[Congressional Record Volume 143, Number 36 (Wednesday, March 19, 1997)]
[Senate]
[Pages S2553-S2563]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BROWNBACK (for himself, Mr. Lieberman, Mr. DeWine, and Mr. 
        Kohl):
  S. 471. A bill to amend the Television Program Improvement Act of 
1990 to restore the applicability of that Act to agreements relating to 
voluntary guidelines governing telecast material and to revise the 
agreements on guidelines covered by that Act; to the Committee on 
Commerce, Science, and Transportation.
                                 ______
                                 

                 THE TELEVISION IMPROVEMENT ACT OF 1997

  Mr. BROWNBACK. Mr. President, I would like to address the body today 
on legislation that I am introducing, along with Senator Lieberman, 
Senator DeWine, and Senator Kohl, an act called the Television 
Improvement Act of 1997. It is my sincere hope that this bill will help 
solve one of our nation's most troubling problems.
  I am fresh off the campaign trail, as the Senator from Georgia is 
fresh off the campaign trail. Throughout the 1996 campaign, I traveled 
across the State of Kansas and talked with thousands of people. I came 
away from that experience convinced that the most important task that 
we as a Nation face today is renewing the American culture.
  I can recall countless meetings where individuals, particularly 
parents, would come up to me worried about the future of the American 
culture, particularly as it affects their children, and they constantly 
felt they were having to fight the culture to raise their kids. They 
hearken back to a time when they didn't feel like they were so opposed 
by the nature of the American culture. They recall a time when the 
culture was supportive of what they were doing and helped them in 
raising a good and solid family. They were just pleading for help. 
``Help us be able to come to a point where we can effectively raise our 
children. Don't make us have to constantly fight our culture.''
  Hollywood is the center of gravity for the American culture and, 
increasingly, the world's culture. Hollywood has changed the culture in 
this country, and, unfortunately, it has led to a decline in our 
culture. Over the past 15 years, television has made our children think 
that violence is OK, that sexuality out of wedlock is expected and 
encouraged, and that criminal activity is OK. Well, these things are 
not OK, and it's time the industry changed television to make it easier 
for parents to raise children.
  The Television Improvement Act of 1997 is intended to encourage the 
broadcasting industry to make raising children easier. What it intends 
to do is to allow the broadcast industry--the television, cable, and 
motion picture industries to enter into, again, a code of conduct 
comparable to the one they used until 1983. They would once again be 
able to say that there is a standard below which they will not go, and 
they can collaborate to establish that standard without running afoul 
of Federal antitrust laws.
  Previously, the NAB had a self-imposed code of conduct that governed 
television content. The code recognized the impact of television on our 
children as well as the responsibility that broadcasters shared in 
providing programming that used television's influence carefully. 
However, in 1983, a Federal district court determined that some of the 
advertising provisions of the code violated Federal antitrust laws.
  Although the court did not rule that any of the code's programming 
standards violated antitrust laws, the NAB decided to stop using the 
entire code. The past 15 years have demonstrated that the code of 
conduct is sorely missed. Television has declined over the past 15 
years, in no small part due to the absence of the code. I don't think 
anybody in this body could argue--or in this country who would 
disagree--that the nature of American television has declined over the 
past 15 years.
  Let me read for the body a statement that is from the old code of 
conduct that the National Association of Broadcasters used until 1983. 
It sounds almost quaint today. But listen to the content of what the 
industry itself had before. It says:

       Above and beyond the requirements of the law, broadcasters 
     must consider the family atmosphere in which many of their 
     programs are viewed. There shall be no graphic portrayal of 
     sexual acts by sight or sound. The portrayal of implied 
     sexual acts must be essential to the plot and presented in a 
     responsible and tasteful manner.

  I do not think there would be many people today who would say that 
this reflects the nature of television today. But I think many 
Americans today would say, ``That is what I want television to be today 
so I don't have to always fight the TV to raise my kids.''
  It is not enough for everybody to say, ``Just turn it off.'' My wife 
and I are raising three children. It is a little tougher than just 
saying, ``Turn it off.'' It is about being there all the time. We are 
trying. One of us is there all the time. It is also not enough to say, 
``Well, we have a rating code so you know what is on television.''
  We are pleading with the industry, saying, ``Let's go back to that 
time when you used a code because television was better then and it so 
directly impacts the culture and the soul of America.'' The average 
American spends 5 hours a day watching TV. Most would liken it to a 
stovepipe of black soot going into the mind and into the soul. Why 
don't we change that back to the way it used to be, and have it as a 
well of fresh spring water going into the mind and into the soul?
  The industry is fully capable of doing this. Witness some of the 
current shows, especially ``Touched by an Angel,'' which is a leading 
show by CBS today. It is a good, positive, and uplifting show. But, 
sadly, there are far more that are far more degrading that would lead 
one more to the stovepipe analogy rather than the fresh spring well 
water.
  We are pleading with the industry with this bill. This bill provides 
no additional authority to the Federal Government; not an ounce of 
additional authority to the FCC. It is a plea to the industry to help 
us. We are having trouble. The American family has been under attack. 
In many places it has disintegrated. In our inner cities we have 70 
percent of our children born to single moms. In many places we no 
longer have families, one of the basic tenets of culture.
  We are asking by this very simple act and pleading with the industry. 
``Let's go back to the time when television did not hurt our lives.'' 
And we are not suggesting censorship. If we have a better product 
coming out of this industry, we will have a better American culture. We 
will have a better world culture because Hollywood is the center of 
gravity for not only this culture but increasingly the world's culture. 
It is coming up time and time again.
  So we are introducing this bill today, a bipartisan bill, requesting 
that the industry negotiate and work together on a code of conduct the 
like of which it had before.
  We will be holding hearings in the Governmental Affairs Committee. We 
have been joined by the chairman and the ranking member of the 
appropriate Judiciary subcommittee who are cosponsoring this bill. We 
anticipate that they will have hearings on it as well. It is a follow-
on to Senator Simon's work in this area in 1990. We hope that it will 
be much more successful. If it is not, there will be further action 
coming to try to address this corrosive effect that, unfortunately, 
television has on our society and, indeed, on the world.
  So, Mr. President, we are introducing this bill today asking the 
industry for help to lead our culture back to a brighter and a better 
time. They can do it. They are capable of doing it.
  Mr. President, again, let me say that I am pleased to introduce today 
with Senators Lieberman, DeWine, and Kohl, the Television Improvement 
Act of 1997, a bill that I believe will help solve one of our Nation's 
most troubling problems. Throughout the 1996 campaign, I traveled 
across the State of Kansas and talked with thousands of

[[Page S2554]]

people. I came away from that experience with the conclusion that the 
most important task that we as a nation face today is renewing the 
American culture.
  People are desperately worried about the decline of our culture and 
about the decline of the American family. Many of the parents that I 
spoke with during the summer and fall believe that they increasingly 
have to fight their culture to raise their children. These parents feel 
that American culture in the 1990's actually makes it more difficult to 
raise children.
  Hollywood is the center of gravity for the American culture and 
increasingly the world's culture. Hollywood has changed the culture in 
this country, and, unfortunately, it has led to a decline in our 
culture. Over the past 15 years, television has made our children think 
that violence is OK, that sexuality out of wedlock is expected and 
encouraged, and that criminal activity is OK. Well, these things are 
not OK, and it's time the industry changed television to make it easier 
for parents to raise children.
  Previously, the National Association of Broadcasters had a self-
imposed code of conduct that governed television content. The code 
recognized the impact of television on our children as well as the 
responsibility that broadcasters shared in providing programming that 
used television's influence carefully. However, in 1983, a Federal 
district court determined that some of the advertising provisions 
included in the code violated Federal antitrust laws.
  Although the court did not rule that any of the code's programming 
standards violated antitrust laws, the NAB decided to stop using the 
entire code. The past 15 years have demonstrated that the code of 
conduct is sorely missed. Television has declined over the past 15 
years, in no small part due to the absence of the code.
  For this reason, Senators Lieberman, DeWine, Kohl, and I are 
introducing this bill to make perfectly clear that the broadcast 
industry is not violating Federal antitrust laws if its members 
collaborate on a code of conduct that includes voluntary guidelines 
intended to alleviate the negative impact that television content has 
had on our children and to promote educational and otherwise beneficial 
programming.
  In drafting this legislation, we have built upon Senator Simon's 
Television Program Improvement Act of 1990. Unlike that law, however, 
the Television Improvement Act of 1997 would not include a sunset 
provision, and we have expanded the scope of the antitrust exemption to 
enable the industry to tackle such issues as the proliferation of 
programming that contains sexual content and condones criminal 
behavior.
  Senator Lieberman and I plan to hold hearings in the Governmental 
Affairs Committee's Government Management and Restructuring 
Subcommittee, which I chair and on which Senator Lieberman serves as 
the ranking Democrat. The hearings will explore the impact that the 
Federal Government has had on the ability of the television industry to 
broadcast more inspirational and less harmful programming. We will 
examine whether the application of Federal antitrust laws to a 
collaboration by the broadcasters to promote better programming hinders 
the industry's ability to police itself and has resulted in a decline 
in television broadcasting. The Federal Government should not be 
impeding any voluntary effort by the industry to improve the quality of 
programming; the Government should be encouraging such an effort.
  Let me just reiterate that we are not calling for a government 
mandate to be imposed upon the industry, nor are we providing the FCC 
with an ounce of additional authority with respect to broadcasting. 
What we are doing is trying to encourage the industry to do what it did 
prior to 1983--broadcast less programming that harms our kids and more 
programming that helps us raise our kids. We want Hollywood to start 
producing, and we want the broadcasters to start airing, better 
programming.
  I ask that the bill be appropriately referred.
  Mr. LIEBERMAN. Mr. President, I am proud today to join with my 
colleagues Senator Brownback, DeWine, and Kohl in introducing the 
Television Program Improvement Act of 1997, a bill we believe will help 
directly address the public's concerns about the declining standards of 
television and that will hopefully lead the television industry to 
exercise more responsibility for the programming it puts on the air.
  The industry has tried in part to respond to the concerns of parents 
about the negative influence television is having on children by 
creating a rating system for sex, violence, and vulgar content. This 
system is a good start, but there is a general consensus it does not go 
far enough in providing parents with the information they need to make 
wise choices for their children.
  When I recently testified before the Senate Commerce Committee on 
this issue, I tried to get this point across by comparing the 
industry's system to putting up a sign in front of shark-infested 
waters that said ``Be careful when swimming.'' That is to say that, 
while these ratings provide a warning to the viewer, they don't tell us 
why we need to be warned.
  But I also used this metaphor to make a larger point, which is 
regardless of how informative the ratings are, what parents really want 
is to get the sharks out of the water, to improve the quality of 
programming on the air, and make it safe for their kids to go swimming 
again.
  The intent of the legislation we are introducing today, the 
Television Program Improvement Act of 1997, is to reiterate that 
message and to urge the industry to focus on what's at the heart of 
this debate over the TV rating system--a very real, broadly-felt 
concern that television has become a destructive force in our society 
and it is doing substantial damage to the hearts, minds, and souls of 
our children.
  This bill really amounts to a plea on our part to the industry for 
their help. Moreover, it is an attempt to move this debate beyond the 
question of rights, which we all accept, acknowledge and support, and 
begin talking more about responsibilities.
  Specifically, the kind of responsibility that broadcasters once 
embraced through a comprehensive code of conduct, in which they 
acknowledged the enormous power they commanded and the need to wield it 
carefully, and in which they recognized that they had an obligation 
under the law to serve the public interest. I would urge my colleagues 
to take a look at some of the standards the Nation's broadcasters set 
for themselves in the old NAB TV Code, which we've excerpted in the 
findings of our legislation, and you'll see that they are quite 
remarkable statements of responsibility.

