[Congressional Record Volume 144, Number 136 (Friday, October 2, 1998)]
[Senate]
[Pages S11339-S11345]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. CHAFEE:
S. 2542. A bill to amend the Internal Revenue Code of 1986 to modify
the tax on commercial aviation to and from airports located on sparsely
populated islands, to the Committee on Finance.
legislation providing relief for certain island airports
Mr. CHAFEE. Mr. President, today, I am introducing legislation
to provide relief to communities for whom air transportation is vital
to their survival.
Last year, Congress altered the structure of the aviation excise tax
which funds the Airport and Airway Trust Fund. As part of the Taxpayer
Relief Act of 1997, the 10% ad valorem ticket tax was replaced with a
combination ad valorem/flight segment charge. When fully phased in, the
tax will consist of an ad valorem tax of 7.5% of the price of a ticket
and a $3.00 charge per flight segment.
This change has dramatically increased the tax imposed on low-fare
flights. A typical flight to or from the Block Island community located
in my state costs $28. Prior to last year, the tax on this flight would
be 10% or $2.80. When fully implemented, however, the new structure
will increase the tax on the same ticket by 82%, to $5.10.
This new structure was intended to provide a user-based approach to
paying for the use of FAA services and facilities. However, short
distance flights between islands and a mainland make little demand on
Air Traffic Control services as these flight segments do not use ATC
centers, rarely use departure or arrive control, often operate under
visual flight rules and usually are transferred from the departure
control tower to the destination control tower.
Congress recognized that this new tax structure would adversely
affect rural communities. Consequently, flights to or from rural
airports are taxed at a rate of 7.5% of the ticket price, with no per
passenger segment charge. For purposes of this exemption, a rural
airport is one that is located at least 75 miles away from an airport
with more than 100,000 passengers. Unfortunately, this restrictive
definition fails to recognize the unique nature of island communities.
Island communities face transportation problems similar to those
encountered by passengers from rural areas. Air and ferry
transportation provide islands with a vital link to the mainland for
shopping, employment, health care, and other needs. Most commercial
passenger enplanements at island airports are for short-distance
flights simply to get off the island. For those communities, air and
ferry service maintain a delicate balance, and both are needed to meet
the communities' needs for mainland access.
The current excise tax structure provides a disincentive to providing
service to remote island communities. This result is contrary to
Congress' intent to increase air service to these remote communities.
My legislation reinstates the prior tax structure for flights to or
from an
[[Page S11340]]
island community. Thus, a passenger flying to or from such a community
would pay a tax equal to 10% of the price of a ticket. It is important
to note that this is less favorable than the exemption currently
provided to passengers to and from rural airports.
I encourage my colleagues to join me as cosponsors of this important
health initiative.
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. 2542
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. MODIFICATION OF TAX ON AIR TRANSPORTATION TO AND
FROM SPARSELY POPULATED ISLANDS.
(a) In General.--Subsection (e) of section 4261 of the
Internal Revenue Code of 1986 is amended by redesignating
paragraphs (4) and (5) as paragraphs (5) and (6) and by
inserting after paragraph (3) the following new paragraph:
``(4) Segments to and from certain island airports.--
``(A) Exception from segment tax.--The tax imposed by
subsection (b)(1) shall not apply to any domestic segment
beginning or ending at an airport which is a qualified island
airport for the calendar year in which such segment begins or
ends (as the case may be).
``(B) Qualified island airport.--For purposes of this
paragraph, the term `qualified island airport' means, with
respect to any calendar year, any airport if--
``(i) such airport is located on an island having a
population of 20,000 or less (determined under the 1990
decennial census), and
``(ii) during the second preceding calendar year--
``(I) there were 400,000 or fewer commercial passengers
departing by air from such airport, and
``(II) 50 percent or more of the initial flight segments of
such commercial passengers are 100 miles or less.
``(C) Ticket tax.--In the case of any domestic segment
beginning or ending at an airport which is a qualified island
airport for the calendar year in which such segment begins or
ends (as the case may be), subsection (a) shall be applied by
substituting `10 percent' for `7.5 percent' and paragraph (6)
shall not apply. A rule similar to the rule of paragraph
(1)(C)(ii) shall apply for purposes of this subparagraph.''
(b) Conforming Amendment.--Clause (i) of section
4261(e)(1)(C) of such Code is amended by striking ``Paragraph
(5)'' and inserting ``Paragraph (6)''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transportation beginning 7 days after the date of
enactment of this Act.
(2) Treatment of amounts paid.--The amendments made by this
section shall not apply to amounts paid before 7 days after
the date of enactment of this Act.
______
By Mr. CHAFEE (for himself, Mr. Baucus, Mr. Grassley, Ms.
Moseley-Braun, Mr. Kerrey, and Mr. Rockefeller):
S. 2543. A bill to amend the Internal Revenue Code of 1986 to impose
an excise tax on persons who acquire structured settlement payments in
factoring transactions, and for other purposes; to the Committee on
Finance.
structured settlement protection act
Mr. CHAFEE. Mr. President, today I am introducing legislation,
together with Senators Baucus, Grassley, Moseley-Braun, Rockefeller,
and Kerrey of Nebraska, the Structured Settlement Protection Act.
Companion legislation has been introduced in the House as H.R. 4314,
cosponsored by Representative Clay Shaw and Pete Stark and a broad
bipartisan group of members of the House Ways and Means Committee.
