justice back to the administration of the Internal
Revenue Code as it respects our farmers.
I am convinced that as soon as we have a revenue bill from the House,
which under the Constitution must deal with such a bill first, that we
will pass this proposal almost unanimously. Mr. President, so far we
have no revenue estimate on it. It was estimated last year to be
minimal because of course these taxes will in fact be collected when
the cash is received by the farmers.
Farmers are not attempting through this bill to avoid a tax
obligation. They are simply asking for the simple justice that that tax
obligation not be imposed upon them until they have received the income
on which the obligation is based.
It is for that reason and under the leadership of the Senator from
Iowa and the Senator from North Dakota, who is here and whom I believe
is next, that this bill is drafted, that we have made this proposal. We
have now received the support of Mr. Rubin, the Secretary of the
Treasury.
I do not know of any reasonable opposition or, for that matter, any
opposition at all to doing justice in this case. I am delighted we have
such strong support for this bill. I urge not only action on this bill,
Mr. President, but the promptest action possible for the Senate to
remedy an injustice against our farmers.
Mr. ENZI. Mr. President, I, too, join my new colleagues in
cosponsoring this legislation. It is important that we act on this
legislation before April 15 to correct a ruling by the Internal Revenue
Service regarding the alternative minimum tax. It is a ruling that
could dramatically and unfairly increase the tax burden on our farmers
who use the cash method of accounting and who utilize installment sales
on crops and livestock.
[[Page S639]]
It is interesting to me that this tax problem is one of the first
issues needing legislative correction to present itself to the 105th
Congress. It is interesting because the problem arises in the areas of
small business and accounting, two areas in which I feel I have some
particularly relevant insight. I am a small businessman and an
accountant--the only accountant in the Senate, in fact.
I have wondered for a long time why United States tax policymakers
continue to subject small business owners to the onerous burden of
calculating both corporate and alternative minimum tax liabilities. The
fact is that fewer than 2 percent of the companies filing Federal
income tax returns end up paying the alternative minimum tax. Still,
all of these companies, many of them small businesses, have to maintain
separate sets of records for tax purposes, and that is at a
considerable cost.
In 1993, a Joint Tax Committee analysis confirmed what I as a small
business owner and corporate accountant already knew, that compliance
with the alternative minimum tax requirements can add 15 to 20 percent
to a company's accounting bills at tax time. The effect is that we bury
100 percent of our small businesses in paperwork in order to increase
tax revenue for about 2 percent of corporate tax filers. If that is not
an unnecessary burden, I do not know what is.
The legislation that is introduced today will amend the 1986 Tax
Reform Act to clarify confusion that was unintentionally created by the
revenue act of 1987. I do not blame the IRS for the position it takes
in the technical advice memorandum filed in 1995, which states that
installment sales of farm property are not exempt from the alternative
minimum tax liability in the year that it is expensed. It is the job of
the IRS to maximize tax revenue within the confines of the
congressionally approved statutes. The question then is, did Congress
intend to subject cash receipts on forward commodity sales to a
farmer's prior year alternative minimum tax? I do not believe that the
99th Congress intended to do that. For 10 years the IRS has not applied
this rule in this way. To do so now is a retroactive tax increase on
farmers. We, the 105th Congress, should make the necessary
clarifications and pass this bill.
I believe the bill will pass because reasonable people can recognize
simple facts and should agree to correct the problem. I am proud to be
a cosponsor of the legislation, but I also hope that it will renew
interest in reviewing the issue of alternative minimum tax reform in
general. One of the issues I promised my constituents I would pursue if
elected to the Senate is simplification of the U.S. Tax Code, and I
believe that the phaseout of the alternative minimum tax is a necessary
part of that promise. The alternative minimum tax inhibits capital
investment, ties up resources and credits, and piles unnecessary
compliance costs particularly on small business. It actually produces
relatively small amounts of Federal revenue, not all of which would be
foregone using regular tax computation.
The problem this bill would correct typifies the difficulties small
business owners in our country have complying with this onerous AMT
law. I was pleased that the last Congress was able to achieve consensus
on a very good AMT reform bill, a bill that unfortunately became
entangled in the highly emotional web of election year politics and
subsequently suffered a swift death at the hands of the President.
I do believe we can and should move toward a more sensible corporate
tax system, and I hope the administration is willing to work with us on
that.
Mr. DASCHLE. Mr. President, I would like to express my strong support
for the legislation Senators Grassley and Dorgan are introducing today.
The bill addresses one of the most pressing problems facing many family
farms, and I am proud to cosponsor it.
Last fall, the IRS released a technical memorandum calling into
question the tax treatment of deferred crop sales. Released during the
harvest just as farmers were making marketing decisions, this apparent
shift in policy created enormous confusion in the farm community. I say
apparent shift in policy because, strictly speaking, the technical
advice memorandum applies only to one taxpayer; the IRS has yet to
issue a formal revenue ruling on the matter as guidance for all
taxpayers.
It has been a long-standing and common practice for farmers to sell
their crops on a deferred basis. Farmers often delay their receipts
from commodity sales into future years in order to maximize their
marketing opportunities and average their incomes over good and bad
years. The legal basis for these deferred contracts dates at least as
far back as an IRS revenue ruling issued in 1958.
Congress has repeatedly expressed its intention that smaller farms be
permitted to manage their affairs on a cash-basis system of accounting.
If implemented, the policy described in the IRS memorandum would have
the effect of eliminating this important tool for many family farmers.
In my view, the IRS has mistakenly interpreted tax law and
legislative history in arriving at the conclusion that deferred
contract receipts are a ``preference'' for purposes of calculating
alternative minimum tax liability. I and a number of my colleagues
communicated this directly to the Secretary of the Treasury last month,
and he agreed to support legislation to correct the problem.
Mr. President, I would hope that we could obtain agreement on both
sides of the aisle to pass this legislation as promptly as possible.
Doing so could save many families tens of thousands of dollars this
winter--money they never anticipated owing to the government.
On November 21st of last year, I asked the Treasury Department to
either suspend the application or narrow the scope of the IRS
memorandum in order to prevent this from happening. Today, I would like
to call publicly on the IRS to reconsider its resistance to my request.
The Treasury Department supports our effort to fix this problem
legislatively, and half of the Senate is cosponsoring the Grassley-
Dorgan bill. Why force taxpayers to pay money this winter that they in
good faith never thought they owed, and then place them in the position
of having to file an amended return to get their money back when the
legislation passes later this year? Surely, there must be a better way,
and, in the interest of taxpayer service, I urge the IRS to try to find
it.
Let's not forget that farmers are the backbone of rural America and
one of the foundations of our economy. Family farmers tell me often of
the hardships they face in managing businesses that are often as
unpredictable as the weather. The apparent change in IRS policy on
deferred commodity contracts does not help matters.
I congratulate Senators Grassley and Dorgan on their legislation and
look forward to working with them to secure its speedy passage.
Mr. SARBANES. Mr. President, I am pleased to join as an original
cosponsor of the Family Farmer Alternative Minimum Tax Relief Act of
1997. This legislation will provide relief for family farmers from a
recent Internal Revenue Service decision regarding deferred payment
contracts which could result in sizable and unexpected tax bills for
the coming year.
For over 16 years, family farmers in Maryland and across the country
have used deferred payment contracts to sell their crops and livestock
in order to better manage and even out their business income from year
to year. The tax code has specifically permitted farmers to manage
their business on a cash basis of accounting and use deferred payment
contracts without AMT liability. However, a recent IRS decision to
enforce alternative minimum taxation on all crop and livestock sales,
including deferred payment contracts, effectively repeals farmers'
ability to use these contracts to move their tax liability into future
years. If relief is not soon provided, many family farmers will face
sizable--and unexpected--tax bills for the coming tax year. The purpose
of this legislation is to clarify the law and ensure that family
farmers can continue to receive the tax benefit provided from the use
of the cash method of accounting and from installment sales for their
deferred payment commodities contracts as Congress originally intended.
I hope the committee will schedule hearings on this matter as quickly
as possible so that this legislation can be
[[Page S640]]
enacted prior to the taxation filing deadline. I urge my colleagues to
join me in supporting this important legislation.
______
By Mr. BYRD:
S. 182. A bill to make available for obligation such sums as are
necessary to pay the Federal share of completion of construction of the
Appalachian development highway system, and for other purposes; to the
Committee on Environment and Public Works.
the appalachian development highway system completion act
Mr. BYRD. Mr. President, I rise today to introduce a critically
important measure to ensure that sufficient funds will be made
available over the next six years to complete the Appalachian
Development Highway System by the year 2003, some 38 years after the
initial authorization of this vital 3,025-mile highway network.
As Senators are aware, the funding authorizations for the Federal-Aid
Highway program will expire at the end of fiscal year 1997.
Consequently, one of the most important pieces of legislation we will
take up during this congressional session will be the reauthorization
of the Intermodal Surface Transportation Efficiency Act, or ISTEA. This
legislation will provide new direction for our Federal highway and
transit programs for the next six years. I commend the Majority Leader
for recognizing the importance of this legislation in his remarks on
the Senate Floor during the first day of this session, during which he
cited his hope that we might turn to it prior to the Easter recess.
Our colleagues in the other body have already completed several
hearings on the reauthorization of ISTEA, and I understand that the
Senate Environment and Public Works Committee will begin its hearings
shortly. As we approach the drafting of a new, comprehensive, Federal-
aid highway bill, I am introducing this bill today so that my
colleagues have available to them my proposal to ensure that the
Federal government finally completes its commitment to the Appalachian
Development Highway System in all affected thirteen states.
The necessity to expand highway access to spur the development of the
Appalachian region was first cited by the President's Appalachian
Regional Commission of 1964. The Commission's report stated:
``Developmental activities in Appalachia cannot proceed until the
regional isolation has been overcome by a transportation network which
provides access to and from the rest of the nation and within the
region itself. The remoteness and isolation of the region . . . are the
very basis of the Appalachian lag. Its penetration by an adequate
transportation network is the first requisite of its full participation
in industrial America.''
One year later, the Appalachian Regional Development Act of 1965
authorized several programs for the development of the region, the
first of which called for the construction of a new highway network.
According to the Act, these highways ``will open up an area or areas
with a developmental potential where commerce and communication have
been inhibited by lack of adequate access.'' Subsequent amendments to
the act defined the 3,025 miles that comprise the Appalachian
Development Highway System.
Unfortunately, today, we find that while the Interstate Highway
System is virtually 100 percent complete, the Appalachian Development
Highway System is only 76 percent complete. Of the 3,025 miles that
comprise the Appalachian system, roughly 725 miles remain unfinished.
These unfinished miles are spread throughout the 13 states that have
counties within the statutorily designated boundaries of Appalachia.
These states include Alabama, Georgia, Kentucky, Maryland, Mississippi,
New York, North Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, Virginia, and West Virginia.
Mr. President, the purpose of my legislation is to ensure that we
expeditiously complete this vital highway network. Its completion is
even more important today than it was 30 years ago, not only for the
local economies of the Appalachian region but also for the entire
nation. The citizens of Appalachia are required to drive through the
existing, inadequate road system--dangerous, narrow roads which
generally wind through the paths of river valleys and stream beds
between mountains. These roads are, more often than not, two-lane roads
that are squeezed into very limited rights-of-way. They are
characterized by low travel speeds and long travel distances. They were
often built to inadequate design standards and, thus, present very
hazardous driving conditions.