  After reading these principles, I would urge my colleagues to compare 
them to some of the comments made recently by industry leaders, such as 
the network official who proclaimed ``it is not the responsibility of 
network television to program for the children of America,'' or the MTV 
executive who said his network ``is not safe for kids'' but markets it 
directly to them anyway.
  Watch what these programmers are bringing into our homes today, and 
it is clear that the face of television has changed dramatically since 
the industry abandoned the old NAB Code in 1983 and abandoned the ethic 
undergirding it. It is also clear that while the networks have profited 
from the resulting competition downward, it is the American family who 
is paying the price--in the form of the awful daytime talk shows that 
parade the most perverse forms of behavior into our living rooms and 
teach our children the worst ways to settle conflicts, and the excesses 
of prime-time comedies that amount to little more than what we used to 
call dirty jokes.
  The rise of these programs leave little doubt that this debate is 
about much more than the threat of violence--which was the reason for 
the original Television Program Improvement Act sponsored by Senator 
Simon in 1990--although this threat remains a serious problem. What is 
driving so much of the public's concern is the deluge of casual sex and 
vulgarities that characterizes so much of television today. The 
collective force of these messages leaves parents feeling as if they 
are in a losing struggle to raise their own children, to give them 
strong values, to teach them right from wrong and guide them to 
acceptable forms of behavior.

[[Page S2555]]

  With the bill we're introducing today, we are asking the television 
industry to do no more than what it did as recently as the early 
1980's, and that is to draw some lines that they will not go below, to 
declare, as author and noted commentator Alan Ehrenhalt has said, 
``that some things are too lurid, too violent, or too profane for a 
mass audience to see.''
  If the industry is not willing to refill that responsible role, there 
will be increasing pressure on the Government to do it for them. One of 
the most telling polls I've seen recently appeared in the Wall Street 
Journal, which showed that 46 percent of Americans favor more 
Government controls on television to protect children. It's not a 
coincidence that there are bills being prepared in Congress that would 
in fact censor what is on the air.
  Our legislation is designed to help us avoid reaching that point. It 
will ideally remind the industry of its obligations to the public we 
both serve, and that changing the subject, as some in the industry 
prefer to do, won't change the minds of the millions of American 
families who want programming that reflects rather than rejects their 
values. Again, to return to my metaphor, we are simply making a plea to 
the industry to take the sharks out of the water, and make it safe for 
our kids to go swimming, or perhaps more aptly, to go channel-surfing 
again.
  Mr. President, in closing, I ask unanimous consent that the full text 
of my remarks be included in the appropriate place in the Record to 
accompany this legislation. I also ask unanimous consent that a summary 
of the Television Program Improvement Act of 1997 be printed in the 
Record. And to provide my colleagues with some additional background on 
the old NAB Television Code and what has happened to television since 
it was abandoned, I ask unanimous consent that a factsheet my staff has 
prepared be included in the Record. This factsheet helps summarize the 
bill's findings and put them into some historical context.
  There being no objection, the items were ordered to be printed in the 
Record, as follows:

    Summary of the Television Program Improvement Act of 1997--TPIA


                          WHAT IS THE PURPOSE

       The TPIA is an attempt to persuade the television industry 
     to directly address the public's growing concerns about the 
     negative influence television is having on our children and 
     our country today. Rather than calling for any form of 
     censorship or government restrictions on content, this 
     legislation would encourage industry leaders to act more 
     responsibly in choosing what kinds of programming they 
     produce and when it is aired. The nation's broadcasters once 
     embraced this kind of responsibility in the form of a 
     comprehensive code of conduct, which featured a widely-
     followed set of baseline programming standards and which 
     showed a special sensitivity to the impact television has on 
     children. This code was abandoned in 1983, and the TPIA would 
     ideally open the door to the reintroduction of a similar set 
     of standards, one that is geared toward making television 
     more family-friendly for 1997 America.


                         WHAT THE BILL WOULD DO

       This proposal builds on the original Television Program 
     Improvement Act of 1990, which created an antitrust exemption 
     for the broadcast and cable industries that allowed them to 
     collaborate on a set of ``voluntary guidelines'' aimed at 
     reducing the threat of violence on television. The TPIA of 
     1997 would permanently reinstate that antitrust exemption 
     (which expired at the end of 1993) and then broaden it. The 
     new exemption would permit the television industry to 
     collaborate on an expanded set of guidelines designed to 
     address the public's concerns about the broad range of 
     programming--not only violence but also sexual content, 
     vulgar language, and the lack of quality educational programs 
     for children.


                       WHAT THE BILL WOULD NOT DO

       This proposal would not give the government any authority 
     to censor or control in any way what is seen on television. 
     Any guidelines or programming standards the industry chose to 
     adopt would be purely voluntary and could not be enforced by 
     the government in any way or result in any form of economic 
     boycott. Nor would the TPIA result in the ``whitewashing'' of 
     television or prevent networks from showcasing sophisticated, 
     mature-themed works such as ``Schindler's List'' and ``NYPD 
     Blue.'' Last, the television industry could not use the 
     antitrust exemption to fix advertising prices or engage in 
     any form of anticompetitive behavior.
                                  ____


              Television Code of Conduct Background Sheet


                        THE NAB TELEVISION CODE

       The first broadcaster TV code was implemented in 1952, to 
     provide broadcasters with guidelines for meeting their 
     statutory obligation to serve the public interest.
       The NAB required all members to follow the code, which was 
     enforced by a committee called the NAB Code Authority. 
     Stations that adhered to the code were permitted to display a 
     seal of approval on screen known as the ``NAB Television Seal 
     of Good Practice.'' Those members that were found to have 
     violated the code could be suspended and denied the ability 
     to display the seal.
       The NAB Code was abandoned in 1983 following an antitrust 
     challenge brought by the Reagan Justice Department.
       In that case, Justice filed a motion for summary judgement 
     in the D.C. Federal District Court in 1982 challenging three 
     provisions restricting the sale of advertising. These 
     provisions limited: 1) the number of minutes per hour a 
     network or station may allocate to commercials; 2) the number 
     of commercials which could be broadcast in an hour; and 3) 
     the number of products that could be advertised in a 
     commercial. The court ruled that one of the provisions--the 
     multiple product standard--constituted a per se violation of 
     the antitrust laws, and granted Justice's motion for summary 
     judgement on those grounds.
       In November 1982, the NAB entered into a consent decree 
     with Justice and agreed to throw out the advertising 
     guidelines being challenged. Then, claiming that the TV Code 
     in general left it vulnerable to antitrust lawsuits, the NAB 
     threw out the entire code in January of 1983.
       The programming standards contained in the code were never 
     found to violate any antitrust laws during the code's 31-year 
     existence.