The Act protects structured settlements and the injured victims who
are the recipients of the structured settlement payments from the
problems caused by a growing practice known as structured settlement
factoring.
Structured settlements were developed because of the pitfalls
associated with the traditional lump sum form of recovery in serious
personal injury cases, where all too often a lump sum meant to last for
decades or even a lifetime swiftly eroded away. Structured settlements
have proven to be a very valuable tool. They provide long-term
financial security in the form of an assured stream of payments to
persons suffering serious, often profoundly disabling, physical
injuries. These payments enable the recipients to meet ongoing medical
and basic living expenses without having to resort to the social safety
net.
Congress has adopted special tax rules to encourage and govern the
use of structured settlements in physical injury cases. By encouraging
the use of structured settlements Congress sought to shield victims and
their families from pressures to prematurely dissipate their
recoveries. Structured settlement payments are nonassignable. This is
consistent with worker's compensation payments and various types of
Federal disability payments which are also non-assignable under
applicable law. In each case, this is done to preserve the injured
person's long-term financial security.
I am very concerned that in recent months there has been sharp growth
in so-called structured settlement factoring transactions. In these
transactions, companies induce injured victims to sell off future
structured settlement payments for a steeply-discounted lump sum,
thereby unraveling the structured settlement and the crucial long-term
financial security that it provides to the injured victim. These
factoring company purchases directly contravene the intent and policy
of Congress in enacting the special structured settlement tax rules.
The Treasury Department shares these concerns as is evidenced with a
similar proposal included in the Administration's FY 1999 budget.
Court records from across the country are shedding light on factoring
company purchases of structured settlement payments from gravely-
injured victims. Recent cases involve a quadriplegic in Oklahoma, a
paraplegic in Texas, a person in Connecticut with traumatic brain
injuries dating from childhood, and an injured worker receiving
workers' compensation in Mississippi. Realizing the long-term risk
being inflicted on these seriously-injured individuals, this
legislation has the active support of the National Spinal Cord Injury
Association, as well as the American Association of Persons With
Disabilities (AAPD).
The National Spinal Cord Injury Association recently wrote to the
Chairman of the Finance Committee strongly supporting the legislation.
They state: ``[o]ver the past 16 years, structured settlements have
proven to be an ideal method for ensuring that persons with
disabilities, particularly minors, are not tempted to squander
resources designed to last years or even a lifetime. That is why the
National Spinal Cord Injury Association is so deeply concerned about
the emergence of companies that purchase payments intended for disabled
persons at drastic discount. This strikes at the heart of the security
Congress intended when it created structured settlements.''
It is appropriate to address this problem through the federal tax
system because these purchases directly contravene the Congressional
policy reflected in the structured settlement tax rules and jeopardize
the long-term financial security that Congress intended to provide for
the injured victim. This problem is nationwide, and it is growing
rapidly.
Accordingly, the legislation we are introducing would impose
substantial penalty tax on a factoring company that purchases the
structured settlement payments from the injured victim. This is a
penalty, not a tax increase. Similar penalties are imposed in a variety
of other contexts in the Internal Revenue Code to discourage
transactions that undermine Code provisions, such as private foundation
prohibited transactions and greenmail. The factoring company would pay
the penalty only if it engages in the transaction that Congress has
sought to discourage. An exception is provided for genuine court-
approved hardship cases to protect the limited instances where a true
hardship warrants the sale of a structured settlement.
This bipartisan legislation, which is supported by the Treasury
Department, should be enacted as soon as possible to stem this growing
nationwide problem.
Mr. President, I ask unanimous consent that the text of the bill and
a summary be printed in the Record.
There being no objection, the items were ordered to be printed in the
Record, as follows:
S. 2543
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
[[Page S11341]]
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This Act may be cited as the ``Structured
Settlement Protection Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
SEC. 2. IMPOSITION OF EXCISE TAX ON PERSONS WHO ACQUIRE
STRUCTURED SETTLEMENT PAYMENTS IN FACTORING
TRANSACTIONS.
Subtitle E is amended by adding at the end thereof the
following new chapter:
``CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS
``Sec. 5891. Structured settlement factoring transactions.
``SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.
``(a) Imposition of Tax.--There is hereby imposed on any
person who acquires directly or indirectly structured
settlement payment rights in a structured settlement
factoring transaction a tax equal to 50 percent of the
factoring discount as determined under subsection (c)(4) with
respect to such factoring transaction.
``(b) Exception for Court-Approved Hardship.--The tax under
subsection (a) shall not apply in the case of a structured
settlement factoring transaction in which the transfer of
structured settlement payment rights is--
``(1) otherwise permissible under applicable law, and
``(2) undertaken pursuant to the order of the relevant
court or administrative authority finding that the
extraordinary, unanticipated, and imminent needs of the
structured settlement recipient or the recipient's spouse or
dependents render such a transfer appropriate.
``(c) Definitions.--For purposes of this section--
``(1) Structured settlement.--The term `structured
settlement' means an arrangement--
``(A) established by--
``(i) suit or agreement for the periodic payment of damages
excludable from the gross income of the recipient under
section 104(a)(2), or
``(ii) agreement for the periodic payment of compensation
under any workers' compensation act that is excludable from
the gross income of the recipient under section 104(a)(1),
and
``(B) where the periodic payments are--
``(i) of the character described in subparagraphs (A) and
(B) of section 130(c)(2), and
``(ii) payable by a person who is a party to the suit or
agreement or to the workers' compensation claim or by a
person who has assumed the liability for such periodic
payments under a qualified assignment in accordance with
section 130.