Just last year, the Federal Highway Administration published a report
indicating that substandard road conditions are a factor in 30 percent
of all fatal highway accidents. I am quite sure that the percentage is
a great deal higher in the Appalachian region. [In my own state, the
inadequate two-lane road that currently lies along the alignment of our
largest uncompleted segment of the ADHS represents the second most
dangerous road in the entire state.] The Federal Highway Administration
has found that upgrading two-lane roads to four-lane divided highways
has served to decrease fatal traffic accidents by 71 percent and that
widening traffic lanes has served to reduce fatalities by 21 percent.
These are precisely the kinds of road improvements that will be funded
through the legislation which I am introducing today. And until this
legislation is enacted, many citizens will die unnecessarily on
inadequate, unsafe roads.
While several of the thirteen Appalachian states have enjoyed
significant economic expansion and job growth over the last three
decades, each such state continues to have pockets of severe economic
distress characterized by low academic achievement, chronic
unemployment, and an inadequate tax base. There are still children in
Appalachia who lack decent transportation routes to school. There are
still pregnant mothers, elderly citizens, and others who lack timely
road access to area hospitals. There are many people who cannot obtain
sustainable well-paying jobs because of poor road access to major
employment centers. These critical conditions affect not only the
citizens of these local communities but also the economy of the entire
nation. Instead of enjoying the full productive potential of all the
citizens of Appalachia, our nation must bear the costs of Federal
assistance that must be provided to those who cannot adequately care
for themselves through no fault of their own--costs associated with
unemployment benefits, health care, school lunch programs, etc.
The Appalachian Regional Commission has conducted a number of studies
and surveys which confirm the linkage between economic prosperity and
the completion of segments of the Appalachian Highway System. These
same studies also highlight the fact that it is almost impossible for
communities still awaiting completion of their segments of these
highways to attract businesses and investment opportunities to their
areas, largely due to an inadequate transportation system, inhibiting
their access to the national markets.
The most rigorous of these studies was financed by the National
Science Foundation and published just a year and a half ago. This study
covered a twenty-year period and compared conditions in Appalachian
counties versus similarly-situated counties outside the Appalachian
region. When looking at conditions in the sixty-two rural Appalachian
counties, the study revealed that the income levels of those counties
with substantially complete Appalachian Development highways grew 80
percent faster and that earnings grew 62 percent faster than did the
counties without such highway access.
Mr. President, the people of Appalachia have waited long enough for
the Federal Government to fulfill its commitment to the Appalachian
region. The bill I am introducing today will ensure that sufficient
funds are set aside in the next major highway bill to complete the
remaining 24 percent of the Appalachian Development Highway System in
the thirteen-state region. This bill takes a different approach from
that of the prior authorization acts for the Appalachian Highway
System. The bill calls for direct contract authority to be made
available from the highway trust fund. This contract authority would be
distributed to the thirteen states of the Appalachian Region solely for
the purpose of completing the 725 unfinished miles of the Appalachian
Development Highway System.
One of the primary reasons why completion of the Appalachian Highway
[[Page S641]]
System has lagged behind that of the Interstate Highway System is
because the interstate system has benefited from the direct
availability of highway trust funds while the Appalachian Development
Highway System has been required to be financed largely through
incremental annual appropriations of general funds.
The bill I introduce today also makes clear that funds provided to
the Appalachian states for the completion of the Appalachian
Development Highway system will be provided in addition to the funds
those states will receive from the Federal Aid Highway Program for
their customary purposes. These states should not be required to choose
between the maintenance of their interstate and other federal highways
and the completion of the Appalachian system.
Under this bill, states will still be required to provide the
standard 20 percent matching share for Federal funds for the completion
of these roads, as is the case for all major Federal aid highway
programs. The bill authorizes the Secretary to distribute ``such sums
as are necessary'' for the completion of the Appalachian Development
Highway System. Similar to the manner in which Federal funds are
currently administered for Appalachian highways, the funds provided
under this bill will be administered by the Appalachian Regional
Commission (ARC). The ARC, with the cooperation of the Federal Highway
Administration, is currently updating its estimate for the cost to
complete the system. This study is expected to be completed by May 1 of
this year, and I anticipate that, when this bill is incorporated into
this year's highway legislation, it will identify and authorize the
appropriate dollar figure that results from this ongoing study.
I should point out, Mr. President, that the Administration shares my
goal for the completion of the Appalachian Development Highway System
in the near term. In addition to having written to President Clinton
several times in support of this legislative approach, I met with him
personally in the Oval Office on December 16, 1996--last year. I have
also had meetings on this subject with his OMB Director, Mr. Franklin
Raines, and his Federal Highway Administrator and Transportation
Secretary-designate, Mr. Rodney Slater. I am confident that the
Administration will be supportive of my efforts to complete the
construction of the ADHS as soon as possible.
So, Mr. President, I urge all my colleagues to support this
legislation. Our entire nation has benefited from the improvements
brought about by the Appalachian Development Highway System. So, too,
will we all benefit from its completion in the near future.
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. 182
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 ``Appalachian Development
Highway System Completion Act''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the Appalachian Regional Development Act of 1965 (40
U.S.C. App.) enacted into law a Federal commitment to the
completion of the Appalachian development highway system for
the purpose of expanding highway access to the Appalachian
region;
(2) economic prosperity within the Appalachian region since
that time has been brought about by, and has centered around,
the availability of adequate highway access;
(3) the rationale behind the completion of the Appalachian
development highway system is as sound today as it was in
1965, but while the Interstate System is nearly 100 percent
complete, the Appalachian development highway system is only
76 percent complete;
(4) those areas in which the Appalachian development
highway system is not yet complete suffer from inadequate
road systems characterized by low travel speeds, long travel
distances, and unsafe conditions; and
(5) there are unfinished miles of the Appalachian
development highway system in all 13 of the States with
counties in the statutorily-designated Appalachian region.
SEC. 3. COMPLETION OF APPALACHIAN DEVELOPMENT HIGHWAY SYSTEM.
(a) Authorization.--
(1) In general.--Subject to subsection (d), there are
authorized to be appropriated out of the Highway Trust Fund
(other than the Mass Transit Account) for the period of
fiscal years 1998 through 2003 such sums as are necessary to
fund the Federal share of the total estimated cost of
completion of construction of the Appalachian development
highway system authorized by section 201 of the Appalachian
Regional Development Act of 1965 (40 U.S.C. App.), as
determined by the Secretary of Transportation.
(2) Transfer and administration of funds.--The Secretary
shall transfer the funds made available by paragraph (1) to
the Appalachian Regional Commission, which shall be
responsible for the administration of the funds.
(b) Federal Share.--The Federal share under this section
shall be 80 percent.
(c) Apportionment to States.--In carrying out subsection
(a), the Secretary shall apportion the funds to the 13 States
in the Appalachian region in accordance with each State's
portion of the total estimated cost of completion.
(d) Allocation Percentages.--One-sixth of the funds
allocated by subsection (a) for the construction shall be
available for obligation in each of fiscal years 1998 through
2003.
(e) Delegation to States.--Subject to title 23, United
States Code, the Secretary shall delegate responsibility for
completion of construction of each segment of the Appalachian
development highway system under this section to the State in
which the segment is located, upon request of the State.
(f) Advance Construction.--When a State that has been
delegated responsibility for construction of a segment under
subsection (c)--
(1) has obligated all funds allocated under this section
for construction of the segment; and
(2) proceeds to construct the segment without the aid of
Federal funds in accordance with all procedures and all
requirements applicable to the segment, except insofar as the
procedures and requirements limit the State to the
construction of segments with the aid of Federal funds
previously allocated to the State;
the Secretary, upon approval of the application of a State,
shall pay to the State the Federal share of the cost of
construction of the segment at such time as additional funds
are allocated for the segment under subsection (d).
(g) Contract Authority.--Funds authorized by this section
shall be available for obligation in the same manner as if
the funds were apportioned under chapter 1 of title 23,
United States Code, except that--
(1) the Federal share of the cost of any construction under
this section shall be determined in accordance with
subsection (b); and
(2) the funds shall remain available until expended.
(h) Inapplicability of Obligation Limitations.--
Notwithstanding any other provision of law, any obligation
limitation enacted for any of fiscal years 1998 through 2003
shall not apply to obligations authorized under this section.
(i) Other State Funds.--Funds made available to a State
under this section shall not be considered in determining the
apportionments and locations that any State shall be entitled
to receive, under title 23, United States Code, and other
law, of amounts in the Highway Trust Fund.
______
By Mr. DODD (for himself, Mr. Daschle, Mr. Kennedy, Mrs.
Feinstein, and Mr. Kerry):
S. 183. A bill to amend the Family and Medical Leave Act of 1993 to
apply the act to a greater percentage of the U.S. work force, and for
other purposes; to the Committee on Labor and Human Resources.
THE FAMILY AND MEDICAL LEAVE FAIRNESS ACT OF 1997
Mr. DODD. Mr. President, we do a great deal of important business
here in the U.S. Senate, but much of it seems arcane and distant from
the lives of American families. But last evening, with the airing of a
CBS made for TV movie, ``A Child's Wish,'' we had a particularly moving
example of the power we have to make a positive difference in the lives
of America's families. I don't know how many of my colleagues had a
chance to see it. It was a fictional story based on the true life
experiences of two families impacted by the Family and Medical Leave
Act signed into law by President Clinton in 1993.
Dixie Yandle was one of those children. I believe she came from North
Carolina, I say to my colleague from North Carolina. Dixie's father
lost his job during her struggle with cancer as he sought to spend more
time with her. She and her parents testified in fact before the
Congress about the need for family medical leave legislation so that
what happened to them would not happen to the other parents.
The second child, Melissa Weaver, was also diagnosed with cancer that
ultimately proved to be fatal. But due to the Family and Leave Act the
family was able to spend the last days of her life together. Melissa's
story is one of many that I heard in 1994 during a series of public
hearings of the Commission on Family and Medical Leave on
[[Page S642]]
the impact of the Family and Medical Leave Act.
``A Child's Wish'' took the lives of these two children and wove them
together to dramatize how important the Family and Medical Leave Act is
and how meaningful it is to families. I am hopeful that this movie may
have helped a lot of people understand the legislation better.
Today, at a time when many Americans are deeply cynical toward the
work we do here in Washington, the family and medical leave stands in
sharp contrast.
Not only is this legislation making a real difference in the lives of
the American people, but it has been judged by a bipartisan commission
to be an unqualified success.
The Family and Medical Leave Act fulfilled a genuine need among
America's working families to take leave in times of medical and family
need.
With this legislation we established in law a basic standard of
decency toward America's families.
Eligible employees were guaranteed 12 weeks of unpaid leave during
times of genuine family need--such as a birth or adoption, placement of
a foster child, or in times of serious medical emergency for a child,
spouse or parent.
This minimal benefit--unpaid leave--is providing millions of workers
and their families with vital assistance during times of crisis.
Yet, even with the apparent success of the FMLA there is still more
work to be done.
Millions of Americans continue to face painful choices involving
their competing responsibilities to family and work.
Employees not covered by the Family and Medical Leave Act are still
often told that they must choose between sick family members and their
jobs.
