[Congressional Record Volume 146, Number 93 (Tuesday, July 18, 2000)]
[Senate]
[Pages S7160-S7164]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. LOTT:
  S. 2883. A bill to suspend temporarily the duty on piano plates; to 
the Committee on Finance.


              temporary suspension of duty on piano plates

  Mr. LOTT. Mr. President, I rise today to introduce legislation 
temporarily suspending duties on imports of certain piano plates. This 
legislation is needed to address a difficult situation facing the 
domestic piano industry.
  A piano plate is an essential part of a piano. It is the iron casting 
over which the strings are stretched and tuned by pins inserted in the 
plate. Baldwin Piano & Organ Company, which employs more than 600 
workers in the production of pianos in Arkansas and Mississippi, is one 
of a diminishing number of piano producers in the United States. Piano 
plates are produced in the United States by a single company, a 
competitor of Baldwin, whose production is for the most part captively 
consumed. As such, Baldwin lacks a domestic source for piano plates, 
other than the surplus production of one of its competitors. Due to its 
own demand for plates, Baldwin's competitor cannot meet Baldwin's 
requirements.
  Mr. President the history and recent contraction in the domestic 
piano industry points to the critical need for this legislation. 
Indeed, were the production of Baldwin or other domestic producers to 
be curtailed due to the insufficient availability of domestically-
produced piano plates, it is likely that this would engender an 
increase in foreign piano supply, rather than an increase in market 
share of other domestic producers. This is evident from the fact that, 
in the early 1980s, there were 15 domestic piano producers supplying 
approximately 80 percent of U.S. consumption, whereas now only nine 
domestic producers remain--servicing approximately half, if not less, 
of the U.S. market. The domestic piano industry is well aware that 
foreign production stands ready to fill any gap in domestic supply.
  The legislation I am introducing today would temporarily suspend, 
through the year 2004, the rate of duty applicable to imports of piano 
plates provided for in subheading 9209.91.80 of the Harmonized Tariff 
Schedule of the United States. Currently, the applicable rate of duty 
is 4.2 percent ad valorem. If the legislation is approved, the 
reduction in duty collection is estimated to be between $300,000 and 
$400,000 per year through 2004.
  Given the situation currently facing domestic piano producers, it is 
unlikely that there will be objection from other domestic manufacturers 
to the legislation proposed today. In view of the fact that Baldwin 
must resort to imported plates regardless of the duty rate applicable 
to such imports, and that no appreciable domestic production of piano 
plates will be displaced by imports, suspension of the duty rate will 
have no adverse affect upon the domestic industry. This legislation 
stands to ensure only that a U.S. piano producer will find a reliable 
source of supply for a critical component and thus will be better 
positioned to stand with other domestic producers in providing a secure 
and stable supply of pianos for the domestic market.
  I ask 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. 2883

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

     SECTION 1. PIANO PLATES.

       (a) In General.--Subchapter II of chapter 99 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     inserting in numerical sequence the following new item:

       

``  9902.92.09.....   Piano plates     Free...........  No change.......  No change.......  On or before 12/
                      (provided for                                                          31/2004........  ''
                      in subheading                                                                            .
                      9209.91.80)....
----------------------------------------------------------------------------------------------------------------


[[Page S7161]]

       (b) Effective Date.--The amendment made by this section 
     shall apply to goods entered, or withdrawn from warehouse for 
     consumption, on or after the 15th day after the date of 
     enactment of this Act.
                                 ______
                                 
      By Mr. GRAMS:
  S. 2884. A bill to amend the Internal Revenue Code of 1986 to allow 
allocation of small ethanol producer credit to patrons of cooperative, 
and for other purposes; to the Committee on Finance.