``(2) Structured settlement payment rights.--The term
`structured settlement payment rights' means rights to
receive payments under a structured settlement.
``(3) Structured settlement factoring transaction.--The
term `structured settlement factoring transaction' means a
transfer of structured settlement payment rights (including
portions of structured settlement payments) made for
consideration by means of sale, assignment, pledge, or other
form of encumbrance or alienation for consideration.
``(4) Factoring discount.--The term `factoring discount'
means an amount equal to the excess of--
``(A) the aggregate undiscounted amount of structured
settlement payments being acquired in the structured
settlement factoring transaction, over
``(B) the total amount actually paid by the acquirer to the
person from whom such structured settlement payments are
acquired.
``(5) Relevant court or administrative authority.--The term
`relevant court or administrative authority' means--
``(A) the court (or where applicable, the administrative
authority) which had jurisdiction over the underlying action
or proceeding that was resolved by means of the structured
settlement, or
``(B) in the event that no action or proceeding was
brought, a court (or where applicable, the administrative
authority) which--
``(i) would have had jurisdiction over the claim that is
the subject of the structured settlement, or
``(ii) has jurisdiction by reason of the residence of the
structured settlement recipient.
``(d) Coordination With Other Provisions.--
``(1) In general.--In any case where the applicable
requirements of sections 72, 130, and 461(h) were satisfied
at the time the structured settlement was entered into, the
subsequent occurrence of a structured settlement factoring
transaction shall not affect the application of the
provisions of such sections to the parties to the structured
settlement (including an assignee under a qualified
assignment under section 130) in any taxable year.
``(2) Regulations.--The Secretary is authorized to
prescribe such regulations as may be necessary to clarify the
treatment in the event of a structured settlement factoring
transaction of amounts received by the structured
settlement recipient.''
SEC. 3. TAX INFORMATION REPORTING OBLIGATIONS.
Subpart B of part III of subchapter A of chapter 61 is
amended by adding at the end thereof the following new
section:
``SEC. 6050T. REPORTING REQUIREMENTS REGARDING STRUCTURED
SETTLEMENT FACTORING TRANSACTIONS.
``(a) In General.--In the case of a transfer of structured
settlement payment rights in a structured settlement
factoring transaction--
``(1) described in section 5891(b) and of which the person
making the structured settlement payments has actual notice
and knowledge, such person shall make such return and furnish
such written statement to the acquirer of the structured
settlement payment rights as would be applicable under the
provisions of section 6041 (except as provided in subsection
(c) of this section), or
``(2) subject to tax under section 5891(a) and of which the
person making the structured settlement payments has actual
notice and knowledge, such person shall make such return and
furnish such written statement to the acquirer of the
structured settlement payment rights at such time, and in
such manner and form, as the Secretary shall by regulations
prescribe.
``(b) Coordination With Other Provisions.--The provisions
of this section shall apply in lieu of any other provisions
of this part to establish the reporting obligations of the
person making the structured settlement payments in the event
of a structured settlement factoring transaction. The
provisions of section 3405 regarding withholding shall not
apply to the person making the structured settlement payments
in the event of a structured settlement factoring
transaction.
``(c) Definition.--For purposes of this section, the term
`acquirer of the structured settlement payment rights' shall
include any person described in section 7701(a)(1).''
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall be effective with
respect to structured settlement factoring transactions (as
defined in section 5891(c)(3) of the Internal Revenue Code of
1986, as added by this Act) occurring after the date of
enactment of this Act.
____
Summary of the Structured Settlement Protection Act
1. Stringent excise tax on persons who acquire structured
settlement payments in factoring transactions
In its analysis of the Administration's proposal, the Joint
Tax Committee notes the potential concern that in some cases
the imposition of a 20-percent excise tax may result in the
factoring company passing the tax along by reducing even
further the already-heavily discounted lump sum paid to the
injured victim for his or her structured settlement payments.
The Joint Committee notes that ``[o]ne possible response to
the concern relating to excessively discounted payments might
be to raise the excise tax to a level that is certain to stop
the transfers (perhaps 100 percent). . .'' (Joint Committee
on Taxation, Description of Revenue Provisions Contained in
the President's Fiscal Year 1999 Budget Proposal (JCS-4-98)
(February 4, 1998), p. 223).
Factoring company purchases of structured settlement
payments so directly subvert the Congressional policy
underlying structured settlements and raise such serious
concerns for structured settlements and the injured victims
that it is appropriate to impose a more stringent excise tax
against the amount of the discount reflected in the factoring
transaction (subject to a limited exception described below
for genuine court-approved hardships). Accordingly, the Act
would impose on the factoring company that acquires
structured settlement payments directly or indirectly from
the injured victim an excise tax equal to 50 percent of the
difference between (i) the total amount of the structured
settlement payments purchased by the factoring company, and
(ii) the heavily-discounted lump sum paid by the factoring
company to the injured victim.
Similar to the stuff excise taxes imposed on prohibited
transactions in the private foundation and pension contexts--
which can range as high as 100 to 200 percent--this stringent
excise tax is necessary to address the very serious public
policy concerns raised by structured settlement factoring
transactions.