In fact today, 43 percent of private sector employees remain
unprotected by the Family and Medical Leave Act because their employer
does not meet the current 50 or more employee threshold.
This legislation I introduce today--the Family and Medical Leave
Fairness Act of 1997--will extend the Family and Medical Leave Act to
millions of Americans who remain uncovered.
This bill would lower the threshold to include coverage for companies
with 25 or more workers.
This small step would provide 13 million additional workers with the
protection of the Family and Medical Leave Act--raising the total
percentage of the private sector work force covered by the FMLA to 71
percent.
In my view, these workers deserve the same job security in times of
family and medical emergency that workers in lager companies receive
from the Family and Medical Leave Act.
With this legislation they will receive it.
Now, for those of my colleagues who still harbor doubts about the
success of the Family and Medical Leave Act I strongly urge them to
examine a recent bipartisan report that documents the positive impact
of this legislation.
When the bill was passed in 1993, provisions in the legislation
established a commission to examine the impact of the act on workers
and businesses.
The Family and Medical Leave Commission's analysis spanned 2\1/2\
years.
It included independent research and field hearings across the
country to learn first hand about the act's impact from individuals and
the business community.
The report's conclusions are clear--the Family and Medical Leave Act
is helping to expand opportunities for working Americans while at the
same time not placing any undue burden on employers.
According to the Commission's final report, the Family and Medical
Leave Act represents ``A significant step in helping a larger cross-
section of working Americans meet their medical and family care giving
needs while still maintaining their jobs and economic security.''
Due to this legislation, Americans now possess greater opportunities
to keep their health benefits, maintain job security, and take longer
leaves for a greater number of reasons.
In fact, according to the bipartisan commission--12 million workers
took job-protected leave for reasons covered by the Family and Medical
Leave Act during the 18 months of its study.
But, not only are American workers reaping the benefits. The law is
working for American business as well. In fact, the conclusions of the
bipartisan report are a far cry from the concerns that were voiced when
this law was being considered in Congress.
The vast majority of businesses--over 94 percent--report little to no
additional costs associated with the Family and Medical Leave Act.
More than 92 percent reported no noticeable effect on profitability.
And nearly 96 percent reported no noticeable effect on business
growth.
Additionally, 83 percent of employers reported no noticeable impact
on employee productivity.
In fact, 12.6 percent actually reported a positive effect on employee
productivity from the Family and Medical Leave Act, twice as many as
reported a negative effect.
And not only did employers report that compliance with the Family and
Medical Leave Act was relatively easy and of minimal cost, but
worksites with a small number of employees generally reported greater
ease of administration and even smaller costs than large worksites.
Today, I introduce this legislation with the hope and expectation
that we can put aside our political differences and build on the
success of the Family and Medical Leave Act. Last November, the
American people gave us a mandate--a mandate for good governance.
The Family and Medical Leave represents the fulfillment of this goal
and I urge all my colleagues to join with me in supporting this
critically important legislation for America's working families.
I think the fact that the law has been working so well has made a
sufficient difference in people's lives in moments of crises. The fact
that people are able to be there particularly when a child is dying, so
that you have the love of parents and a family coming together and you
don't have to choose between that job and your family is a wonderful
thing. It has made such a difference in people's lives.
There have been many issues dealt with in this body over 16 years,
and there is none that I am more proud of than the day that this body
voted to support the family and medical leave legislation, and when
President Clinton signed it into law.
I am pleased to be joined in this effort by Senator Daschle, Senator
Kennedy, Senator Feinstein, and Senator Kerry. Mr. President, I can't
miss the opportunity to briefly say that a friend of mine who is here
from Pennsylvania, who I know is going to speak on the nomination of
Madeleine Albright, but the body should know that the Senator from
Pennsylvania, Senator Specter, was an invaluable ally in that effort
beginning in the first day we arrived in the Senate some 16 years ago.
We formed a caucus on children's needs. I thank him for his efforts
over the years in that regard.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SPECTER. Mr. President, I thank my colleague from Connecticut for
those generous comments. He and I cochaired the Children's Caucus in
the early 1980's. And he mentioned that he and I cosponsored the first
family leave act exactly 10 years ago at this time--it was in 1987--
which was very important legislation.
______
By Mr. D'AMATO:
S. 184. A bill to provide for adherence with the MacBride Principles
of Economic Justice by United States persons doing business in Northern
Ireland, and for other purposes; to the Committee on Finance.
the northern ireland fair employment practices and principles of
economic justice act of 1997
Mr. D'AMATO.
Mr. President, I rise today to offer the Northern Ireland Fair
Employment Practices and Principles of Economic Justice Act of 1997.
This amendment seeks to deter efforts to use the work place as an arena
of discrimination in Northern Ireland.
The Northern Ireland Fair Employment Practices and Principles of
Economic Justice Act of 1997 incorporates the MacBride Principles,
which are modeled after the famous Sullivan Principles, one of the
initial efforts to apply United States pressure to change the system of
apartheid in South Africa. The MacBride Principles are named
[[Page S643]]
in honor of the late Sean MacBride, winner of the Nobel Peace Prize and
co-founder of Amnesty International.
This amendment will enlist the cooperation of United States companies
active in Northern Ireland in the campaign to force the end of
discrimination in the workplace by:
First, eliminating religious discrimination in managerial,
supervisory, administrative, clerical, and technical jobs and
significantly increasing the representation in such jobs of individuals
from under represented religious groups.
Second, providing adequate security for the protection of minority
employees at the workplace.
Third, banning provocative sectarian and political emblems from the
workplace.
Fourth, publicly advertising all job openings and undertaking special
recruitment efforts to attract applicants from under represented
religious groups, and establishing procedures to identify and recruit
minority individuals with potential for further advancement, including
managerial programs.
Fifth, establishing layoff, recall, and termination procedures which
do not favor particular religious groupings.
Sixth, abolishing job reservations, apprenticeship restrictions, and
differential employment criteria which discriminate on the basis of
religious or ethnic origin.
Seventh, developing and expanding upon existing training and
educational programs that will prepare substantial numbers of minority
employees for managerial, supervisory, administrative, clerical, and
technical jobs.
Eighth, appointing a senior management staff member to oversee the
U.S. company's compliance with the principles described above.
It is in the workplace in Northern Ireland, which can be used to
eliminate discrimination, where improving the employment opportunities
for the underprivileged will help factor out the economic causes of the
current strife in Northern Ireland. This will hopefully begin the
process toward a peaceful resolution of the so-called troubles.
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. 184
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 ``Northern Ireland Fair
Employment Practices and Principles of Economic Justice Act
of 1997''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Currently, overall unemployment in Northern Ireland is
approximately 13 percent, as compared to 9 percent in the
rest of the United Kingdom.
(2) Unemployment in the minority community in Northern
Ireland is 16 percent (22 percent for males and 8 percent for
females), and in some portions of the minority community
unemployment has historically exceeded 70 percent.
(3) The British Government Fair Employment Commission
(F.E.C.), formerly the Fair Employment Agency (F.E.A.), has
consistently reported that a member of the minority community
is two times more likely to be unemployed than a member of
the majority community.
(4) The Investor Responsibility Research Center (IRRC),
Washington, District of Columbia, lists more than 90 United
States companies doing business in Northern Ireland, which
employ approximately 11,000 individuals.
(5) The religious minority population of Northern Ireland
is subject to discriminatory hiring practices by some United
States businesses.
(6) The MacBride Principles are a nine point set of
guidelines for fair employment in Northern Ireland which
establishes a corporate code of conduct to promote equal
access to regional employment but does not require
disinvestment, quotas, or reverse discrimination.
SEC. 3. RESTRICTION ON IMPORTS.
An article from Northern Ireland may not be entered, or
withdrawn from warehouse for consumption, in the customs
territory of the United States unless there is presented at
the time of entry to the customs officer concerned
documentation indicating that the enterprise which
manufactured or assembled such article was in compliance at
the time of manufacture with the principles described in
section 5.
SEC. 4. COMPLIANCE WITH FAIR EMPLOYMENT PRINCIPLES.
(a) Compliance.--Any United States person who--
(1) has a branch or office in Northern Ireland, or
(2) controls a corporation, partnership, or other
enterprise in Northern Ireland,
in which more than ten people are employed shall take the
necessary steps to ensure that, in operating such branch,
office, corporation, partnership, or enterprise, those
principles relating to employment practices set forth in
section 5 are implemented and this Act is complied with.
(b) Report.--Each United States person referred to in
subsection (a) shall submit to the Secretary--
(1) a detailed and fully documented annual report, signed
under oath, on showing compliance with the provisions of this
Act; and
(2) such other information as the Secretary determines is
necessary.
SEC. 5. MACBRIDE PRINCIPLES OF ECONOMIC JUSTICE.
The principles referred to in section 4 are the MacBride
Principles of Economic Justice, which are as follows:
(1) Increasing the representation of individuals from
underrepresented religious groups in the workforce, including
managerial, supervisory, administrative, clerical, and
technical jobs.
(2) providing adequate security for the protection of
minority employees at the workplace.
(3) Banning provocative sectarian or political emblems from
the workplace.
(4) Providing that all job openings be advertised publicly
and providing that special recruitment efforts be made to
attract applicants from underrepresented religious groups.
(5) Providing that layoff, recall, and termination
procedures do not favor a particular religious group.
(6) Abolishing job reservations, apprenticeship
restrictions, and differential employment criteria which
discriminate on the basis of religion.
(7) Providing for the development of training programs that
will prepare substantial numbers of minority employees for
skilled jobs, including the expansion of existing programs
and the creation of new programs to train, upgrade, and
improve the skills of minority employees.
(8) Establishing procedures to assess, identify, and
actively recruit minority employees with the potential for
further advancement.
(9) Providing for the appointment of a senior management
staff member to be responsible for the employment efforts of
the entity and, within a reasonable period of time, the
implementation of the principles described in paragraphs (1)
through (8).
SEC. 6. PROHIBITION.
Nothing in this Act shall require quotas or reverse
discrimination or mandate their use.
SEC. 7. WAIVER OF PROVISIONS.
(a) Waiver of Provisions.--In any case in which the
President determines that compliance by a United States
person with the provisions of this Act would harm the
national security of the United States, the President may
waive those provisions with respect to that United States
person. The President shall publish in the Federal Register
each waiver granted under this section and shall submit to
the Congress a justification for granting each such waiver.
Any such waiver shall become effective at the end of ninety
days after the date on which the justification is submitted
to the Congress unless the Congress, within that ninety-day
period, adopts a joint resolution disapproving the waiver. In
the computation of such ninety-day period, there shall be
excluded the days on which either House of Congress is not in
session because of an adjournment of more than three days to
a day certain or because of an adjournment of the Congress
sine die.
(b) Consideration of Resolutions.--
(1) Any resolution described in subsection (a) shall be
considered in the Senate in accordance with the provisions of
section 601(b) of the International Security Assistance and
Arms Export Control Act of 1976.
(2) For the purpose of expediting the consideration and
adoption of a resolution under subsection (a) in the House of
Representatives, a motion to proceed to the consideration of
such resolution after it has been reported by the appropriate
committee shall be treated as highly privileged in the House
of Representatives.
SEC. 8. DEFINITIONS AND PRESUMPTIONS.