                     small ethanol producer credit

  Mr. GRAMS. Mr. President, I rise today to introduce legislation to 
allow farmer-owned cooperatives access to the small ethanol producer 
tax credit. Mr. President, current law provides for an income tax 
credit of 10 cents per gallon for up to 15 million gallons of annual 
ethanol production by a small ethanol producer. A small ethanol 
producer is one defined as having a production capacity of less than 30 
million gallons per year. The credit was enacted as part of the Omnibus 
Budget Reconciliation Act of 1990 and championed by our former 
colleague, Senator Bob Dole. Unfortunately, the credit was enacted at a 
time when the growth and shape of the ethanol industry was still 
difficult to predict.
  This situation has led to an unfortunate situation in Minnesota, 
Iowa, and in other areas where farmer-owned cooperatives have been 
unable to access the credit due to the way in which the original 
legislation was drafted. The original legislation certainly envisioned 
these small, farmer-owned cooperatives as being eligible for the tax 
credit, but the intricacies of the tax code have made it impossible for 
them to do so.
  Mr. President, there are currently 22 cooperative ethanol plants in 
the United States. Twelve of them are located in Minnesota. Eleven of 
these Minnesota cooperatives involve over 5,000 farmers and their 
families. Minnesota cooperatives are able to produce roughly 189 
million gallons of ethanol per year.
  My legislation would simply provide a technical correction to ensure 
farmer-owned cooperatives are included in the definition of who can 
benefit from the small ethanol producer tax credit. My bill also 
expands the definition to include facilities with less than 60 million 
gallons in annual capacity.
  I want to again stress that this proposal is consistent with the 
original intent of the 1990 law that created the small ethanol producer 
tax credit. Farmer-owned cooperatives were never intended to be 
excluded from receiving the benefits of the tax credit if they produce 
less than 30 million gallons. It was just hard to envision the role and 
growth of cooperatives when we passed the 1990 law. Cooperatives are 
not huge corporate ventures, but associations of small farmers.
  Mr. President, the ethanol industry in Minnesota and across the 
country is one we should promote. Ethanol is a crucial product for 
rural America, for our nation as a whole, and especially for Minnesota. 
I'd like to point out just a few of ethanol's impressive benefits--
environmentally and economically. According to the Minnesota Corn 
Growers, ethanol production boosts nationwide employment by over 
195,000 jobs. Ethanol improves our trade balance by $2 billion and adds 
$450 million to state tax receipts. It reduces emissions from gasoline 
use and therefore helps us clean up the environment.
  According to the American Coalition for Ethanol, more than $3 billion 
has been invested in 43 ethanol facilities in 20 states. Those 
investments have directly created 40,000 jobs and more than $12.6 
billion in increased income over the next five years.
  Minnesota is now home to over a dozen operating ethanol plants with a 
capacity of over 200 million gallons annually. These plants mean new 
jobs with good wages and good benefits for people living in rural areas 
where these plants are built. According to a report by the Minnesota 
Legislative Auditor, those plants, and the resulting economic activity, 
are expected to create as many as 5,000 new, high-wage jobs--including 
jobs in production, construction, and support industries.
  In addition to its positive economic impact, ethanol production 
allows our nation to move away from our dependence on foreign energy 
sources. The United States Department of Agriculture estimates that for 
every gallon of ethanol produced domestically, we displace seven 
gallons of imported oil. Ethanol plays a role in increasing our 
national energy security by providing a stable, homegrown, renewable 
energy supply. Ethanol is estimated to reduce our demand for foreign 
oil by 98,000 barrels per day.
  Those are just some of the reasons why I urge my colleagues to join 
me in allowing small, farmer-owned cooperatives to enjoy the full 
benefits of the small ethanol producer tax credit.
  I want to thank Senator Charles Grassley of Iowa for working with me 
on this important legislation. As everyone knows, Senator Grassley has 
been a steadfast leader of efforts to promote tax relief for farmers 
and rural Americans. I'm proud to be working with him on this 
legislation.
  I ask 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. 2884

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

     SECTION 1. SMALL ETHANOL PRODUCER CREDIT.