                          THE FAMILY HOUR CASE

       In 1975, after being prodded by FCC Chairman Dick Wiley, 
     the NAB added a family viewing policy to its TV code. This 
     policy said that entertainment programming inappropriate for 
     a general family audience should not be aired between the 
     hours of 7 p.m. and 9 p.m. EST.
       In October of 1975, the Writers Guild of America (led by 
     Norman Lear) filed a lawsuit challenging the family viewing 
     policy on First Amendment grounds, alleging that the NAB had 
     been coerced by the government into adopting the policy.
       The District Court struck down the family viewing provision 
     in the code in 1976, concluding that FCC Chairman Wiley had 
     engaged in a ``successful attempt . . . to pressure the 
     networks and the NAB into adopting a programming policy they 
     did not wish to adopt.''
       However, the court decision did not rule that a voluntary 
     family viewing policy would be unconstitutional, and said 
     that networks were free to implement a family hour policy on 
     their own.
       In the end, the District Court's decision was vacated and 
     remanded on appeal in 1979, on the grounds that the District 
     Court was not the proper forum for the initial resolution of 
     a case relating to broadcast regulation. The case was 
     returned to the FCC for judgement, and in 1983 the FCC 
     concluded that the family viewing policy did not violate the 
     First Amendment, ruling that Chairman Wiley's actions 
     amounted to permissible jawboning and not coercion.
       No court has ever ruled that a voluntary family hour 
     violates the First Amendment rights of broadcasters or of 
     producers.


          THE ORIGINAL ``TELEVISION PROGRAM IMPROVEMENT ACT''

       Senator Paul Simon (D-IL) sponsored legislation in 1989 to 
     create a temporary antitrust exemption that would allow the 
     television industry to collaborate on a set of guidelines 
     designed to ``alleviate the negative impact'' of television 
     violence. The exemption had a life of three years.
       This legislation was passed by Congress in the waning days 
     of the 1990 session as part of the Judicial Improvements Act 
     (a federal judgeships bill).
       When the Simon bill first moved through the Senate in 1989, 
     the Judiciary Committee approved an amendment that would 
     broaden the bill's scope to cover guidelines relating to the 
     glamorization of drug use.
       The version passed by the Senate also was broadened to 
     cover sexual content. Senator Jesse Helms (R-NC) succeeded in 
     passing an amendment relating to sexually explicit material 
     by a vote of 91-0.
       The language relating to sexual content and the depiction 
     of drug use was stripped from the bill that came out of 
     conference after House Democrats objected to broadening the 
     scope of the exemption beyond violence.


                THE INDUSTRY RESPONSE TO THE SIMON BILL

       A few months prior to the passage of the Simon bill, the 
     NAB issued new ``voluntary programming principles'' in four 
     areas: children's television, indecency and obscenity, drugs, 
     and violence. These principles were general statements 
     resembling several provisions in the old NAB Code, but they 
     were strictly voluntary and unenforceable.
       After the Simon bill passed, the broadcast and cable 
     industries held a few meetings in 1991, but with no 
     discernible results.
       As concern about television violence mounted, the networks 
     felt increasing pressure to produce some results. In December 
     of 1992, the major broadcast networks agreed to adopt a new 
     set of joint standards on the depiction of violence.
       Although billed as being ``new,'' the networks made clear 
     that these guidelines tracked closely with their own 
     individual

[[Page S2556]]

     programming standards. The joint guidelines were broadly-
     worded and did not make any specific statements regarding the 
     time shows with graphic violence should be aired, noting only 
     that the composition of the audience should be taken into 
     consideration.
       In June of 1993, the networks took the additional step of 
     agreeing on a set of ``parental advisories'' that would be 
     applied to programs with violent content.
       With criticism from the public and Congress continuing to 
     grow, the four major networks and the cable industry 
     announced in February of 1994 that they would conduct 
     separate monitoring studies to measure the level of violence 
     in their programming. The first of these studies was done in 
     1995.


                      THE SIMON LEGACY ON VIOLENCE

       The results of the Simon legislation could accurately be 
     described as mixed.
       On the one hand, the 1996 UCLA violence study suggested 
     that the amount of violence on broadcast television had 
     declined somewhat since it peaked a few years earlier, and 
     industry observers generally acknowledge that 
     primetime series television has become less violent. The 
     UCLA study also found that the networks had taken some 
     steps to reduce the violence in on-air promotions. ``The 
     overall message is one of progress and improvement,'' the 
     UCLA study concluded. ``The overall picture is not one of 
     excessive violence.''
       On the other hand, the UCLA study still found that there is 
     still a serious problem with violence on broadcast 
     television. It singled out the high number of violent 
     theatrical movies, five primetime series that ``raised 
     frequent concerns,'' and the disturbing rise of ``reality'' 
     shows (such as Fox's ``When Animals Attack") that often 
     feature graphic violence.
       In addition, the National Television Violence Study, the 
     comprehensive review sponsored by the cable industry, is 
     scheduled to release its 1996 report later this month, and it 
     is generally expected to show that the kinds of violence 
     depicted on both broadcast and cable television still 
     presents a real threat to viewers.


                         THE CURRENT SITUATION

       When asked about reviving a code of conduct, some 
     television industry leaders have expressed concern about 
     potential antitrust lawsuits that might arise.
       The Justice Department, however, has issued rulings since 
     the Simon exemption expired that strongly suggest that a 
     voluntary code of conduct would not run afoul of any 
     antitrust laws.
       In a ``business review'' letter released in November 1993, 
     the Justice Department told Simon that additional steps the 
     industry took to reduce the threat of violence ``may be 
     likened to traditional standard setting efforts that do not 
     necessarily restrain competition and may have significant 
     procompetitive benefits.''
       Justice repeated this finding in another business review 
     letter sent to Senator Lieberman in January 1994 regarding 
     the video game industry's efforts to develop a rating system 
     for violent and sexual content.
       Some in the television industry also contend that a code of 
     conduct is unnecessary because the major broadcast networks 
     and most local stations and cable networks all have 
     individual programming standards to which they adhere.
       The reality, however, is that few people know that these 
     standards even exist. That's largely because they are often 
     hidden from public view. Of the big four networks, only CBS 
     will release its programming standards to the public. ABC, 
     NBC, and Fox have refused to do so.
                                 ______
                                 
      By Mr. CRAIG (for himself, Mr. Graham, Mr. D'Amato, Mr. 
        Torricelli, Mr. Akaka, Mr. Mack, Mr. Allard, Mr. Thomas, Mr. 
        Reid, Mr. Breaux and Mr. Warner):
  S. 472. A bill to provide for referenda in which the residents of 
Puerto Rico may express democratically their preferences regarding the 
political status of the territory, and for other purposes; to the 
Committee on Energy and Natural Resources.


             THE PUERTO RICO SELF-DETERMINATION ACT OF 1997

  Mr. CRAIG. Mr. President, I am proud to join with my colleague from 
Florida today in the introduction of the Puerto Rico Self-Determination 
Act.
  In the 104th Congress, I joined as a cosponsor of S. 2019, with a 
bipartisan effort in the Senate to deal with this issue. I know that 
some of my colleagues will question the need for Congress to take up 
this issue. The most common reaction is that we should let Puerto 
Ricans decide the issue for themselves. The problem with that approach 
is that there are two parties in that relationship: Congress, due to 
its constitutional plenary power expressly vested in it by the 
territorial clause of article IV, section 3, clause 2, on the one hand 
and the people of Puerto Rico who have U.S. citizenship but are not yet 
fully self-governing on the other.
  When Congress failed to approve legislation to provide a status 
resolution process in 1991, the Puerto Ricans conducted a status vote, 
and the commonwealth option was defined on the ballot in the terms most 
favorable to its approval, to the point that it promised a lot more 
than Congress could ever approve. Even with the ballot definition that 
would significantly enhance the current status, the existing 
commonwealth relationship received less than a majority of the vote. So 
there is a serious issue of the legitimacy of the current less-than-
equal or less-than-full self-governing status, especially given the 
U.S. assertion to the United Nations in 1953 that Puerto Rico was on a 
path toward decolonization.
  That is why the legislature of Puerto Rico passed Concurrent 
Resolution 2, on January 23, 1997, requesting Congress to sponsor a 
vote based on definitions it would be willing to consider, if approved 
by voters. With timely approval of this legislation, 1997 will be the 
year Congress provides the framework for the resolution of the Puerto 
Rican status question, through a three-phase decisionmaking process 
that will culminate during the second decade of the next century. It 
will be a process with respect to the right of residents of Puerto Rico 
to become fully self-governing, based on local self-determination, and, 
at the same time, recognizes that the United States also has a right of 
self-determination in its relationship to Puerto Rico.
  Consequently, resolution of the status of Puerto Rico should take 
place in accordance with the terms of a transition plan that is 
determined by Congress to be in the national interest. Acceptance of 
such a congressionally approved transition plan by the qualified voters 
of Puerto Rico in a free and informed act of self-determination will be 
required before the process leading to change of the present status 
will commence.
  The bill that I am introducing today, joined in by nine other 
colleagues, and my colleague from Florida, creates an evenhanded 
process that can lead to either separate sovereignty or statehood, 
depending on whether Congress and the residents of Puerto Rico approve 
the terms of the implementation of either of the two options of full 
self-government. Preservation of the current status also will be an 
option on the plebiscite ballot. However, the existing unincorporated 
territory status, including the commonwealth structure of local 
government, is not a constitutionally guaranteed form of self-
government. Thus, until full self-government is achieved for Puerto 
Rico, there will be a need for periodic self-determination procedures 
as provided in this legislation.
  Whichever new status proves acceptable to Congress and the people of 
Puerto Rico, final implementation of the new status could be subject to 
approval by Congress and the people of Puerto Rico, at such time in the 
first or second decade of the next century as a transition process is 
completed.
  This explanation of the bill should dispel any concern in this body 
or the House that empowerment of the people of Puerto Rico to exercise 
the right of self-determination will impair the ability of Congress to 
work its will regarding the status of Puerto Rico.
  Mr. President, in 1956, 4 years after Congress and the people of 
Puerto Rico approved the Constitution of the Commonwealth of Puerto 
Rico, the U.S. Supreme Court considered the constitutional nature and 
status of unincorporated territories such as Puerto Rico. In its 
opinion in the case of Reid v. Covert (354 U.S. 1), the Supreme Court 
confirmed that the territorial clause of the U.S. Constitution--article 
IV, section 3, clause 2--confers on Congress the power, in the court's 
words, ``. . . to provide rules and regulations to govern temporarily 
territories with wholly dissimilar traditions and institutions . . .''
  While the Reid case was not a territorial status decision, it is 
significant that the Supreme Court's opinion in this case recognizes 
the temporary nature of the unincorporated territory status defined by 
the high court in an earlier line of status decisions known as the 
Insular Cases. For even though Puerto Ricans have had statutory U.S. 
citizenship since 1917, and local constitutional self-government 
similar to that of the States since 1952, it has become quite clear 
that U.S. citizens residing in an unincorporated territory cannot 
become fully self-governing in the Federal constitutional system on the 
basis of equality with their fellow