(a) Definitions.--For the purpose of this Act--
(1) the term ``United States person'' means any United
States resident or national and any domestic concern
(including any permanent domestic establishment of any
foreign concern);
(2) the term ``Secretary'' means the Secretary of Commerce;
and
(3) the term ``Northern Ireland'' includes the counties of
Antrim, Armagh, Derry, Down, Tyrone, and Fermanagh.
(b) Presumption.--A United States person shall be presumed
to control a corporation, partnership or other enterprise in
Northern Ireland if--
(1) the United States person beneficially owns or controls
(whether directly or indirectly) more than 50 percent of the
outstanding voting securities of the corporation,
partnership, or enterprise;
(2) the United States person beneficially owns or controls
(whether directly or indirectly) 25 percent or more of the
voting securities of the corporation, partnership, or
enterprise, if no other person owns or controls (whether
directly or indirectly) an equal or larger percentage;
[[Page S644]]
(3) the corporation, partnership, or enterprise is operated
by the United States person pursuant to the provisions of an
exclusive management contract;
(4) a majority of the members of the board of directors of
the corporation, partnership, or enterprise are also members
of the comparable governing body of the United States person;
(5) the United States person has authority to appoint the
majority of the members of the board of directors of the
corporation, partnership, or enterprise; or
(6) the United States person has authority to appoint the
chief operating officer of the corporation, partnership, or
enterprise.
SEC. 9. EFFECTIVE DATE.
This Act shall take effect 180 days after the date of
enactment of this Act.
______
By Mr. AKAKA:
S. 186. A bill to amend the Energy Policy and Conservation Act with
respect to purchases from the strategic petroleum reserve by entities
in the insular areas of the United States, and for other purposes; to
the Committee on Energy and Natural Resources.
the emergency petroleum supply act
Mr. AKAKA. Mr. President, today I am introducing the Emergency
Petroleum Supply Act, a bill to ensure that Hawaii has access to the
strategic petroleum reserve during an oil supply disruption. The
Emergency Petroleum Supply Act would guarantee Hawaii oil at a fair
price and give tankers bound for Hawaii priority loading during an
emergency.
This legislation passed the Senate in two previous Congresses. During
the 104th Congress, the Senate Committee on Energy and Natural
Resources once again approved the bill. Only the inability of the House
to adopt strategic petroleum reserve reforms has prevented my bill from
becoming law. I will work aggressively during the 105th Congress to
enact this measure.
The objective of the Emergency Petroleum Supply Act can be summarized
in one word: access. Because of its tremendous distance from the Gulf
Coast, Hawaii needs guaranteed access to the strategic petroleum
reserve [SPR], as well as priority access to the SPR loading docks.
My bill addresses both these concerns. First, it provides a mechanism
to guarantee an award of SPR oil. Hawaii's energy companies will be
allowed to submit binding offers for a fixed quantity of oil at a price
equal to the average of all successful bids. This concept is modeled
after the Federal Government's method of selling Treasury bills. It
would give Hawaii ready access to emergency oil supplies at a price
that is fair to the Government. Without this bill, Hawaii's energy
companies, and the population they serve, face the risk that their bid
for SPR oil would be rejected and that oil inventories would run dry.
The second component of my bill addresses the problem of delay. The
Emergency Petroleum Supply Act grants Hawaii-bound ships expedited
access to SPR loading docks. It would be a terrible misfortune if
deliveries to Hawaii were delayed because the tanker scheduled to carry
emergency supplies was moored in the Gulf of Mexico, waiting in line
for access to the SPR loading docks.
As any grade-school geography student knows, Hawaii is a long way
from the Gulf of Mexico, especially when you have to transit the Panama
Canal. The distance between the SPR loading docks and Honolulu, by way
of the canal, is 7,000 miles--more than one-quarter of the distance
around the globe.
But distance alone is not the issue. When you add together the time
between the decision to draw down the reserve and the time for oil from
the reserve to reach our shores, the seriousness of the problem
emerges. It takes time to solicit and accept bids for SPR oil, time to
locate and position tankers, time for tankers to wait in line to gain
access to SPR loading docks, and more time to transit the canal to
Hawaii. Obviously, Hawaii is at the end of a very, very long supply
line. People overlook the fact that insular areas have a limited supply
of petroleum products on hand at any time. While Hawaii waited for
emergency supplies to arrive, oil inventories could run dry and our
economy could grind to a halt.
Recently, the Department of Energy asked Hawaii's East-West Center to
study this problem. The East-West Center report concluded that my SPR
access measure ``is an excellent proposal which would greatly reassure
the islands that their basic needs would be maintained.''
The East-West Center report provides strong justification for
granting Hawaii special access to SPR oil during an energy emergency.
The report found that a major oil supply disruption would have a much
more severe impact on the Pacific islands than on the rest of the
United States. Although all of Asia would experience some degree of
inflation and recession, the small economies of the insular areas would
be virtually unprotected from volatile economic forces. While the rest
of the United States does not have to rely on ocean transport from
other nations for essential goods and services, the economies of Hawaii
and the Pacific islands are heavily dependent on ocean-borne trade and
foreign visitors.
The need for this provision is further justified by a December 1993
Department of Energy/State of Hawaii analysis of Hawaii's energy
security which found the following:
Hawaii depends on imported oil for over 92 percent of its
energy. This makes Hawaii the most vulnerable State in the
Nation to the disruption of its economy and way of life in
the event of a disruption of the world oil market or rapid
oil price increases.
Currently, 40 percent of Hawaii's oil comes from Alaska and
the remainder from the Asia-Pacific region. The export
capabilities of these domestic and foreign sources of supply
are projected to decline by approximately 50 percent by the
year 2000. This will likely increase Hawaii's dependence on
oil reserves of the politically unstable Middle East.
Hawaii is also vulnerable to possible supply disruptions in
the event of a crisis. The long distance from the U.S.
Strategic Petroleum Reserve in Louisiana and Texas, combined
with a declining number of U.S.-flag tankers capable of
transiting the Panama Canal, make timely emergency deliveries
problematic.
Other studies have consistently verified Hawaii's energy
vulnerability and its need for special access to the SPR. An analysis
by Mr. Bruce Wilson, an accomplished oil economist, determined that the
delivery of SPR oil to Hawaii from the Gulf of Mexico could take as
long as 53 days. That exceeds the State's average commercial working
inventory by 23 days. As Mr. Wilson's research shows, an oil supply
disruption is Hawaii's greatest nightmare.
Some suggest that market forces will ensure that Hawaii and the
territories receive the oil they need during an energy emergency.
Unfortunately, these are the same market forces that cause Hawaii's
consumers to pay 50 percent more per gallon of gasoline than consumers
pay on the Mainland. When a crisis hits, our energy prices can double
or triple.
Hawaii may be the 50th State, but we deserve the same degree of
energy security that the rest of the Nation enjoys. It's simply a
matter of equity. Hawaii's tax dollars help fill and maintain the
reserve; Hawaii should enjoy the energy security the SPR is designed to
provide.
My bill will safeguard Hawaii from the harsh economic consequences of
an oil emergency. The Emergency Petroleum Supply Act is not only good
energy policy, it's good economic policy for Hawaii.
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. 186
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 ``Emergency Petroleum Supply
Act''.
SEC. 2. PURCHASES FROM STRATEGIC PETROLEUM RESERVE BY
ENTITIES IN INSULAR AREAS OF UNITED STATES.
Section 161 of the Energy Policy and Conservation Act (42
U.S.C. 6241) is amended by adding at the end the following:
``(j) Purchases From Strategic Petroleum Reserve by
Entities in Insular Areas of United States.--
``(1) Definitions.--In this subsection:
``(A) Binding offer.--The term `binding offer' means a bid
submitted by the State of Hawaii for an assured award of a
specific quantity of petroleum product, with a price to be
calculated pursuant to this Act, that obligates the offeror
to take title to the petroleum product without further
negotiation or recourse to withdraw the offer.
``(B) Category of petroleum product.--The term `category of
petroleum product' means a master line item within a notice
of sale.
[[Page S645]]
``(C) Eligible entity.--The term `eligible entity' means an
entity that owns or controls a refinery that is located
within the State of Hawaii.
``(D) Full tanker load.--The term `full tanker load' means
a tanker of approximately 700,000 barrels of capacity, or
such lesser tanker capacity as may be designated by the State
of Hawaii.
``(E) Insular area.--The term `insular area' means the
Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the United States Virgin Islands, Guam,
American Samoa, the Republic of the Marshall Islands, the
Federated States of Micronesia, and the Republic of Palau.
``(F) Offering.--The term `offering' means a solicitation
for bids for a quantity or quantities of petroleum product
from the Strategic Petroleum Reserve as specified in the
notice of sale.
``(G) Notice of sale.--The term `notice of sale' means the
document that announces--
``(i) the sale of Strategic Petroleum Reserve products;
``(ii) the quantity, characteristics, and location of the
petroleum product being sold;
``(iii) the delivery period for the sale; and
``(iv) the procedures for submitting offers.
``(2) In general.--In the case of an offering of a quantity
of petroleum product during a drawdown of the Strategic
Petroleum Reserve--
``(A) the State of Hawaii, in addition to having the
opportunity to submit a competitive bid, may--
``(i) submit a binding offer, and shall on submission of
the offer, be entitled to purchase a category of a petroleum
product specified in a notice of sale at a price equal to the
volumetrically weighted average of the successful bids made
for the remaining quantity of the petroleum product within
the category that is the subject of the offering; and
``(ii) submit 1 or more alternative offers, for other
categories of the petroleum product, that will be binding if
no price competitive contract is awarded for the category of
petroleum product on which a binding offer is submitted under
clause (i); and
``(B) at the request of the Governor of the State of
Hawaii, a petroleum product purchased by the State of Hawaii
at a competitive sale or through a binding offer shall have
first preference in scheduling for lifting.
``(3) Limitation on quantity.--
``(A) In general.--In administering this subsection, in the
case of each offering, the Secretary may impose the
limitation described in subparagraph (B) or (C) that results
in the purchase of the lesser quantity of petroleum product.
``(B) Portion of quantity of previous imports.--The
Secretary may limit the quantity of a petroleum product that
the State of Hawaii may purchase through a binding offer at
any offering to \1/12\ of the total quantity of imports of
the petroleum product brought into the State during the
previous year (or other period determined by the Secretary to
be representative).
``(C) Percentage of offering.--The Secretary may limit the
quantity that may be purchased through binding offers at any
offering to 3 percent of the offering.
``(4) Adjustments.--
``(A) In general.--Notwithstanding any limitation imposed
under paragraph (3), in administering this subsection, in the
case of each offering, the Secretary shall, at the request of
the Governor of the State of Hawaii, or an eligible entity
certified under paragraph (7), adjust the quantity to be sold
to the State of Hawaii in accordance with this paragraph.
``(B) Upward adjustment.--The Secretary shall adjust upward
to the next whole number increment of a full tanker load if
the quantity to be sold is--
``(i) less than 1 full tanker load; or
``(ii) greater than or equal to 50 percent of a full tanker
load more than a whole number increment of a full tanker
load.
``(C) Downward adjustment.--The Secretary shall adjust
downward to the next whole number increment of a full tanker
load if the quantity to be sold is less than 50 percent of a
full tanker load more than a whole number increment of a full
tanker load.