       (a) Allocation of Alcohol Fuels Credit to Patrons of a 
     Cooperative.--Section 40(g) Internal Revenue Code of 1986 
     (relating to definitions and special rules for eligible small 
     ethanol producer credit) is amended by adding at the end the 
     following:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) Election to allocate.--
       ``(i) In general.--Notwithstanding paragraph (4), in the 
     case of a cooperative organization described in section 
     1381(a), any portion of the credit determined under 
     subsection (a)(3) for the taxable year may, at the election 
     of the organization, be apportioned pro rata among patrons of 
     the organization on the basis of the quantity or value of 
     business done with or for such patrons for the taxable year.
       ``(ii) Form and effect of election.--An election under 
     clause (i) for any taxable year shall be made on a timely 
     filed return for such year. Such election, once made, shall 
     be irrevocable for such taxable year.
       ``(iii) Special rule for 1998 and 1999.--Notwithstanding 
     clause (ii), an election for any taxable year ending prior to 
     the date of the enactment of this paragraph may be made at 
     any time before the expiration of the 3-year period beginning 
     on the last date prescribed by law for filing the return of 
     the taxpayer for such taxable year (determined without regard 
     to extensions) by filing an amended return for such year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons under subparagraph (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) with respect to the organization for the 
     taxable year,
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron for which 
     the patronage dividends for the taxable year described in 
     subparagraph (A) are included in gross income, and
       ``(iii) shall be included in gross income of such patrons 
     for the taxable year in the manner and to the extent provided 
     in section 87.
       ``(C) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization (as so defined) determined under subsection 
     (a)(3) for a taxable year is less than the amount of such 
     credit shown on the return of the cooperative organization 
     for such year, an amount equal to the excess of--
       ``(i) such reduction, over
       ``(ii) the amount not apportioned to such patrons under 
     subparagraph (A) for the taxable year,
     shall be treated as an increase in tax imposed by this 
     chapter on the organization. Such increase shall not be 
     treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this subpart or 
     subpart A, B, E, or G.''.
       (b) Definition of Small Ethanol Producer; Improvements to 
     Small Ethanol Producer Credit.--
       (1) Definition of small ethanol producer.--Section 40(g)(1) 
     of the Internal Revenue Code of 1986 (relating to eligible 
     small ethanol producer) is amended by striking ``30,000,000'' 
     and inserting ``60,000,000''.
       (2) Small ethanol producer credit not a passive activity 
     credit.--Clause (i) of section 469(d)(2)(A) of such Code 
     (relating to passive activity credit) is amended by striking 
     ``subpart D'' and inserting ``subpart D, other than section 
     40(a)(3),''.
       (3) Allowing credit against minimum tax.--
       (A) In general.--Subsection (c) of section 38 of such Code 
     (relating to limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following:
       ``(3) Special rules for small ethanol producer credit.--
       ``(A) In general.--In the case of the small ethanol 
     producer credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

[[Page S7162]]

       ``(I) subparagraphs (A) and (B) thereof shall not apply, 
     and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the small 
     ethanol producer credit).

       ``(B) Small ethanol producer credit.--For purposes of this 
     subsection, the term `small ethanol producer credit' means 
     the credit allowable under subsection (a) by reason of 
     section 40(a)(3).''.
       (B) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) of such Code is amended by inserting ``or the 
     small ethanol producer credit'' after ``employment credit''.
       (4) Small ethanol producer credit not added back to income 
     under section 87.--Section 87 of such Code (relating to 
     income inclusion of alcohol fuel credit is amended to read as 
     follows:

     ``SEC. 87. ALCOHOL FUEL CREDIT.

       ``Gross income includes an amount equal to the sum of--
       ``(1) the amount of the alcohol mixture credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a)(1), and
       ``(2) the alcohol credit determined with respect to the 
     taxpayer for the taxable year under section 40(a)(2).''.
       (c) Conforming Amendment.--Section 1388 of the Internal 
     Revenue Code of 1986 (relating to definitions and special 
     rules for cooperative organizations) is amended by adding at 
     the end the following:
       ``(k) Cross Reference.--For provisions relating to the 
     apportionment of the alcohol fuels credit between cooperative 
     organizations and their patrons, see section 40(d) (6).''
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 1997.
       (2) Certain provisions.--The amendments made by paragraphs 
     (1) and (4) of subsection (b) shall apply to taxable years 
     ending after the date of the enactment of this Act.
                                 ______
                                 