[[Page S2557]]

citizens residing in the States of the Union.
  Specifically, unincorporated territorial status with the commonwealth 
structure for local self-government cannot be converted into a 
permanent form of union with constitutionally guaranteed U.S. 
citizenship, or equal legal and political rights with citizens in the 
States including voting rights in national elections and representation 
in Congress. At the same time, Congress cannot abdicate, divest or 
dispose of its constitutional authority and responsibility under the 
territorial clause or be bound by a statutory conferral of special 
rights intended to make the citizens of a territory whole for the lack 
of equal rights under the Federal constitution.
  The concept of an unalterable bilateral pact between Congress and the 
territories is politically implausible and constitutionally 
impermissible. A mutual consent based relationship would amount to a 
local veto power over acts of Congress and would give the territories 
rights and powers superior to those of the States. Indeed, I am not 
certain what the results would be if the States were given the option 
of trading in representation in Congress and the vote in Presidential 
elections for the power to veto Federal law, but it is a prospect 
inconsistent with American federalism.
  Thus, altering our constitutional system to attempt to accommodate 
the unincorporated territories in this way would be a disproportionate, 
inequitable, and politically perverse remedy for the problems the 
territories are experiencing due to the lack of voting in Federal 
elections or representation in Congress.
  Moreover, the concept of enhancing a less-than-equal status so that 
the disenfranchisement of U.S. citizens in the Federal political proces 
becomes permanent would arrest the process of self-determination and 
decolonization that began when the local constitution was established 
by Congress and the voters in the territory in 1952.
  It would reverse the progress that has been made toward full self-
government to attempt to transform a temporary territorial status into 
a permanent one, although that is precisely what has been attempted by 
some in Puerto Rico for the last 40 years. Some in Congress have 
facilitated and promoted the fatally flawed notion that Puerto Rico 
could become a nation within a nation--if only at the level of partisan 
politics while being careful never to formally accept or commit that it 
could be constitutionally sustained.
  In reality, Puerto Rico is capable of becoming a State or a separate 
nation, or of remaining under the territorial clause if that is what 
the people and Congress prefer. But a decision to retain territorial 
status must be based on acceptance that this is a temporary status 
under the territorial clause, which can lead to full self-
government outside the territorial clause only when Congress and the 
voters determine to pursue a recognized form of separate nationhood or 
full incorporation into the Federal political process leading to 
statehood.

  Thus, the question becomes one of how long can a less-than-equal and 
non-self-governing status continue now that Puerto Rico has 
constitutional self-government at the local level and has established 
institutions and traditions which are based upon, modeled after, and 
highly compatible with those of the United States? How long is 
temporary when we consider that Puerto Rico has been within U.S. 
sovereignty and the U.S. customs territory for a century?
  The proposals in the past that the self-determination process be 
self-executing may have had the appearance of empowering the people to 
determine their destiny. However, any attempt to bind Congress and the 
people to a choice the full effect and implications of which cannot be 
known at the time the initial choice is made is actually a form of 
disempowerment. For self-determination to be legitimate it must be 
informed, and a one-stage binding and self-executing process prevent 
both parties to the process--Congress and the people--from knowing what 
it is they are approving.
  Any process which does not enable Congress and the voters to define 
the options and approve the terms for implementation through a 
democratic process which involves a response by each party to the 
freely expressed wishes of the other as part of an orderly self-
determination procedure is a formula for stagnation under the status 
quo.
  That is why the legislation defining a self-determination process for 
Puerto Rico must be based on the successful process Congress prescribed 
in 1950 through which the current constitution was approved by Congress 
and the voters in 1952. That process empowered the people and Congress 
to approve the process itself, then approve the new relationship 
defined through the process.
  As explained below, this is the most democratic procedure possible 
given the complicated dilemma faced by the United States and Puerto 
Rico. For only when the people express their preference between status 
options defined in a manner acceptable to Congress can the United 
States inform the people of the terms under which the preferred option 
could be accepted by Congress. This would empower the people to then 
engage in an informed act of self-determination, and it would empower 
Congress to define the national interest throughout the process.
  In the 104th Congress, S. 2019, was a response to Concurrent 
Resolution 62, adopted by the Legislature of Puerto Rico on December 
14, 1994, and directed to the U.S. Congress, requesting a response to 
the results of a 1993 plebiscite conducted in Puerto Rico under local 
law. See, Congressional Record S9555-S9559, August 2, 1996. Like a 
similar locally managed vote in 1967, the 1993 vote did not resolve the 
question of Puerto Rico's future status, in large part because of 
pervasive confusion and misinformation about the legal nature of Puerto 
Rico's current status.
  The problem of chronic nonproductive debate in Puerto Rico and in 
Congress with respect to definition of the current status of Puerto 
Rico, as well as the options for change, is examined carefully in House 
Report 104-713, part 1, July 26, 1996, pp. 8-23, 29-36. In addition to 
responding to Resolution 62 by introducing legislation addressing the 
subject matter of that request by the elected representatives of the 
residents of Puerto Rico, S. 2019 was intended to complement and 
support the efforts of a bipartisan group of knowledgeable Members in 
the House to address the troubling issues raised in House Report 104-
713, part 1.
  S. 2019 was a companion measure to H.R. 3024, the United States-
Puerto Rico Political Status Act, which was the subject of House Report 
104-713, part 1. Although H.R. 3024 was scheduled for a vote by the 
House in the last days of the 104th Congress, and overwhelming approval 
was expected, a vote was delayed due to ancillary issues. However, 
important amendments to H.R. 3024 were agreed upon by participants in 
the House deliberations, and some of these should be incorporated in 
any measure to be considered in the 105th Congress.

  For example, because the debate in the 104th Congress and in the 1996 
elections in Puerto Rico clarified certain fundamental issues regarding 
definition of status options, it may now be appropriate to include a 
three-way array of ballot options in any future status referendum. 
Thus, commonwealth, independence, and statehood should appear side-by-
side on the ballot the next time there is a status vote in Puerto Rico.
  In the 104th Congress I concurred in the bipartisan position that 
developed in the House deliberations in support of a two-part ballot, 
separating the question of preserving the current unincorporated 
territory status from the two options for change to a permanent form of 
full self-government--separate sovereignty or statehood. However, the 
agreed upon House bill amendments and this new Senate bill make it 
clear that separate nationality or statehood remain the two paths to 
full self-government, and that commonwealth is a territorial clause 
status. I believe this approach will result in a free and informed act 
of self-determination by the residents based on accurate definitions.
  This will simplify the structure of the ballot, and make it all the 
more imperative that the definitions of status options also remain as 
simple and straightforward as possible. All the options presented on 
the ballot in a future status referendum must be based on the objective 
elements of each status option under applicable provisions