``(5) Delivery to other locations.--The State of Hawaii may
enter into an exchange or a processing agreement that
requires delivery to other locations, if a petroleum product
of similar value or quantity is delivered to the State of
Hawaii.
``(6) Standard sales provisions.--Except as otherwise
provided in this Act, the Secretary may require the State of
Hawaii to comply with the standard sales provisions
applicable to purchasers of petroleum product at competitive
sales.
``(7) Eligible entities.--
``(A) In general.--Subject to subparagraphs (B) and (C) and
notwithstanding any other provision of this paragraph, if the
Governor of the State of Hawaii certifies to the Secretary
that the State has entered into an agreement with an eligible
entity to carry out this Act, the eligible entity may act on
behalf of the State of Hawaii to carry out this subsection.
``(B) Limitation.--The Governor of the State of Hawaii
shall not certify more than 1 eligible entity under this
paragraph for each notice of sale.
``(C) Barred company.--If the Secretary has notified the
Governor of the State of Hawaii that a company has been
barred from bidding (either prior to, or at the time that a
notice of sale is issued), the Governor shall not certify the
company under this paragraph.
``(7) Supplies of petroleum products.--At the request of
the governor of an insular area, the Secretary shall, for a
period not to exceed 180 days following a drawdown of the
Strategic Petroleum Reserve, assist the insular area in its
efforts to maintain adequate supplies of petroleum products
from traditional and non-traditional suppliers.''.
SEC. 3. REGULATIONS.
(a) In General.--The Secretary of Energy shall issue such
regulations as are necessary to carry out the amendment made
by section 2.
(b) Administrative Procedure.--Regulations issued to carry
out the amendment made by section 2 shall not be subject to--
(1) section 523 of the Energy Policy and Conservation Act
(42 U.S.C. 6393); or
(2) section 501 of the Department of Energy Organization
Act (42 U.S.C. 7191).
SEC. 4. EFFECTIVE DATE.
The amendment made by section 2 takes effect on the earlier
of--
(1) the date that is 180 days after the date of enactment
of this Act; or
(2) the date that final regulations are issued under
section 3.
By Mr. GLENN:
S. 193. A bill to provide protections to individuals who are the
human subject of research; to the Committee on Labor and Human
Resources.
HUMAN RESEARCH SUBJECT PROTECTION ACT
Mr. GLENN. Madam President, I rise today to introduce the Human
Research Subject Protection Act of 1997. I send the bill to the desk.
The PRESIDING OFFICER. The bill will be received and appropriately
referred.
Mr. GLENN. Madam President, if I approached any Senator here and I
said, ``You did not know it, but the last time they went to the doctor
or went to the hospital, your wife or your husband or your daughter or
your son became the subject of a medical experiment that they were not
even told about. They were given medicine, they were given pills, they
were given radiation, they were given something and were not even told
about this, were not even informed about it, yet they are under some
experimental research that might possibly do them harm--maybe some good
will come out of it, but maybe it will do them harm also--but they do
not know about it,'' people would laugh at that and say that is
ridiculous. That cannot possibly happen in this country. Yet, that very
situation is what this piece of legislation is supposed to address.
I have been in public life and have served this country for many
years. Frankly, I do not think too many things that I see surprise me
anymore about our laws and about Government. Three years ago, though, I
began to learn about a gap in our legal system that does truly concern
me. In 1993 the Governmental Affairs Committee began to investigate the
cold war radiation experiments. These experiments are one of the
unfortunate legacies of the cold war, when our Government sponsored
experiments involving radiation on our own citizens without their
consent. They did not even know the experiments were being run on them.
It was without their consent.
One of the most infamous of these experiments took place in my own
State of Ohio, when scores of patients at the University of Cincinnati
were subjected to large doses of radiation during experimental
treatments, without their consent, without their informed consent.
During the course of this investigation, I began to ask the question,
what protections are in place to prevent such abuses from happening
again? What law prohibits experimenting on people without their
informed consent?
What I found, when I looked into it, is there is no law on the books
requiring that informed consent be obtained. More important, I believe
there is a need for such a law, as there continue to be cases where
this basic right--I do view it as a basic right--is abused. As I
started out, I would like to put this on a personal level for everyone
of my colleagues. You just think about your own family, your own son,
your own daughter, or grandchildren who might be, the next time they go
to a doctor, the subject of some medical experiment that they are not
even told about. I do not think there can be many things more un-
American than that.
With the introduction of this bill today I hope to begin the process
of correcting some serious gaps in our
[[Page S646]]
legal system. I want to make clear right now I am not seeking to bring
medical research to a screeching halt. Please do not anybody at NIH, or
anybody doing research throughout this country, think we are trying to
stop that. We are not. That is not my intent and not the intent of this
bill.
This country has the very finest health care system in the world, in
part because of basic research. In fact, in large part because we have
put more effort, more resources, more of our treasure into health
research than any other nation in this world. In fact, I believe most
people are not opposed to participating themselves in scientific
research, if they are told about the pros and the cons. That is the
goal of this legislation, to make sure that people have the appropriate
information to make an informed choice about their medical treatment.
Everyone listening today probably has heard of the Nuremberg Code.
That is the list of 10 ethical research principles which were produced
as part of the judgment against Nazi physicians who engaged in truly
heinous medical experiments during World War II.
The first principle of the Nuremberg Code states that the voluntary
consent of the human subject of research is absolutely essential.
Unfortunately, as we look back through our history since the late
1940's, it appears that researchers in America may not have taken all
that Nuremberg lesson completely to heart.
I ask my colleagues what the following names might have in common:
thalidomide, Tuskegee, and Willowbrook?
Well, the answer is that these are all sad examples of unethical
research conducted in the United States, and in the United States well
after the Nuremberg Code was issued, adopted and worldwide attention
had been focused on some of the abuses of that time during World War
II.
Given this history, I find it astounding that even after Nuremberg,
the thalidomide babies, Willowbrook, Tuskegee and the cold war
radiation experiments, and who knows how many other cases, we still
don't have a law on our books requiring that informed consent--those
two words, ``informed consent''--be obtained prior to conducting
research on human subjects.
I have had research conducted on me because of my past activities
before I came to the Senate in the space program and so on, but I knew
what was being looked at, what was being tried. I knew the objectives
of it, and I was willing to do that. I was happy to do it. But it was
informed consent that I had personally, and I knew what I was getting
into and glad to do it.
I think most people feel the same way. If they know what they are
getting into and they feel there is a good purpose to it, they are
willing to do it. But to do research on people when they don't even
know what the research or the medicines or the radiation is that is
being tried on them, I think is unconscionable.
What it comes down to is there are no criminal fines or penalties for
violating the spirit or the letter of that Nuremberg Code that should
be the basis of all of our informed consent in this country.
In fact, our own Constitution says, ``The right of the people to be
secure in their persons . . . shall not be violated.''
So there is no explicit statutory prohibition against improper
research. I must add that just because there is no law on the books
does not mean there are no protections for people from unethical
medical or scientific research.
These tragic incidents I have mentioned have resulted in changes in
the way human research subjects are treated. I don't want to
misrepresent this, because there is a very elaborate system of
protections that have developed over the years. Unfortunately, though,
this system does have some gaps and, if enacted, I believe this
legislation will close those gaps.
Let me briefly describe the system that is currently in place.
Regulations governing the protection of human research subjects were
issued by the Department of Health, Education, and Welfare in 1974 and
may be found at part 46 of title 45 of the Code of Federal Regulations.
In 1991, 10 years after a recommendation of a congressionally
chartered Presidential advisory board, 16 other agencies adopted a
portion of this rule, a portion of the rule to apply to research that
these agencies sponsored. And at that point, these regulations became
known as the common rule.
The common rule requires research institutions receiving Federal
support and Federal agencies conducting research to establish
committees, and these are known as--the shorthand version is IRB's--
Institutional Review Boards. Their job is to review research proposals
for risk of harm to human subjects and to perform other duties to
protect human research subjects.
The common rule also stipulates requirements related to informed
consent, how researchers must inform potential subjects of the risks to
which they, as study participants, agree to be exposed.
It should also be noted that HHS regulations contain additional
protections not included in the common rule for research involving
vulnerable populations; namely, pregnant women, fetuses, subjects of in
vitro fertilization research, prisoners and children. No other Federal
agency has adopted these additional protections.
Several mechanisms have been developed by HHS and research
institutions over the years to extend the common-rule protections to
more people. For example, many, but not all, research institutions
which receive some Federal support voluntarily apply common-rule
guidelines to all research conducted at their institutions.
Additionally, in order to receive approval for a drug or device from
the Food and Drug Administration, a research institution or
pharmaceutical company must comply with the requirements of the common
rule as administered by the FDA.
In addition to the Federal regulations, most professional medical
societies and associations have adopted ethical codes of conduct
regarding research.
The first such ethical code, called the Helsinki Code, was adopted by
the World Medical Association in 1964. So it has been on the books for
a long time. Since that time, other prominent organizations, like the
American Medical Association, the American Society for Clinical
Investigation, and the American Federation of Clinical Research have
also adopted such ethical codes.
Most recently, in October 1995, the President exhibited, I believe,
strong leadership and established the National Bioethics Advisory
Commission, NBAC. This had been a long time coming. It had been
suggested, but no one had ever gone ahead and done this, and the
President exerted the leadership and established the NBAC.
Quite simply, the scientific and ethical issues which the NBAC are
supposed to evaluate represent some of the most important, some of the
most complex and controversial questions of our time. NBAC's input will
be critical to informed policymaking for both the legislative and
executive branches.
The two primary goals of NBAC are to, first, evaluate the current
level of compliance of Federal agencies to the common rule, and,
second, evaluate the common rule and advise both the executive and
legislative branches on any changes that might be needed to it.
I very strongly support the work of the NBAC but recently have become
extremely concerned to hear that more than 15 months after its
establishment, the NBAC is still operating with a volunteer staff. It
was my understanding that a number of Federal agencies supported the
creation of the NBAC and agreed to back up their support with resources
and staff. Some NBAC members have stated in public meetings that they
are frustrated with the progress the Commission is making and attribute
the slow pace to the lack of resources. Additionally, the resource
problem may be limiting the number of meetings of the Commission.
Further, if this problem is not resolved in the near term, the
Commission may have to stop meeting altogether. I sent a letter to the
President's science adviser a few days ago, Dr. John Gibbons, to
express my concerns about this. Dr. Gibbons was working to resolve this
funding problem, which I view as an urgent priority.
I am very glad to announce--as a matter of fact, it was just today--
that these groups in Government that are interested in this had a
meeting under Dr. Gibbons' leadership, and the $1.6 million that was
supposed to accrue
[[Page S647]]
from these different agencies to be used by the NBAC is now
forthcoming. So the NBAC is now funded so they can do the job they were
originally supposed to do.
We are very glad to say that has happened just today, and I am glad
it happened today, just when I am introducing this bill, because it
looks as though we now truly are moving to support the NBAC that did
not receive the kind of monetary support, the kind of funding that we
thought it was going to have when it was first formed a year and a half
ago.
There are a number of existing mechanisms that do protect human
research subjects today. In fact, in March of 1996, the GAO reported to
me that the testing protection system has reduced the likelihood of
serious abuses from occurring. However, the GAO also pointed out a
number of weaknesses and gaps in the current system.