      By Mr. WARNER (for himself and Mr. Robb):
  S. 2885. A bill to establish the Jamestown 400th Commemoration 
Commission, and for other purposes; to the Committee on Energy and 
Natural Resources.


            the jamestown 400th commemoration commission act

  Mr. WARNER. Mr. President, today I introduce legislation to establish 
a federal commission to join the Commonwealth of Virginia in preparing 
for the 400th anniversary of the founding of the Jamestown settlement, 
the first permanent English settlement in the United States.
  In a little more than six years, America will observe one of its most 
important anniversaries with the celebration of the Jamestown 
quadricentennial. On May 13, 1607, nearly five months after setting 
sail from London, a group of 104 English men and boys selected a site 
on the banks of Virginia's James River as their new home. Settling 
Jamestown was a momentous event in American history.
  While the Spanish founded St. Augustine in Florida in the 1560's and 
the English attempted to colonize Roanoke Island in North Carolina in 
the 1580's, Jamestown was America's first successful, permanent 
European settlement. Jamestown is the birthplace of our nation, and is 
where representative government in the Americas began. The founding of 
Jamestown marks the beginning of what Alex de Toqueville described as 
the United States' ``great experiment'' in democracy.
  The establishment of Jamestown remains a cornerstone event in 
American history because of the lasting traditions that the English 
brought with them, including the legacy of language and common law that 
have shaped our great republic for decades.
  Celebrating the 400th Anniversary of Jamestown marks an important 
opportunity to remember and reflect on how our ancestors established 
Virginia: how they treated America's original inhabitants, the Indians, 
and how the slave trade was begun. While injustice is a major part of 
this historical legacy, it is also the legacy that marked the beginning 
of our rich cultural heritage that defines the United States today.
  With the 2007 celebration we have a chance to properly remember a 
story--too often glossed over--of the ``darker side of the Jamestown 
legacy'' as one scholar has noted, ``a legacy of slavery; of warfare 
and conquest; of the displacement and decimation of Native Americans; 
of damage to the natural environment.''
  The history of Jamestown is rich, complex, tragic and inspirational. 
Certainly, an important part of Jamestown's history is the beginning of 
the distinct American spirit of exploration and adventure. The 
Jamestown adventure led directly to the formation of the great American 
principles of rule of law, religious and political freedom and the 
rights of man. The establishment of these pillars of American 
government was, again, unique in the history of man and government. The 
United States stands today as the world's longest lived, continuous 
democratic republic in existence today.
  The Jamestown story is also the story of the beginning of truly 
global commerce. Not only was the establishment of Jamestown a 
commercial venture, it was a venture that coincided with an emerging 
worldwide capitalism. The landing was one of many efforts by primarily 
western European countries to go beyond a country's boundaries in 
search of commercially important natural resources.
  The English came to Virginia looking for economic gain, but found 
personal freedom. They quickly found that the British model of 
government was not well-suited to the challenges of the New World.
  Americans have joined in celebrating Jamestown's founding with major 
events during the past two centuries, most recently in 1957. These 
occasions have been marked with parades to an eight-month international 
exposition.
  The 2007 Jamestown celebration will allow us to learn from our past 
as we prepare for the future. It is a national event that deserves our 
national attention and commemoration. The commission will bring the 
many talents of noted historians and scholars together with the 
Commonwealth's plans to fully observe the Jamestown experiment and its 
lasting contributions to our society.
  Mr. ROBB. Mr. President, I want to join my senior colleague today in 
introducing legislation that will establish a Federal commission to 
commemorate the founding of the English colony at Jamestown nearly 400 
years ago. Jamestown, the first permanent English Colony in the new 
world, holds enormous significance for us as a nation. We are an 
English speaking nation and our laws are based on English law. The 
history of Jamestown is the earliest history of the United States, and 
our culture still reflects those beginnings.
  Jamestown was the capitol of Virginia for 92 years and was the center 
of cultural activity for the new colony. The celebration of the 400th 
anniversary of the founding of Jamestown is important to Virginia, and 
the Nation. In order to ensure that the celebration be conducted in a 
way that all Americans can appreciate and share in the history of 
Jamestown, we propose to establish a federal commission that will 
assist in developing federal activities that will complement those 
programs and activities undertaken by the Commonwealth of Virginia.
  Currently the Commonwealth of Virginia and the federal government, 
through the Department of Interior, work together at Jamestown to tell 
the story of the early colonial times. The commission will provide 
additional assistance, and coordination and will provide support for 
the scholarly research that is ongoing at the Jamestown site. The 
commission can help ensure that the celebration of our earliest history 
is accessible to a broad range of Americans, and not just those in the 
immediate vicinity of the original colony.
  The authority for the Commission will terminate one year after the 
Jamestown celebration in 2007 and after completing a report on its 
activities. The report will not only tell the story of the Jamestown 
celebration, but will provide guideposts and information for national 
celebrations in the future. Having an end to the commission's work will 
ensure that the organization will not outlive its usefulness. The 
planning for this wonderful celebration has already begun, and so I ask 
for quick consideration of this legislation so that we can move forward 
together.
                                 ______
                                 