[[Page S2558]]

of the U.S. Constitution and international law as recognized by the 
United States.
  In this connection, it must be noted that in the last four decades 
every attempt by Congress and territorial leaders to define the status 
options and establish a procedure to resolve the status question has 
failed. The last process which produced a tangible result and advanced 
Puerto Rico's progress toward self-government was that which Congress 
established in 1950 to allow the residents of Puerto Rico to organize 
local constitutional government.
  Thus, instead of trying to revisit battles of the past over any of 
the bills considered by Congress in 1990 and 1991, a better model for 
taking the next step in the self-determination process for Puerto Rico 
is the one employed by Congress to authorize and establish the current 
commonwealth structure for local self-government based on consent of 
the voters. The process established under Federal law in 1950 was based 
on a three-stage process through which the proposed new form of self-
government was defined, approved and implemented with consent of both 
the United States and the residents of the territory at each stage.
  In the successful 1950 process, Congress set forth in U.S. Public Law 
600 an essentially three-phase procedure as follows:
  Congress acted first, defining a framework under Federal law for 
instituting constitutional self-government over local affairs. An 
initial referendum was conducted in which the voters approved the terms 
for instituting constitutional self-government as defined by Congress.
  A second referendum was conducted on the proposed constitution and 
the President of the United States was required under Public Law 600 to 
transmit the draft constitution approved in that second referendum to 
Congress with his findings as to its conformity with the criteria 
defined by Congress.
  Congress approved final implementation of the new local constitution 
with amendments which were accepted by the locally elected 
constitutional convention and implemented on that basis by proclamation 
of the Governor.
  We should adopt a similar procedure for taking the next step to 
complete the process leading to full self-government which began with 
enactment of Public Law 600 in 1950. Such a three-stage process would 
be one through which:

  First, Congress defines the procedures and options it will accept as 
a basis for resolving the status question. In an initial referendum the 
voters then approve a status option they prefer.
  Second, the President transmits a proposal with recommended terms for 
implementing the choice of the voters consistent with the criteria 
defined by Congress, and upon approval by Congress a second referendum 
is held to determine if the voters accept the terms upon which Congress 
would be willing to implement the new status.
  Third, both Congress and the voters must act affirmatively to approve 
final implementation once the terms of the transition plan have been 
fulfilled.
  This would track the successful model of Public Law 600, except that 
it improves upon it by requiring Congress and the voters to approve 
final implementation. This is more democratic than the procedure 
followed in 1952, in which Congress amended the Constitution and the 
revisions were accepted by the constitutional convention and put into 
effect by proclamation of the Governor.
  To ensure that there is no ambiguity about the new relationship as 
there was after the current local constitution was implemented in 1952, 
the Congress and the voters themselves, again, should have the last 
word on implementation. This prevents the local political parties from 
attempting to exploit ambiguity and convert it into a political 
platform, as has been the case with the current commonwealth structure 
for local self-government.
  In this regard, I note that there are those who continue to suggest 
that definitions of status options for a political status referendum 
should be based upon the formulations adopted by the political parties 
in Puerto Rico. This approach is urged in the name of consensus 
building. However, the history of attempts to address this problem--
including the approval of H.R. 4765 by the House in 1990--makes it 
clear that the illusion of consensus has been achieved on status 
definitions in the past only by sacrificing the constitutional, legal, 
and political integrity of the process.
  Recognizing the principle of consent by the qualified voters through 
an act of self-determination to retain the current status or seek 
change under definitions acceptable to Congress is very different from 
the idea that legislation to make self-determination possible cannot be 
enacted unless there is consent by local political parties to both the 
form and content of what is proposed. The qualified voters of Puerto 
Rico, not the local political parties, are Puerto Rico for purposes of 
the self-determination process.
  No sleight-of-hand gimmicks or disclaimers disguised as good-faith 
commitments will substitute for intellectually honest status 
definitions. We must approve legislation that makes it clear that 
Congress will propose a transition plan on terms it deems to be in the 
best interests of the United States, and when it does the people 
qualified to vote in Puerto Rico will have to decide if the terms 
prescribed by Congress are acceptable.
  If the terms for a change of status defined by Congress are not 
acceptable to the voters, then the right of self-determination can be 
exercised thereafter in an informed manner based on that outcome. There 
should be no stated or implied commitment to a moral obligation to 
consider any status definition--no matter who might propose it--which 
is deemed unconstitutional or unacceptable to Congress. That would be 
misleading and dishonest, and no clever caveat could redeem such a 
breach of the institutional integrity and constitutional duty of the 
Congress.
  In 1997, Congress must take responsibility for informing the people 
of Puerto Rico of what the real options are based on congressional 
definition of the status formulations which Congress determines to be 
consistent with the national interest and the right of self-
determination of both the United States and the people of Puerto Rico. 
This represents an opportunity and challenge as we seek to define our 
Nation in the next century, and there is an obligation for all 
concerned to ensure that the voters in Puerto Rico are given an 
opportunity for a free and informed act of self-determination.
  If we accomplish that, then whatever the outcome may be will 
vindicate 100 years of democratization and development for Puerto Rico 
through its evolving relationship with the United States and the self-
determination of its people.
  Mr. GRAHAM. Mr. President, I rise today to introduce the Puerto Rico 
Self Determination Act of 1997. I am proud to cosponsor this important 
legislation with Senator Larry Craig and a bipartisan coalition of 
eight other distinguished colleagues.
  Mr. President, on December 10, 1898, through the Treaty of Paris that 
ended the Spanish-American War, Puerto Rico became part of the United 
States. Next year marks the 100th anniversary of this union.
  Mr. President, there is no better way for us to commemorate this 
special occasion than to give the U.S. citizens of Puerto Rico the same 
right that their counterparts in all 50 States and the District of 
Columbia enjoy--the right to choose their political destiny.
  In 1917, the Jones Act gave the people of Puerto Rico U.S. 
citizenship, but it was less than complete. Though they are citizens, 
Puerto Ricans can only vote in Presidential elections if they are 
registered in a State or the District of Columbia. They have a delegate 
in Congress--a position currently held by Congressman Carlos Romero-
Barcelo--who does not have voting privileges.
  But this lack of political rights is not due to a lack of 
communication. Throughout their history as part of the United States, 
Puerto Ricans have expressed their desire to achieve full political 
rights. They have on various occasions let Congress know of their 
desire to be full participants in our democracy. And their actions 
speak even louder than their words.
  Puerto Ricans have contributed in all aspects of American life,--in 
the arts, in sciences, in sports, and especially in service to the 
Nation. Their record of service to this country speaks for itself. In 
World War II alone, more than

[[Page S2559]]

65,000 Puerto Rican men and women served in the Armed Forces. In 
Vietnam, over 60,000 served. The first United States soldier killed in 
Somalia was Puerto Rican. One of the airmen shot down over Libya in 
1986 was Puerto Rican. And it was a soldier from Puerto Rico who 
sounded the alarm--and saved lives--in the 1983 bombing of the Marine 
barracks in Beirut.
  I recently received a letter from retired U.S. Army Lt. Col. Dennis 
Freytes, a Puerto Rican who resides in Orlando. He states in his 
letter:

       As an American Puerto Rican, who has proudly served our 
     country, I think that Puerto Rico's political status should 
     be promptly resolved, so we don't have second class citizens 
     in our democratic form of government.

  Puerto Ricans voluntarily joined our Armed Forces and have given 
their lives in defense of our country and democratic way of life. I 
emphasize ``our'' because U.S. citizens must have the same rights no 
matter where they were born or where they choose to live.
  In 1996 and 1997, the Legislature of Puerto Rico, the democratically 
elected representatives of 3.7 million U.S. citizens, overwhelmingly 
approved resolutions requesting that the Congress and the President of 
the United States respond to their legitimate democratic aspirations. 
They requested that a plebiscite be held not later than December 31, 
1998, almost exactly 100 years after Puerto Rico gained territorial 
status. There have been similar referendums in the past, but those were 
locally mandated--Congress gave no direction as to how, if at all, the 
results might affect Puerto Rico's political status.
  It is time for the people of Puerto Rico to have a referendum process 
which defines the choices in a manner which are constitutionally valid, 
and that Congress is willing to uphold.
  Mr. President, I want to particularly stress this latter point. 
Congress needs to understand that if it passes this bill--and I share 
the hope of my friend and colleague, Senator Craig that we will and 
that we will do so expeditiously--it is assuming an important 
political, and moral obligation to the American citizens of Puerto 
Rico.
  This is not a bill without significant consequences. If Puerto Ricans 
ask to remain a Commonwealth, we need to respect their wishes. If they 
want to become a State, we must begin the process of incorporation. And 
if they desire independence, we must take steps to meet that request. 
To do otherwise would be to seriously undermine our credibility with 
the 3.7 million citizens of Puerto Rico and the nearly 300 million 
residents of Latin America.
  Mr. President, for the last 100 years, the United States had given 
Puerto Ricans status as citizens but withheld some of the rights, 
privileges, and responsibilities that come with that privilege. It is 
time for that to end. Puerto Ricans do not deserve second-class 
political status. For all that they have done to enrich our culture and 
defend our Nation from external threats, they have earned the right to 
decide their own political destiny.
  Mr. President, since the early 1900's, self-determination has been a 
cornerstone principle of our Nation's foreign policy.
  As we approach the century mark of the union between Puerto Rico and 
the United States, this bill will serve as a model of American 
democracy at its best--providing citizens with their right to decide 
their own futures.
                                 ______
                                 
      By Mr. BOND (for himself and Mr. Nickles):
  S. 473. A bill to amend the Internal Revenue Code of 1986 to clarify 
the standards used for determining that certain individuals are not 
employees, and for other purposes; to the Committee on Finance.


           THE INDEPENDENT CONTRACTOR TAX REFORM ACT OF 1997

  Mr. BOND. 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. 473

       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 ``Independent Contractor Tax 
     Reform Act of 1997''.

     SEC. 2. SAFE HARBOR FOR DETERMINING THAT CERTAIN INDIVIDUALS 
                   ARE NOT EMPLOYEES.