Unlike the Administration's proposal, the excise tax
imposed on the factoring company under this legislation would
use a more stringent tax rate of 50 percent and would apply
it to the excess of the total amount of the structured
settlement payments purchased by the factoring company over
the heavily-discounted lump sum paid to the injured victim.
The excise tax under the Act would apply to the factoring
or structured settlements in tort cases and in workers'
compensation. A structured settlement factoring transaction
subject to the excise tax is broadly defined under the Act as
a transfer of structured settlement payment rights (including
portions of payments) made for consideration by means of
sale, assignment, pledge, or other form of alienation or
encumbrance for consideration.
2. Exception from excise tax for genuine, court-approved
hardship
The stringent excise tax would be coupled with a limited
exception for genuine, court-approved financial hardship
situations. Drawing upon the hardship standard enunciated in
the Treasury proposal, the excise tax would apply to
factoring companies in
[[Page S11342]]
all structured settlement factoring transactions except those
in which the transfer of structured settlement payment rights
(1) is otherwise permissible under applicable Federal and
State law and (2) is undertaken pursuant to the order of a
court (or where applicable, an administrative authority)
finding that the extraordinary, unanticipated, and imminent
needs of the structured settlement recipient or his or her
spouse or dependents render such a transfer appropriate.
This exception is intended to apply to the limited number
of cases in which a genuinely extraordinary, unanticipated,
and imminent hardship has actually arisen and been
demonstrated to the satisfaction of a court (e.g., serious
medical emergency for a family member). In addition, as a
threshold matter, the transfer of structured settlement
payment rights must be permissible under applicable law,
including State law. The hardship exception under this
legislation is not intended to override any Federal or State
law prohibition of restriction on the transfer of the payment
rights or to authorize factoring of payment rights that are
not transferable under Federal or State law. For example, the
States in general prohibit the factoring of workers'
compensation benefits. In addition, State laws often prohibit
or directly restrict transfers of recoveries in various types
of personal injury cases, such as wrongful death and medical
malpractice.
The relevant court for purposes of the hardship exception
would be the original court which had jurisdiction over the
underlying action or proceeding that was resolved by means of
the structured settlement. In the event that no action had
been brought prior to the settlement, the relevant court
would be that which would have had jurisdiction over the
claim that is the subject of the structured settlement or
which would have jurisdiction by reason of the residence of
the structured settlement recipient. In those limited
instances in which an administrative authority adjudicates,
resolves, or otherwise has primary jurisdiction over the
claim (e.g., the Vaccine Injury Compensation Trust Fund), the
hardship matter would be the province of that applicable
administrative authority.
3. Need to protect tax treatment of original structured
settlement
In the limited instances of extraordinary and unanticipated
hardship determined by court order to warrant relief under
the hardship exception, adverse tax consequences should not
be visited upon the other parties to the original structured
settlement. In addition, despite the anti-assignment
provisions included in the structured settlement agreements
and the applicability of a stringent excise tax on the
factoring company, there may be a limited number of non-
hardship factoring transactions that still go forward. If the
structured settlement tax rules under I.R.C. Sections 72, 130
and 461(h) had been satisfied at the time of the structured
settlement, the original tax treatment of the other parties
to the settlement--i.e., the settling defendant (and its
liability insurer) and the Code section 130 assignee--should
not be jeopardized by a third party transaction that occurs
years later and likely unbeknownst to these other parties to
the original settlement.
Accordingly, the Act would clarify that if the structured
settlement tax rules under I.R.C. Sections 72, 130, and
461(h) had been satisfied at the time of the structured
settlement, the section 130 exclusion of the assignee, the
section 461(h) deduction of the settling defendant, and the
Code section 72 status of the annuity being used to fund the
periodic payments would remain undisturbed. That is, the
assignee's exclusion of income under Code section 130 arising
from satisfaction of all of the section 130 qualified
assignment rules at the time the structured settlement was
entered into years earlier would not be challenged.
Similarly, the settling defendant's deduction under Code
section 461(h) of the amount paid to the assignee to assume
the liability would not be challenged. Finally, the status
under Code section 72 of the annuity being used to fund the
periodic payments would remain undisturbed.
The Act provides the Secretary of the Treasury with
regulatory authority to clarify the treatment of a structured
settlement recipient who engages in a factoring transaction.
This regulatory authority is provided to enable Treasury to
address issues raised regarding the treatment of future
periodic payments received by the structured settlement
recipient where only a portion of the payments has been
factored away, the treatment of the lump sum received in a
factoring transaction qualifying for the hardship exception,
and the treatment of the lump sum received in the non-
hardship situation. It is intended that where the
requirements of section 130 are satisfied at the time the
structured settlement is entered into, the existence of the
hardship exception to the excise tax under the Act shall not
be construed as giving rise to any concern over constructive
receipt of income by the injured victim at the time of the
structured settlement.
4. Tax information reporting obligations with respect to a
structured settlement factoring transaction
The Act would clarify the tax reporting obligations of the
person making the structured settlement payments in the event
that a structured settlement factoring transaction occurs.
The Act adopts a new section of the Code that is intended to
govern the payor's tax reporting obligations in the event of
a factoring transaction.
In the case of a court-approved transfer of structured
settlement payments of which the person making the payments
has actual notice and knowledge, the fact of the transfer and
the identity of the acquirer clearly will be known.
Accordingly, it is appropriate for the person making the
structured settlement payments to make such return and to
furnish such tax information statement to the new recipient
of the payments as would be applicable under the annuity
information reporting procedures of Code section 6041 (e.g.,
form 1099-R), because the payor will have the information
necessary to make such return and to furnish such statement.