      By Mr. GRASSLEY (for himself, Mr. Robb, Ms. Collins, and Mr. 
        Daschle):
  S. 2887. A bill to amend the Internal Revenue Code of 1986 to exclude 
from gross income amounts received on account of claims based on 
certain unlawful discrimination and to allow income averaging for 
backpay and

[[Page S7163]]

frontpay awards received on account of such claims, and for other 
purposes.


                 CIVIL RIGHTS TAX FAIRNESS ACT OF 2000

  Mr. GRASSLEY. Mr. President, I rise today to introduce the Civil 
Rights Tax Fairness Act of 2000. I am being joined by Senator Robb in 
this effort. Civil rights legislation has been in force throughout this 
country for nearly thirty years; its purpose being to provide real 
remedies to victims of discrimination.
  The Civil Rights Tax Fairness Act restores certain remedies for 
victims of discrimination by eliminating taxes on emotional distress 
awards. This tax was incorporated into the Small Business Job 
Protection Act of 1996, making the taxation of awards received in 
discrimination cases involving back wages or non-physical injuries ( 
including emotional distress) taxable. The result of the 1996 
legislation was to discriminate against people involved in civil rights 
cases. People who received damage awards because of a bar-room brawl or 
slip-and-fall incident, often caused by simple negligence, get tax free 
awards. While, for similar types of psychological injuries caused by 
intentional discrimination the damages are taxed. The result of this 
taxation is that the attorneys and government make out better than the 
victims who had their rights violated.
  A second part of The Civil Rights Tax Fairness Act changes the 
current law, which requires people who receive back pay awards in 
discrimination cases to be bumped up into a higher tax bracket. When 
back pay awards are received by a person in a case the IRS considers it 
taxable income to be taxed in the year it is received, even though the 
award received covers many years of lost wages. Currently no averaging 
of back pay awards is allowed, but The Civil Rights Tax Fairness Act 
attempts to address this problem. The act provides for income averaging 
of back pay awards, making it possible for the award to be taxed over 
the number of years it was meant to compensate.
  The third area that The Civil Rights Fairness Act attempts to combat 
is the double taxation of attorneys' fees that takes place under 
current law. Presently individuals who receive awards end up having to 
include in that award their attorneys' fee. This fee can end up being 
larger than the actual award received by the plaintiff. The current tax 
implications in the law require the plaintiff to pay taxes on their 
award and on the attorneys fees received by their lawyer.
  One real life example recently brought to my attention involves an 
Iowa citizen named Don Lyons. Mr. Lyons, a man attempting to do the 
honorable thing by helping out a co-worker with filing a sex 
discrimination complaint against their employer, was unjustly 
retaliated against. After prevailing in court and receiving a $15,000 
remitted judgment, Mr. Lyons then had to deal with the present tax 
laws, which not only devoured his judgment, but required him to 
actually pay thousands of more dollars to the government in taxes.
  First, Mr. Lyons had to pay taxes on the $15,000 he received as 
punitive damages from his employer. After he pays his taxes he is left 
with $9,533. However, when Mr. Lyons takes into account the taxes that 
he has to pay on the combination of his settlement and attorneys' fees, 
he ends up owing $67,791 in taxes. When you subtract the $9,533 Mr. 
Lyons had left from the initial judgment he ends up still owing the 
government $58,236 in taxes. Mr. Lyons attorney, Ms. Victoria L. 
Herring, also has to pay taxes on the fee she received for taking Mr. 
Lyons case. Mr. Lyons ends up paying taxes on money that he never even 
received, making him a good example of why it is important to pass The 
Civil Rights Tax Fairness Act and end double taxation. Everyone should 
agree that this is a extreme example of unfair taxation.
  Mr. Lyons helped out a co-worker, was attacked by his employer, and 
received damages in a court of law. People count on the legal system to 
protect them and when their civil rights are violated the system needs 
to function properly. It is disheartening to learn that, in actuality, 
Mr. Lyons is going to be taken to the cleaners by the government tax 
system, and as a result, he ends up owing $58,236 to the government for 
the ``privilege'' of having won his retaliation case.
  It seems to me that there is something fundamentally wrong with the 
law when it hurts the people it is supposed to protect. This being 
said, it is time to change the mistakes made in the past by passing the 
Civil Rights Tax Fairness Act 2000. This bill will go a long way toward 
helping out victims of discrimination by eliminating taxes on emotional 
distress awards, ending lump-sum taxation, and ending double taxation. 
The changing of the law will have positive effects on citizens like Mr. 
Lyons, allowing similar victims to keep more of their awards. At the 
same time, it will be beneficial for business, since they will be able 
to settle discrimination claims for lower settlements.
  I ask unanimous consent to have printed in the record after my 
remarks the letter I received from Mr. Lyon's attorney, Victoria L. 
Herring. Ms. Herring does an outstanding job of quantifying and 
personalizing the importance of the Civil Rights Tax Fairness Act.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                November 30, 1999.

