[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.

[[Page S11344]]

  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.

                          ____________________