[Congressional Record Volume 145, Number 33 (Wednesday, March 3, 1999)]
[Senate]
[Pages S2215-S2216]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             AMENDMENT TO THE INTERNAL REVENUE CODE OF 1986

  Mr. INOUYE. Mr. President, six thousand miles from where I am 
standing today, The Queen's Health System of Hawaii is providing health 
care services that benefit the residents of all the Hawaiian Islands. 
This year, approximately 18,000 inpatients and more than 200,000 
outpatients will seek health care from The Queen's Health Systems. The 
organization maintains an open emergency room; admits Medicare and 
Medicaid patients; operates a 536-bed accredited teaching hospital; 
operates Molokai General Hospital; operates clinics on various islands; 
provides home health care; supports nursing programs at Hawaiian 
colleges and universities; and promotes good health practices in many 
other ways.
  In 1885 Queen Emma Kaleleonalani, wife of King Kamehameha IV, 
bequeathed land which in large part composes the assets of The Queen 
Emma Foundation, a non-profit, tax-exempt, public charity. The 
Foundation s charitable purpose is to support and improve health care 
services in Hawaii by committing funds generated by Foundation-owned 
properties to The Queen's Medical Center, the Queen's Health Systems 
and other health care programs benefiting the community.
  Much of the land bequeathed by Queen Emma to the Foundation is 
encumbered by long-term, fixed rent commercial and industrial ground 
leases. As these leases expire, the land and improvements revert back 
to the Foundation. The existing, aged improvements thereon will need to 
be upgraded in order to enhance and continue the revenue-generating 
potential of the properties. However, the Foundation's available cash 
and cash flow are insufficient to implement these improvements which 
would result in increased financial support to The Queen's Medical 
Center, The Queen's Health Systems and other health care programs 
benefiting the community. If the Foundation borrows the funds, any 
income generated from those improvements would be subject to the debt-
financed property rules of the unrelated business income tax provisions 
of the Internal Revenue Code. Since the income would be taxed at the 
corporate rate, the amount ultimately available to The Queen's Health 
System would be greatly reduced.
  Consequently, the generosity and intent of Queen Emma more than 100 
years ago are being frustrated by federal tax provisions intended to 
prevent abuses. I am sure the Congress never intended the unfortunate 
consequences these provisions are having on what is virtually the sole 
source of private financial support for this sound and unique system of 
providing and delivering health care to the people of Hawaii.
  Current law already allows an exception from the debt-financing rules 
for certain real estate investments of pension trusts as well as an 
exception for educational institutions and their supporting 
organizations. The legislation I am introducing today grants similar 
relief to institutions like The Queen Emma Foundation which provide and 
deliver health care to the people of our nation.

[[Page S2216]]

  I request unanimous consent that the full text of my bill be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 523

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. TREATMENT OF CERTAIN HOSPITAL SUPPORT 
                   ORGANIZATIONS AS QUALIFIED ORGANIZATIONS FOR 
                   PURPOSES OF DETERMINING ACQUISITION 
                   INDEBTEDNESS.

       (a) In General.--Subparagraph (C) of section 514(c)(9) of 
     the Internal Revenue Code of 1986 is amended by striking 
     ``or'' at the end of clause (ii), by striking the period at 
     the end of clause (iii) and inserting ``; or'', and by adding 
     at the end the following new clause:

       ``(iv) a qualified hospital support organization (as 
     defined in subparagraph (I)).''

       (b) Qualified Hospital Support Organizations.--Paragraph 
     (9) of section 514(c) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new subparagraph:
       ``(I) Qualified hospital support organizations.--For 
     purposes of subparagraph (C)(iv), the term `qualified 
     hospital support organization' means, with respect to any 
     indebtedness, a support organization (as defined in section 
     509(a)(3)) which supports a hospital described in section 
     170(b)(1)(A)(iii) and with respect to which--

       ``(i) more than half of its assets (by value) at any time 
     since its organization--

       ``(I) were acquired, directly or indirectly, by gift or 
     devise, and
       ``(II) consisted of real property,

       ``(ii) the fair market value of the organization's 
     unimproved real estate acquired, directly or indirectly, by 
     gift or devise, exceeded 10 percent of the fair market value 
     of all investment assets held by the organization immediately 
     prior to the time that the indebtedness was incurred, and
       ``(iii) no member of the organization's governing body was 
     a disqualified person (as defined in section 4946 but not 
     including any foundation manager) at any time during the 
     taxable year in which the indebtedness was incurred.

     In the case of any refinancing not in excess of the 
     indebtedness being refinanced, the determinations under 
     clauses (ii) and (iii) shall be made by reference to the 
     earliest date indebtedness meeting the requirements of this 
     subparagraph (and involved in the chain of indebtedness being 
     refinanced) was incurred.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to indebtedness incurred on or after the date of 
     the enactment of this Act.
                                 ______
                                 
      By Mr. INOUYE:
  S. 524. A bill to amend the Organic Act of Guam to provide 
restitution to the people of Guam who suffered atrocities such as 
personal injury, forced labor, forced marches, internment, and death 
during the occupation of Guam in World War II, and for other purposes; 
to the Committee on the Judiciary.

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