     Re Tax implications of civil rights litigation.

     Senator Charles Grassley,
     U.S. Senate,
     Washington, DC.
     Senator Tom Harkin,
     U.S. Senate,
     Washington, DC.
       Dear Senators: I write you as an attorney of long-standing 
     in Des Moines and an Iowa citizen who represents other Iowans 
     in employment-related matters. I write to bring to your 
     attention a problem that you should know of (as legislation 
     is now pending to cure the problem, H.R. 1997), but perhaps 
     the effect of the present status of the law escaped you.
       As you know, for some thirty years civil rights legislation 
     has been in force in this country; that includes Title VII, 
     the ADA, the ADEA, and other types of such statutes. As a 
     part of the legislative effort to provide remedies to victims 
     of discrimination, Congress also passed an attorney fees 
     provision that entitles a successful plaintiff to have his or 
     her attorney fees and expenses compensated by the losing 
     defendant, subject to the trial court's discretion. 
     Certainly, this legislation had a salutary effect in ending 
     some of the worst vestiges of discrimination and seeing that 
     the litigators were paid for their efforts as ``private 
     attorneys general''. The United States Supreme Court has 
     endorsed this concept in numerous cases.
       What I now bring to your attention is the fact that all of 
     this legislation has been rendered meaningless and, indeed, 
     punitive against plaintiffs and their attorneys, by the 
     Congress's passage in 1996 of the Small Business Protection 
     Act and the various tax laws enacted by Congress over the 
     years. I have a real life example to bring to your attention, 
     in the hope that you will see how unfair and offensive is the 
     present state of the law. In fact, in light of the law as it 
     is today, it is entirely possible that no attorney in his or 
     her right mind would take any plaintiff's civil rights 
     case, and that no person in his or her right mind would 
     undertake to litigate civil rights discrimination no 
     matter how much they were harmed by such actions.
       First, it is my understanding that the tax laws now require 
     the payment of taxes upon any and all sums obtained in 
     litigation or settlement that are not clearly related to 
     ``personal physical injury''. As most (if not all) civil 
     rights and discrimination cases brought under Title VII, the 
     ADA, etc., rarely involve ``personal physical injury'', most 
     (if not all) jury verdicts, judge awards and/or settlements 
     are entirely taxable to the victim of discrimination. Perhaps 
     that was truly the intent of Congress in its 1996 passage of 
     the amendment to Internal Revenue Code Section 104. If so, 
     then victims of discrimination certainly do owe taxes on 
     whatever they might receive by way of verdict, judgment or 
     settlement, and should pay those taxes. Of course, that 
     frequently prevents settlements from occurring or raises the 
     cost of the settlements, but that might also be within 
     Congress's intent in passing the legislation. (That less than 
     salutary effect of the 1996 amendment is one reason quite a 
     variety of groups have supported the proposed bill, H.R. 
     1997, among them the U.S. Chamber of Commerce, NELA, the 
     AARP, etc.) In any event, that is not the entire problem 
     facing victims and litigators.
       The most pernicious problem and one which causes me to 
     write to you is the combined effect of the above legislation 
     coupled with other laws of Congress, court cases and IRS 
     regulations. The effect is to cause any and all lawyers who 
     might wish to advocate for plaintiffs who have been harmed by 
     discrimination to rethink whether, in fact, they wish to 
     continue to do that work. And it places lawyers who do 
     continue to advocate at loggerheads with their clients' 
     interests.
       The law is now clear that victims of discrimination owe tax 
     payments on whatever settlement/judgment they might receive. 
     And it is clear that their attorneys owe tax payments on 
     whatever attorney fees and expenses they are awarded. 
     However, the law is also quite clear that the victims of 
     discrimination also owe taxes upon the amount of