Despite the anti-assignment restrictions applicable to
structured settlements and the applicability of a stringent
excise tax, there may be a limited number of non-hardship
factoring transactions that still go forward. In these
instances, if the person making the structured settlement
payments has actual notice and knowledge that a structured
settlement factoring transaction has taken place, the payor
would be obligated to make such return and to furnish such
written statement to the payment recipient at such time, and
in such manner and form, as the Secretary of the Treasury
shall by regulations provide. In these instances, the payor
may have incomplete information regarding the factoring
transaction, and hence a tailored reporting procedure under
Treasury regulations is necessary.
The person making the structured settlement payments would
not be subject to any tax reporting obligation if that person
lacked such actual notice and knowledge of the factoring
transaction. Under the Act, for purposes of the reporting
obligations, the term ``acquirer of the structured settlement
payment rights'' would be broadly defined to include an
individual, trust, estate, partnership, company, or
corporation.
The provisions of section 3405 regarding withholding would
not apply to the person making the structured settlement
payments in the event that a structured settlement factoring
transaction occurs.
5. Effective date
The provisions of the Act would be effective with respect
to structured settlement factoring transactions occurring
after the date of enactment of the Act.
______
By Mr. FAIRCLOTH:
S. 2544. A bill to enhance homeownership through community
development financial institutions; to the Committee on Banking,
Housing, and Urban Affairs.
the community development and homeownership act of 1998
Mr. FAIRCLOTH. Mr. President, today I introduce legislation that will
allow Community Development Financial Institutions (CDFIs) and their
affiliates to borrow from the Home Loan Bank System.
Since the 1930's the Home Loan Bank System has provided the nation's
savings institutions with advances that can be used to make home
mortgages. In 1989, the System was opened up to banks and credit
unions. The Home Loan Bank System is critical for homeownership in the
U.S. The Bank System has nearly 7,000 members and has outstanding
nearly $181 billion in housing advances.
The membership of the system is reserved for insured institutions. My
legislation, however, would permit Community Development Financial
Institutions to have ``non-member'' borrowing status. This would allow
approximately 200 CDFIs to borrow from the System, with the approval of
their regional Home Loan Bank and on the same terms as all other
members.
Mr. President, this is a small, but important step toward creating
more homeownership opportunities, particularly for low income
individuals. CDFIs were created for the purpose of reaching out to
provide housing and economic opportunity in distressed areas. My home
state of North Carolina is home to more CDFIs than any other state in
the United States, except for California, New York and Illinois. North
Carolina has been a leader in finding new and different ways to foster
economic growth and home ownership.
Very simply, this legislation will allow CDFIs to have a source of
credit to make home loans. These loans will have to meet the normal
collateral requirements of any other institution that belongs to the
Home Loan Bank System. Because CDFIs are chartered to target distressed
communities, however, this could be an important source of credit for
homeownership that might not otherwise exist. We know from experience
that once an individual has a home--he or she has a stake in the
community. This can help turn distressed communities into thriving
communities. We have made great
[[Page S11343]]
progress in the last few years. Welfare rolls are at their lowest point
since 1969. Homeownership is at its highest level ever. We are no
longer running our federal budgets in the red. Now we can begin to take
new and creative steps to continue promoting economic growth and
opportunity.
I would urge my colleagues to co-sponsor and support this
legislation.
______
By Mr. HATCH (for himself, Mr. Dodd, Mr. Ashcroft, Mr. Lieberman,
Mr. Sessions, and Mr. Torricelli):
S. 2546. A bill to establish legal standards and procedures for the
fair, prompt, inexpensive, and efficient resolution of personal injury
claims arising out of asbestos exposure, and for other purposes; to the
Committee on the Judiciary.
the fairness in asbestos compensation act of 1998
Mr. HATCH. Mr. President, I am pleased to introduce today the
``Fairness in Asbestos Compensation Act of 1998''. With me, sponsoring
this important legislation are: Senator Dodd, Senator Ascroft, Senator
Lieberman, Senator Sessions and Senator Torricelli.
Asbestos litigation is a national crisis. Today, state and federal
courts are overwhelmed by up to 150,000 asbestos lawsuits. Over 30,000
new suits are added to the dockets annually. Unfortunately, those that
are truly sick with asbestosis and various asbestos-related cancers and
illnesses spend years in court before receiving any compensation, and
then lose 60% of that compensation to attorneys' fees and other costs.
The best available data show that on average asbestos suits take 31
months to reach resolution, compared to 18 months for other product
liability suits. One cause of this extraordinary delay in compensation
is the large number of lawsuits filed by those who, without any
symptoms or signs of asbestos-related illness, bring suits for future
medical monitoring and fear of cancer.
In a lottery-like system, juries award enormous compensation and
outrageous punitive damages to non-impaired plaintiffs, while others in
identical cases or with actual illness receive little or no
compensation. Excessive Damage awards, along with the transaction costs
associated with the lawsuits, deplete the financial resources of
defendant companies and lead them to file for bankruptcy. As legal and
financial resources are tied up and exhausted, it is increasingly
unclear whether those who are truly inflicted with asbestos-caused
diseases will be able to recover anything at all in the years ahead.
Courts have tried unsuccessfully to cope with and alleviate the
problems associated with the more than half a million asbestos cases.