There are at least four areas, four major gaps.
First, not all agencies have adopted the common rule, including
agencies that currently sponsor research involving human subjects. The
Department of Labor and the Nuclear Regulatory Commission are examples
of agencies that sponsor such research but those agencies have not
adopted the common rule, which I think they should have.
Second, the common rule's research is voluntarily applied in many
cases. Most institutions which receive Federal funds will voluntarily
apply the common rule to all research conducted at their institution.
However, not all research institutions adopt this policy. And in any
case, if any improper research is discovered at these institutions,
there are very few steps available to the Federal Government to do much
about it.
Third, a private institution or a researcher who conducts
nonfederally funded research or is not seeking approval of a drug or
device with the FDA does not have to apply the principles of the common
rule to its research. In other words, there is a huge area of all the
private medical research out there that is not under the common rule
unless they just choose themselves to just voluntarily do it.
Fourth, no Federal agency, other than HHS, has applied the additional
protections described in 45 CFR 46 for vulnerable populations--pregnant
women and their fetus, children, prisoners--to their own research. So
the purpose of this legislation is to help close the gaps that exist
within the current system for protecting research subjects.
Well, is there really a problem out there?
Is this just a paper loophole that I am trying to close?
Unfortunately, Mr. President, there are ongoing problems with
inappropriate, ethically suspect research on human subjects. It is
difficult to know the extent of such problems because information is
not collected in any formal manner on human research.
The Cleveland Plain-Dealer in my home State of Ohio has recently
reported in a whole series of articles, after much investigation of
this issue. And I quote from them:
What the government lacks in hard data about humans, it
more than makes up for with volumes of statistics about
laboratory animals. Wonder how many guinea pigs were used in
U.S. research? The Agriculture Department knows: 333,379. How
many hamsters in Ohio? 2,782.
So we have all this data on animals and little on human beings. I
would hasten to add that the guinea pigs the Plain-Dealer refers to are
the four-legged kind too and not the guinea pigs that are humans being
used for research.
The reason we know so much about the use of animals in research is
that we have laws governing the handling and treatment of them.
For example, the Animal Welfare Act requires that certain minimum
standards be maintained when using animals in research.
Let me give you some recent examples which indicate why,
notwithstanding the common rule and the other protections that are in
place, I think additional protections are needed in statute.
In 1994-95, in an effort to explore the rights and interests of
people currently involved in radiation research conducted or sponsored
by the Federal Government, the Presidential Advisory Committee on Human
Radiation Experiments conducted an in-depth review of 125 research
projects funded by HHS, DOE, DOD, VA, and NASA. According to the ACHRE
report:
Our review suggests that there are significant deficiencies
in some aspects of the current system for the protection of
human subjects.
The ACHRE found that documents provided to IRB's often did not
contain enough information about topics that are central to the ethics
of research involving human subjects. In some cases the committee found
it was difficult to assess the scientific merit of a protocol based on
the documentation provided.
ACHRE's report states that some consent forms studied by the
committee are--and I quote--
. . . flawed in morally significant respects, not merely
because they are difficult to read but because they are
uninformative or even misleading.
The report states further:
Our review also raises serious concerns about some research
involving children and adults with questionable decision-
making capacity.
And the ACHRE concludes:
All told, the documents of almost half the studies reviewed
by the committee that involved greater than minimal risk [to
the subject] raised serious or moderate concerns.
That is a horrible indictment.
As I mentioned earlier, from December 15 to 18, 1996, the Cleveland
Plain-Dealer published a series of articles entitled ``Drug Trials: Do
People Know the Truth About Experiments.''
And I want to give credit to the people that worked on
that. Keith Epstein, has covered Capitol Hill here and has
written much and done much investigative reporting working on
this, as did Mr. Sloat, S-l-o-a-t, Bill Sloat. Those two
fellows worked on this and did a great job in pointing out
some of the problems that still exist. And we have talked to
them about some of these things.
The Plain-Dealer uncovered a number of disturbing cases, very
disturbing cases as a matter of fact, where people were either unaware
of the fact that they were involved in research or were not provided
full information about potential side effects of research. The series
raises very serious questions about the adequacy of our current system
of protecting human research subjects.
The Plain-Dealer found, for example, of ``4,154 FDA inspections of
researchers testing new drugs on people [since 1977] . . . more than
half the researchers were cited by FDA inspectors for failing to
clearly disclose the experimental nature of their work.''
Another serious finding in this series is that researchers who
receive the most severe penalty by the FDA, being designated
``Disqualified Investigators,'' have little fear of this fact being
found out by their peers or patients. One of the articles discusses
potentially serious problems in the way research conducted outside of
the United States is incorporated into applications for drug approvals
in the United States.
The Plain-Dealer uncovered much evidence to suggest that the Federal
Government continues to sponsor research where informed consent is not
obtained. And this fact disturbed me greatly also.
On November 14, 1996, the Wall Street Journal published an article
that examined the practice at one pharmaceutical firm, Eli Lilly and
Co. in using homeless alcoholics in their clinical trials. The article
raises some disturbing questions about the quality of the phase I
trials conducted by this one company. Also serious ethical questions
are raised concerning the appropriateness of paying homeless alcoholics
significant sums to be human guinea pigs. It is not clear from the
article whether these tests were reviewed by any IRB.
On December 27, 1996, the New York Times reported on a New York State
appeals court ruling which found that the State's rules governing
psychiatric experiments on children and the mentally ill were
unconstitutional. The court found that the rules did not adequately
protect people who, because of age or illness, cannot give informed
consent to take part in drug tests or other experiments. The article
mentions 10 to 15 of the 400 psychiatric experiments covered by the
ruling as being ``privately financed'' and therefore outside the
coverage of Federal rules.
How would you like it if your father, mother, son or daughter,
husband, wife was in one of those institutions and was having
experiments conducted on
[[Page S648]]
them without your knowing about it or without them knowing about it?
That is what we are up against.
On August 15, 1994, the New York Times reported on ethical and legal
questions regarding a company's efforts to promote a drug that can make
some children grow taller than they otherwise would. The drug in
question, Protropin, has been approved by FDA for use in children whose
bodies do not make sufficient quantities of human growth hormone.
However, once approved, doctors may prescribe it for other purposes at
their discretion. In this case the company was apparently surveying
schools for short children and then trying to funnel those children to
doctors who would prescribe the drug whether or not the children lacked
the human growth hormone. This unapproved research was occurring
without the oversight of an IRB. And at least 15,000 children have
taken this drug.
Another illustration of the precarious coverage of the common rule
occurred in 1995 when it became known that researchers from the Center
for Reproductive Health at the University of California Irvine, were
fertilizing humans and implanting theses in different mothers without
the consent of the donor. This research was not being funded by any
Federal agency; however, NIH was funding more than $20 million worth of
other research at the university. Even though several internal and
external investigations by the university and the district attorney
were being conducted on this experiment, a clarifying moment occurred
when investigators from OPRR visited UC Irvine early last year. These
investigators reminded university officials of the common rule; the
fact that the university had agreed to apply it to all research
conducted there--through OPRR's assurance process; and that NIH was
currently funding a good deal of research at the institution. Within a
week of OPRR's visit, the university took public action to halt the
research and formally investigate the researchers.
On October 10, 1994, the New York Times reported on a New York doctor
who adopted two types of drugs approved by FDA for cancer treatment and
stomach ulcers for an unapproved use to perform nonsurgical abortions.
The article quotes the doctor saying that in 121 of 126 cases his
approach was successful. The remaining five cases required surgery to
complete the procedure. Because the drugs were FDA approved and the
doctor was not funded or connected to federally sponsored research, no
IRB or approved informed consent procedures were required. Apparently,
each patient signed a three-page consent form, but this was not
approved by an IRB. According to the Times, once FDA approves a drug,
physicians are generally allowed to use it for off label purposes.
Now Mr. President, some of the issues discussed in these articles are
problems with how the common rule itself is being applied. Some of
these examples illustrate the gaps in the common rule coverage. My
legislation will address both the coverage and the application of the
common rule.
Now how precisely would the legislation work?
It would require all research facilities to register with HHS.
Registration shall include: First, statement of principles governing
the research facility in its conduct of human subject research; second,
designation of the official responsible for all human subject; third,
designation of membership roster of IRB(s); and fourth, attestation
that the research facility is complying with the protection
requirements of the common rule.
The legislation includes a grandfather provision for all research
entities which currently have negotiated project assurances with HHS.
The vast majority of research facilities have such assurances.
The legislation contains a 3-year reregistration requirement.
The legislation includes criminal penalties for failure to comply
with the act. Therefore, if enacted it would be a felony offense to
experiment on someone without their informed consent.
The intent therefore of this legislation is twofold: First, to fill
in the gaps of coverage of the common rule by requiring all research
involving human subjects to abide by the rule; and second, to elevate
the importance of conducting research ethically, the bill provides
criminal fines and penalties for failure to comply with the
requirements of this law, and by extension 45 CFR 46.
Finally Mr. President, my legislation would codify a recommendation
which the Advisory Committee on Human Radiation Experiments made
regarding the conduct of classified research involving human subjects.
Specifically, the advisory committee recommended that informed
consent of all human subjects of classified research be required, and
that such requirement not be subject to waiver or exemption. Under
current rule and executive order, it is possible to waive informed
consent and IRB review for classified research. Title II of this
legislation would prohibit the waiver of either informed consent or IRB
review for classified research.
The advisory committee also recommended that human subjects of
classified research be provided with certain information regarding that
research. My legislation would require that such subjects be
information concerning: First, the identify of the sponsoring Federal
agency; second, a statement that the research involves classified
information; and third, an unclassified description of the purpose of
the research.
Mr. President I have tried today to briefly lay out the case for the
need for the legislation I am introducing. I know that my colleague
from Ohio, Senator DeWine, is also concerned about the issues I have
raised today, and about those that appeared last month in the Plain
Dealer. I believe that he has requested that the chairman of the Labor
and Human Resources Committee hold hearings on this subject. I think
that is entirely appropriate. And I hope that this legislation could be
considered in that process. I look forward to working with the Labor
Committee in this regard.
I do not claim to have the magic bullet solution with this bill.
However, I believe there are some key principles which should guide the
Senate's consideration of this legislation. These principles are:
First, informed consent and independent review of experiments
involving human subjects must be required.
Second, anyone who violates the right of research subject to have
informed consent, should be held criminally responsible for that
violation.
I want to put this in personal terms once again. You can imagine your
spouse, husband, wife, father, mother, children, being experimented on
without your knowledge or their knowledge. That is unconscionable, and
we should not permit that. This legislation will close many of the
loopholes that permit that to happen now.
As the legislative process moves ahead, it is certain that the bill
will undergo scrutiny and amendments. But I think the outcome, if this
legislation is enacted into law, will be improved protections for all
Americans.
Madam President, obviously, I welcome any cosponsors on this
legislation. I will be sending out a ``dear colleague'' letter to all
the offices, and I hope we get a good response to that. I think there
are very few Senators who will not back this when they hear what can
happen then to them, their families, and their constituents back home,
if we do not pass something like this.