[[Page S7164]]

     money their attorney is compensated for his/her efforts in 
     obtaining the settlement/verdict. While in some situations it 
     is possible to deduct those costs, given the Alternative 
     Minimum Tax provisions and recent Tax Court cases, it is 
     close to impossible to do so. Thus, victims of discrimination 
     may well add up with an additional tax burden in excess of 
     any sums of money actually obtained in the litigation to 
     compensate them for their injuries. This must be contrary to 
     the intent of Congress in passing civil rights legislation 
     over the past thirty years, and the views of the Supreme 
     Court in holding that attorney fees awards should be fully 
     but reasonably compensatory to the attorneys, in order to 
     facilitate attorneys in handling civil rights legislation.
       I can provide you with a real-life example which impacts an 
     Iowa citizen who successfully fought discrimination and 
     retaliation and his attorney, the undersigned, who joined in 
     that effort. Based on what we know now, both of us are 
     quite sorry we ever entered into the effort to prevent 
     discrimination and retaliation from occurring.
       Don Lyons assisted a co-worker in filing a sex 
     discrimination complaint against their employer. As a result, 
     he and the co-worker were retaliated against. We brought suit 
     on behalf of the co-worker for sex discrimination in 
     employment in the Southern District of Iowa and made a claim 
     for retaliation in violation of Title VII on behalf of both 
     Don and his co-worker. The case was litigated in the court 
     here, with the result that the sex discrimination case was 
     resolved prior to trial. However, because no settlement of 
     Don's claim was possible, his retaliation case went onto a 
     jury trial before eight jurors from the southern District of 
     Iowa.
       We put on two days of evidence before the jury and Judge 
     Wolle, with the result that Don was awarded $1.00 in nominal 
     damages (a recognition of his right to bring the claim) and 
     $150,000 in punitive damages. On post-trial motions, Judge 
     Wolle upheld the jury's verdict on liability and held that 
     there was sufficient evidence that ``defendant had an evil 
     motive and had intentionally violated federal law in 
     retaliating against Lyons because he had assisted other 
     pilots in protecting their civil rights.'' However, Judge 
     Wolle remitted the punitive damage amount to $15,000.00, 
     because he thought that would be sufficient to punish the 
     defendant. Pursuant to the attorney fee provision of the 
     civil rights law, I have petitioned the court for 
     approximately $170,000 in fees and expenses; that is based on 
     my hourly rate of $180.00 an hour (a rate much less than that 
     of lawyers in other cities, and probably much less than the 
     two defense lawyers from Chicago who tried the case). The 
     fees and expenses amount may seem high, but is the result of 
     a fair amount of contentiousness and the need to take 
     depositions in Kansas and Arizona.
       The problem for my client and for myself arises from the 
     clear tax implications of this situation. My client would 
     normally pay out of his $15,000 in punitive damages the sum 
     of $5,467.00, and that would be fine for him.
       However, if the court awards me a ``fully compensatory'' 
     fee and expenses figure of $150,000 (I am using that as an 
     example, because we have run the figures on this sum), not 
     only will I pay my taxes on this figure (gladly so), but my 
     client will also and without the ability to deduct the sum 
     due to the pernicious effect of the alternative minimum tax!