The major parties involved attempted to compromise on a fair and
equitable solution that included prompt compensation. The Third Circuit
Court of Appeals overturned one such compromise, known as the Amchem or
Georgine agreement, on civil procedural rule grounds but found the
settlement to be ``arguably a brilliant partial solution.'' Justice
Ruth Bader Ginsburg, writing for the Supreme Court, upheld the
Appellate decision and stated, ``[t]he argument is sensibly made that a
nationwide administrative claims processing regime would provide the
most secure, fair and efficient means of compensating victims of
asbestos exposure. Congress, however, has not adopted such a
solution.'' The Court accurately recognized that Congress is the most
appropriate body to resolve the asbestos crisis. That is what we intend
to do by introducing this important legislation.
Mr. President, by virtue of the hundreds of thousands of cases that
already have been litigated in the court system, the legal and
scientific issues relating to asbestos litigation have been thoroughly
explored and punishments have been exacted on defendant companies.
Recognizing the potential dangers of asbestos exposure, we have seen
asbestos consumption in the United States drop to historic lows since
peak consumption in the early 1970's. These factors along with the
recent court decisions demonstrate that the asbestos litigation issue
is now ripe for a legislative solution.
The bill that I introduce today will correct the asbestos litigation
crisis problems. It is crafted to reflect as closely as possible the
original settlement agreed to by the involved parties in the Amchem
settlement. This bill will eliminate the asbestos litigation burden in
the courts, get fair compensation for those who currently are sick, and
enable the businesses to manage their liabilities in order to ensure
that compensation will be available for future claimants. It is
important to note that no tax-payer money will fund this bill. It will
be entirely funded by asbestos defendants.
Specifically, the bill reforms asbestos litigation in the judicial
system by establishing a national claims facility to provide fair and
prompt compensation for persons suffering from asbestos-associated
illnesses. Eligibility for compensation will be determined by objective
predetermined criteria. The legislation provides for alternative
dispute resolution and allows plaintiffs who go through the system
without resolving their claims through the claims facility to use the
tort system. Again no taxpayer dollars will fund this facility or any
part of this program.
I have carefully crafted this legislation so that it is at least as
favorable--and, in many cases, more favorable--to claimants as the
original Amchem settlement. As this bill makes its way through the
legislative process, I look forward to working with my colleagues to
further refine the language in order to achieve the maximum public
benefit from this legislation.
Mr. DODD: Mr. President, I am pleased to join with my colleague,
Senator Hatch, to introduce the ``Fairness in Asbestos Compensation Act
of 1998.'' This legislation would expedite the provision of financial
compensation to the victims of asbestos exposure by establishing a
nationwide administrative system to hear and adjudicate their claims.
Mr. President, millions of American workers have been exposed to
asbestos on the job. Tragically, many have contracted asbestos-related
illness, which can be devastating and deadly. Others will surely become
similarly afflicted. These individuals--who have or will become
terribly ill due to no fault to their own--deserve swift and fair
compensation to help meet the costs of health care, lost income, and
other economic and non-economic losses.
Unfortunately, many victims of asbestos exposure are not receiving
the efficient and just treatment they deserve from our legal system.
Indeed, it can be said that the current asbestos litigation system is
in a state of crisis. Today, more than 150,000 lawsuits clog the state
and federal courts. In 1996 alone, more than 36,000 new suits were
filed. Those who have been injured by asbestos exposure must often wait
years for compensation. And when that compensation finally arrives, it
is often eaten up by attorneys' fees and other transaction costs.
In the early 1990's, an effort was made to improve the management of
federal asbestos litigation. Cases were consolidated, and a settlement
to resolve them administratively was agreed to between defendant
companies and plaintiffs' attorneys. This settlement also obtained the
backing of the Building and Construction Trades Union of the AFL-CIO.
Regrettably, the settlement was overturned by the Third Circuit Court
of Appeals in 1996. Though the Court termed the settlement ``arguably a
brilliant partial solution,'' it found that the class of people created
by the settlement--namely, those exposed to asbestos--was too large and
varied to be certified pursuant to Rule 23 of the Federal Rules of
Civil Procedure. The Supreme Court affirmed that decision. In its
decision, the Court effectively invited the Congress to provide for the
existence of such a settlement as a fair and efficient way to resolve
asbestos litigation claims.
Hence this bill. In simple terms, it codifies the settlement reached
between companies and the representatives of workers who were exposed
to asbestos on the job. It would establish a body to review claims by
those who believe that they have become ill due to exposure to
asbestos. It would provide workers with mediation and binding
arbitration to promote the fair and swift settlement of their claims.
It would allow plaintiffs to seek additional compensation if their non-
malignant disease later developed into cancer. And it would limit
attorneys' fees so as to ensure that a claimant receives a just portion
of any settlement amount.
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All in all, Mr. President, this is a good bill. I commend Senator
Hatch for his leadership in crafting it. However, it is not a perfect
bill. My office has received comments on the bill from representatives
of a number of parties affected by asbestos litigation. I hope and
expect that those comments will be given the consideration that they
deserve by the Judiciary Committee and the full Senate as this
legislation moves forward, as I hope it will early in the 106th
Congress.