       (a) In General.--Chapter 25 of the Internal Revenue Code of 
     1986 (relating to general provisions relating to employment 
     taxes) is amended by adding after section 3510 the following 
     new section:

     ``SEC. 3511. SAFE HARBOR FOR DETERMINING THAT CERTAIN 
                   INDIVIDUALS ARE NOT EMPLOYEES.

       ``(a) Safe Harbor.--
       ``(1) In general.--For purposes of this title, if the 
     requirements of subsections (b), (c), and (d), or the 
     requirements of subsections (d) and (e), are met with respect 
     to any service performed by any individual, then with respect 
     to such service--
       ``(A) the service provider shall not be treated as an 
     employee,
       ``(B) the service recipient shall not be treated as an 
     employer,
       ``(C) the payor shall not be treated as an employer, and
       ``(D) compensation paid or received for such service shall 
     not be treated as paid or received with respect to 
     employment.
       ``(2) Availability of safe harbor not to limit application 
     of other laws.--Nothing in this section shall be construed--
       ``(A) as limiting the ability of a service provider, 
     service recipient, or payor to apply other applicable 
     provisions of this title, section 530 of the Revenue Act of 
     1978, or the common law in determining whether an individual 
     is not an employee, or
       ``(B) as a prerequisite for the application of any 
     provision of law described in subparagraph (A).
       ``(b) Service Provider Requirements With Regard to the 
     Service Recipient.--For purposes of subsection (a), the 
     requirements of this subsection are met if the service 
     provider, in connection with performing the service--
       ``(1) has the ability to realize a profit or loss,
       ``(2) incurs unreimbursed expenses which are ordinary and 
     necessary to the service provider's industry and which 
     represent an amount at least equal to 2 percent of the 
     service provider's adjusted gross income attributable to 
     services performed pursuant to 1 or more contracts described 
     in subsection (d), and
       ``(3) agrees to perform services for a particular amount of 
     time or to complete a specific result or task.
       ``(c) Additional Service Provider Requirements With Regard 
     to Others.--For the purposes of subsection (a), the 
     requirements of this subsection are met if the service 
     provider--
       ``(1) has a principal place of business,
       ``(2) does not primarily provide the service at a single 
     service recipient's facilities,
       ``(3) pays a fair market rent for use of the service 
     recipient's facilities, or
       ``(4) operates primarily with equipment not supplied by the 
     service recipient.
       ``(d) Written Document Requirements.--For purposes of 
     subsection (a), the requirements of this subsection are met 
     if the services performed by the service provider are 
     performed pursuant to a written contract between such service 
     provider and the service recipient, or the payor, and such 
     contract provides that the service provider will not be 
     treated as an employee with respect to such services for 
     Federal tax purposes.
       ``(e) Business Structure and Benefits Requirement.--For 
     purposes of subsection (a), the requirements of this 
     subsection are met if the service provider--
       ``(1) conducts business as a properly constituted 
     corporation or limited liability company under applicable 
     State laws, and
       ``(2) does not receive from the service recipient or payor 
     benefits that are provided to employees of the service 
     recipient.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Failure to meet reporting requirements.--If for any 
     taxable year any service recipient or payor fails to meet the 
     applicable reporting requirements of section 6041(a) or 
     6041A(a) with respect to a service provider, then, unless the 
     failure is due to reasonable cause and not willful neglect, 
     the safe harbor provided by this section for determining 
     whether individuals are not employees shall not apply to such 
     service recipient or payor with respect to that service 
     provider.
       ``(2) Burden of proof.--For purposes of subsection (a), 
     if--
       ``(A) a service provider, service recipient, or payor 
     establishes a prima facie case that it was reasonable not to 
     treat a service provider as an employee for purposes of this 
     section, and
       ``(B) the service provider, service recipient, or payor has 
     fully cooperated with reasonable requests from the Secretary 
     or his delegate,

     then the burden of proof with respect to such treatment shall 
     be on the Secretary.
       ``(3) Related entities.--If the service provider is 
     performing services through an entity owned in whole or in 
     part by such service provider, the references to `service 
     provider' in subsections (b) through (e) may include such 
     entity, provided that the written contract referred to in 
     subsection (d) is with such entity.
       ``(g) Determinations by the Secretary.--For purposes of 
     this title--
       ``(1) In general.--
       ``(A) Determinations with respect to a service recipient or 
     a payor.--A determination by the Secretary that a service 
     recipient or a payor should have treated a

[[Page S2560]]

     service provider as an employee shall be effective no earlier 
     than the notice date if--
       ``(i) the service recipient or the payor entered into a 
     written contract satisfying the requirements of subsection 
     (d),
       ``(ii) the service recipient or the payor satisfied the 
     applicable reporting requirements of section 6041(a) or 
     6041A(a) for all taxable years covered by the agreement 
     described in clause (i), and
       ``(iii) the service recipient or the payor demonstrates a 
     reasonable basis for determining that the service provider is 
     not an employee and that such determination was made in good 
     faith.
       ``(B) Determinations with respect to a service provider.--A 
     determination by the Secretary that a service provider should 
     have been treated as an employee shall be effective no 
     earlier than the notice date if--
       ``(i) the service provider entered into a contract 
     satisfying the requirements of subsection (d),
       ``(ii) the service provider satisfied the applicable 
     reporting requirements of sections 6012(a) and 6017 for all 
     taxable years covered by the agreement described in clause 
     (i), and
       ``(iii) the service provider demonstrates a reasonable 
     basis for determining that the service provider is not an 
     employee and that such determination was made in good faith.
       ``(C) Reasonable cause exception.--The requirements of 
     subparagraph (A)(ii) or (B)(ii) shall be treated as being met 
     if the failure to satisfy the applicable reporting 
     requirements is due to reasonable cause and not willful 
     neglect.
       ``(2) Construction.--Nothing in this subsection shall be 
     construed as limiting any provision of law that provides an 
     opportunity for administrative or judicial review of a 
     determination by the Secretary.
       ``(3) Notice date.--For purposes of this subsection, the 
     notice date is the 30th day after the earlier of--
       ``(A) the date on which the first letter of proposed 
     deficiency that allows the service provider, the service 
     recipient, or the payor an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals is 
     sent, or
       ``(B) the date on which the deficiency notice under section 
     6212 is sent.
       ``(h) Definitions.--For the purposes of this section--
       ``(1) Service provider.--The term `service provider' means 
     any individual who performs a service for another person.
       ``(2) Service recipient.--Except as provided in paragraph 
     (4), the term `service recipient' means the person for whom 
     the service provider performs such service.
       ``(3) Payor.--Except as provided in paragraph (4), the term 
     `payor' means the person who pays the service provider for 
     the performance of such service in the event that the service 
     recipient does not pay the service provider.
       ``(4) Exceptions.--The terms `service recipient' and 
     `payor' do not include any entity in which the service 
     provider owns in excess of 5 percent of--
       ``(A) in the case of a corporation, the total combined 
     voting power of stock in the corporation, or
       ``(B) in the case of an entity other than a corporation, 
     the profits or beneficial interests in the entity.
       ``(5) In connection with performing the service.--The term 
     `in connection with performing the service' means in 
     connection or related to the operation of the service 
     provider's trade or business.
       ``(6) Principal place of business.--For purposes of 
     subsection (c), a home office shall in any case qualify as 
     the principal place of business if--
       ``(A) the office is the location where the service 
     provider's essential administrative or management activities 
     are conducted on a regular and systematic (and not 
     incidental) basis by the service provider, and
       ``(B) the office is necessary because the service provider 
     has no other location for the performance of the essential 
     administrative or management activities of the business.
       ``(7) Fair market rent.--The term `fair market rent' means 
     a periodic, fixed minimum rental fee which is based on the 
     fair rental value of the facilities and is established 
     pursuant to a written agreement with terms similar to those 
     offered to unrelated persons for facilities of similar type 
     and quality.''
       (b) Clarification of Rules Regarding Evidence of Control.--
     For purposes of determining whether an individual is an 
     employee under the Internal Revenue Code of 1986 (26 U.S.C. 1 
     et seq.), compliance with statutory or regulatory standards 
     shall not be treated as evidence of control.
       (c) Repeal of Section 530(d) of the Revenue Act of 1978.--
     Section 530(d) of the Revenue Act of 1978 (as added by 
     section 1706 of the Tax Reform Act of 1986) is repealed.
       (d) Clerical Amendment.--The table of sections for chapter 
     25 of such Code is amended by adding at the end the following 
     new item:

``Sec. 3511. Safe harbor for determining that certain individuals are 
              not employees.''

       (e) Effective Dates.--
       (1) In general.--The amendments made by, and the provisions 
     of, this section shall apply to services performed after the 
     date of enactment of this Act.
       (2) Determinations by secretary.--Section 3511(g) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to determinations after the date of enactment of 
     this Act.
       (3) Section 530(d).--The amendment made by subsection (c) 
     shall apply to periods ending after the date of enactment of 
     this Act.
                                 ______
                                 
      By Mr. KYL (for himself, Mrs. Feinstein, Mr. Graham, Mr. 
        Hutchinson, Mr. Grassley, and Mr. Johnson):
  S. 474. A bill to amend sections 1081 and 1084 of title 18, United 
States Code; to the Committee on the Judiciary.