                                                                 Amount
Don's taxes of $15,000........................................$5,467.00
Don's taxes on $15,000 plus the attorney fee award of $150,00067,791.00
Difference/Additional Taxes Owed by Don for the ``privilege'' of 
  having won his retaliation case.............................58,236.00
                                                             __________
                                                             

       In other words, because Don assisted someone to bring a 
     claim of sex discrimination through appropriate channels and 
     prevailed in his jury trial claim of retaliation, he will be 
     forced by present tax laws to pay an additional amount of 
     $58,236.00, which is over two-thirds of his annual salary. 
     And he will not have any additional money as a result of the 
     remittment of the judgment to pay that additional tax. And 
     because Don hired me to be his advocate and then prevailed 
     before a jury of eight citizens, he is penalized with a 
     severe tax penalty for having advocated civil rights. And I 
     need not tell you that this result has severely strained what 
     had been a cordial and positive working relationship between 
     attorney and client.
       This is a clear injustice and one that we cannot find any 
     way of resolving, given the present state of the law. If we 
     could, we would. We are, therefore, bringing this to your 
     attention because it is a concern which only legislation can 
     rectify. We believe that H.R. 1997 is the only means possible 
     to rectify this problem and urge you to support it strongly 
     and vocally as soon as Congress returns.
       If you have need of further information, please let me 
     know. Both Don and I would appreciate the opportunity to 
     visit with you or your staff to discuss this problem and to 
     shed light upon how this situation causes me to rethink my 
     chosen profession and Don to rethink his willingness to 
     assist people who are being discriminated against.
           Very truly yours,
                                              Victoria L. Herring,
                                                  Attorney at Law.

  Mr. ROBB. Mr. President, I am pleased to introduce the Civil Rights 
Tax Fairness Act of 2000 with Senators Grassley, Daschle and Collins. 
This important legislation will correct several imperfections in our 
Tax Code that unfairly tax the victims of civil rights violations at a 
time when they are most vulnerable. I'm pleased that it accomplishes 
this in a fashion that has bi-partisan Congressional support and has 
been endorsed by civil rights organizations as well as the business 
community.
  The Civil Rights Tax Fairness Act contains several provisions. The 
first section excludes emotional distress awards received in 
discrimination cases from the gross income of the recipient. Due to a 
change in the Small Business Job Protection Act of 1996, damages 
received for emotional distress in civil rights cases are taxable, 
while those received in slip and fall accidents are not. There is no 
defensible reason for this disparity and it must be changed.
  The bill would also allow employees who receive lump sum awards for 
back wages for civil rights violations by their employers to take 
advantage of income averaging. Currently, if an employee receives a 
large award it will generally push that person into a higher income 
bracket for that year due to the income spike from the damages. The 
result is that the victim may be taxed at a higher rate than they would 
if they had received the income as wages in the normal course of 
business. This is the wrong tax treatment and should be corrected.
  Finally, this legislation ends the double taxation on attorney's fees 
that are awarded to a victim in a discrimination case. Mr. President, 
even though the attorney ultimately gets the fees, not the victim, 
present law not only taxes the attorney on the fees that they receive 
when they take them into income, but also requires that the victim 
include them in computing their gross income. Even though they are 
supposed to be able to take a corresponding deduction, due to 
limitations on miscellaneous deductions and the alternative minimum 
tax, in most cases the victims cannot get the entire amount. This is 
not fair and cannot be the intended effect.
  I look forward to working with the senior Senator from Iowa in 
getting this bill signed into law. It is time to bring our Tax Code 
into the 21st Century. We must implement tax policies that help to 
eradicate discrimination.

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