Mr. ASHCROFT. Mr. President, I rise today as a co-sponsor of the
Fairness in Asbestos Compensation Act of 1998 to speak in favor of this
important, bipartisan measure. I support this bill for a simple
reason--it makes sense. The problems caused by the manufacture and use
of asbestos are well-documented. Although some companies initially
denied responsibility and fought suits to recover for asbestos-related
injuries in court, the injuries associated with asbestos and the fact
that manufacturers are liable for those injuries are now well-
established.
The courts--both state and federal--have done an admirable job of
establishing the facts and legal rules concerning asbestos. That is a
job the courts do well. However, now that the basic facts and liability
rules have been established, the courts are being asked simply to
process claims. That is not a job the courts do particularly well. The
rules governing court actions give parties rights to dispute facts that
have been conclusively established in other proceedings. All the while
the meter is running for the lawyers on both sides. Dollars that could
go to compensate deserving victims, instead go to lawyers and court
costs.
In the asbestos context, these problems are exacerbated by the finite
amount of resources available to compensate victims and the fact that
legal rules concerning both punitive damages and what constitutes a
sufficient injury to bring suit make for jury awards that do not
correspond to the seriousness of the injury. Someone filing suit
because of a preliminary manifestation of a minor injury, i.e., pleural
thickening, which may never lead to more severe symptoms, may receive
more compensation than another person with more serious asbestos-
related injuries. None of this is to suggest that it is somehow wrong
for plaintiffs with a minor injury to file suit. To the contrary, some
state rules concerning when injury occurs obligate plaintiffs to file
suit or risk having their suit dismissed as time-barred. What is more,
in light of the finite number of remaining solvent asbestos defendants,
potential plaintiffs have every incentive to file suit as soon as
legally permissible.
The Fairness in Asbestos Compensation Act of 1998 attempts to address
these problems by establishing an administrative claims systems that
aims to compensate victims of asbestos rationally and efficiently. The
Act accomplishes this goal by ensuring that more serious injuries
receive greater awards, by securing a compensation fund so that victims
whose conditions are not yet manifest can recover in the future, and by
eliminating the statute of limitations and injury rules that force
plaintiffs into court prematurely. Although I wish I could claim some
pride of authorship in these mechanisms, these basic features were all
part of a proposed settlement worked out by representatives of both
plaintiffs and defendants.
At the end of last term, the Supreme Court rejected the proposed
global asbestos settlement in Amchem Products versus Windsor. The
District Court had certified a settlement class under Rule 23 that
included extensive medical and compensation criteria that both
plaintiffs and defendants had accepted. The Supreme Court ruled that
this type of global, nationwide settlement of tort claims brought under
fifty different state laws could not be sustained under Rule 23. The
Court recognized that such a global settlement would conserve judicial
resources and likely would promote the public interest. Nonetheless,
the Court concluded that Rule 23 was too thin a reed to support this
massive settlement, and that if the parties desired a nationwide
settlement they needed to direct their attention to the Congress,
rather than the Courts.
I believe the Supreme Court was right on both counts--the proposed
settlement criteria were in the public interest, but the proposed class
simply could not be sustained under Rule 23. The Rules Enabling Act and
the inherent limits on the power of federal courts preclude an
interpretation of Rule 23 that would result in a federal court
overriding or homogenizing varying state laws. However, as the Supreme
Court pointed out, Congress has the power to do directly what the
courts lack the power to do through a strained interpretation of Rule
23.
This bill takes up the challenge of the Supreme Court and addresses
the tragic problem of asbestos. The bill incorporates the medical and
compensation criteria agreed to by the parties in the Amchem settlement
and employs them as the basis for a legislative settlement. In the
simplest terms, the legislation proposes an administrative claims
process to compensate individuals injured by asbestos as a substitute
for the tort system (although individuals retain an ability to opt-in
to the tort system at the back end). The net effect of this legislation
should be to funnel a greater percentage of the pool of limited
resources to injured plaintiffs, rather than to lawyers for plaintiffs
and defendants.
I want to be clear, however, that I am not here to suggest that this
is a perfect bill. This bill represents a complex solution to a complex
problem. A number of groups will be affected by this legislation, and
it may be necessary to make changes to make sure that no one is
unfairly disadvantaged by this legislation. But that said, I am
confident that we can make any needed changes. We have a bipartisan
group of Senators who have agreed to cosponsor this legislation, and
the bill represents a sufficient improvement in efficiency over the
existing litigation quagmire that there should be ample room to work
out any differences.
Finally, let me also note that this bill also plays a minor, but
important role in preserving a proper balance in the separation of
powers. I have been a strong and consistent critic of judicial
activism. Judges who make legal rules out of whole cloth in the absence
of constitutional or statutory text damage the standing of the
judiciary and our constitutional structure. On the other hand, when
judges issue opinions in which they recognize that the outcome sought
by the parties might well be in the public interest, but nonetheless is
not supported by the existing law, they reinforce the proper, limited
role of the judiciary. Too often, federal judges are tempted to reach
the result they favor as a policy matter without regard to the law.
When judges succumb to that temptation, they are justly criticized. But
when they resist that temptation, their self-restraint should be
recognized and applauded. The Court in Amchem rightly recognized a
problem that the judiciary acting alone could not solve. By offering a
legislative solution to that problem the bill provides the proper
incentives for courts to be restrained and reinforces the proper roles
of Congress and the judiciary.