             THE INTERNET GAMBLING PROHIBITION ACT OF 1997

  Mr. KYL. Mr. President, I rise to introduce the Internet Gambling 
Prohibition Act of 1997. It will outlaw gambling on the Internet. I 
believe it will protect children from logging on to the Internet and 
being exposed to activities that are normally prohibited to them. And 
for those people with a gambling problem, my bill will make it harder 
to gamble away the family paycheck.
  Gambling erodes values of hard work, sacrifice, and personal 
responsibility. Although the social costs of gambling are difficult to 
quantify, research indicates they are potentially staggering. Gambling 
is a growing industry in the United States, with revenues approaching 
$550 billion last year--three times the revenues of General Motors 
Corp. In 1993, more Americans visited casinos than attended a major 
league baseball game.
  The problem can only grow worse with online casinos. Now it is no 
longer necessary to go to a casino or store where lottery tickets are 
sold. Anyone with a computer and a modem will have access to a casino: 
Internet users can access hundreds of sites for blackjack, craps, 
roulette, and sports betting. Gambling addiction is already on the 
rise. Online gambling will only increase the problem.
  Why is this bill necessary? It dispels any ambiguity by making clear 
that all betting, including sports betting, is illegal. Currently, 
nonsports betting is interpreted as legal. The bill also clarifies the 
definition of bets and wagers. This ensures that those who are gambling 
cannot circumvent the law. For example, virtual gaming businesses have 
been known to offer prizes instead of money, in an attempt to evade the 
law.
  Additionally, my bill clarifies that Internet access providers are 
covered by the law. As the National Association of Attorneys General 
[NAAG] task force on Internet Gambling reported, ``this is currently 
the most important section to State and local law enforcement agencies, 
because it provides a civil enforcement mechanism.'' FCC-regulated 
carriers notified by any State or local law enforcement agency of the 
illegal nature of a site are required to discontinue services to the 
malfeasor. NAAG believes that this can be a very effective deterrent. 
The bill includes interactive computer-service providers among those 
entities required to discontinue such service upon notice. Federal, 
State, and local law enforcement entities are explicitly authorized to 
seek prospective injunctive relief against continued use of a 
communications facility for purposes of gambling.
  The Internet Gambling Prohibition Act makes explicit the intent of 
Congress to create extraterritorial jurisdiction regarding Internet 
gambling activities. Too often, illicit operators of virtual casinos 
set up shop in friendly jurisdictions beyond the direct application of 
U.S. law. It will also require the DOJ to report on the difficulties 
associated with enforcing the statute. Finally, it places some burden 
on the bettor.
  The Internet has great potential to promote both educational 
opportunities and business expansion in this country. At the same time, 
the Internet is fast becoming a place where inappropriate activities 
such as gambling, pornography, and consumer fraud thrive. Recently, 
many businesses have welcomed law enforcement's involvement in cracking 
down on consumer fraud. We must find a constitutional way to deal with 
the other problems raised by this revolution in communications. I 
believe that it is possible to impose some conditions, as we have in 
other areas, without violating free speech rights.
  There is growing support for changes to current law. As I mentioned, 
the NAAG has a task force on Internet gambling, and the report of the 
task

[[Page S2561]]

force--authored by Attorneys General Dan Lungren and Hubert Humphrey--
called for a legislative remedy to stem the tide of gambling 
electronically. NAAG has endorsed my bill.
  Mr. President, the Internet Gambling Prohibition Act of 1997 ensures 
that the law will keep pace with technology and keep gambling off the 
Internet. I urge my colleagues to pass the bill.
 Mr. GRAHAM. Mr. President, I join my friend and colleague from 
Arizona, Senator Kyl, in cosponsoring the Internet Gambling Prohibition 
Act introduced today, which is intended to address a growing problem in 
the United States as our technology continues to modernize our modes of 
communication.
  This legislation is an attempt to take a step forward in meeting the 
needs of State law enforcement organizations and officials.
  With the development of the Internet World Wide Web, the ability of 
Americans to access information for their personal and professional use 
has taken a quantum leap. It is safe to say that the Internet is one of 
the more important technological advances of the late 20th century with 
respect to the influence that the technology can have on the lives of 
so many Americans.
  The number of American Internet users has grown from 1 million in 
1992 to over 50 million today. This number is expected to grow to 
several hundred million users by the year 2000. As we bring Internet 
technology into our schools, we will see greater use of the Internet 
particularly among our youth, many who are already adept at using their 
home computers and surfing the Internet for educational and 
recreational purposes.
  With this convenience and easy access to a variety of information 
sources, many of which are of great educational, cultural and 
professional value, come certain expected problems. The one that I want 
to speak to briefly is that of the increasing use of the Internet for 
the purposes of gambling.
  The National Association of Attorney Generals has recently studied 
the problem of Internet gambling. In a 1996 report, ``Gambling on the 
Internet,'' the Association cited the following:

       The availability of gambling on the Internet * * * 
     threatens to disrupt each State's careful balancing of its 
     own public welfare and fiscal concerns, by making gambling 
     available across State and national boundaries, with little 
     or no regulatory control.
       There are literally hundreds of gambling-related sites on 
     the Internet. Dozens more are being added monthly.

  Let me make several key distinctions that must be understood with 
respect to this legislation.
  First, it is important to note that the number of actual online 
gambling operations are few at this time due to electronic commerce and 
technical limitations. Advancements in technology, however, make such 
shortcomings temporary. Only 6 months ago, there were only 17 active 
Internet gambling sites on the World Wide Web. Today, there are over 
200. And, today, there are hundreds of advertisements for gambling as 
well as informational how-to sites on the Internet. In short, the 
Internet's ability to serve as an information conduit for the gambling 
industry has been recognized.
  Second, States have historically been the primary regulator of 
gambling activities. However, the widespread use of the Internet and 
its potential to serve as a conduit of gambling activities across 
national and State borders, serves to undermine States' regulatory 
control. Our legislation is not intended to disrupt this prerogative, 
but rather to assist States' ability to enforce its own gambling laws.
  Finally, the legislation would not hold Internet access providers--
such as America Online--liable for gambling activities that occur on 
the Internet. However, the Internet access providers are required, once 
notified by a State or law enforcement agency of the illegal activity, 
to discontinue Internet services to the malfeasor.
  Mr. President, there is growing awareness of the importance of this 
issue in my State of Florida. The attorney general of the State of 
Florida wrote me on February 17, 1997, urging strong support of this 
legislation. I am committed to providing strong support in the Congress 
for Florida law enforcement concerns.
  It is timely and necessary for the Congress to assist States on this 
growing problem which undermines States' jurisdiction and control. We 
should support the efforts of our State and local law enforcement 
officials so that they can prevent the growth of activities which are 
illegal in that State.
  I thank my colleague from Arizona for his work in drafting this 
important legislation. I look forward to working with him this year in 
support of passage of this bill.
  Mr. President, I ask my colleagues in the Senate to join us in 
supporting this measure.
                                 ______
                                 
      By Mr. JEFFORDS (for himself, Mr. Leahy, Mr. D'Amato, and Mr. 
        Moynihan):
  S. 475. A bill to amend the Internal Revenue Code of 1986 to clarify 
the excise tax treatment of draft cider; to the Committee on Finance.


             TAX TREATMENT OF HARD APPLE CIDER LEGISLATION

 Mr. JEFFORDS. Mr. President, I am introducing tax legislation 
designed to increase opportunities for the apple industry in the United 
States. I am pleased that Senators Leahy, D'Amato, and Moynihan are 
joining me as original cosponsors of the bill.
  Our bill clarifies the excise tax treatment of fermented apple cider. 
Current Federal tax law unfairly taxes fermented apple cider at a much 
higher rate than beer despite the two beverages similar alcohol levels. 
Currently, fermented apple cider, commonly known as draft cider, is 
subject to a tax of $1.07 per wine gallon, despite its alcohol level. 
This bill lowers the excise tax on draft cider containing not more than 
7 percent alcohol to equal the beer tax rate of 22.6 cents per gallon.
  I believe this small tax change would allow draft cider producers to 
compete more fairly in the market with comparable beverages. As draft 
cider becomes more competitive the market will likely grow. This will 
greatly benefit the apple growers throughout this Nation, by expanding 
the use and need for their product.
  The production of draft hard cider comes from apples that are culls, 
processing apples or apples that are not usable in the fresh market. 
The conversion of culled apples into high value processed products such 
as draft cider is important to growers as well as to processors.
  Cider and other apple byproducts are important to Vermont's economy, 
providing a market for otherwise unmarketable fruit. Of Vermont's 
average annual crop of 1.1 million bushels, approximately 20 percent, 
or 220,000 bushels, are graded out as culls, or processing apples. 
Apple production has a long history in Vermont, and is an integral part 
of agriculture in our State as it is in many States.
  Many States have recognized the potential benefits to their apple 
farmers by lowering the tax on draft cider to equal the beer tax rate. 
State Departments of Agriculture, farm bureaus, and representatives 
from the apple industry across this Nation have voiced their support 
for lowering the cider tax rate.
  This bill that I introduce today is similar to legislation that I 
introduced along with my friend from Vermont, Senator Leahy, and my 
colleagues from New York in the last Congress. The same bill was 
successful in the Senate last Congress as part of the Small Business 
Job Protection Act of 1996, H.R. 3448. Unfortunately, the language was 
not included in the conference report of H.R. 3448.
  Mr. President, it is my hope that this legislation will again pass in 
the Senate and be signed by the President. I ask my colleagues to 
support this legislation.
 Mr. LEAHY. Mr. President, I am pleased to join my friend from 
Vermont, Senator Jeffords, in introducing tax legislation designed to 
stimulate the apple industry in the United States. I am pleased that 
Senators D'Amato and Moynihan are joining me as original cosponsors of 
the bill.
  Our bill revises the Federal excise tax on fermented apple cider, 
more commonly known as draft cider, to beer tax rates. As one of the 
senior members of the Senate Agriculture Committee, I believe this 
small tax change will be of great benefit to cider makers and apple 
growers across the country.
  Draft cider is one of the oldest categories of alcoholic beverages in 
North America. Back in colonial times, nearly every innkeeper served 
draft cider to