I think this is many years overdue. I don't want to scare people to
death with this, because I think most of the research in this country
is conducted in a way that is good and is with informed consent--in
most cases. But just the few examples that I have mentioned here today,
as well as the articles in the Cleveland Plain Dealer and New York
Times I quoted from, indicate there is still a very major problem in
this area and one that we want to close the gaps on so that no American
is subjected to experiments like this, unless they know exactly what is
going on and have given informed consent.
Thank you. I yield the floor.
______
By Mr. CHAFEE (for himself, Mr. Moynihan, Mr. Abraham, and Mr.
Kyl):
S. 194. A bill to amend the Internal Revenue Code of 1986 to make
permanent the section 170(e)(5) rules pertaining to gifts of publicly
traded stock to certain private foundations and for other purposes; to
the Committee on Finance.
[[Page S649]]
private foundations legislation
Mr. CHAFEE. Mr. President, today, I am introducing legislation which
makes permanent the full value deduction for gifts of appreciated stock
to private foundations. I am pleased that my distinguished colleagues,
Senator Moynihan and Senator Abraham, have agreed to join me in this
effort.
Since 1984, donors have been allowed to deduct the full fair market
value of certain gifts of public traded stock to private foundations.
This provision of the tax code was added as part of the Tax Reform Act
of 1984 to encourage individuals to create foundations during their
lifetime. Unfortunately, when this section was enacted it included a
sunset date of December 31, 1994 which was extended through May 31,
1997 as part of the Small Business Jobs Protection Act. Without this
provision, the number of new foundations--as well as additional
endowments to existing foundations--is likely to fall off dramatically.
Private foundations are nonprofit organizations that support
charitable activities in order to serve the common good. They provide
support by making grants to other nonprofit agencies, or through
operating their own programs. In some cases, such as scholarships and
disaster relief, foundations may make grants to individuals.
Foundations are created with endowments--money given by individuals,
families, or corporations. They make grants or operate programs with
the income earned from investing the endowments. Since most foundations
have permanent endowments, they do not need to raise funds each year
from the public in order to continue their work. Freed from these
constraints, foundations are perfectly positioned to act as the
research and development arm of society.
In a 1965 Report on Private Foundations, the Treasury Department
recognized the special nature of foundations by describing them as
``uniquely qualified to initiate thought and action, experiment with
new untried ventures, dissent from prevailing attitudes, and act
quickly and flexibly.'' Indeed, foundations reflect the innovative
spirit of the individuals and corporations that endow them.
There are more than 34,000 private foundations in America today that
provide over $9 billion annually to support innumerable projects, large
and small. Among other things, they help the poor and disadvantaged,
advance scientific and medical research, and strengthen the American
educational system.
Let me give you a few examples of some of the medical advances that
have occurred as a result of the financial assistance provided by
private foundations: The polio vaccine developed by Dr. Jonas Salk in
1953 after the Sarah Scaife Foundation provided him with the money he
needed to establish and equip his virus laboratory.
With the help of the Commonwealth Fund, Dr. Papanicolaou discovered
in 1923 that cervical cancer could be diagnosed before a woman
presented any symptoms. That breakthrough led to the basic and now
routine diagnostic technique known as the Pap smear.
In 1951, Dr. Max Theiler received the Nobel Prize in medicine for his
work in developing the yellow fever vaccine. That effort was the direct
result of a 30-year, all-out commitment by the Rockefeller Foundation
to eradicate this disease.
But, Mr. President, private foundations have been involved in many
more aspects of our daily lives than simply funding medical advances.
Dr. John V.N. Dorr was an engineer in the early 1950's. He speculated
that many accidents occurring on our Nation's highways during inclement
weather were the result of drivers hugging the white lines painted in
the middle of the road. Dorr believed that if similar lines were
painted on the shoulder side of the road, lives could be saved.
Dorr convinced transportation engineers in Westchester County, NY, to
test his theory along a particularly treacherous stretch of highway.
The dropoff in accidents along this part of the road was dramatic, and
Dr. Dorr used his own foundation to publicize the demonstration's
results nationally. Today, although State funds are now used to paint
white lines on the shoulder side of the Nation's highways, every person
traveling in motor vehicles is indebted to Dorr and his foundation for
implementing this lifesaving discovery.
As these examples indicate, private foundations provide a great many
benefits to our society. By permanently extending this tax incentive,
we can continue to encourage individuals to dedicate a substantial
portion of their wealth to public, rather than private purposes. I hope
my colleagues will support this legislation.
Our bill permanently extends the tax incentive for an individual who
contributes stock to a private foundation. This provision currently
expires on May 31, 1997.
Under this bill, a taxpayer who contributes publicly traded stock to
a private foundation would be allowed a deduction for the full fair
market value of the stock. Absent this legislation, the deduction would
be limited to the cost basis of the stock, which for many donors
effectively eliminates the incentive to make the donation.
The legislation also conforms the due date for a private foundation's
first quarter estimated tax payment with the filing date for the annual
tax return. Currently, a private foundation is required to make its
first quarter estimated tax payment on April 15, even though the annual
income tax return is not due until May 15. Under this bill, a
foundation's first estimated tax payment would be due on May 15.
Finally, the bill also simplifies the rules governing distributions
from a private foundation to a charity located outside the United
States.
A similar proposal introduced in the 104th Congress was estimated by
the Joint Committee on Taxation to cost $287 million over 5 years.
Mr. MOYNIHAN. Mr. President, I am pleased to join my distinguished
colleague, Senator Chafee, in introducing this legislation to extend
permanently the full, fair market value deduction for gifts of publicly
traded stock to private foundations.
Much of the focus in Congress over the last several years has been on
efforts to control or reduce Government spending in order to balance
the budget. As programs are cut to meet budget constraints, pressure
will be placed on other sectors, particularly the independent sector,
to fill the void. Already, the extent to which nonprofit institutions
in the United States perform functions that are typically governmental
undertakings in other countries is perhaps not fully understood or
appreciated. It is a unique feature of our society of inestimable value
and must be sustained. As demand on the independent sector grows, we
must support its efforts to promote the common good and confront social
problems.
A bit of history: prior to 1969, contributions of appreciated
property were deductible at their fair market value. In 1969, Congress
adopted a number of rules to address certain abuses then occurring with
respect to a small number of private foundations. These included a
series of targeted Treasury Department recommendations to impose excise
tax penalties on self-dealing transactions, excess business holdings,
insufficient distributions for charitable purposes, and the like.
However, in response to the negative publicity surrounding private
foundations at the time, Congress felt it necessary to impose other
restrictions beyond the targeted Treasury proposals. These included a
provision to limit the deduction for gifts of appreciated property to
private foundations to the donor's basis, usually, the original
purchase price.
After 1969, the IRS and other experts concluded that the targeted
antiabuse rules worked well to correct the problems with private
foundations. And nothing indicated that the 1969 limit on deductibility
of gifts of appreciated property to private foundations was necessary
to prevent abuse, at least to the extent that the property's value was
readily determinable. Thus, in 1984, Congress approved a rule, that
sunset after 10 years, providing a deduction for the full value of
gifts of publicly traded stock to private foundations. This temporarily
restored parity of treatment to contributions of stock to public
charities--already fully deductible--and to private foundations.
Then came the Tax Reform Act of 1986, which was largely an effort to
broaden the tax base and reduce rates. One such base-broadening
provision was the creation of a tax preference under the individual
alternative minimum tax [AMT] for gifts of appreciated
[[Page S650]]
property to charitable organizations. Thus, taxpayers subject to the
AMT could only deduct the basis of property donated to charitable
organizations.
As it turned out, the 1986 Tax Act worked all too well. Not only was
the base broadened, but charitable giving of appreciated property
nearly disappeared. And the charitable organizations let us know that
our action had hurt them financially in such a way that not only they,
but the larger public trust they serve, were suffering. Thus, at the
behest of this Senator, in 1990 Congress at first temporarily, and then
in 1993 permanently, repealed the tax preference for contributions of
appreciated property.
At the end of 1994, however, the full deduction for contributions of
appreciated stock to private foundations expired. It had been intended
as a 10-year experiment; the 10 years ran out, and the experiment was
over. But most observers concluded that the experiment had worked--the
private foundation rules continued to work reasonably well to prevent
abuse, even while gifts of appreciated stock were fully deductible. In
particular, the rule was not a source of compliance problems for the
Internal Revenue Service. Thus, we agreed to extend the provision
temporarily just last year in the Small Business Job Protection Act.
Unfortunately, it will expire once again at the end of May. There being
no harm done by this provision, and much good, it is a rule we should
like to see extended once again--and this time permanently.
Mr. President, no reason exists to provide different treatment under
the Tax Code for gifts of appreciated stock to private foundations than
is provided for such gifts to public charities. Private foundations are
an important component of our nonprofit, independent sector. They make
vast contributions to our society in the areas of education, health,
disaster relief, the advancement of knowledge and the preservation of
historical and cultural artifacts, to name only a few. Government must
play a role in ensuring that nonprofit institutions not merely survive,
but thrive--particularly during an era of Government cutbacks. The
legislation we introduce today will be a great help in this regard. I
look forward to its early and favorable consideration in the 105th
Congress.
______
By Mr. McCAIN:
S. 196. A bill to amend the Public Buildings Act of 1959 to require
the Administrator of General Services to prioritize construction and
alteration projects in accordance with merit-based needs criteria, and
for other purposes; to the Committee on Environment and Public Works.
the federal building construction and alteration funding improvement
act
Mr. McCAIN. Mr. President, today I am introducing legislation to
establish a system to ensure that funding for the construction and
repair of Federal buildings is allocated according to need and
priority.
First, the bill would require the President to submit the
administration's building construction budget request in the form of a
prioritized list of projects. Second, and most importantly, the bill
would require the General Services Administration to prepare and
maintain a ranked priority list of all ongoing and proposed
construction projects. The list would be updated and reprioritized with
each new project added either through administrative or congressional
action.
Last year, Congress provided nearly $900 million for Federal building
construction and major repairs not including the funds provided to the
Department of Defense. Over the past 5 years Congress obligated over $4
billion for this purpose. This is an enormous sum of money. Clearly,
the Federal building construction program can and must share in the
sacrifice as we seek to gain, control over the deficit.
As we rein in spending, it is more critical now than ever to ensure
that scarce financial resources are allocated to our highest
priorities. In order to trim the fat in an informed and efficient
manner, Congress, the administration and the taxpaying public must know
what our construction priorities are.
During debate on the rescission bill in the last Congress, the Senate
considered proposals to cut Federal construction funding. The list of
projects proposed for defunding was rather arbitrary and capricious.
The tenets of good government dictate that when we reduce spending, our
lowest priorities should be put on the chopping block first. Yet,
Congress cannot readily determine what those priorities are. By
requiring the General Services Administration, which administers the
Federal building fund, to maintain a ranked list of project priorities,
we can be sure that funding decisions will be made on the basis of
merit rather than politics or congressional caprice.
Mr. President, foremost, this legislation will help us address the
pork barrel politics which has played far too great a role in the
process of Federal building construction. Currently, when a Member of
Congress decides a new building is needed in his or her State or
district, the General Services Administration conducts what is known as
an 11b survey to determine the need. In most cases, the GSA determines
that a need exists. The study is then used to justify project
authorization and appropriation, even though a finding of need is not a
finding that such a project is a priority.