In short, this bill provides a proper legislative solution to the
asbestos litigation problem. It ensures that in an area in which
extensive litigation has already established facts and assigned
responsibility, scarce dollars compensate victims, not lawyers. I want
to thank Chairman Hatch for his leadership on this issue and to thank
my co-sponsors for their work on the bill. I look forward to working
with them to ensure final passage of this legislation. The courts have
completed their proper role in ascertaining facts and liability. It is
time for Congress to step in to provide a better mechanism to direct
scarce resources to deserving victims.
Mr. LIEBERMAN. Mr. President, I want to thank Senator Hatch for
introducing this important legislation, which I am pleased to co-
sponsor with him and Senators Dodd, Ashcroft, Sessions, and Torricelli.
As Senator Hatch already has explained, this bill addresses an issue--
asbestos litigation--that has clogged the federal and state courts for
some time now. Due to the huge number of these cases and the massive
verdicts they often yield, it is unclear whether those who have been
exposed to asbestos, but have not yet become sick, will be able to gain
full compensation for their injuries should they become sick in the
future.
[[Page S11345]]
To address these concerns, and respond to calls from the courts and
others for creating an alternative mechanism for resolving these
disputes outside of the court system, a settlement was reached several
years ago that, among other things, would have created an alternative
claims resolution system for dealing with certain asbestos claims.
Unfortunately, despite the desire of representatives of the interested
parties--both victims and defendants--to enter into this settlement,
and despite the trial court's belief that the settlement was fair, the
Supreme Court voided it. The Supreme Court acted, however, not because
it believed that the settlement was in any respect unfair, but instead
because it concluded that only Congress has the authority to sanction
such a settlement.
That is the goal of this goal--for Congress to step up to the plate
and authorize a solution to the asbestos litigation problem that will
ensure that all those who become sick from asbestos are fairly and
efficiently compensated, as contemplated by the parties' earlier
settlement. Because I believe this is a problem crying out for
Congressional action, and because I believe the settlement reached by
the parties was a fair one, I am supporting the bill.
With that said, I understand that representatives of some of those
exposed to asbestos who supported the settlement are not currently
supporting this proposed legislation. Because I firmly believe that
this should go forward as a consensus bill, I remain open to supporting
any reasonable changes that would be required to gain the support of
all parties with an interest in asbestos litigation. I am hopeful that
we can gain their support and move forward with and pass this
legislation.
______
By Mr. ROBB:
S. 2547. A bill to amend title 38, United States Code, to authorize
the memorialization at the columbarium at Arlington National Cemetery
of veterans who have donated their remains to science, and for other
purposes; to the Committee on Veterans' Affairs.
to memorialize veterans at arlington national cemetery who donate their
organs
Mr. ROBB. Mr. President, several months ago, one of my
constituents, Ms. Llewellyn Hedgbeth of Arlington, Virginia, contacted
my office to request my intervention in a matter which has brought
considerable anguish and frustration to her family.
It so happened that Ms. Hedgbeth's father, Mr. Roger A. Hedgbeth,
Sr., a decorated veteran of World War II, and a career civil servant,
had recently passed away. Before his death, however, he made two simple
requests: one, that his body be donated to science, and two, that his
ashes be placed at Arlington National Cemetery. His widow, now 71,
honored the first of those wishes. But in honoring the one, it seemed
that the second was precluded.
The Hedgbeths learned that due to various legal concerns, no ashes of
organ donors who donate their bodies to science are returned to the
respective families of these donors. This situation presented an
insurmountable obstacle for the Hedgbeth family who were informed by a
regretful staff at Arlington National Cemetery, that current
regulations prohibit memorializing veterans in the Columbarium unless
their remains were actually inurned there.
While I can appreciate that limited space at Arlington has
necessitated adherence to strict guidelines for burial and
memorialization, I cannot see the virtue in denying appropriate
recognition for an entitled veteran simply because he has donated his
remains to science. In fact, I would like to encourage more veterans to
do just that.
All of us recognize the great need for viable remains for both
transplantation and for medical study. Mr. Roger Hedgbeth and other
veterans who make this courageous commitment should be suitably
recognized and their loved ones should know that a grateful nation has
made a place for them at one of our country's most sacred memorials.
With that said, I submit this bill which seeks to modify current
regulations to allow otherwise qualified veterans, who have donated
their remains to science, to be memorialized at the Columbarium in
Arlington National Cemetery, not withstanding the absence of their
cremated remains.
Mr. President, I salute these veterans and their devoted families,
and 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. 2547
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. MEMORIALIZATION AT COLUMBARIUM AT ARLINGTON
NATIONAL CEMETERY OF VETERANS WHO HAVE DONATED
THEIR REMAINS TO SCIENCE.
(a) Authority To Memorialize.--(1) Chapter 24 of title 38,
United States Code, is amended by adding at the end the
following:
``Sec. 2412. Arlington National Cemetery: memorialization at
columbarium of veterans who have donated their remains to
science
``The Secretary of the Army may honor, by marker or other
appropriate means at the columbarium at Arlington National
Cemetery, the memory of any veteran eligible for inurnment in
the columbarium whose cremated remains cannot be inurned in
the columbarium as a result of the donation of the veteran's
organs or remains for medical or scientific purposes.''.
(2) The table of sections at the beginning of that chapter
is amended by adding at the end the following:
``2412. Arlington National Cemetery: memorialization at columbarium of
veterans who have donated their remains to science.''.
(b) Applicability.--Section 2412 of title 38, United States
Code, as added by subsection (a), shall apply to veterans who
die on or after January 1, 1996.
____________________