[[Page S2562]]

his or her patrons during the long winter. In fact, through the 19th 
Century, beer and draft cider sold equally in the United States.
  Recently, draft cider has made a comeback in the United States and 
around the world. Our tax law, however, unfairly taxes draft cider at a 
much higher rate than beer despite the two beverages sharing the same 
alcohol level and consumer market. This tax treatment, I believe, 
creates an artificial barrier to the growth of draft cider. Our 
legislation will correct this inequity.
  Present law taxes fermented cider, regardless of its alcohol level, 
as a wine at a rate of $1.07 per gallon. Our bill would clarify that 
draft cider containing not more than 7 percent alcohol and marketed in 
various size containers would be taxed at the beer rate of 22.6 cents 
per gallon. I believe this tax change would allow draft cider producers 
to compete fairly with comparable beverage makers. As draft cider grows 
in popularity, apple growers around the nation should prosper because 
draft cider is made from culled apples, the least marketable apples.
  The growth of draft cider should convert these least marketable 
apples, which account for about 20 percent of the entire U.S. apple 
production, into a high value product, helping our struggling apple 
growers. Indeed, I have received letters from officials at state 
agriculture departments from across the nation--Arizona, Connecticut, 
Georgia, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, 
Vermont and Virginia--supporting the taxing of draft cider at the beer 
rate because this change would allow apple farmers in their States to 
reap the benefits of an expanded culled apple market.
  I have also heard from the Northeast McIntosh Apple Growers 
Association, the New York Apple Association, the New England Apple 
Council and many apple farmers, processors and cider producers that 
support revising the excise tax on draft cider.
  This bill is identical to legislation I introduced with Senators 
Jeffords, D'Amato and Moynihan in the last Congress. That bill passed 
the Senate as part of the Small Business Job Protection Act of 1996, H. 
R. 3448, but was not included in the conference report on H.R. 3448. I 
am hopeful that with the leadership of Senators Jeffords, D'Amato and 
Moynihan, we can enact into law this small tax change that will have a 
large positive impact on the Nation's apple industry.
  I urge my colleagues to support this legislation.
                                 ______
                                 
      By Mr. HATCH (for himself, Mr. Biden, Mr. Stevens, Mr. Gregg and 
        Mr. Kohl):
  S. 476. A bill to provide for the establishment of not less than 
2,500 Boys and Girls Clubs of America facilities by the year 2000; to 
the Committee on the Judiciary.


              BOYS AND GIRLS CLUBS OF AMERICA LEGISLATION

  Mr. HATCH. Mr. President, I rise today to introduce a measure to 
further the commitment of the Republican Congress to support the 
expansion of the Boys and Girls Clubs of America, one of the best 
examples of proven youth crime prevention. I am pleased to be joined in 
introducing this bill by a bipartisan group of Senators, including 
Senator Biden, the ranking Democrat on the Youth Violence Subcommittee, 
Senator Stevens, the chairman of the Senate Appropriations Committee, 
Senator Gregg, the chairman of the Commerce, Justice, State 
Appropriations Subcommittee, and Senator Kohl, who serves on the 
Judiciary Committee.
  Our legislation addresses our continuing initiative to ensure that, 
with Federal seed money, the Boys and Girls Clubs of America are able 
to expand to serve an additional 1 million young people through at 
least 2,500 clubs by the year 2000. The dedication of all of these 
Members demonstrates our commitment to both authorize and fund this 
effort.
  Last year, in a bipartisan effort, the Republican Congress enacted 
legislation I authored to authorize $100 million in Federal seed money 
over 5 years to establish and expand Boys and Girls Clubs in public 
housing and distressed areas throughout our country. With the help of 
the Appropriations Committee, we have fully funded this initiative.
  The bill we are introducing today streamlines the application process 
for these funds, and permits a small amount of the funds to be used to 
establish a role model speakers' program to encourage and motivate 
young people nationwide.
  It is important to note that what we are providing is seed money for 
the construction and expansion of clubs to serve our young people. This 
is bricks and mortar money to open clubs, and after they are opened 
they will operate without any significant Federal funds. In my view, 
this is a model for the proper role of the Federal Government in crime 
prevention. The days are over when we can afford vast never-ending 
federally run programs. According to a GAO report last year, over the 
past 30 years, Congress has created 131 separate Federal programs, 
administered by 16 different agencies, to serve delinquent and at-risk 
youth. These programs cost $4 billion in fiscal year 1995. Yet we have 
not made significant progress in keeping our young people away from 
crime and drugs.

  What we can and must afford is short-term, solid support for proven 
private sector programs like the Boys and Girls Clubs that really do 
make a difference. Boys and Girls Clubs are among the most effective 
nationwide programs to assist youth to grow into honest, caring, 
involved, and law-abiding adults.
  We know that Boys and Girls Clubs work. Researchers at Columbia 
University found that public housing developments in which there was an 
active Boys and Girls Club had a 25 percent reduction in the presence 
of crack cocaine, a 22 percent reduction in overall drug activity, and 
a 13 percent reduction in juvenile crime. Members of Boys and Girls 
Clubs also do better in school, are less attracted to gangs, and feel 
better about themselves.
  Distinguished alumni of Boys and Girls Clubs include role models such 
as actor Denzel Washington, basketball superstar Michael Jordan, and 
San Francisco 49ers quarterback Steve Young.
  More important, however, are the uncelebrated success stories--the 
miracles performed by Boys and Girls Clubs every day. At a Judiciary 
Committee hearing today, we have some of these miracles with us. Amador 
Guzman, from my State of Utah, told us how he believes the club in his 
neighborhood saved his life, by keeping him from gangs, drugs, and 
violence.
  The reason Boys and Girls Clubs work, and the Republican Congress 
wants to do more for them is because they are locally run, and depend 
mostly on community involvement for their success.
  Never have our youth had a greater need for the positive influence of 
Boys and Girls Clubs, and never has the work of the clubs been more 
critical. Our young people are being assaulted from all sides with 
destructive messages. For instance, drug use is on the rise. Recent 
statistics reconfirm that drugs are ensnaring young people as never 
before. Overall drug use by youth ages 12 to 17 rose 105 percent 
between 1992 and 1995, and 33 percent between 1994 and 1995; 10.9 
percent of our young people now use drugs on a monthly basis, and 
monthly use of marijuana is up 37 percent, monthly use of LSD is up 54 
percent, and monthly cocaine use by youth is up 166 percent between 
1994 and 1995.
  Our young people are also being assaulted by gangs. By some 
estimates, there are more than 3,875 youth gangs, with 200,000 members, 
in the Nation's 79 largest cities, and the numbers are going up. Even 
my State of Utah has not been immune from this scourge. In Salt Lake 
City, since 1992, the number of identified gangs has increased 55 
percent, from 185 to 288. The number of gang members has increased 146 
percent, from 1,438 to 3545; and the number of gang-related crimes has 
increased a staggering 279 percent, from 1741 in 1992 to 6611 in 1996. 
Shockingly, 208 of these involved drive-by shootings.
  Every day, our young people are being bombarded with cultural 
messages in music, movies, and television that undermine the 
development of core values of citizenship. Popular culture and the 
media glorify drug use, meaningless violence, and sex without 
commitment.
  The importance of Boys and Girls Clubs in fighting drug abuse, gang 
recruitment, and moral poverty cannot

[[Page S2563]]

be overstated. The clubs across the country are a bulwark for our young 
people and deserve all the support we can give.
  Indeed, Federal efforts are already paying off. Using over $15 
million in seed money appropriated for fiscal year 1996, the Boys and 
Girls Clubs of America opened 208 new clubs in 1996. These clubs are 
providing positive places of hope, safety, learning, and encouragement 
for about 180,000 more kids today than in 1995. In my state of Utah, 
these funds have helped keep an additional 6,573 kids away from gangs, 
drugs, and crime.
  The $20 million appropriated for fiscal year 1997 is expected to 
result in another 200 clubs and 200,000 more kids involved in clubs. We 
need now to redouble our efforts. The legislation we introduce today 
demonstrates our commitment to do that. I urge my colleagues to support 
it.
                                 ______
                                 
      By Mr. HATCH (for himself and Mr. Bennett):
  S. 477. A bill to amend the Antiquities Act to require an Act of 
Congress and the consultation with the Governor and State legislature 
prior to the establishment by the President of national monuments in 
excess of 5,000 acres; to the Committee on Energy and Natural 
Resources.

                          ____________________