As projects that are not in the President's budget request are added
by Congress, we do not always have a clear idea of where they are
ranked among competing priorities. Passage of this legislation will
ensure that this vital information is readily available.
I urge the relevant committees to expeditiously examine this proposal
so that we can approve rapidly this relatively minor but, I believe,
important and helpful change in procedure.
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By Mr. ROTH (for himself, Mr. Lott, Mr. Breaux, Mr. Grassley, Mr.
Nickles, Mr. Murkowski, Mr. Abraham, Mr. Kyl, Mr. Helms, Mr.
D'Amato, Mr. Craig, Mrs. Hutchison, Mr. McConnell, Mr. Thomas,
Mr. Gordon H. Smith, Mr. DeWine, Mr. Inhofe, Mr. Bryan, Mr.
Roberts, Ms. Mikulski, Mr. Smith, Mr. Hatch, Mr. Bennett, Mr.
Kempthorne, Mr. Inouye, Mr. Enzi, Mr. Ford, Mr. Burns, Mr.
Lieberman, Mr. Hagel, Mr. Gramm, Mr. Dodd, Ms. Collins, Mr.
Gregg, Mr. Grams, Mr. Bond, and Mr. Kohl):
S. 197. A bill to amend the Internal Revenue Code of 1986 to
encourage savings and investment through individual retirement
accounts, and for other purposes; to the Committee on Finance.
the savings and investment incentives act of 1997
Mr. ROTH. Mr. President, today we reintroduce the super IRA, a
savings plan that is well-known as the Roth-Breaux super IRA.
I'm honored again to be joined by Senator John Breaux, in introducing
this bill. I believe now, as I did last Congress, that this is
extremely well conceived legislation that succeeds in strengthening two
fundamental components of our society: the family and the future of our
economy. Much has been written and said about both of these lately,
particularly as we look to a new century. Likewise, we're hearing more
and more about the need to promote personal responsibility and self-
sufficiency.
The Roth-Breaux super IRA will have a positive influence in all of
these areas. Congress understands this. That's why Congress has passed
similar legislation in the past. We all know that Washington must
promote policies that strengthen family and create an environment where
our economy can grow, this is why our IRA legislation in the past has
been marked by a strong, cooperative, bipartisan spirit. In 1991,
legislation similar to this had 78 cosponsors. In 1994, we had 58
cosponsors and in 1995, 52 cosponsors. I believe this legislation will
find similar support.
Why? Because this super IRA will go a long way toward strengthening
our families and restoring equity to work-at-home spouses and other
workers without pensions. It will also boost our Nation's saving rate
and lead to capital formation, increased investment and economic
growth. The lack of saving in this country, as we all know, is a real
concern. Chairman Alan Greenspan at the Federal Reserve says that the
single most important long-term economic issue for this country is
savings--savings that are essential for jobs, opportunity, and growth.
This super IRA has been designed to address our Nation's need for
savings
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and to provide families with as much flexibility as possible to use
their savings not only for their security, but for the important goals
and challenges in life. For example, this super IRA allows withdrawals
to be made penalty-free to purchase first homes, to pay for college,
and to cover expenses during extended periods of unemployment.
This super IRA removes many of the Tax Code's barriers to retirement
saving. First, this bill increases and phases out the IRA's income
limits over 4 years, and increases the contribution limit to keep up
with inflation. Furthermore, one of the key features of our bill is
that we separate the IRA and the 401(k) or 403(b), so Americans can
save the maximum in both, and so that spouses who work at home will not
have their savings limited by their husband's or wife's 401(k).
To strengthen the way this super IRA serves our families, this
legislation not only allows parents to use penalty free withdrawals to
help their children meet these goals and challenges, but children can
use their IRA's to help their parents. Grandparents can make penalty
free withdrawals to help grandchildren. And grandchildren can use their
IRA's to help their grandparents. Our objective is to make this IRA as
family oriented, as flexible and as useful as possible. It will go a
long way toward promoting opportunity and reliance on self and family.
Let me stress, this super IRA bill builds on what we did in the Small
Business job Protection Act of 1996 and eliminates the unequal
treatment of work-at-home spouses that now exists under current law.
This bill allows spouses--husbands or wives--who work at home to make
equal IRA contributions, up to $2,000, in their own accounts regardless
of whether their spouse has an employer pension.
With the super IRA, we also create a new type of individual
retirement account--an IRA in which an individual's contribution is not
tax deductible, but where the earnings can be withdrawn tax free if the
account is open for at least 5 years, and the account owner is at least
59\1/2\ when the funds are withdrawn.
Mr. President, it's clear to see why this is a bill whose time has
come. We have passed it before--in both Houses of Congress--now we must
pass it again. It serves the individual. It serves the family. It
serves the Nation. It is equitable, restoring spousal contributions to
where they should be. It is flexible, offering penalty free withdrawals
for life's necessities. It promises the vital capital formation America
needs to invest in its future. And it builds upon the very important
concept of self-reliance.
Mr. BREAUX. Mr. President, today Senator Roth and I are introducing
the Savings and Investment Incentive Act of 1997. We have introduced
this bill in past Congresses but it is even more timely now as the
pressure builds to secure the retirement of the baby boomers.
The facts are staring us in the face. Within 30 years one out of
every five Americans will be over 65. The baby boomers are 76 million
strong, doubling the number of Social Security beneficiaries by the
year 2040.
At the same time, Social Security outlays will begin out pacing
Social Security receipts in 2013 and the Social Security trust fund
will be bankrupt in 2029 if we don't take the necessary steps to
preserve it. And our national savings rate is only 1 percent of GDP.
This is one-half of what it was in 1970. By comparison, we save half as
much as the Germans and one-third as much as the Japanese. This is a
serious problem. We need to address it by reducing the budget deficit
and eliminating the drain it places on our national savings but we need
to address it in other ways, as well.
The Super IRA bill makes changes in the rules governing IRA's that
will expand the availability of the IRA as a savings vehicle. The
income caps will be eliminated over a 5-year period. Our bill creates a
new kind of IRA that allows taxpayers to earn tax-free income. Funds
can be withdrawn from either the current form of IRA or the new IRA to
purchase a first home, meet a family's income needs during an extended
period of unemployment or to pay for educational expenses.
IRA's have broad bipartisan support as demonstrated by the list of
cosponsors. I hope that we will work together to pass this legislation
this year.
______
By Mr. McCAIN:
S. 198. A bill to prohibit campaign expenditures for services of
lobbyists, and for other purposes; to the Committee on Rules and
Administration.
THE LOBBYING CONFLICT OF INTEREST ELIMINATION ACT
Mr. McCAIN. Mr. President today I am introducing legislation entitled
the ``Lobbying Conflict of Interest Elimination Act.'' This bill would
ban a candidate or a candidate's authorized committee from paying
registered lobbyists for political services. Additionally, the bill
would mandate that any political contributions made by a registered
lobbyist be reported by such individual when he or she files his or her
lobbying disclosure report as mandated in the Lobbying Disclosure Act.
In the last Congress, we were successful in passing legislation that
bans gifts from lobbyists to Members and staff in order to put a wall
between lobbyists who seek to curry special favor by the giving of
gifts. Unfortunately, a loophole allows lobbyists to serve as
fundraisers for Members of Congress, which could result in an increase
in their influence.
Mr. President, this practice must stop. Registered lobbyists who work
for campaigns as fundraisers clearly represent a conflict of interest.
When a campaign employs an individual who also lobbies that Member, the
perception of undue and unfair influence is raised. This legislation
would stop such practices.
The two important changes made by this legislation represent a
substantial effort to close any loopholes that exist in our lobbying
and gift laws. The Congress has begun to make great strides to restore
the public's confidence in this institution. We must continue that good
work.
______
By Mr. McCAIN:
S. 199. A bill to require industry cost-sharing for the construction
of certain new federally funded research facilities, and for other
purposes; to the Committee on Governmental Affairs.
the federal research financing improvement act of 1997
Mr. McCAIN. Mr. President, today I am introducing legislation to
restore fairness and fiscal accountability to the Federal Government's
many research and development programs and activities. The bill would
require that commercial interests share the cost of constructing and
operating new Federal research facilities that are intended to benefit
their industries.
Last year, the Federal Government spent $73 billion for research
programs, including facility construction. Many of these programs are
intended primarily to assist private industries and are sponsored by a
host of Federal agencies, predominantly the Department of Defense, the
Department of Agriculture, the Department of Commerce, and the National
Research Council.
For example, the Department of Agriculture spends nearly $750 million
per year for 116 centers under the Agriculture Research Service. These
federally funded centers are designed to help a variety of agricultural
industries, many of which have enormous resources and do not require
Federal assistance. I understand the agency is planning to construct
even more facilities. Last year, Congress appropriated $26 million to
construct a new swine research center at Iowa State University, even
though we already have 12 Federal centers dedicated to swine research.
This additional facility will cost nearly $10 million a year to
operate.
Mr. President, I recognize the importance of research and development
to our competitiveness and economic growth, although I seriously
question why we need 13 centers dedicated to swine research.
Nevertheless, given our serious fiscal condition at a time when we are
contemplating significant reductions in practically every area of
domestic discretionary spending, I see absolutely no reason why
Government research that benefits private industries, many of them
quite prosperous, should not be cost-shared by the private sector.
Regarding swine research centers, the pork industry generates nearly
$66 billion per year. Surely, it is reasonable to expect the industry,
and the many others that directly benefit from Federal research, to
share the cost of the centers and its operation. I should add that the
legislation would not require cost sharing for any research
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conducted for the purpose of helping industry comply with Federal
regulations.
Mr. President, industry is historically more cautious with their
resources than the Federal Government. If the private sector will not
expend their resources for a program that is intended for their
benefit, one must question why we should feel compelled to spend the
taxpayers' hard-earned money on the same venture. Public-private cost-
sharing arrangements for commercially oriented Federal research will
ensure that proposed activities are truly cost-beneficial and that the
potential outcomes of the research are worth the dollars invested.
Again, I realize and appreciate the importance of research and
development. I believe, however, that the legislation is a prudent and
responsible approach which, no doubt, can be improved, but which should
receive the Senate's full and timely consideration. I hope that we can
have a hearing in the very near future to examine what I believe is a
very important fiscal issue.
______
By Mr. AKAKA (for himself and Mr. Inouye):
S.J. Res. 10. A joint resolution to consent to certain amendments
enacted by the Legislature of the State of Hawaii to the Hawaiian Homes
Commission Act, 1920; to the Committee on Energy and Natural Resources.
the hawaiian homes commission act, 1920 amendments consent act of 1997
Mr. AKAKA. Mr. President, I ask unanimous consent that the text of
the joint resolution be printed in the Record.
There being no objection, the joint resolution was ordered to be
printed in the Record, as follows:
S.J. Res. 10
Resolved by the Senate and House of Representatives of the
United States of America in Congress assembled,
That, as required by section 4 of the Act entitled ``An Act
to provide for the admission of the State of Hawaii into the
Union'', approved March 18, 1959 (73 Stat. 4), the United
States consents to the following amendments to the Hawaiian
Homes Commission Act, 1920, adopted by the State of Hawaii in
the manner required for State legislation:
(1) Act 339 of the Session Laws of Hawaii, 1993.
(2) Act 37 of the Session Laws of Hawaii, 1994.
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